Topic: Economic Policy
Mike Montagne Rebuts Hyperinflation as a Cause of an Inevitable, Second Great Depression Vital identification of cause as a vital basis for solution.by mike montagne (PFMPE)
(libertarian)
Saturday, December 27, 2008
The idea of national or world-wide monetary failure as a consequence of some ostensible, dramatic manifestation of inflation, conflicts with an eleventh hour, ever growing array of further assertions, submitted likewise without conclusive argument. The conditions we are presently combating, and which are the cause of the mounting failure, on the contrary embody a scarcity of circulation respective to a growing sum of debt, with the resultant collapse being a consequence of a resultant inability to service debt.
As the failure mounted prior to the recent efforts to purportedly rescue the system with increasing artificial infusions of capital, in fact then neither inflation nor hyperinflation can be truly said to be causative, for at best now (both being absent), either can only eventually manifest in the wake of the onset of failure. Thus it is only in understanding the actual, previous causative forces, that we can accurately project further consequences (which may ultimately include inflation). Likewise, it is only by understanding those previous causes that we can develop or identify solution, responding to actual cause (versus the said, eventual consequences).
What is obviously contradictory to a mere assertion of hyperinflation as a present cause then, is that the basic reasons for the present rush to resume sufficient "credit" as will maintain a vital circulation, speaks instead to a perpetual, prevailing deflation of the circulation by present obligations to service the most monumental sums of debt in history. It is this escalating obligation to service an inherent, irreversible, and terminal multiplication of debt then, which in fact is the only present cause of the downturn. Thus the mounting failure is instead manifested from a starvation for sufficient circulation to sustain a diminishing industry, which in fact too, is already largely expatriated by the previous stress of ever escalating indebtedness upon markets and producers alike.
On top of this systemic stress of inherent multiplication of debt, certainly we suffer further stress of downstream exploitation. But the monumental primary obligation to service multiplying indebtedness comprises an escalating deflation, in which servicing the escalating debt perpetually and ever more dramatically depletes the circulation in such a way as can only require ever more borrowing, to replenish the circulation.
The fact of this escalating deflationary process thus obligates any assertion of circulatory inflation as a potential cause of failure, to prove first that the necessarily escalating act of borrowing further, so much as may or may not even replenish the circulation of the deflation, actually prevails in a purported increase in circulation. Secondly, such unqualified assertions are obligated to prove that it is the increasing circulation which actually causes failure, versus the underlying, singular disposition of the imposed system to perpetually multiply debt in proportion to a finite potential to service illimitable debt.
On the contrary then, artificial inflation of the circulation is not a cause of failure at all. Ultimately instead, artificial inflation is the only possible, eventual, systemic recourse against an irreversible systemic process, which, in perpetually re-borrowing so much as would replenish a vital circulation of ever escalating depletion, inherently transforms interest and principal paid out of the general circulation into the very escalating sums of debt which ultimately impose failure. But inflation of any kind or magnitude then is not causative. On the contrary, the very need for artificial inflation, rescues, and so forth, testifies to the cause of failure being irreversible, inherently escalating multiplication of debt. Eventual inflation of any eventual magnitude is a consequence of preserving the system of exploitation, versus establishing mathematically perfected economy.
The subject currency of course was privatized (versus rectified) for a purpose; and the very disposition of the imposed system therefor is a device to take unearned profit, multiplied at inherently escalating rates. Only because the device of taking is itself irreversible so long as it exists, does the usually (but not necessarily) privatized system ultimately impose such a sum of debt that the subjects cannot afford to borrow further as would otherwise enable them to replenish the circulation against its perpetually escalating deflation.
Failure therefore is an inevitable culmination of this systemic, irreversible multiplication of debt in proportion to the obligated circulation; with ever more massive inflation being a consequence both of inherent systemic failure, and a public which fails to recognize and adopt solution.
The system of exploitation thus fails for a simple combination of inevitable events:
1. Merely to maintain a vital circulation, the subjects are inevitably compelled to perpetually re-borrow principal and interest paid out of the general circulation, as subsequent sums of debt, perpetually increased so much as periodic interest on an ever greater sum of debt.
2. The sum of debt thus multiplies at an ever escalating rate, requiring ever more monumental further borrowing, merely to maintain a circulation.
3. All the while, ever more of the obligated circulation is dedicated to servicing debt, leaving ever less of the circulation to sustain the industry which is obligated to do so.
4. Ultimately then, an eventual sum of debt exceeds the finite capacity of industry to service it, which in turn exceeds a limit of credit-worthiness which the artificially indebted public can in fact service.
5. Because they can service no further debt, they cannot borrow further, as remains necessary to replenish the circulation of the deflation which in turn results in depletion of the circulation across their final days of servicing the existent sum of debt.
6. With the inability to borrow further to replenish the circulation, and with the primary obligation being to service debt (versus sustain industry), this depletion further makes it impossible to sustain the industry which is obligated to service the debt.
7. As failing sectors quickly take down multiple dependent sectors, the failure of the first important sectors soon escalate into complete failure, in which the falling subjects are only further compromised to maintain a sustainable circulation by taking on the further debt which they are already proven unable to afford.
Thus opposed to this proposition that hyperinflation will cause the present failure, the nature of the currency which Jefferson, Franklin, Adams, Madison, Jackson, Lincoln, McFadden and so many others of this caliber warned against, is the cause of a sudden and inevitable depletion, in which a mortal, final period of servicing a terminal sum of debt deflates the circulation, leaving the subjects unworthy of borrowing further, simply because the fatal sum of debt can only multiply their obligations above what they already cannot service.
If anything then, hyperinflation will only eventually manifest from artificial attempts to preserve a process which still, will continue to inherently and irreversibly multiply debt in proportion to the obligated circulation, as will only allow pathetic subjects to marginally tread water against the eventual culmination in failure.
All this of course was projected thirty years ago, not only in my proposition of mathematically perfected economy, but in computer models I provided the Reagan Administration which projected the accumulation of this debt, manifesting in potential world wide failure at approximately 2010 AD. Now curiously, even those who argued most against this idea of inevitable failure and singular solution, lay claim to eleventh hour projections which still yet deny recognition of what they argued against, both as the inevitable cause of failure and singular basis solution and the only veritable thing therefore from which anyone can truly predict the failure they boast only now of predicting.
There is one and one integral solution only for 1) inflation and deflation, 2) systemic manipulation of the cost or value of money or property, and 3) inherent, irreversible, and inevitably terminal multiplication of debt in proportion to the vital, obligated circulation and the only reason you won't have that solution is the very pretended representatives you have chosen, remain the very people most dedicated to your exploitation.
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Posted By: Walt Thiessen
Date: 2008-12-27 16:11:54
I don't see anything in your article which contradicts the basic fact that the entire banking crisis was driven by a massive monetary expansion over the past 10-15 years. The expansion created a huge overinvestment problem which has led to the effective destruction of some of the monetary expansion. The result: deflation.
My guess is that it could be argued we have already experienced hyperinflation [in the housing market], 20% or more annual increases in monetary values over quite a few years with no underlying real value creation, wouldn't this fit the bill? And that would be without factoring in whatever percentage increase was profited each time a mortgage backed security was turned over. After all, the underlying real product is a house? and has there been any major elected official in our lifetime that was seriously dedicated to protecting the economy of the people rather than special interests? When the supply of created money is virtually endless, people do really stupid things with it.
Posted By: mike montagne
Date: 2008-12-27 21:29:13
Thiessen,
You say the expansion created the over-investment problem. How so? Do you mean availability of further money inherently results in over-extended indebtedness, instead of further proprietorship of further property? How so?
There's no proof of any such theorem. Never has been, and never will be. It's as if you can say that if you have 50 cents in your pocket, that's what you're going to pay for lemonade, even if the lemonade stand's price is 25 cents.
You don't even say what you mean by "over-investment." You surely don't mean that we bought more houses than we need, do you? No, the 12,000 homes and more which are going into foreclosure daily are doing so because in some cases, sure, floating rates suddenly required excessive periodic interest -- breaking the "investor". (?) *Their problem* however is too much debt at the eventual interest rate, is it not? It certainly isn't an excessive share of circulation!
It's mathematically impossible merely to maintain a circulation without suffering irreversible multiplication of debt, if to maintain the circulation we have to re-borrow principal and interest as ever greater sums of debt, perpetually increasing so much as periodic interest on an ever greater sum of debt. It's just this inherent, irreversible multiplication of debt as well, which requires ever greater expansion of the circulation, which (because the circulation only comes into circulation as debt) further increases the sum of debt, and the rate at which the sum of debt increases.
Thus the banking crisis wasn't "driven" by massive monetary expansion; you would have the crisis without any expansion whatsoever, and in fact, you would have the crisis all the earlier, if "growth" (circulatory inflation) did not extend the lifespan of the system by bringing in new circulation to service the ever escalating multiplication of debt.
Take away the growth in the circulation, and you still have an inevitable crisis, not only because of the imposed obligation to service ever more debt, but because servicing ever more debt inherently dedicates ever more *of* the circulation to servicing debt, leaving ever less of the circulation to sustain the industry which is obligated to do so.
*THAT* is the reason *we require* the increasing circulation.
The deflation you evidently agree upon (versus the hyper*INFLATION* the article and this response refute as a cause) however is not merely a consequence of eventual failure. There is a constant, perpetual deflationary aspect to any purported economy based on interest-bearing debt, because we are constantly paying principal and interest out of the general circulation.
When does that deflationary aspect however prevail in terminal consequences?
When industry can no longer afford to sustain itself against the perpetual multiplication of debt, it is no longer fit (credit-worthy) to borrow further, as necessary to maintain a vital circulation. We have long been beyond that point, because in fact federal overspending has been necessary to replenish the circulation of what the private sector is no longer capable of re-borrowing.
So again, it is multiplication of indebtedness, eventually beyond creditworthiness, which precipitates the failure -- whether you have circulatory expansion to forestall a more immediate failure, or not.
The problem then is the nature of the currency -- that we have allowed a "central bank" to pretend it's the creditor, only to issue our promises to pay each other, at the cost of *denying* interest to the real creditor, who accepts our promise to pay as currency. If creditors should have "interest," or if creditors inherently demand "interest," in fact the present implementation disproves that assertion by denying interest to the real creditor.
All we have is a publisher of our promises to pay each other, usurping the role of creditor to impose interest on us, to take ever greater unearned wealth from us by the vehicle of perpetual multiplication of debt.
The first thing that happens, and the only inevitable thing which happens as a consequence of this usurpation and subjugation of our promises to pay by an extrinsic parasitical entity which produces nothing, is multiplication of debt.
