[P2P-F] [GiftEconomy] the debt-virus : "every paid back loan must be replaced by two new loans"

Tue Feb 8 18:04:38 CET 2011

Under the current system, when lending decreases the economy slows. Isn't  
that one of the problems of today's global "recession" ?

Another problem with interest is that if it is allowed to grow  
uninterrupted, it outstrips all other resources. Dr. Margrit Kennedy,  
author of Interest and Inflation-free money" says that a penny invested at  
the time of the birth of Christ and getting five percent annually through  
the year two thousand would be a sum equal to six gold balls, each the size  
of the earth. But there is disruption in mounting interest, she notes, by  
the periodic destruction of value, typically in wars.

Capitalism has always sought to force open markets, with physical force eg  
Admiral Peary sailing into Tokyo Harbor to wage war on Japan in the 19th  
Century, through to more subtle force eg all the modern free-trade  
agreements.

On Feb 8, 2011 8:21am, Dante-Gabryell Monson <dante.monson at gmail.com> wrote:
> "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. "

> " every paid back loan must be replaced by two new loans, leading to  
> exponential payments to the banks by the economy as a whole."

> "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."

> "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. "

> more details below...

> ---------- Forwarded message ----------
> From: Sepp Hasslberger sepp at lastrega.com>

> Date: Tue, Feb 8, 2011 at 3:13 PM
> Subject: Re: [P2P-F] An update on BIBO, financial stability standards,  
> and the debt-virus hypothesis
> To: Michel Bauwens michelsub2004 at gmail.com>

> Cc: p2p-foundation p2p-foundation at lists.ourproject.org>

> 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

> standards, and the debt-virus hypothesis" target="_blank">

> 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, ie that the current system leads to the
> infinite creation of debt through compound interest.
> You can find it here.
> 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. “
> --
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