[P2P-F] An update on BIBO, financial stability standards, and the debt-virus hypothesis

Tue Feb 8 15:53:48 CET 2011

this is perfect comment and I'll add it,

Michel

On Tue, Feb 8, 2011 at 9:13 PM, Sepp Hasslberger <sepp at lastrega.com> wrote:

> Dear Michel,
>
> it is a largely technical discussion and I hope it can resolve, although I
> have doubts that the two people doing the discussing can listen to each
> other, or comprehend and find common ground.
>
> Probably the operative word in this (the subject of contention) is a
> difference between "infinite" and "unbounded".
>
> While there is no infinite creation of debt, it certainly is unbounded,
> meaning the system does not provide a limit to the debt being created. As a
> matter of fact, charging interest on money created by the banks
> substantially out of nothing, initiates a flow of resources towards the
> banks that becomes ever greater, the more the economy grows. Since most of
> our money we currently use is created by commercial banks through loans,
> most of our money (except a small part that is actual cash) is expected to
> pay interest. As individual loans are repaid, other loans must take their
> place, so overall, our economy is perpetually in debt, and perpetually pays
> a tribute to the banks creating the money, through the mechanism of
> interest.
>
> It is this mechanism that brings about instability of the economy. There
> can be no growth without a corresponding growth of the tribute, which
> incidentally is never being created. Only the principal is being created,
> but the repayment is ALWAYS more than the principal. So under the current
> system, the more we work the faster everything we produce and everything we
> own, will end up being owned by the banks. There is nothing to be done about
> it, under the current system. Therefore we can say that the system is
> unstable.
>
> Ardeshir argues that every individual loan gets paid back within a certain
> number of years, and therefore the debt cannot grow towards infinity. He
> fails to see that every paid back loan must be replaced by two new loans,
> leading to exponential payments to the banks by the economy as a whole.
>
> In Ardeshir's own paper, he has several tables of repayment of loans.
> Looking at those tables (let's use the first table in his article), it is
> quite clear that the money created by the loan (the balance in year 1) is
> 13,800. After 30 years, the total of payments made is 28,260, more than
> double of the money first created. So an initial sum of money is created,
> and after a period of years, twice that money is paid back to the bank,
> extinguishing the original loan. The taker of the loan had to 1) pay back
> the money he originally obtained, and 2) pay back another time that much,
> which he had to obtain from somewhere else.
>
> In the overall view of the economy, two things are necessary to do so.
> 1) Someone else has to take a loan of 13,800 just to keep the economy going
> steady state (the money originally borrowed vanished out of the economy by
> repayment and has thus to be replenished).
> 2) Someone else again has to take a loan of 14,460 so that the first person
> taking the original loan could find somewhere in the economy the money to
> pay the interest.
>
> By accumulation of interest, the whole of the economy thus ends up working
> for the banks, in addition to being forced to continually expand (with
> consequences for us humans in the rat race, and for the environment being
> destroyed in the process). So there is really little argument that the
> system is inherently unstable.
>
> Marc expresses that instability with a mathematical formula. Ardeshir says
> the instability does not exist (actually his argument is a technical one
> saying the instability isn't infinite). Anyone who can conceptualize the
> economy as a whole, as opposed to just one single loan, can see that
> something doesn't add up and that reform is urgent.
>
> Kind regards
> Sepp
>
>
> *"The individual is supreme and finds the way through intuition"*
>
> http://www.newmediaexplorer.org/sepp/
> http://www.laleva.org
> http://blog.hasslberger.com/
> http://www.facebook.com/hasslberger
> http://twitter.com/healthsupreme
>
> .
>
> On Feb 8, 2011, at 5:14 AM, Michel Bauwens wrote:
>
>
> Dear Sepp,
>
> because the discussion is largely technical, this is all I can do, but
> perhaps you can add an extra comment?
>
> also, if you are in contact with Marc, please give him a chance to say
> something about the evolution of the bibo project since december 2009,
>
> Michel
>
>
> <http://blog.p2pfoundation.net/understanding-the-logic-of-intervallic-periods-i-e-periods-with-riots-not-revolutions/2011/02/08>
>
>
> <http://blog.p2pfoundation.net/?p=13869>
> [image: photo of Michel Bauwens]
> Michel Bauwens
> 16th February 2011
>
> In December 2009, Sepp Hasslberger introduced to us Bibo, a proposed
> standard for stable currencies, that would replace the current inherently
> unstable banking money system.
>
> This article has become our most comment rich article, in particular
> through a recurring debate between one of the Bibo co-authors Marc, and
> Ardeshir Mehta.
>
> Ardeshir has written an article that challenges one of the main points of
> monetary reformers, i.e. that the current system leads to the infinite
> creation of debt through compound interest.
>
> You can find it here<http://homepage.mac.com/ardeshir/DebunkingTheDebt-VirusHypothesis.html>
> .
>
> The context:
>
> *“Currently, most if not all money is loaned into existence by banks, and
> is thus based on interest-bearing debt. There is no question that neither
> interest nor debt-based money are good for society, and I have written
> denouncing both debt and interest elsewhere. However, 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, resulting in inevitable foreclosures. “*
>
>
> --
> P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net
>
> Connect: http://p2pfoundation.ning.com; Discuss:
> http://lists.ourproject.org/cgi-bin/mailman/listinfo/p2p-foundation
>
> Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
> http://twitter.com/mbauwens; http://www.facebook.com/mbauwens
>
> Commons Strategies Group, http://www.commonsstrategies.org/
>
>
>
>
>
>
>
>

-- 
P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net

Connect: http://p2pfoundation.ning.com; Discuss:
http://lists.ourproject.org/cgi-bin/mailman/listinfo/p2p-foundation

Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
http://twitter.com/mbauwens; http://www.facebook.com/mbauwens

Commons Strategies Group, http://www.commonsstrategies.org/
-------------- next part --------------
An HTML attachment was scrubbed...
URL: https://lists.ourproject.org/pipermail/p2p-foundation/attachments/20110208/bbaca735/attachment.htm 