You *can* understand that expansion of the circulation in fact extends the lifespan of such a system, can't you? There of course is no other need for ostensibly increasing the circulation per represented wealth, particularly as the multiplication of debt further consumes ever more of *the* circulation in servicing debt, versus sustaining the commerce which is obligated to do so.
Posted By: mike montagne
Date: 2008-12-27 21:48:59
gene,
You assert that because the money is inexpensively produced/published, that people do stupid things with it. Of course, some do. But there is no alternative to suffering perpetual multiplication of debt in proportion to the circulation, if the money is subject to "interest." It is not the inexpensive availability of "money" which multiplies debt; it is interest; and even if no one did anything stupid with the money, this multiplication of debt by interest would prevail in terminal conditions.
The further effects of interest are not difficult to understand; but if we don't understand them, certainly we grant ourselves no power to rectify the purported economy. What's going to fix the consequences of the process? Increasing the cost of creating the money? Or eradicating the process which inherently multiplies debt into a terminal sum of debt?
You can increase the cost of the money all you want, and so long as you retain interest, you suffer the terminal consequences of inherent, irrreversible multiplication of debt.
When you pay 3 houses for every one house (accounting for interest), there of course is some plausible interest in recouping the "over-investment" in property, which, if we were trading our production for equal measures of each others' production, would have only cost us 1 house. True, "the banks" exploit circumstances by financing whatever can be afforded at a given point in time, versus what the property should cost as a consequence of natural depreciation; and of course, the devaluation of the currency as ever more of the circulation is inherently dedicated to servicing debt, contributes further to a perceived need to increase prices to combat the consequences of a system which can only multiply debt into terminal debt, if we fail to rectify the system.
We cannot just say that there's an increase in circulation per represented wealth (circulatory inflation) without citing a fact of such proportional increases which reflect the actual rising rates of prices. Not only is this not demonstrated by data, a further observable fact would negate circulatory inflation as an ostensible cause of the increases, because the multiplication of indebtedness is dedicating ever more *of* the circulation to servicing debt, leaving ever less to ostensibly cause the rising prices. The proportional rise in circulation necessary to account for engendering price inflation is therefore far greater, because of the re-dedication of ever more of the circulation to servicing debt.
Note further that the escalation of indebtedness is itself manifested at an inherently escalating rate of ever greater sums of periodic interest on an ever greater sum of debt.
If it were a further availability of circulation which drove up the costs, then we would have more money. On the contrary, the circulation is disappearing, just as the article argues, because so much is being paid out of circulation, that we are even running up against the limits of prospective effectiveness for artificially *replenishing* the circulation.
Hi Mike, i am certainly not discounting your argument, i agree totally with your opinion of the debt. i was disagreeing with taking an "exclusive" view on it. it is all debt in one sense or another whether new or old. to me, it is simply not enough underlying value. houses are a good example and a good metaphor for the whole economy, they simply were not worth that much. the economy is the same, it is only worth what it is worth, no matter what we try to do to overvalue it.
Posted By: Walt Thiessen
Date: 2008-12-28 07:35:01
I guess by your analysis, then, a large portion of the population simply went mad all at once and engaged in massively foolish behavior all at the same time. Too bad you have no cogent explanation as to why this occurred.
Based upon your assumptions, taken from your website, you state the vital circulations of monetary systems subjected to interest must maintain such circulations which are comprised of the principle amount of the debt, but that these are perpetually deflated by servicing those obligations which are comprised of both principle and interest. However, then you go on to say that the vital circulations are sustained only through the perpetual “re-borrowing” of principle and interest as subsequent sums of debt. Thus, it appears that , in one statement you state that this debt is only being serviced through the act of “re-borrowing” principle and interest, thus it is little more than a continual debt swap which amounts to little more than yet another “ponzi” scheme where old debt is swapped for new, thus we have a continual multiplication of debt. However, you also apparently believe that the general circulation of currency is diminished by servicing the debt that appears to be serviced through the process of what amounts to a continual refinance.
While it is completely understandable to have commercial debt siphoning off viability when there arises a situation, as we are now seeing, where the level of debt within the commercial sector is extremely high, it appears that what we know as the “national debt” does not operate under the same parameters, at least according to your website. Now, prima materia debt under a fiat monetary system, whether that system is subjected to interest or not, is a very interesting and seemingly contradictory monetary enigma. Since all fiat money is a double liability and nothing more than a legal notification of a debt obligation, whether interest is accrued on that debt obligation or not. The basis of the grand debt standard of fiat money, regardless of the weight or lack thereof of interest, means that the prima materia debt can never be paid down or off since it is impossible to repay a debt with a debt obligation which action created both forms of debt. Thus we have a very interesting enigma, how to pay debt with a debt that created that debt in the first place.
Thus under normal circumstances, each Federal Reserve Fiat Note is borrowed into circulation through the purchasing of Treasury Bonds, which are themselves a form of Fiat Note, a debt obligation by government decree. Under this system, the Federal Reserve purchases those Bonds with yet another debt obligation, a “check” if you will drawn on a Federal Reserve Bank account that contains absolutely zero in terms of money as we know it. Now, we are seeing extraordinary times in which the Federal Reserve appears to be stepping outside the normal creation process of fiat instruments. Eventually, it appears that instead of relying upon external credit, the Federal Reserve will issue its own very specific debt instruments, thus creating money that does not follow the normal path of monetary injection into circulation. It also appears to be taking steps toward a very dramatic form of Quantitative Easing to inject liquidity into the economic system. These steps are substantially different than the normal processes of fiat monetary creation and quite outside the customary form of debt that is accumulated through such processes.
Based on the artificial manipulation of the business cycle, what we are seeing is the first stages of the conclusion of yet another disinflation cycle following the inflation cycle, commonly called a boom. At this point however, we have yet to see a consistent deflationary event across the board in all economic sectors, in fact based on flawed government CPI figures there is still an inflationary rate of approximately 5.9% in pricing levels, including the highest being food and the lowest being energy.
Based on your assumptions, you state that inflation nor hyperinflation can be truly said to be causative because, according to your assumption both are absent. However, it appears that you equate symptomatic inflation in pricing with a lack of monetary inflation; in such a case your premise that there is no inflation ignores the fact that there has been a massive monetary inflationary pressure that is currently being accumulated outside the parameters of normal fiat debt creation.
If also appears that you totally ignore the mechanics of hyperinflation, which is not a singular monetary event that is isolated to the money supply but it is also a psychological event that occurs primarily, at least in 95% of historic cases, during deepening deflationary slumps. Hyperinflation, unlike either inflation or deflation, is not primarily a linear mathematical formation of simply a drastic increase of the fiat money supply. In fact, during a hyperinflationary event something extremely strange occurs, money disappears from circulation, consequently prices begin to increase far more rapidly than the ability of the issuing authority to place money into circulation. This is something that you cannot address in your assumptions since it does not follow your original premise or the linear consequences of your mathematical formulas. It is, in essence, a circular equation without an exit in the normal understanding of a solution. Hyperinflation is a non-predictable event that includes an almost incalculable number of variables, a conclusion that cannot be formulated by general mathematical or even economic premises.
Hyperinflation is definitely not a present cause since hyperinflation is an event and not causative in nature, it is the result of several factors, as I stated. While it is predictive to estimate inflation or deflation by the expansion or contraction of the money supply the same cannot be said of hyperinflation. Hyperinflation is a horse of a very different color when it comes to causative factors within the general economy and the society as a whole.
At the moment, as you stated a “starvation in circulation” there is however, not a starvation of money; in fact there is a massive “dollar-overhang” currently accumulating globally, not only in terms of domestic dollars but also in euro-dollars. It appears that there is, as usually occurs during deepening deflationary slumps, a dollar hoarding taking place, particularly in terms of Treasuries. This, along with the massive moves by the Federal Reserve and our Treasury to implement Quantitative Easing, along with the possibility that the Federal Reserve has engaged in issuing its own debt, with or most likely without Congressional approval, points to the real danger of either a steep inflationary depression or a hyperinflationary event as the hoarded dollar overhang is released into circulation along with the measures taken by the Federal Reserve. Remember, the Federal Reserve is operating outside the normal monetary creation process through the issuance of debt. There in is the danger, particularly if this government takes the path, that many governments have taken in the past, to inflate the debt away. As usual, this follows the path of destruction that most fiat monetary systems travel toward collapse and the consequential destruction of the society that depends upon that fiat monetary system.
Thus, it is not the increasing circulation which actually causes failure, but a combination of factors that, unfortunately, you completely ignore both in this article and on your website.
good comment republicae. it is very complicated. and i think walt is right, "did they all go mad at once?" Seems to me the entire fiat system was instituted to ignore debt? So Mike are you saying, a system that uses debt to belittle debt, by increasing circulation, will meet its demise through lack of circulation?
You need to learn to write better. Your article has good content but is too verbose. I could only ready it while omitting unnecessary words. You're intelligent. Why exaggerate?
Posted By: mike montagne
Date: 2008-12-28 12:13:47
gene,
I fully agree that the costs of homes are artificially inflated. In fact, I'm explaining the different forces which artificially drive them upward.
Foremost among those is the artificial multiplication of indebtedness, as this process is irreversible so long as we maintain a vital circulation by the perpetually further borrowing. The costs of all things affected are forever driven upward by this artificial multiplication, until of course we can no longer afford the rising prices necessary to sustain industrial margins of solubility, and the system collapses under terminal sums of debt.
In the case of homes, you have costs of interest which, in the attempt to recoup those costs, former owners, selling homes, tend to exploit the market to whatever degree "the banks" are willing to finance -- and the upper limit of that of course is whatever the subsequent debtor can afford to service. The result of all this then is artificial inflation of costs -- all of it driven by events and circumstances existing solely under the influence of interest.
Understanding that, we can readily solve the problem. What would a $100,000 home with a 100-year lifespan cost in an economy perfected of inflation and deflation, or multiplication of debt by interest?
It would cost $1,000 per year or $83.33 per month (overall) under a mathematically perfected economy™, because only a schedule of payment equal to the value and lifespan of the subject property or related debt maintain a circulation which at all times is equal to the remaining value of the wealth it represents.
Obviously then, it is impossible to solve inflation and deflation when a currency is subject to interest, because more must be paid out of the circulation than the original value of the financed property.
What we really have in a central banking system is a situation where the central bankers pretend to be the creditor. The real creditor is the owner or producer of the financed property, because it is they who accept a promise to pay from the debtor; and it is the rest of us who therefore accept the purported integrity of this promise as circulation.
