“We better talk to Ken Doll,” Judy said.
“Ken Doll?” Jack asked.
“Prince Karl Eusebius von Liechtenstein,” Judy said in her snootiest voice. “Otherwise known as the Ken Doll of the Barbie Consortium.”
“Oh,” Jack said, sounding confused.
Trudi, who was with them, giggled. “By majority vote of shareholders, AEC can issue as much preferred stock as it chooses to. That’s in the charter, right?”
“Yes,” Susan said. “What about it?”
“Susan, what exactly is the difference between a preferred stock certificate and a dollar bill?”
Susan started to answer, then stopped. She didn’t have a clue what the difference between a dollar bill and a preferred stock certificate was. Neither did anyone else in the room. They were all quite sure there was a difference, but when they actually thought about it, they couldn’t think what it was.
This was a job for Sarah.
* * *
“That’s a good question, Trudi,” Sarah said, pleased. “There are a couple of differences. I guess the first is that money is issued by governments. There have been exceptions to that, company scrip that’s only good in company stores, but the results are usually bad. I’d say universally bad, but I can’t prove it. It ties people into a single supplier, the company that issued the script because who else would take it? Money issued by governments is—or at least can be made—legal tender for all debts public and private, so if you have a debt measured in that money, they have to take it. The second difference is that preferred stock is an investment that is generally expected to pay dividends. Interest of some sort anyway. After all, why would someone loan you money if they weren’t getting interest?”
“Like the AEC preferred that the Ken Doll has,” Susan said “He’s made a bundle on that.”
Which was true enough, Sarah had to admit. “That’s participating preferred. If you guys do well, he gets extra dividends, but if you don’t, he just gets more paper. You’ve been lucky so far.”
“Don’t confuse skill with luck, Sarah,” Vicky said. “Sure, we were lucky at first, but we’ve gotten good at it.”
Trudi interrupted before the conversation got totally derailed. “Why do people loan governments money for no interest? That’s what money is, a loan. You’ve said that lots of times.”
“Another good question,” Sarah said. “Because money benefits everyone . . . well, everyone who has it. It is a transferable debt on the government, true enough. But the key there is it’s transferable, which lets it act as a medium of exchange. A dollar in your pocket is a dollar in your pocket, whether you got it from the government or from the local bookie.”
“So if we issued preferred stock in AEC, it would work like money.”
“No,” Sarah said. “People wouldn’t accept it. Not if they had any choice in the matter. You wouldn’t know about company scrip, at least not the term. But when a company out in the boonies paid its employees in company scrip, it was because that was the only job available and it locked them into using the company store where prices were jacked up. It was a way of keeping people locked in perpetual debt. It didn’t work in cities where people had other options.”
“It’s not so different from a village shop that gives credit,” Trudi said. “It’s not like you can take your credit to another shop. Shopkeepers often act as local banks, loaning people money that goes on their account and is paid when the harvest comes in.”
“Sort of,” Sarah acknowledged. “But the loan is going the other way. It’s the shopkeeper giving the loan, not the company getting it. It’s always easier to get people to accept a loan than to give one.”
“Not always,” Trudi said. “Often enough the shopkeeper will pay people in credit at the shop. Sometimes my father paid people in credit in local shops. My father wasn’t a cheat, but after Kipper and Wipper, we didn’t have the cash. Almost no one did and the shopkeepers knew we were good for it.”
“Didn’t the banks issue money way back when?” Vicky asked. “Back in colonial days?”
“I knew someone would bring that up,” Sarah muttered, feeling cross. “Yes, and that’s more like what the local shopkeepers Trudi was talking about were doing. Acting as local banks with their own money, just without the cash. Just the accounts on their books. People will always find a way around the lack of money. The trouble is they generally don’t work that well. And usually the problem is that the pseudo money ties people down in some way. Bank money worked fine locally, as long as the bank was solid, but the money lost value as you got farther from the bank.”