[P2P-F] debunking the debt virus hypothesis

[Michel Bauwens]

hi sepp, this article by ardeshir is too technical for us, but if you want
to comment on it or mention it, that'd be great (this is part of that bibo
controversy), of course, no problem if not,

Michel


http://homepage.mac.com/ardeshir/DebunkingTheDebt-VirusHypothesis.html

there is a fairly common thesis, based on the fact that money is loaned into
existence as interest-bearing debt, that if new loans are not continually
being issued in ever-increasing amounts, enough money will not be created to
pay the interest on existing loans; and as a result, at least some those
loans will be defaulted upon. In essence, the thesis is that if an amount P
is created as the principal of a loan (or of a combination of loans), the
loan(s) cannot be fully paid back if the total amount of the debt exceeds P
– as is necessarily the case when interest is charged. In other words, there
would not be enough money in the economy to pay off the entire debt, and
therefore some of the borrowers must perforce default. This is claimed to be
an inherent feature of the system of interest-based debt itself, and to have
nothing to do with the ability of the borrowers to earn enough to pay back
their loans. The thesis claims that even if all borrowers could earn enough,
by dint of hard or smart work, to pay back their loans, there simply would
not be enough money in the economy to enable them all to do so: some of them
would *have* to be unable to pay back their loans. In different forms this
thesis has been enunciated
here<http://www.cyberclass.net/turmel/bankmath.htm>and
here <http://bibocurrency.org/> – among other places. The thesis is
sometimes called the “debt-virus” hypothesis.

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