MAD2 released, with "digital coin" proposal
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Mike Hearn
Jun 13, 2009, 10:03:28 AM6/13/09
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Paul Grignon, who produced the popular "Money as Debt" animated cartoon, has just released "MAD2: Promises Unleashed".
It is another entertaining tour of the money system. This time, unlike MAD1, he devotes significant time to the idea of interest payment recirculation. He concludes that despite the way interest payments recirculate, the system is still unsustainable, because the money doesn't have to be respent into the economy in such a way that it can be re-earned by the borrower. It can be relent by a secondary non-bank "real" lender, it can be hoarded, it can be gambled and lost in the currency trading markets etc.
As far as I can tell, this argument continues to be invalid. I went back and reread the discussion of this topic between myself, Ryan, Gaute and others to check this idea.
The basic idea that if less than 100% of the loan is respent into the economy it's unpayable is true, if you assume the existence of no other money in the system. But this is an oversimplification which produces nonsense. As long as there is any money circulating elsewhere that you can earn, the loan can still be repaid in full. Even if there's a continual suction of money out of the system, the remaining money can simply increase in velocity to compensate until new money is created outside the context of an interest paying loan.
Now, moving on. Grignon proposes a new currency scheme at digitalcoin.info:(btw it makes references to a video on the site)
http://digitalcoin.info/Digital_Coin_in_Brief-June7-09.pdf
The key innovation (?) in digital coin is that it actually consists of two types of coin, "permanent coin" which is basically a pool of coins of fixed size and "credit coin" which is a time-limited (demurrage) claim against goods/services of the issuer. It's a personal currency. The idea is to balance the merits of both schemes. Anyway, regardless of what you think of the videos or my explanation, read the PDF - it's only a few pages long.
It is another entertaining tour of the money system. This time, unlike MAD1, he devotes significant time to the idea of interest payment recirculation. He concludes that despite the way interest payments recirculate, the system is still unsustainable, because the money doesn't have to be respent into the economy in such a way that it can be re-earned by the borrower. It can be relent by a secondary non-bank "real" lender, it can be hoarded, it can be gambled and lost in the currency trading markets etc.
As far as I can tell, this argument continues to be invalid. I went back and reread the discussion of this topic between myself, Ryan, Gaute and others to check this idea.
The basic idea that if less than 100% of the loan is respent into the economy it's unpayable is true, if you assume the existence of no other money in the system. But this is an oversimplification which produces nonsense. As long as there is any money circulating elsewhere that you can earn, the loan can still be repaid in full. Even if there's a continual suction of money out of the system, the remaining money can simply increase in velocity to compensate until new money is created outside the context of an interest paying loan.
Now, moving on. Grignon proposes a new currency scheme at digitalcoin.info:(btw it makes references to a video on the site)
http://digitalcoin.info/Digital_Coin_in_Brief-June7-09.pdf
The key innovation (?) in digital coin is that it actually consists of two types of coin, "permanent coin" which is basically a pool of coins of fixed size and "credit coin" which is a time-limited (demurrage) claim against goods/services of the issuer. It's a personal currency. The idea is to balance the merits of both schemes. Anyway, regardless of what you think of the videos or my explanation, read the PDF - it's only a few pages long.
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