Of course, we can only be served by that promise if its value is maintained. So this imposed arrangement of the central banker, because it destroys the integrity of that promise by perpetually multiplying debt in proportion to the circulation, itself destroys the utilizable value of money, because it dedicates ever more of the circulation to servicing debt, versus representing the wealth we ourselves would intend for a circulation to perpetually represent. This multiplication of debt into terminal debt, together with the resultant dedication of ever more of every dollar to servicing debt, versus sustaining the value of "the money," is what is wrong with the world's imposed central banking systems.
Increasing costs are inherent to the obfuscated nature of those currencies; and when we realize that we are tolerating these so called central banks to publish our promises to pay for the express purpose of collecting interest on a principle which in fact denies the real creditor what they claim is "justified" interest... not only do the whole injustice and impropriety of that imposed system become clear... we understand clearly that to avoid these injustices, all we have to do is solve inflation, deflation, and inherent multiplication of debt by interest, by restoring to debtors the right to issue their own promises to pay; and thus ensuring the real creditors that they are paid in a substance which not only will retain its value throughout the lifespan of the circulation, but will avert eventual monetary failure by artificial multiplication of debt.
The latter of course exists only as a vehicle of exploitation.
Posted By: mike montagne
Date: 2008-12-28 12:44:01
: Walt Thiessen,
"I guess by your analysis, then, a large portion of the population simply went mad all at once and engaged in massively foolish behavior all at the same time. Too bad you have no cogent explanation as to why this occurred."
No one said that of course, so your retort is mere intended sarcasm, and is taken as a lack of bona fide argument.
In fact, on the contrary, I explained how it is impossible to maintain a vital circulation without further borrowing; and furthermore, how this further borrowing inherently escalates the rate of multiplication of debt, which nonetheless results in such terminal sums of debt as is our present experience.
On the contrary, as a Ron Paul supporter and advocate of the unqualified thesis that our problem is "creating money out of thin air," you, like G. Edward Griffin, have failed to demonstrate a) either how it is possible to maintain a vital circulation subject to interest without perpetually multiplying debt in proportion to the circulation (as interest and principal are inevitably borrowed back into circulation as subsequent sums of debt, perpetually increased so much as periodic interest); and b) that costlessness of tokens of wealth is in fact any adversity/liability at all.
So demonstrate those points. Where is their proof/theorem (versus mere claim) ?
As I've explained several ways already on this one page, the only way it is possible not to multiply debt in proportion to a circulation is eradication of interest, because it is the interest which you have to perpetually re-borrow to maintain a circulation which is vital from the very initiation of such a system, merely to continue to service obligations which exceed the original circulation (principal).
So, *AGAIN* that's the cogent explanation why and how so much debt has been engendered as a consequence of interest. People went mad when they tolerated the imposition of the system.
Actually, if you claim not to understand that (or to be able to refute that), I frankly don't believe you. Instead, I think you're indirectly defending the opposing proposition of Mr. Paul, who advocates *further ["competing"] banks*!
Obviously, if interest inherently and irreversibly multiplies debt in proportion to a vital circulation, the higher rates of interest Mr. Paul *also* advocates would only escalate the collapse (because higher rates of interest multiply the sum of debt at a faster rate, even if we *only* maintain a vital circulation -- as opposed to suffering circulatory inflation, as he constantly claims, without accounting for the perpetually deflationary aspect of all the accumulated debt [which has left us in "a credit crisis"; i.e. starved for circulation]).
We only have to look to Hayek for Pauls reasoning (unless Mr. Paul wants to state and qualify the benefits of his further banks), for von Hayek, God of the Austrians himself aspires to maintain such banks for reasons he clearly confesses:
"I am more convinced than ever that if we ever again are going to have a decent money, it will not come from government: it will be issued by private enterprise, because providing the public with good money which it can trust and use can not only be an extremely profitable business..."
(See his speech, "A Free-Market Monetary System.")
So, by "free markets," the Austrians, Mr. Paul inclusive, mean markets subject to usury -- and I assert therefore with no sarcasm whatsoever, that this is why Mr. Paul refuses to debate this proposition of inherent multiplication of debt by interest, and why, being a supporter of Mr. Paul, you are offended by exposure of this matter.
As to why you intend to preserve interest beyond von Hayek's confession, I cannot say.
But not only do I stand by my arguments that interest inherently multiplies debt into terminal debt, I invite you to examine the source code of the models I furnished the Reagan Administration, which not only accurately forecast the accumulation of debt to now (from then), but projected then a collapse of the U.S. economy under terminal sums of debt at approximately 2010 AD.
Of course, as you'll see when you examine the source code, the principle of the models is simply to re-borrow interest at prescribed rates, necessary to maintain targeted circulations.
If that isn't a cogent and accountable explanation Mr. Thiessen, what is?
Posted By: mike montagne
Date: 2008-12-28 13:07:54
Republicae,
Until you can and have disproven that a circulation subject to interest inherently multiplies debt in proportion to a vital circulation, then on the contrary, it is you who in your mere 15 minutes have not accounted for the cause of the so-called cycles.
If you had studied my website at all in fact (among your further mis-statements), nowhere do you find I claim/explain/assert that federal/public debt is generated by the same process. In fact, quite to the contrary, I explain not only how federal debt accumulates as a related consequence of artificial multiplication of debt upon the private sector in its perpetual obligation to maintain a vital circulation; I further have accounted for 40 years how it is this multiplication of debt which infringes on our capacity to sustain public (government) costs (which too are inflated by artificial multiplication of debt); and yet that ultimately, "artificial sustension" becomes the only remaining way of replenishing a circulation, when in fact the private sector becomes so marginalized by the multiplication of indebtedness that its compromised credit-worthiness makes it impossible to borrow further, as would otherwise maintain a vital circulation. Federal overspending in the end, becomes one of the few remaining recourses for sustaining the circulation.
You simply claim in ignoring this proces of inherent multiplication of debt, that you have accounted for or sufficiently disavowed the consequences of the inherent multiplication of debt.
As much as you claim circulatory inflation in the unqualified pattern of Mr. Paul however, the present "credit crisis" is an instance of deficient circulation, in which, just as I have explained, compromised/exceeded credit-worthiness of the private sector has made it impossible to sustain a vital circulation.
The people don't have money, republicae; and so, contrary to your spurious claims that additional circulation *more than replensihes the perpetual deflation of the circulation comprised of servicing debt, and particularly contrary to your own *assumption* that additions to the circulation result in increases in the circulation even against this perpetual, deflationary process I have explained, if anything you have claimed accounted for the circulatory inflation you claim, it more than compensates for how much we are paying *out* of the general circulation.
Moreover, if that were the case, we'd actually *have* more money, rather than less. So no fact whatever stacks up to what you are trying to claim -- that we suffer circulatory inflation. On the contrary, the perpetual deflation I've described so carefully, so often, so thoroughly, and in so many ways, itself explains the vanished circulation.
After all, if you or gene, or Walt wer right, there wouldn't *be* a "credit crisis," would there!
I would like to challage all Mike's responders to download the spreadsheet presentations of Mathematic Perfect Economy and spend an evening using different variables in the equation, examine the cell formulas. By making several charts of different time periods, using different variables to correspond with the time period you can see the results of the graphs follow very closely what's actually happened with the economy. I venture to say, maybe it could be used to make some future projections.
I'd love to hear back if it has helped your understandings of Perfect Economy, it sure helped me.
Hi Mike, after reading your last response directed to me, i found it very informative. i think it is sound reasoning, but don't understand why it would be "exclusive" reasoning? and aren't we still talking about the same thing, the disconnect between the medium of exchange and the underlying value? And if we do indeed have less money than say three years ago[i am not up on the numbers] is this not due to loss of monetary value of assets and inability to produce debt from this, or is it less actual currency?
Posted By: mike montagne
Date: 2008-12-28 14:16:00
gene,
Well thank you.
It's not clear what you mean by "exclusive reasoning." But yes, absolutely -- we're talking not only a disconnect between a medium which *is not* a medium of exchange, but which instead is a vehicle of exploitation, taking ever greater sums of unearned profit from the unassenting subjects of the system by inherent, irreversible multiplication of debt; we're also talking about an inherent revisory dedication of the circulation to servicing debt, which drives up the cost of all subject production, and leaves ever less of the circulation to sustain the industry/commerce which is obliged to do so.
So, rather than Bon's wish the explanation be less verbose, these in fact are all factors which contribute to the overall picture, which we must resolve if we are going to punch our way out of this little paper bag. Crying that the money is created out of thin air not only means nothing -- it so oversimplifies the problem that we can't possibly understand a real solution.
What I've hoped for of course is not just to push Ron Paul's button, but to fight for real consensus on the problem, and on a real solution.
OK. So do we or do we not have less money?
Well, let's just evaluate that as best we can in real terms. Are we scrambling for the money we need, harder than ever? You bet. It's all the more difficult to meet ends. Is that because there is too much money? No. Can it be that too much money is driving up prices? A volume of money doesn't even have *a power* to do so. On the contrary, only *a process* has the power to do so; and the only process attached to money *is interest*.
OK, so if you downloaded the models I provided Reagan, which projected this *inevitable* collapse from 1983 numbers (25 years ago) by simply replicating this essential process of re-borrowing principal and interest as necessary to maintain a targeted circulation, you'll see that all of these things are consequences of the one fundamental process of such a currency -- which of course is inherent, irreversible multiplication of debt.
If you look around you with this understanding, what further do you see?
You'll see indeed that everything everyone is trying to do which will preserve this system, indeed requires borrowing further, with no way in sight how we're even going to service the additional debt, because we are *already* taxed to the limits by terminal sums of debt -- which of course, is why the curtain is falling.
Visit our pages (PEOPLE For Mathematically Perfected Economy™) and see my article, "If I Were President... How to arrest monetary collapse in a day and establish mathematically perfected economy™ in little longer," for a prescription of how to immediately convert a contemporary central banking system into mathematically perfected economy™.
Obviously, if our homes were immediately refinanced on the scale of $1,000 per year or $83.33 per month for every $100,000 of value and 100 years of lifespan, there shouldn't be any complaints from homeowners, or continuation of the so called housing collapse.
Steve Groves, I rarely comment on something that I have not read and throughly researched. Thanks, but I fully understand what is being said on the PMPE.
Ah, it looks as though I have touched a nerve based upon the tone of your response. Interesting.
Here I was thinking that it was up to you to prove your position, you certainly haven’t done it here or on your website. You have also failed or perhaps avoided the issues that I raised, instead you seek to bring your website, your experience and your premise to the forefront. Basically, you have failed to provide a rebuttal to my comments. Your comment here basically repeats the information on your site, but doesn’t answer the questions addressed to you regarding very important factors that call your premise into question.
