[p2p-research] Fwd: Where does the "lost" money go ? can we find it and get it back ?

[marc fawzi]

I'm interested in building and experimenting with P2P-enabled economic
models and software for PC/mobile for implementing those models.

As you may know, right now I'm working on this model:
http://p2pfoundation.net/P2P_Social_Currency_Model

We've started specifying the simulation scenarios and the step after that is
to code the software

When people have a tool that works as advertised and does something
dramatically better they will use it.

We are building one such tool. And there will be many.







On Tue, Jan 6, 2009 at 1:39 AM, <nicholas at themediasociety.org> wrote:

> cheers marc..
>
> check out http://transitionus.ning.com/ - the US branch of a global
> grass roots peak oil / climate change transition movement exploding in
> the US, AUs, UK right now ---- just about exploding as a mainstream
> process,.,. inspired by Permaculture education in the UK
>
> I wonder if Peak Debt could be folded into the Transition Towns
> *local, state, national" movements ? but what would the Peak Debt
> movement say ? how do we reform money ....
>
> local currencies ? what else ?
>
> dont we need to also challenge and dismantle such systems as the Fed,
> corporate finance, finance capitalism, financialisation etc etc
>
> or is simply creating a transition movement to an alternative system enough
> ?
>
> as michel says, this is researchable
>
>
> On 1/6/09, marc fawzi <marc.fawzi at gmail.com> wrote:
> > <<
> > IF the socioeconomic system were also
> > revised/reformed/evolved to be more equitable.  Right now, that AIN'T
> > going to happen.
> >>>
> >
> > Stan: I was waiting for someone to say this.
> >
> > It ain't if we continue to look at the state as some kind of parent or
> sheep
> > herder
> >
> > But it can happen if we get our head out of our ass and start taking
> > responsibility for our existence.
> >
> >
> >
> >
> > On Tue, Jan 6, 2009 at 12:04 AM, Stan Rhodes <stanleyrhodes at gmail.com
> >wrote:
> >
> >> Kevin, added you in case something I said needs to be slapped around a
> >> bit.
> >>
> >> There are three concepts here.  One is "asset value," one is the
> >> creation of money via "credit" (aka the "monetization of debt"), and
> >> the last one is "inflation."
> >>
> >> The "money" doesn't go anywhere if there is something valued (an
> >> asset) that drops in value.  You've probably heard the term "toxic
> >> asset."  A "toxic asset" is just something that's not worth the price
> >> tag people have put on it.
> >>
> >> Consider a gemstone you think is a diamond, and you think is worth
> >> 1000 USD.  You go to sell it, and the prospective buyer has it
> >> appraised.  The appraiser tells you both it's just glass.  The
> >> asset--the glass you thought was diamond--is essentially worthless,
> >> and has negligable value.  No one "wins" that "lost" value.
> >>
> >> Stocks and various financial instruments--assets--that are held for
> >> their monetary value can lose their value too, but no one "gets" that
> >> drop in value as money.  It's a question of who holds the hot
> >> potato(es) when the value plummets, and in this case it was a
> >> significant portion of the financial sector.  In a bubble, those
> >> making a lot of money from the bubble also stand to lose their ass in
> >> it as well, and often do.  Most simply have no idea when the bubble
> >> will pop, and they're getting GREAT returns in the meantime...
> >>
> >> The estimated value of the mortgages came from the estimated value of
> >> the homes, and that value had been increasing constantly, beyond
> >> anything reasonable, creating a bubble.  A bubble is when assets are
> >> valued much more than they're actually worth.  Not many people care
> >> that the overvalued assets are overvalued during the bubble, because
> >> everyone's buying and selling and the value is growing.  Eventually
> >> this inflated sense of value "pops" when people realize the assets are
> >> not worth as much as they are priced.  That's the asset portion of the
> >> mess, in simple terms.
> >>
> >> In case Thomas' reply about credit and monetization wasn't understood,
> >> I'll explain that briefly too. "Monetizing debt" means the government
> >> borrows money from the Fed and spends it as money.  Essentially, the
> >> government is credited Federal Reserve Notes (USDs), with the promise
> >> to repay that debt to the Fed Reserve in the future.  The government
> >> then puts this money into circulation by spending it.
> >>
> >> The concept of money created from credit is simple enough in concept.
> >> Think of 3 people on an island that use IOUs with each other.  One
> >> harvests coconuts, another fishes, and another makes sandals.  Let's
> >> assume they value fishes and coconuts the same, but sandals are worth
> >> about 10 fishes or coconuts.  We can see how credit (IOUs which are
> >> money) flows:
> >> 1. The coconut gal needs sandals, so she "buys" a pair from the sandal
> >> guy by writing him a 10-coconut IOU.
> >> 2. The sandal guy needs some fish, so he gives the fish dude the IOU
> >> for 10 coconuts in exchange for 10 fish.
> >> 3. Later that day, the fish dude brings the IOU to the coconut gal and
> >> gets 10 coconuts.  The gal destroys the IOU.
> >> The cycle of credit has come full-circle.
> >>
> >> Our government essentially tells the Fed Reserve "IOU 10 USDs," the
> >> Fed Reserve says "ok, I'll put those in your account, but you owe me"
> >> and the government then spends those USDs on programs or bailouts or
> >> whatever.  At some point, those USDs are supposed to be paid back to
