Rethinking Money Part 6: The Unmortgage and Humane Economies

We can create free-market economies that are profitable, fair, and humane.

Previous articles explained the dangers of our debt-based money created through the fractional reserve banking system. One way (but not the only way) to avoid those problems is to build your own economy through credit clearing cooperatives. Co-ops can avoid the debt trap by simply not using debt-based, interest-bearing financial instruments.

With proper innovation, it is possible to completely eschew any type of financial instrument that charges interest. Charging interest always requires people to pay back loans with money that has not been created by the economic system. People trying to pay back interest on a loan do so by competing for an ever-shrinking supply of money that is circulating through the system. This is one of the primary causes of poverty in our world today.

Of course, modern banking is built almost entirely on interest-bearing financial instruments. They are so common that they seem natural to us. In fact, even most people in the financial industry would be hard pressed to figure out new types of financial instruments that do not depend on charging interest. But the reality is, it’s all been done before.

Prior to the 1600’s, most cultures equated charging interest with usury, which was strictly forbidden in the Bible, the Koran, and other sacred writings. During the 1500’s and 1600’s, people redefined usury to mean charging “excessive” interest. The laws of most Western nations were built on this idea.

To build a better future, we can look to the past to see what kind of financial instruments were used during times that prohibited interest.

Example: The Unmortgage

A good example of an innovative financial instrument that does not require the payment of interest is what we at Cognisaya call the “unmortgage”. This financial instrument performs the same function as a mortgage but doesn’t involve interest. We call it the unmortgage because there is no English word for it.


It is completely possible to implement the unmortgate with US dollars or any other kind of currency. However, try getting a bank to do that.

Because mainstream financial institutions are so resistant to change, the unmortgate and other non-intreast-bearing financial instruments are more likely to find widespread use in the credit clearing co-op system. It's a natural fit given that people in the co-op system will need innovative ways to invest their money.

It Starts Out Nearly the Same as a Mortgage

Suppose you want to buy a home. Imagine also that there is a home for sale by a member of the co-op system that you belong to. That member will be glad to accept credits instead of money.

The first step in the unmortgage process is to go to your co-op and find an investment group that handles unmortgages. They approve you just as if they were a bank.

In this example, we’ll say that the home costs $200,000 and you are required to put down 10% on the home.

So far, this sounds like a regular mortgage, doesn’t it? However, here's where things start to get different.

The Partnership Buys the House

The investment group buys the house with credits that members have deposited in its investment account and with your $20,000 worth of credits. The investment group is 90% owner of the house and you own 10%. You have entered into a business partnership with the investment group. You are not debtor and creditor, which is of necessity an adversarial relationship.

You Rent the House

You now rent the house from partnership and move in. The monthly rent is approximately the same as the payments you would pay with a mortgage. 90% of the rent goes to the investment group. The co-op, which manages the investment group, keeps some of that for the service of running the group. The investors get the rest.

You Get a Portion of the Partnership's Profit

The other 10% of the rent you pay is yours. However, you don’t put it back in your pocket. Instead, you pay your 10% to the investment group for a greater share of ownership in the house. So every time you make a rent payment, the co-op gets 100% of the rent. That is how it makes its money without charging interest.

Each time you pay rent, your share of the ownership increases until you are the full owner of the house. At that point, the partnership terminates.

The Investment Group Makes a Profit through Rent Rather than Interest

A 30-year unmortgage will make about the same amount of money for an investment group as a normal mortgage. But this method does not require the payment of interest.

What If Something Goes Wrong?

In the event of a financial setback, the unmortgage is more humane. 

Suppose something bad happens to you. You become unable to make your rent payments. The co-op’s investment group must evict you for nonpayment. However, you do not lose your equity in the house as you would with a normal mortgage. The investment group does not repossess your house. Instead, they just rent it out to someone else who can pay the rent. The partnership continues.

Meanwhile, you do your best to recover from your financial setback. In the interim, the house is still being rented and the payments are still being made. You are still getting 10% of the rent and you are still able to apply that 10% toward ownership of the house.

This path to home ownership is much more humane than a mortgage. There is a distinct possibility that you will be able to get back on your feet and start making rent payments again. In that case, the investment group can let you move back in when the lease with the current tenant expires.

Even if you can’t move in for many years, you are still on a path to home ownership for as long as the investment group can keep the home rented. Again, this is a distinctly humane approach to home ownership by comparison to what we have now.

Partnerships Instead of Loans

With the unmortgage as an example, it’s easier to see how we might create an economy that is not based on interest. For example, it might be reasonable for the co-op investment group to enter into partnerships with companies that require fleets of cars. The company can start out by putting 10% down on its fleet and then rent the fleet from the investment group. Eventually, the company will own the cars.

Other types of partnerships might also be possible. For instance, do factories really need to own their machinery? Might it be profitable for investment groups to create a business that owns such machinery and leases it out to factories?

In any case, avoiding interest-based financial instruments avoids the crippling weaknesses of the fractional reserve banking system. Investments based on joint ventures, equity shares, claims against future production, and revenue sharing can be as profitable as interest-bearing financial instruments and be healthier for the system in the long term.

You are really only limited here by your imagination. With the software we're producing at Cognisaya, we all really can invent innovative new financial instruments, partnerships, and economic structures that are both profitable and humane.

Our Software

The software we are producing at Cognisaya, LLC enables you to create legal contracts with programming logic built into them. Technically speaking, our servers support a scripting language and you can embed the scripts into the contracts themselves. The contract “lives” on the server until it reaches its termination conditions. At that point, the server stops processing the contract.

The upshot of this is that contracts can enforce their own terms and conditions. They can make deposits, withdrawals, and transfers. They can send email notifications, hold funds in escrow, and more.

In short, you can create brand new types of financial instruments and add them to the system, which will them process them as if they were built in. You can use these financial instruments with any type of currency or with credits that our software issues.

With our software, you can create a currency, such as a private, merchant-specific currency like Amazon's Coin, and then build a financial system that uses your currency.

Or you can issue credits and then make financial instruments for your co-op system that don't charge interest.

In other words, with our software you can custom design your own money and financial system completely from scratch.


The software we're producing enables you to:

 Create currencies and currency-like credits for your business or for your own microeconomy.

 Build financial instruments that use your custom form of money.

 Install your financial instruments into our transaction validation servers so that they can process the legal contracts they define.

 Use your money and financial instruments as the basis of a customized monetary system.

If you were to design your own money and financial system, what would it be like?

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