Actually, you have not explained or proven much of anything Mike, on the contrary, you have made assumptions based upon a particular premise. I have not ignored the inherent multiplication of debt under a fiat monetary system where prima materia debt is the process of monetary creation. What I have questioned is the results of a premise that fails to address some essential questions regarding the very nature of a fiat monetary system.
Now, on to your premise that interest should be eliminated from the economy. First, I'm going to suggest you read the very substantial work entitled The History Of Interest Rates, 2000 B.C. To The Present by Sydney Homer. It is a very interesting volume that not only gives evidence of the necessity of interest in a market, but also shows that without interest there can be no effective incentive for the processes that create a productive market.
Also, I think you will find that your assumptions, particularly about gold specie, is less than correct. Indeed, while I agree that interest on a prima materia debt is corrosive to a fiat monetary system. There is no prima materia debt under a gold specie monetary system. Indeed, gold, being a double asset does not function in the same way, neither does the economy as under a fiat monetary system. There are substantial differences between the two systems, so many in fact, that your conclusions cannot address since your premise does not consider those differences.
Additionally, under a gold monetary system there is no interest attached to the monetary unit upon its creation, except when it is borrowed by individuals and businesses; interest therefore, in a free market performs a vital function that cannot be replaced and if forbidden as a function of the free market then you no longer will have a free market and it will have to be just as managed as the one we currently suffer under.
Interest rates, under a free market, serves other vital functions as well, it is a gage of economic health and an indicator that provides individuals and businesses with a timing mechanism for capital improvements, investments and purchases.
In order to forbid such interest, there would have to be a government mechanism that is just as intrusive as the current system and even worse, because the entire economy would not function on its own without the ability to determine the time preference of money.
There would be no capital production under an economy where interest is forbidden by the government. It sounds all nice and fuzzy to think that your would not have to pay for any money you borrow, but the problem is that unless you have the government as a single source lender no one would lend their money on an interest-free basis. The primary basis for all profit begins with accrued interest, it not only allows for economic growth, but proper economic growth when it operates within a free market unencumbered by government intervention. Are you then advocating such a massive degree of government intervention to accomplish your interest free utopia?
Thus it appears that you give an example of this interest free utopia sounds wonderful on paper, but the reality of its workability is simply as impossible as other Socialistic forms of economies.
“A $100,000 home with a 100 year lifespan would be paid for at the overall rate of $1000 per year or $83.33 per month; and the earning this alone would immediately free should we implement mathematically perfected economy immediately, reflect the degree to which we would prosper further, without any other improvement whatever.”
Wonder who would build those houses? Certainly not builders unless they were independently wealthy because under an interest free system of economics there would be no incentive whatsoever to lend. The only way that their would be lending is by government mandate or if the government was the lender. The only way for such a system to work is that it be forced by government decree, government enforcement and administration.
Now, based on the premise that fiat money spent directly into the economy instead of through the Federal Reserve and the fractional reserve system would solve many of the problems of a fiat monetary system is very naive at best. Facts show that there have been no successful fiat monetary systems that did not eventually succumb to inflation, since under such a system, there must be direct government control over the system and therefore indirectly over the markets. The plan has been tried time and again; each time there is no long term success and eventually inflation destroys the currency and the economy that depends upon it. Why? Because when you put the power of money making directly into the hands of any government there will always be a tendency for abuse.
You should definitely read Principles of Economics by Carl Menger, it will expose you to the principle of marginal utility that completely blows the PMPE out of the water, sorry, but it does and it was written over a hundred years ago. You should also read Capital and Interest by Eugen von Bohm-Bawerk, that should also be quite an eye-opener to you concerning the importance of interest in a free market society.
Now, here is another of your quotes: “We have in effect two conflicting philosophies. One wants earnings for its work equivalent to its work. The other wants unearned gain which can only be taken at the cost of earning equivalent to real work. We mature beyond the era of unearned gain. Like cannibalism, unearned monetary gain and all the manipulation which goes with it will one day disappear from history forever after.”
Also, for the substantial time I have spent researching your website, your premise and even some of your quotes I had a very strange feeling that I recognized many of the elements on your website and then it occurred to me that indeed the writing style, along with many of the ideas and even the quotes had an eerily similarity to a book that you might be familiar with: Karl Marx’s Das Capital. In fact, there are not only similarities in your writing styles and quotes, but even the idea of elimination of all interest in the economy has Marx written all over it.
'Usury centralizes money wealth, where the means of production are disjointed. It does not alter the mode of production but attaches itself to it as a parasite, and makes it miserable." Gosh Mike, that sounds like something you would say, in fact it is eerily similar to your quote I noted above, but it is Karl Marx.
In fact, if you like I could show more than a few of your ideas and quotes that appear to come for Marx.
“After all, if you or gene, or Walt wer right, there wouldn't *be* a "credit crisis," would there!”
I am not sure how you came to that conclusion, but like your premise and your mathematical equations on which you partially base your assumptions, you can, as numerous others before you, can make numbers do just about anything to support and “prove” a premise. Normally, those who do so at least use enough caution to call their premise theories. Thus far, I see nothing in your math or your assumptions that make me think you know anything about economics, monetary mechanics. Perhaps you should stick to software engineering.
While you are at it, your verbal and contextual construction on your website is horrendous, there is a complete lack of conciseness and as I said, it mimics the writing style of Karl Marx, but with even more vagueness.
Posted By: mike montagne
Date: 2008-12-28 22:52:51
Republicae,
Touched a nerve? I just got an email wondering what kind of medication you're on.
Thus it appears that you give an example of this interest free utopia sounds wonderful on paper, but the reality of its workability is simply as impossible as other Socialistic forms of economies.
YOU WRITE:
“A $100,000 home with a 100 year lifespan would be paid for at the overall rate of $1000 per year or $83.33 per month; and the earning this alone would immediately free should we implement mathematically perfected economy immediately, reflect the degree to which we would prosper further, without any other improvement whatever.”
Wonder who would build those houses?
If it's a $100,000 home, that what people *are* building them for.
THEN YOU WRITE:
You should definitely read Principles of Economics by Carl Menger, it will expose you to the principle of marginal utility that completely blows the PMPE out of the water, sorry, but it does and it was written over a hundred years ago.
All you do is trash talk. You later claim, evidently because of your mathematical ignorance, that mathematicians can make math say just about anything. You also claim to understand MPE.
But if you can refute it, then provide your invalidation. The mathematics you claim obfuscate the situation *merely pay off the resultant debt at the rate of depreciation. OF COURSE, THAT'S THE ONLY WAY IT IS POSSIBLE TO SOLVE INFLATION AND DEFLATION; AND ERADICATION OF INTEREST IS THE ONLY WAY TO AVERT COLLAPSE UNDER TERMINAL DEBT.
So, if you had an argument, you'd provide it.
Instead, converse to understanding anything, you prove why we are in the trouble we're in -- calling effective eradication of usury and restoration of the right to issue our promises to pay, "socialism"?
You don't even know what socialism is. Evidently, you only pretend an appreciation for freedom. But you obviously have too much free time on your hands!
Now, where is that proof how we would suffer a credit crisis, if interest didn't inherently and irreversibly multiply debt in proportion to a circulation?
Here's a couple of other tries to prove that assertion for you to ruminate on:
Posted By: mike montagne
Date: 2008-12-28 23:03:07
Republicae,
Aren't you the same socialist name-caller who complained that mathematically perfected economy™ would ruin rental markets because people would be able to own their own homes?
And aren't you the same socialist name-caller who claims three "axioms" (self evident truths) of "economics" -- one being the rate at which the value of money changes, even as devaluation is undesirable?
And you really don't think we can tell what field you're really in?
:-)
You crack me up, Victor. But you aren't kidding anyone.
First, let me say that I am not Victor and if you recall I rebutted Victor on the DP with the same zeal that I rebut you. I don’t hold to Victors Axiomatic crap anymore than I agree with your rerun of Marx’s Dialectic Materialism. Either of you miss or perhaps I should say ignore some extremely important economic principles.
I though one of your Socialist Youth might drop you a line to try to form a rebuttal, it is interesting how I caught on to that fact the moment I read his comments on the DP. I told him to stop mimicking you and provide me with actual answers based on his understanding. I suppose since your “adherent” is lacking of much understanding of his own that he had to continue relying on your guidance.
Thus it appears that you give an example of this interest free utopia sounds wonderful on paper, but the reality of its workability is simply as impossible as other Socialistic forms of economies.
Really trash, have you read Carl Menger? Actually, have you read any major works of economics? Have you read Capitalism by George Reisman? Have you read any substantial work of any economic school of thought or any of the theories, including those of the Classical, or even the Neo-Classical School?
Do you understand the economic and market functions of interest, apparently not because you want to do away with all interest. Tell me how your society would work, how the market would function, how businesses would make judgments for capital investments, for inventories, for hiring? How would your grand society work without interest? You should be able to provide a very detailed essay on that subject since you are espousing to remove all interest and the functions that interest plays from the economy.
Mike, fortunately, unlike your adherents, I do understand MPE; it would be just like you to confuse the difference between a lack of understanding with a lack of agreement. So, you are telling me that mathematics never lie, strange I can show you various areas of statistics, particularly those used by the government that are used to form public opinion based on how they manipulate mathematics to achieve a certain result. Oh, I think I have a pretty firm grasp of mathematical principles to understand that it can be a doubled edged sword in the right hands.
I am not nearly as concerned with your mathematical formulations as much as your Dialectic Ideology in economic and sociological terms.
On the contrary Mike, it is your argument that you must prove, that is the purpose of your website after all however you have, thus far offered no proofs. You have based your mathematical “findings” on certain suppositions. If your mathematical formula is indeed as predictive as you claim, should it not give intermediate indicators pointing to exact states at any given point on a time line? If so, then provide us with proofs regarding the exact measure of the state of decay at this moment.
You math, as I said, doesn’t bother me as much as the basis of your economic ideology. As I said, provide us all with details of a working economy, with all its intricacies without interest. Tell me how your economy would function without massive STATE intervention. I know that you call for yet another Fiat Currency, or Money by STATE Decree, so what functions do you envision for this Massive STATE Machinery as it manages your interest-free economy?
To enforce your interest-free economy you would have to put in place some pretty stringent laws, is that not true? You couldn’t allow a black market in lending after all. You ignore Private Contracts and would have to outlaw them to enforce an interest-free society, after all when I contract with another person for a loan I should be free to contract at terms that both I and the lending party agree with, should I not? So, you must support a STATE regime to enforce both Legal Tender Laws for your Fiat Money, a huge STATE apparatus to enforce and manage an interest-free society. Strange, it doesn’t sound much different than the STATE that others and I oppose.
You are a little quick to say that I don’t know what socialism is aren’t you Mike, is it in your nature to make such assumptions about a person you know nothing about? I think my writings speak for both my appreciation of Freedom and Liberty, along with the decades I have spent engaging the STATIST politicians from local, State and federal levels.
