"The financial crisis that has wiped $3 trillion off stock markets"

Headlines like this just remind us that share prices have little to do with the real, productive economy.

If you are looking to invest in shares in the future, this is good news, if you own shares and were hoping to sell in the near future, this is bad news. But the whole thing is a sideshow.

People flatly refuse to understand that there's no natural or economic law that says that private sector businesses, whether quoted or not, have to have share capital at all.

The model, which we can use for illustration, is the Limited Liability Partnership ('LLP').

* The assets side of the balance sheet, i.e. what it owns, looks exactly the same as a company with share capital, but instead of 'share capital' it just has 'members' capital'.

* Each LLP can pretty make up its own rules, but the general idea is that profits would be divided up between members according to how much real cash they have actually put into the business (plus undrawn profits from earlier years).

* Instead of the business being owned by 'shareholders' it is owned by 'members'.

* Instead of each shareholder getting a cash dividend of so many pence per share with the rest of the profits being reinvested, the LLP's profits would simply be apportioned between members according to how much hard cash they have paid in.

* Instead of buying shares in the business from existing shareholders, people just pay in cash to the LLP. Instead of receiving dividends or selling shares when members need cash, they just withdraw cash/capital.

* Instead of each share being entitled to one vote at meetings, you would get one vote for each £1 or £100 you have invested.

* Instead of wild fluctuations in share prices, no member of an LLP would make or lose a fortune overnight.

* Instead of people wasting oodles of time analysing share price movements, they would be scrutinising the actual performance of the business, which is far more important.

* Instead of businesses being valued at the discounted net present value of expected future profits, a business would just be worth roughly the same as its total assets.

* Investor returns, per £ invested would be much higher. Let's say that for quoted companies, the shares are worth three times as much as the actual assets in the business and the overall return on those shares is five percent (dividends + reinvested profits). Instead of paying £3 for £1's worth of assets in the hope that you will get your £2 back from the company and a return of 15 pence per share, people would just pay in £1 into a quasi bank account with the LLP and be credited with 15 pence profits every year.

* As mentioned, each LLP can have its own rules. Clearly, if there is a sudden downturn in expectations for a particular business, then investors might rush to withdraw their cash/capital, thus speeding up the demise of the business (which might be a good thing). In which case, an LLP could be entitled to simply suspend withdrawals in the same way as trading in some shares can be suspended. Or the LLP simply makes a write down for expected future losses, so if you paid in £1 and there's a huge loss (past or future) which will wipe out half the asset base, then 50p is simply written off your balance. This is still a lot better than buying a share for £3 and seeing it fall in value to 50p.

* When a whizz bang start up floats on the stock exchange, then of course the founders will sell out for a multiple of what the company's assets are actually worth, no harm in that, it incentivises start ups. With an LLP system, when a private LLP goes public, those founders would just make it clear that for every £3 people pay in, £1 goes into the business and the other £2 goes into the founders' pockets. That is, in cash flow terms, absolutely no different to what happens now, just a bit more honest.

* The only downside I can see is that it will be more administrative faff running such quasi bank accounts than just updating a shareholder's register. Again, each LLP can make up its own rules, so for example, it could say that people can only pay in or withdraw cash/capital once a month or on four specified dates in the year with a few weeks' notice. It is all perfectly do-able.

We know that this is a much better system, but current owners will always vote against it because they can make a windfall gain at that point in time when their business is first quoted on the Stock Exchange, just like the building society flotations of the 1990s. It's a beggar-thy-neighbour rent seeking policy where profits are transferred from future owners to current owners. That's the only 'law' that I can see operating here - people are stupid and greedy.