As far as my time, it is my own. I retired at age 34 after a very successful run in the business world, then reentered the corporate world and worked for two Fortune 100 Companies until I retired again at the age of 65. So, yes I do have a great deal of time on my hand and I use that time to oppose any and all policies and ideologies, including yours, that I see as a potential threat to the principles of the free-market, sound money, individual Liberty and Freedom and Constitutional Order.
You ask for proof, yet you have not provided proof that interest is the direct cause of this credit crisis; you have only made suppositions without actual evidence. Give us the actual evidence that you base your assumptions on with detailed examples within the actual economy together with a time-line that points to the degrees of that economic decay. Since you state you have proof you should be able to provide it in very explicit detail.
Have you wondered why economists and the politicians ignore you and your suggestions? None of them take you or your assumptions as potential solutions to any problem within this economy because you don’t offer a solution. You offer an ideology and at best, another theory.
Mike, how do you know that people haven’t refuted your premise, you wouldn’t accept it anyway would you? That does seem to be a common problem with ideologues such as yourself.
Posted By: mike montagne
Date: 2008-12-29 17:49:05
If you "succeeded" by trash talking all your way through life, we know what makes you tick; and we know that the only way you have ever ticked is at someone else's expense.
I have thoroughly explained over and over again how it is impossible even to maintain a circulation subject to interest without suffering perpetual multiplication of debt in proportion to the vital circulation.
The reason you can't disprove that, and the reason no one else has disproven that, is you can't account for how to maintain a circulation by any practical quantities sufficient to nullify inherent multiplication of debt by so much as periodic interest on an ever increasing sum of debt. In fact, by all your foul assertions, you demonstrate yourself quite incapable of even recognizing how to present a position in a credible way... so, you're 60-what... you can't spell, have terrible grammar, wouldn't recognize anyone who knew how to accomplish anything if you tried, and aren't about to try, because all you're "good" for is throwing around a few names and accusations which, if you had half a wit, you'd know you can't make stick. Why do you just say, "Either of you miss or perhaps I should say ignore some extremely important economic principles?" Because you don't have half the wit to name the first "ingored" principle. Why would anyone call freeing a market from exploitation, "Marxism?" Because they don't have half an hair brained argument that freedom is Marxism, or that the purportedly free market, which is a mere arena for you exploitation, is in fact free.
If it were free, why wouldn't people issue their own promises to pay? If it were free, why would a dozen private banks purposely call themselves "federal"? If it were free, why would those 12 private corporations create the money for free and charge us interest for it?
You come to my door the next time you want to call me a Marxist, and I'll show you what you're made of. You're just a troll.
You don't even recognize the difference between a refutation and a denial. At sixty-what?... you're just a little piece of gold who claims he hasn't read what he has, claims he has read the worthless stuff he probably hasn't, and, because he doesn't realize how anything works anyway thinks asserting there's a refutation, or that it just wouldn't be recognized, is so good as disproof.
If this were my forum, you'd be out of here, because I wouldn't want my readership having to wade through your pathetic, immature accusations on my site. Instructive is instructive. You're as negative and pathetic as both get.
If this were my forum, you'd have one chance to stay; and that would be to provide the disproof you allege exists, or I wouldn't recognize. I pointed you at examples of attempts to disprove mathematically perfected economy™. If you can prove there's any more than one solution for inflation and deflation, other than maintaining a circulation which at all times is equal to the wealth it is intended to represent, then where's your proof?
You don't have any, and any elementary mathematician in the world will realize you can't, because by definition there is no more than one solution to inflation and deflation (increases and decreases in circulation respectively).
Your one chance in other words, you would already have used up.
Where are your disproofs? Where's your further solution for inflation or deflation? What *exactly* makes mathematically perfected economy™ "Marxist"?
You've only said you know what that means. Now prove it, @$%@#$%.
Republicae, please say something constructive, have an original idea. You give references to other works on economics, but don't paraphrase the idea you are trying to support with your references much less even try to explain your own idea. Your calling people names to hide your own ignorance, please add something instructive or go away! Three cheers for Gene who has raised some interesting questions and for Mike well though out answers.
We need thinkers not Austrian psychics that can't use a spreadsheet. God save us from the Austrian sheep.
Posted By: mike montagne
Date: 2008-12-29 19:22:36
Amen to the end of Republicae.
Even by his own account he's been trolling for years, without producing his first proof yet. To assert Marxism... without even an idea how to make the label stick... and most obviously, to do so because he doesn't have a leg to stand on... wow... what a contributor... what an instructor. I mean, there are actually people out there who thing stuff like that is as good as what he's saying he has replied to?
Where's that proof, Republicae? Where is it?
What *good* business do you have, stinking up a discussion like you have?
I realize that you are hesitant in answering complex economic questions, nevertheless....
Let me continue to press you for answers to certain problems within a political economy and how your assumptions provide a solution to such problems. How do you suppose that anyone, whether it is an institutional lender, a small business extending credit, or anyone extending credit would be willing to voluntarily give up consumption [based on the money they have on hand] today in anticipation of consuming more [the money they receive for lending their money] in the future?
What would be the incentive for anyone to lend under such circumstances? You must have some idea. If there is no incentive how will the economy function, especially if that economy is based on a fiat monetary system even one that does not have an accrued interest attached to the creation of the paper specie? Have you considered productivity and the influence that interest has on it?
Now, in a free market, interest rates are not only determined like other prices through the interaction of supply and demand, but it also is a determinate factor in providing both present and future supply and demand along with a stimulus for productivity, a vital timing signal and risk evaluator. Without interest how will all those factors come into play in your “economy”?
It all boils down to what money is and how money acts within a given economy, questions that you don’t address because you can’t address such questions in your economic modeling. Money, particularly asset money, provides a store of both present and future economic energy therefore there is a definite time value and time preference to money. Now, based on your assumptions you take away elements of time value and time preference by the rejection of interest in your economic model, how will you account for the lack thereof and the effects such a lack will have on economic flows, both in active states of the market and in rest states of the market?
Think about savers, what incentive to they have in an interest free economy and if there is no interest what about investments which pay, in the form of dividends, a type of interest on the investor’s money based on corporate earnings, would those also be banned in your “perfect utopian economy”?
Concerning savings, when a person places money in savings what he is doing is transferring real current resources or at least the means to purchase current resources to a bank or other entity with the anticipation that his money will have just as much or more, due to the interest accrued on the savings account, more future purchasing power than when he deposited his money. How will your economy provide incentives for savings? Savings, by the way, especially in a sound monetary economy, are the backbone for capital production, without it how do you solve that problem?
The same is true of someone lending money, when someone is willing to transfer his funds in the form of a loan, the basis of that loan if the promise of the borrower of those current resources to return those resources to the lender at a future time; in an interest free economy, the lender would not be compensated from the time value of his money and therefore there would be absolutely no incentive for anyone to lend present resources that could be readily placed into economic service today for those same resources at a future date without an expression of time value on those funds. In this case you are saying that there is no need in an economy for either time value or time preferences that would be a major and massive hindrance for any economic movement or productivity.
You seem to miss the entire premise of lending, of time value, time preference and the productivity associated with lending using interest as a measure of future value and timed usage. The borrower assesses risk based on the rate of interest and a certain degree of faith in his ability to repay the loan. The borrower is using current resources of the lender in the belief that he will be able to produce future goods and or services to the extent that he will not only have enough to pay back the lender both principle and interest, but that he will, through the process and his business acumen also have a profit at the end of the process. How therefore, do you deal with the transfer of qualified demand in such cases?
If there is no incentive for such practices, and apparently under your “style” of economy such incentives would be banned by, I assume, law, how would there be a determination whether a person or lender should keep their resources to themselves for present productive activities from which they could profit instead of lending those resources for a future return with no profit whatsoever. I mean if I were a lender who could make a profit today within my money, why would I lend it for 1 year, 5 years, 10, 15, 20 or 30 years with no return at all on it?
How would the balances between savings, investment and capital production be achieved under your interest free economy? What mechanisms would you put into place to replace the vital role that interest plays between those balances?
Posted By: mike montagne
Date: 2008-12-29 19:44:45
You write:
"I realize that you are hesitant in answering complex economic questions, nevertheless...."
On the contrary, it is you who haven't answered *any* of the questions to any reasonable person's satisfaction -- and we know why.
Then you write:
"How do you suppose that anyone, whether it is an institutional lender, a small business extending credit, or anyone extending credit would be willing to voluntarily give up consumption [based on the money they have on hand] today in anticipation of consuming more [the money they receive for lending their money] in the future? What would be the incentive for anyone to lend under such circumstances? You must have some idea. "
Well you already read that idea, didn't you.
The answer is because they don't have to borrow money from a bank, which merely issues our promises to pay each other... etc. Read it again....
And since freeing ourselves from a central bank is... ahem... in your "opinion" and wisdom and so forth... "Marxism..." why would anyone give a damn what you have to say?
Now where's those proofs you've alleged I can't understand?
Furthermore, what is the vital role of interest? You merely allege one. What is it. How does it work? MOST OF ALL, HOW DOES IT NOT MULTIPLY DEBT IN PROPORTION TO THE VITAL CIRCULATION, UNTIL WE SUCCUMB TO THE PRESENT TERMINAL SUM OF DEBT?
You're a broken record, making unqualified assertions over and over again... evidently because you're just a troll.
Steve Groves...Oh, I haven't called names, I associated Mikes economics with those of Marx, there is a difference.
For instance when Mike states: "Free, unimpeded barter allowed people to produce to natural capacities, and to obtain for our own production whatever we deemed to be equal, undiminished measures of the production of others. Because no one takes from the trade anything but the equal of what they contribute to it, each party receives the full, self-determined equivalent of their contribution to the overall pool of their wealth."
Strange, but it certainly sounds like Marx’s Law of Value to me as in: “exchange cannot take place without equality, and equality not without commensurability”, and “ each his share in the part of the total product destined for individual consumption…the share of each individual producer in the means of subsistence is determined by his labour time", “"the proceeds of labor belong undiminished with equal right to all members of society.”
How about this: “the individual receives from the public store of consumer goods a corresponding quantity of products. After a deduction is made of the amount of labor which goes to the public fund, every worker, therefore, receives from society as much as he has given to it.”
Sorry, but it is not name calling, but simply the exposure of similarities between the “Mathematically Perfect Economy” and the Marxist Socialist Utopian Economy.
By the way, IGNORANCE is when you choose, for whatever reason, to ignore any and all evidence required to explore a subject to form an educated conclusion.
Posted By: mike montagne
Date: 2008-12-29 20:18:21
"You seem to miss the entire premise of lending, of time value, time preference and the productivity associated with lending using interest as a measure of future value and timed usage. The borrower assesses risk based on the rate of interest and a certain degree of faith in his ability to repay the loan. The borrower is using current resources of the lender in the belief that he will be able to produce future goods and or services to the extent that he will not only have enough to pay back the lender both principle and interest, but that he will, through the process and his business acumen also have a profit at the end of the process. How therefore, do you deal with the transfer of qualified demand in such cases?"
No, you miss the whole intended deception, either because you just can't perceive it, or because you're one of those golden citizens who has taken it upon his self to extinguish the last vestige of critical thinking at whatever the cost to the rest of us.
What you call a lender is not the real creditor at all. The real creditor accepts a promise to pay for whatever property they give up.
Now, under the system you promote as so good and valuable, all a central banking system does is intervene upon that natural relationship to deny the debtor the right to issue their own promise to pay, and to deny the real creditor any interest, which you only assert is necessary and valuable.
Moreover, the real creditor (who gives up the property to the debtor) doesn't require interest in either system because they receive payment in full from the outset. So your assertions are just rubbish, designed to conceal the real facts so that a system of exploitation can be imposed.
In what you argue for, the central bank merely issues/publishes our promises to pay; and it does so at virtually no cost to itself. Our promises to pay *each other*, which it issues at virtually no cost to itself, therefore do *not* represent earned wealth or title, which is at risk or which justifies interest, especially because as soon as the central bank collects the negligible publishing costs, they have broken even.
Furthermore, the obfuscation of the natural relationship imposes upon the subjects of the system, a need to maintain a vital circulation against a deflationary obligation which exceeds the circulation. That is, in being obligated to pay principal and interest out of the general circulation (comprised only of the principle), they must borrow further to maintain the vital circulation, so that they can continue to service their original debts. So, as we have said countless times already, they must borrow principal and interest back, which of course increases the sum of debt so much as periodic interest on an ever increasing sum of debt.
So there is no product or service whatever provided. We've already explained to you that inflation and deflation are solved only by maintaining a circulation which at all times is equal to the remaining value of the related wealth. The "money" in fact is created for free. Nothing is at risk. Nothing justifies interest. In fact, the system you say is justified *deprives* the real creditor of interest -- proving that they don't need it, especially as they are paid in full from the outset. And you would still like your teeth handed to you through the backside of your head.
Now if you can't understand that, or if you think the *actual* obligation to replenish the circulation is merely "theoretical" (even as this is just the rate at which we have irreversibly accumulated a terminal sum of debt), or if you pathology "somehow" limits you in some way that you can only consider solution of this purposed obuscation, Marxism, that's just the way your kookies crumble, isn't it.
But in summary then, not only are you just a name caller, and not only do you choose the filthiest names because your arguments are equally unqualified and foul, all your assertions are merely lies, however often repeated from the exploiters who wrote them.
Freeing the people of imposed usury is not Marxism. Period.
And after we do that (and we will do that), I hope you're so (equally) incautious as to stand up and shout those lies again in public.
After all, if you could make them stand, you (or someone else in 30-40 years) would already have produced that proof which you don't even dare cite, after visiting my pages dedicated to the few pathetic tries.
Yours?
It doesn't merit publishing -- AT LEAST because you haven't even PRESENTED IT YET. I've already received several mails wondering what's wrong with NC, that swell, intelligent leader type folks like you can use the place to assert that mathematically perfected economy™ is Marxism.
I mean, while you troll away so pathetically, where is the definition you're so confident of, that solving inflation, deflation, systemic manipulation of the cost or value of money or property, and inherent, irreversible, and terminal multiplication of debt in proportion to a circulation, is "Marxism"?
How many times do I have to ask about your ad hominems? Where is the definition that fits?
That's simple stuff, dude. Cough it up. Where's the fitting definition?
How many times are you going to choke on that one?
Posted By: mike montagne
Date: 2008-12-29 20:25:16
AND NOW YOU'RE TELLING US WE SHOULD *NOT* BE ABLE TO EXPECT TO TRADE WITHOUT EXPLOITATION, JUST BECAUSE MARX *MAY* HAVE SAID SO TOO?
I bet you can dredge up a quote from almost every founding father -- including Hamilton -- who argued for the same thing.
And they were "Marxists"?
That's as lowly a pretended definition as pretension gets.
As to your definition of ignorance, "IGNORANCE is when you choose, for whatever reason, to ignore any and all evidence required to explore a subject to form an educated conclusion," you err as well, for "education" can mean to absorb mere dogma without critical thing -- thus of course, preventing *an intelligent* conclusion.
Posted By: mike montagne
Date: 2008-12-29 20:35:39
And thus to your further discredit, you claimed much earlier, "Thanks, but I fully understand what is being said on the PMPE."
Now, why would you ask ANY of these questions if you "thoroughly understand" what is being said on our pages?
There isn't any doubt you're using terms such as Marxism and Socialism because you don't have arguments. Mathematically perfected economy™ isn't Marxism. Marx didn't set the people free from usurers, arguing to restore to them their right to issue their own promises to pay. Marx may have decried usury, but that doesn't mean that he identified or solved a process which inherently multiplied debt in proportion to a vital circulation. Thomas Jefferson cam close to that; and he certainly wasn't a Marxist -- even if the likes of you would call him one.
So you're name calling, because that's all you've got.
As I said Mike, this is your article, as well as your economic and monetary assumptions. It is you who have put these assumptions on a public forum and should be prepared to defend those assumptions with definitive answers, thus far you have failed to provide any definitive answers.
"The answer is because they don't have to borrow money from a bank, which merely issues our promises to pay each other... etc. Read it again"....
That answers none of those questions; you are only providing an apparent alternative in the form of certificate exchange in the form of a promise. What enforcement mechanisms to you purpose for the abbreviation of such promises? You have not given any mechanisms of how those promises work throughout the economic productive ladder. For instance, will a man who makes a widget be able to wait until the person he sells it to sell the gadget he makes to another person while he also waits on a promise of payment from the guy he bought the widget from? Then you must go on an on, up the production ladder of exchange. What gives any of them the incentive to wait for payment that could be months or longer in coming? Who would the first guy who sold his widget get operating capital to continue making his widgets when it takes months on end to get payment on those he sold on the issuance of a promise?
You have not given any proofs or provided any of us with any information that closely resembles definitive answers on how your Mathematically Perfect Economy would actually work.
Now, if you cannot answer the questions about interest and how it functions within an economy then how can you say that I only allege a role. You have not been able to answer those questions for the very simple reason that you have no answers that would purpose a solution in your “perfect economy” Therefore you seek, once again, to divert attention away from that to a theory that you have yet to prove concerning the multiplication of debt, you have only provided spread sheets that show a variety of mathematical possibilities, but no proofs. Therefore, you only provide a theory based upon your assumptions, but nothing else.
Ah, the old call him a troll trick…that works every time when someone is forced to avoid answering pertinent questions regarding a supposition he is putting forth in public view. Remember, this is your chance to defend your positions and frankly you are doing a pitiful job of it.
I am asking you the same thing…where are the proofs of your position that you have voluntarily placed on this forum. I am not defending my positions, I am asking you for your defenses based on your assumptions and the economy model you purpose through those assumptions.
You have yet to answer a single question brought to you, why is that?
As I said Mike, I am pointing out that there are similarities between your assumptions and how you express those assumptions and the economic philosophy of Karl Marx and the various Socialistic elements that arose from Marxism.
If you don’t know the reason why someone would ask questions then you don’t know the basic principles of critique. I ask questions regarding these issues because you do not address them in your assumptions. I ask the questions I do because I do understand your premise and have followed your website for a substantial time, I have watched your progression on that site. So, it is not that I have no understanding of your premise and the assumption that you base your perfect economy on, it is that I disagree with a great deal of it and therefore I am asking you questions regarding the numerous deficiencies I see in your premise and assumptions.
Posted By: Jake, the champion of the constitution
Date: 2008-12-30 03:11:32
whoa, there are far too many words over 4 letters in this comment stream for my pea-sized "Austrian sheep" brain (thanks Steve, that comment was pretty funny, I think its a new breed!), perhaps everyone needs to take a step backwards this 4-min video from Duck Tales Economics
http://www.youtube.com/watch?v=t_LWQQrpSc4
Dear Mike -
the idea of your economy is exactly what Alan Greenspan (the Road to RootA) and Friedman. Economics, unfortunately, is not just math dude. I recommend reading the 40-page intro to this book from Dr Salerno. Good luck peddling your perfect economy. And Austrians dont strive for perfection, just practicality and honesty
Posted By: mike montagne
Date: 2008-12-30 10:51:30
Jake,
You should read Hayek if you're an Austrian. You'll find out you're right: they don't peddle solution; they (Ron Paul at least) want to remove the present banks, only to become further member banks, with the power to issue such a currency. That's hardly "honest money" or honesty at large. For how is it honest at all to evade debate how "gold" for instance can arrest multiplication of debt by interest -- something which the Austrians (and you) simply advocate, and even advocate higher rates thereof.
Oh sure, the Austrians disallow mathematic analysis as you have. So you're indeed a fine example of an Austrian "economist." Math just doesn't count. Somehow, though you advocate a mathematic process... like blithering Republicae, no matter how many times you are explained that it is impossible even to maintain a circulation subject to interest without re-borrowing principal and interest... which of course perpetually increases the sum of debt in proportion to the obligated circulation... well that's just stupid to you, because "honesty" is advocating dissolution of one bank, to set up the same process magnified in others... and honesty is not even having to account for that.
Honesty is calling solution Marxism, or simply asserting what is mathematical, is not.
Which is why the answer won't ever be raised at Nolan Chart, because here, the aptitude for solution (or denial of the problem?) is so mundane, and of such mere assumed substance, that you can also assert without question or complaint from the readership, that what one pathetic appellant claims is Marxism, is equally valid for you to claim is "exactly what Alan Greenspan (the Road to RootA) and Friedman..." and the rest of your sentence was?
Oh, so Greenspan and Friedman's principal argument was eradication of interest? Since when?
You've just helped Republicae prove his own principle of ignorance again.
As it is for your pal who claims to understand the proposition of mathematically perfected economy™ (hundreds of articles of which answer all his questions -- and he knows that, but, while failing to answer any questions himself, he asserts Marxism and socialism... because he can't even use or refute a spreadsheet which itself provides all the answers he'd find in the hundreds of articles he claims already to understand)... you need to turn that pea brain on, for it to be worth a pea.
Posted By: Jake, the champion of the constitution
Date: 2008-12-30 17:58:32
Dear mike montagne,
hehe, you are pretty funny. Your website is blocked by the Chinese firewall, feel free to send any files to my email below to prove your point. I haven't read Hayek intensively yet, but from what I have seen so far, I already am aware I will have a lot of disagreements.
You took my "math" comment the wrong way. I am not surprised. In no way am I disparaging the use of mathematics to make sense of all this, just the blindness to being able to blindly calculate human action which is what the Keynesian/Monetarist schools overlooked to their, well, detriment - just look at the financial system right now.
Speaking of which, have you read Mises's "Human Action"? I am not saying its the bible or anything, but he certainly a clear point that economies function as a result of human action, not some giant mathmatical brain.
As far as interest goes, how would you reply to Rothbard's balance sheet demonstration here in chapters "Loan Banking" and "Deposit Banking"
http://mises.org/books/fed.pdf
I challenge you to "raise the answer" here at the NC. This article failed pretty badly. Perhaps rephrase?? use simpler language?? you dont need to prove to me you are intelligent, and I wont belittle your brain as you did mine. (OK I DID send you a Duck Tales clip, but its kind of a nice explanation for hyperinflation, isnt it?) :) In the end, we are both searching for the answers, so in a way, same team, same team!
I wouldnt be so careless as to callously disregard Republicae's statements, but that's up to you. And remember, we are pushing for ideas and open discourse, it seems you are a little tied in to this mathematically perfect economy. Good luck.
Prior to Montange’s wacked out responses on the Daily Paul, I judged his assumptions based on logic and accuracy, both proved deficient however, once he exhibited his complete and absolute lack of self-control I now must judge him by his lack of character and prudence on top of all that, he objects and rejects any other possibilities other than his own dogma. He has constructed a box that appears to now restrict his ability for any further exploration, how utterly sad. He is in conflict to any and all who even question his "theories", if indeed you could even call them that. Any man who could exhibit such a high degree of insufficient self-discipline should always be questioned as to his actual motives and the soundness of his concepts.
In his own words, he spews the inner vile of his debased character; it is that character that calls into question his stability. Below is how he reacted on the Daily Paul, he certainly didn’t come across on the Daily Paul as a person that anyone would listen to after allowing his undisciplined and unbridled tongue to get the best of him. When he went on this childish tirade, he made me feel embarrassed for him, though he should have rightly been embarrassed by himself and his juvenile behavior. This is how he alienates those who even question his concepts, get a load of this insane outburst:
"STILL, YOU'RE THE LAST FOLKS ON EARTH WHO *REALLY* WANT A RETURN TO "CONSTITUTIONAL" "MONEY," BECAUSE FOLKS WHO CAN READ KNOW WHAT "THEIR" GOLD WILL BE "WORTH" THEN!!!GREAT JOB. KUDOS TO ALL OF YOU. WHAT A SORRY BUNCH YOU ARE.Cheers to all you HYPOCRITES, DULLARDS, AND YOUR IDIOCRISY! ANYONE WHO FALLS FOR THESE CHEAP SHOTS IS A TESTAMENT TO A COUNTRY WHICH CAN ONLY DESTROY ITSELF."mike montagne -- founder of PEOPLE For Mathematically Perfected Economy, and author of mathematically perfected economy (1979)
"YOU'RE SO FULL OF IT, IT'S PATHETIC.CALCULATION IMPOSSIBLE? You can't even have a consistent value of money subject to interest, if interest multiplies debt (which is evident everywhere around YOU [YOU DUMB SOB!!!]), BECAUSE *OF COURSE* THAT MEANS THAT A GIVEN CIRCULATION IS GOING TO BE DEDICATED EVER MORESO TO SERVICING DEBT.YOU OBVIOUSLY DON'T CALCULATE FOR THAT IF YOU DENY THE PHENOMENON EXISTS!!!!HA! YOU'RE PATHETIC!!!SO ARE THE REST OF YOU (SAVE A FEW WHO HAVE MORE INTELLECT AND GONADS).MARK MY WORDS: THERE WILL BE PEOPLE WHO SOME DAY SOON LOOK AT WHAT'S GOING ON RIGHT HERE AND SHAKE THEIR HEADS IN DISGUST FOR THE LOWLINESS HERE.MARK MY WORDS."mike montagne -- founder of PEOPLE For Mathematically Perfected Economy, and author of mathematically perfected economy (1979)
"YOU HAVE THE GALL TO QUOTE SUMNER, KNOWING FULL WELL THE SYSTEM YOU'RE ADVOCATING WAS IMPOSED UPON US BY LIES LIKE YOURS? BY BETRAYAL OF THE VERY PARTY PLATFORM?HEY, WHAT DO YOU FOLKS HERE HAVE AGAINST THE SO CALLED FEDERAL RESERVE SYSTEM IF YOU DENY ITS ONLY POWER TO DESTROY YOU???OH... THAT'S A BAD/OFFENSIVE QUESTION???YOU FOLKS ARE JOKES!!! HYPOCRITES!!! SCUM!!!PATHETIC!!!!!"mike montagne -- founder of PEOPLE For Mathematically Perfected Economy, and author of mathematically perfected economy (1979)
As you can also see, aside from his uncontrollable juvenile emotionalism, he doesn’t understand Austrian Economics when he blithely declares that they disallow mathematical analysis that is not true, they believe that it plays a role, but not the primary role in the field of economics. To prove that all you need do is look at the some of the mathematical concepts expressed in Austrian Economy Theory. The difference is that Austrian Economist understands that it is virtually impossible for any mathematical equation or complex algorithm to determine or calculate the intricacies of the trillions of spit second decisions made by humans as they act in their own self-interest.
If it were true that economics should be mathematically predictable then we would all live in a very efficient economy without booms and bust and panics, without recessions or depressions. The most complex mathematical algorithms that are employed and have been employed by government economists for years have not been able to predict economic movements. The most sophisticated computers that government money can buy are used in such mathematical algorithms that focus on the Finite-Sample Accuracy of Nonparametric Resampling Algorithms for Economic Time Series, Computationally Efficient Algorithm for Imposing the Saddle Point Property in Dynamic Models, Accelerating Non Linear Perfect Foresight Model Solution by Exploiting the Steady State Linearization, Symbolic Algebra Programming for Analyzing the Long Run Dynamics of Economic Models: An Investigation of Overlapping Generations Models, Exploring Dynamic Properties of Nonlinear Economic Models Through Asymptotic Linearization, Continuous Time Application of the Anderson-Moore (AIM) Algorithm for Imposing the Saddle Point Property in Dynamic Models, and many, many more and yet they still cannot get it right. Would you like for me to list even more mathematical modeling systems that this government and economist use to predict economic movements?
Of course, Montagne has the perfect mathematical modeling tool: an Excel Spreadsheet. Mathematically Perfect; doubtful in the extreme! Montagne advocates a "public" bank, which is nothing more than another government bank, which will mandatory confiscation half of people's income for a government savings program.
Strangely, he thinks that we want and need even more government intervention and intrusions into our lives: Another interesting thing on your website was this little STATIST ditty, chew really good on this folks:
“In obligating the savings of half of earnings across a usual adult lifespan, half of which is worked, savings would sustain a person throughout retired years at the same standard of living they maintained while working.” Mike Montagne
“Optimally, a singular public banking system running under official authority of government can largely be a software process in which a person's income is automatically deposited and managed. That is, automated processes can certify credit-worthiness, pay debts, manage savings, and deduct negligible service fees to cover the costs of administration.” Mike Montagne
Mandatory savings hey? Hmmmm…..so, Montagne would replace one mandatory government enforce with another. How about just individual responsibility, ever thought about that as a solution in a free market, which would definitely operate very differently than another highly managed economic model. It would have to be extremely managed by government in order to work, would it not? I mean you would have to legally ban interest; you would force mandatory savings of half a persons income.
Montagne would have to have some government or pseudo-central bank to make the economy function without interest regulating the markets. Montagne is actually calling for such a managed economy, it certainly doesn’t sound like free markets or freedom for that matter. It sounds like Montagne’s calling for some massive official apparatus to achieve his so-called perfect economy. Sorry, that is contrary to all that we are fighting for in this country.
Of course, as you also see Montagne also continues to repeat the same line over and over and over again, and his blind followers do exactly the same thing in the same way as he does. He believes, or so it seems, that the system is a closed system and obviously doesn’t even understand the principle of monetary fungibility, nor does he seem to understand fixed capital verses circulating capital. Of course, what should we expect from someone who doesn’t even believe in the forces of supply and demand that drive economic movements? It appears that he believes the national debt is simply a big bundle setting somewhere up in Washington DC, and doesn’t appear to recognize that it is circulating through trade each and every day throughout the world.
The total public debt of the United States is not a static debt, but is traded within primary and secondary markets and is owned by States, Corporations, Individuals and Foreign Governments. Some of the debt is even Intra-governmental debt obligations where one agency owes another, and then there is the Social Security Trust Fund which is also accounted in the debt as an asset (empty asset). So, what is the national debt made up of? Well, it should be apparent that it is made up of Treasury Bills, Treasury Notes, Treasury Bonds, TIPS and Savings Bonds, etc. How do these securities work, certainly not like normal debt that you and I would normally associate with the word debt? The national debt is a dual monetary instrument that is both a debt and an asset.
Montagne does seem to take many factors into consideration when making his assumptions on his Excel Spreadsheets, such as the fact that The Public Debt Outstanding decreases when there are more redemptions of Treasury securities than there are issues. T-bills, for instance, are sold in terms ranging from a few days to 52 weeks. Bills are sold at a discount from the par amount. So, if you bid on a T-bill, you may pay $900.00 for a $1,000 bill. Only when the T-bill matures are you paid the $1,000.
The difference between the purchase price and face value is interest. It is also possible for a bill auction to produce a bid at a price equal to par, which means that Treasury will issue and redeem the securities at par value, in other words no interest would be paid on that money that the government borrowed. Now, if you sell the T-bill prior to maturity then the amount at redemption will naturally be less.
Treasury note pay interest every six months until they mature, the yield is determined by the auction bid. The price of Treasury notes may be greater than, less than, or equal to the face value of the note depending on the auction bids. What Montagne also seems to avoid is that government revenues on these securities clearly made up for government outlays in interest payments. The interest fluctuates based on issue and redemptions, but Montagne doesn’t even address such factors in his Excel Spreadsheets.
For instance, contrary to Montange’s conception, the fact is that since October 1980 through November 2008, the monthly receipts verses outlays on the debt, based on Monthly Treasury Statements, show that there were 243 of those months where there was a surplus verses 93 months when there was a deficit. What that means is that during 93 months there were more government securities issued, driving up the debt while there were 243 months when there were redemptions driving down the debt. Thus during these surplus or receipts the government was paid money on securities and during the deficit months it paid money on the securities.
As you can see, Montagne’s entire premise rest on either inaccurate or incomplete information; at least I haven’t seen any indications that he takes any of these factors into consideration in his Excel Spreadsheets.
He appears to think of debt in the same way as he sees a consumer debt and has nailed his mind down so tight that he can’t think past his own redundancy. He also doesn’t seem to take into consideration the intra-governmental debt, or what the government owes the government, as well as the mechanisms of various types of debt in his equations, he just blankets it all as debt despite the numerous mechanical differences between those debt instruments and how they operate within the system. He doesn’t include Marketable debt from other types of debt or amortized from unamortized discount debt. Montagne also does not make any distinctions that take into consideration the various spreads between the maturity dates of government securities or between the various types of securities themselves.
So Montagne doesn’t seem to consider such things in his LOUD PROCLAMATIONS and his overly arrogant MARK MY WORDS comments. He doesn’t seem to include the fact that investors in these securities pay a premium to our government and then at maturity the yield, which is the face value minus the purchase value divided by the face value times the days of the year divided by the days to maturity, is the actual “interest” the government pays our creditors.
I would like to know how Montagne deals with the multitude of variables within the debt itself and how he considers such variables within his Excel Formula. Obviously, if he doesn’t take such variables into consideration then there is no possible way for his calculations to be correct. Also, if his calculations provide for a resulting prediction then he should be able to tell you at any given time the actual state of consumption of the circulation and its effects on the economy, not just generalized statements as he provides so freely, but exact detrimental effects on the economy during any given year and any month during any given year. So, if his Mathematically Perfect calculations are correct then they should also be predictive of intermediate issues that present themselves within the economy at any specific point within the scope of his predictions.
Concerning my references to Marxism, I pointed out that many of his quotes parrot those of the Marxist Exploitation Theory and the Labor Theory of Value. His proposals for an interest free economy completely ignore the role that interest plays in an economy, especially in a free market economy. He also denies the Right of Property in such a system because a person has no ability to maintain control over his money. He is obviously ignorant of the fact that interest represents both the time preference of money and the time value of money.
He cannot account for his denial that when someone earns money, that represents a portion of their own life, it is a property that is no different than a piece of real estate upon which a person might charge rent. The next thing he will propose if he understands that rent and interest is exactly the same thing, that rent should be banned as well as interest. Purely Marxist concepts. As far as principles of ignorance, well, as you can see Montange’s entire concept is inundated with so many holes that it is incomprehensible that anyone with a smidgen of economic education would considered his proposals with anything more than a passing glance.
I am quite sure, based on his previous undisciplined childish outburst, that we can expect nothing but more of the same from him.
I should be obvious, but perhaps not, that there is a vast difference between calling someone a name and comparing the theory they promote with another theory that is well-known, such as the Marxist Theory of Exploitation and the Marxist Labor Theory of Value. Montagne’s theories are not simply similar, but almost word for word Marx. If you want to find something original, then the “mathematically perfect economy” that Montagne purports is not it.
Apparently, you are a converted adherent to the Montagne Ideology, that does not however, excuse your willingness to overlook various factors that should be considered when seeking to understand any assumption or theory.
If you actually believe that an Excel Spreadsheet provides the adequate proofs of any economic indicators then perhaps your journey for knowledge has indeed found its end. Your statement on Austrian Economics, as well as Montagne’s, show a woeful lack of understanding about economics in general and Austrian Economics in particular. I dare say that you would not be able to wade through an economics book, much less one containing the complex theorems of Austrian Economics.
Here is something you can chew on in, as you state Austrian “psychics” don’t use spreadsheets…there is a reason for that you know, spreadsheets are for those who need simply office software, not economic theorems”, so despite all the derisions about Austrian Economics and their supposed lack of mathematical usages, the truth is that they simply don’t rely totally on math for their theories, they don’t exclude it all together. Once again, those who use such falsehoods, such as Montagne and yourself, in an attempt to make their case must have something to hide, perhaps their own mistakes.
Let:1. xi (i = 1…n) be the set of n goods that are relevant for an individual;
2. X = Xj(xi) (j = 1…m) (i = 1…n) be the set of m different bundles of the n goods that are relevant for an individual;
3. Xj >~ Xk be a preference relation that means bundle Xj is preferred at least as much as bundle Xk;
4. U be a neoclassical utility function such that for any bundle of goods, Xi(xi, yi), U(Xi) = 10xi 0.25yi 0.25;
5. U(X1) = 80.07+;
6. U(X2) = 79.93– ;
7. rank of X1 = k, where k is an ordinal number (e.g., 3rd or 15th); and,
8. rank of X2 = k+1.
Now consider an additional bundle, XM+1(16, 256) ⇒ U(XM+1) = 80. All that it is necessary to know about bundles X1 and X2 in order to rank correctly bundle XM+1 is that U(X1) = 80.07+, U(X2) = 79.93-, the rank of X1 = k, and the rank of X2 = k +1. That is, one need know nothing about the elements of bundles X1 and X2 (i.e., x1, y1, and x2, y2)18 in order to rank XM+1.
Compare that to a true ordinal utility function on the same two goods.
Let: V = V(X) be a true ordinal utility function, such that:
V(Xj) = 1st if Xj >~ Xk ∀ k ≠ j; k ∈ X,V(Xh) = 2nd if Xh >~ Xk ∀ k ≠ j, h; k ∈ XV(Xg) = 3rd if Xg >~ Xk ∀ k ≠ j, h, g; k ∈ XV(Xm) = mth if Xm >~ Xk ∀ k ≠ j, h, g, …m -1; k ∈ X
Perhaps the great Austrian Economist Murray Rothbard can provide you with much more simple equation for you to munch on: The exchange demand for each good—the amount of money that will be spent in exchange for the good—equals the stock of money in the society minus the following: the exchange demands for all other goods and the reservation demand for money. In short, the amount spent on X good equals the total money supply minus the amount spent on other goodsand the amount kept in cash balances. . . . Now, when all goods are considered, the exchange demand for goods equals the stock of money minus the reservation demand for money .
The exchange demand for money equals the stock of all goods minus the reservation demand for goods.Now the equation implicit in the above quotation from Rothbard may be written as follows:
1. (P1 x Q1) + (P2 x Q2) + . . . + (PN x QN) = MS - MDR
Since the exchange demand for money is the obverse of the exchange demand for all goods and therefore equal to the total receipts of money for the sale of goods:
2. MDE = (P1 x Q1) + (P2 x Q2) + . . . + (PN x QN)Substituting equation 2 into equation 1 gives us3. MDE = MS – MDR
Rothbard was the first to analyze the demand for money in terms of its exchange demand and reservation demand components.
In 1913, Herbert J. Davenport also clearly identified these two partial demands for money but ultimately failed to integrate them into an overall theory of the demand for money. The exchange demand for money bears no relation to the Keynesian transactions demand for money, which is an attempt to classify the motives for holding cash balances, i.e., “transactions,” “precautionary,” and “speculative.” Rearranging terms, we get the supply of money equals the total demand for money, the familiar condition of equilibrium in the market for cash balances:
4. MS = MDE + MDR = MDFor purposes of our analysis, we substitute equation 2 and the equilibrium condition becomes:
5. MS = (P1 x Q1) + (P2 x Q2) + . . . + (PN x QN) + MDR where:MS = Money SupplyMD = Total Demand for MoneyMDE = Exchange Demand for MoneyMDR = Reservation Demand for MoneyP1 . . . N = Market-clearing price of nonmonetary commodities 1 to NQ1 . . . N = Market-clearing quantity of nonmonetary commodities 1 to N5
So Steve, there is a bit of Austrian Economics for you….what do you make of it? What does it show in terms of Ordinal or Cardinal Behavior or in the case of monetary demand, what do you suppose the exchange demand verses reservation demand portend in such an equation. I mean you are putting yourself out as someone who depends on math for his economic understanding, so I would like to hear what you have to say about the two displays of behavior between Ordinal and Cardinals and then on exchange and reservation demand of money. Surely you can make such distinctions since you are completely relying on mathematics for your economic understanding.
But by all means, continue to ignore Austrian Economics for an Excel Spreadsheet.
Posted By: mike montagne
Date: 2009-01-08 15:19:19
Jake, Repugnance, you're just two assholes, and that's all there is to it. The only reason there's "a demand" for "money" is a purposed shortage of our promises to pay, published by usurpers.
The good thing here is you're laying down the quality/class of support for the so called Paul movement and Austrian "economics." Like you, just assholes.
Why doesn't that response surprise me? Totally expected, just as I predicted and it didn't take an Excel Spreadsheet to make such a prediction. Apparently, your definition of assh*le is substantially different than most people I know, based on your own words it appears that you meet all the qualifications and definitions of assh*le than either Jake or myself.
I have not seen your spread sheet mathematics Mike, However , I do not need to see them to at least agree that the problem is interest. I get in to heated debates with other monetary reformers over this all the time. Part of the problem is that people toss words around without actually knowing what they mean. The term "value" for instance. As soon as someone spits that one out ,I get them to define it. They can't. The etymological definition of value is "equivalent to ". It has nothing to do with dollars but it does pose an interesting point for debate.
Let's say that Bob trades his pincic table for Sallys coat. They agree that they are " equivalent to " each other. The Sally sews another coat and trades it with John 10 pounds of dried smoked fish. Sally introduces John to Bob and these two decide to trade their wares. Does this infer that 10 pounds of smoked fish equals one picnic table? The math here being , if A equals B and B equals C then C equals A ?
What if John thinks a picnic table is only worth 6 pounds of fish? The mathematical arguement falls down because we are dealing with the perception of the people engaged in the various trades. No outsider to the trades should have any say in the determination of the values, even though some would disagree with the percieved values.
The point I am making is this. If we are going to create a system of trade using money instead of barter we have to try to model the money transaction as closely to barter as possible. If the A=B=C=A theory is flawed then we have to agree then on the more simple mathematical flaw of lending at interest, as it relates to the total money supply, and leave the rest of it to the traders and their personal perceptions of value.
In other words, there is no mathematically perfect economy. Economy is trade and the values of the traded goods are not mathematical, they are perceptual.
There is , however, a mathematically perfect money supply. It relies on the removal of interest from the equation. This leaves the question " do we have private banks or government banks". ( someone has to issue the money )If we have private banks, how are they to be paid for issuing money? I say we have them issue the money to the client and a flat, non-compounding fee for the service, to themselves at the same time. The banks should be non-reserve and with no central bank.
Look, I am not a big fan of banks, but we have to acknowledge the benefit of money as a catalyst to modern trade. We just need to get rid of interest.
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