> >> the Fed Reserve.  That's why those USDs are also called Federal
> >> Reserve Notes--they're IOUs to the Fed Reserve.
> >>
> >> In theory this is useful, because our government, like the coconut
> >> gal, could get the sandals when she needed them and then pay back
> >> later.  In other words, the government could get a wad of cash when it
> >> needed it and pay that wad of cash back later (via collected taxes,
> >> for example).  This is what banks do when they give someone (person,
> >> business, another bank) credit.
> >>
> >> You may be asking "why do we need the Fed Reserve to create money and
> >> lend it to us?"  Good question, but that's another very long
> >> discussion, one that I think begins with "In theory, we really don't
> >> need them to, because we could do it ourselves..."
> >>
> >> Lastly, INFLATION.  Monetary inflation, as Thomas said, is pumping
> >> more money into the economy, diluting the money supply.  It's
> >> "dilution" because the same "value" in the economy is spread over more
> >> money, meaning each money unit is worth less value than it was--it's
> >> diluted.  Gum was a penny, now 50 pennies.  The gum, itself, is still
> >> just gum, but a penny is worth less than it was.
> >>
> >> Take the islanders again.  There is no need to destroy the IOUs when
> >> they come back to the issuer, since they'd just need to write one
> >> again.  They become "monetized debt."  These dollars go into
> >> circulation and occasionally one of them writes additional dollars
> >> when they wear out.  There are only 3 people, so it's pretty easy for
> >> the islanders to keep an eye on one another, and each knows the other
> >> is good for it.
> >>
> >> Let's say they make an "official" unit: the former IOU 10 becomes 10
> >> "island dollars."  The IOUs are no longer connected to a particular
> >> person, they are just an exchangeable note. They also make these
> >> dollars legal tender: all 3 agree it MUST be accepted for all debts,
> >> public and private, just like our Federal Reserve Notes.  Although a
> >> dollar was originally valued as roughly one coconut or one fish or .1
> >> of a pair of sandals, supply and demand causes fluctuations in price.
> >> That's fine, and expected.
> >>
> >> Over time, more people wash ashore and begin exchanging their goods
> >> and services, until there are 10 islanders, all using the established
> >> money system.  One of them--we'll call her the rancher--wants to clear
> >> a section of land and build a ranch for the island's native flightless
> >> birds, so she can produce and sell more eggs.  To finance this, she
> >> creates 10000 dollars, and figures that, once she's built her ranch,
> >> she'll just destroy 100 dollars that come to her per week.
> >> Essentially, she is acting as a bank, and loaning to herself by
> >> monetizing debt.
> >>
> >> The island hasn't run into this situation before, but it's "legal,"
> >> and the rancher has good intentions.  She wants to create something of
> >> value to her, and likely the community.  This new development seems
> >> reasonable enough to everyone.
> >>
> >> The rancher spends this 10000 dollars on supplies and labor.  The
> >> others are just a little uncertain that she'll be able to provide
> >> enough goods and services to "repay" in "good time."  They're not sure
> >> she sees how much those 10000 dollars are worth to everyone.  As she
> >> spends more money, and it enters into circulation, the islanders see
> >> more money in everyone's hands.  Those working on her land ask for
> >> higher wages than they earn on their own, both because they know she
> >> needs the help, and because they feel they should be compensated more
> >> for spending their leisure time working.  Other islanders see this
> >> increase in the money supply, and realize they could ask a little more
> >> for their good and services, and get it.  These factors combine to
> >> nudge the islanders to increase their prices.
> >>
> >> Thus, the islanders see the value of their dollars decrease as prices
> >> increase, and marvel at inflation.  Sandals now sell for 20 dollars,
> >> coconuts for 3 dollars (they cleared coconut trees for the ranch, so
> >> coconuts are more scarce), and fish for 2 dollars.  "Why, back in the
> >> old days," the original 3 islanders complain, "a fish only cost a
> >> dollar!"
> >>
> >>
> >> I hope these explanations begin to reveal some of the mechanics behind
> >> the issues discussed.  I don't know how far the email goes back.
> >> However, I think anyone discussing money and economics should also go
> >> through the effort of reading some of the material online, including
> >> some of the material, like E.C. Riegel's work (Thomas makes this
> >> available online because he's awesome), and some basic Austrian,
> >> Chicago, etc school perspectives (use wikipedia at least), and so on.
> >> Just because many people are confused about what things are and why
> >> they happen doesn't mean that no one knows, or that the whole thing is
> >> a weird scheme (well, ok, the Federal Reserve is a weird scheme).
> >>
> >> Also, Michel, think about it backwards, or maybe inside-out.  Credit
> >> is (in theory) a measure of your "worth" in demanded value.  This is
> >> why Chris Cook talks about guarantee societies and credit as a
> >> relationship.  If the rancher took the loan from an actual bank, but
> >> couldn't pay it back, the bank would lower the measure of her "worth"
> >> in public-demanded value (goods and services the public wants).  In
> >> other words, if you take more than you can pay back, you will be
> >> allowed less credit, or perhaps none at all.  The "loss" is then
> >> written off, and you can think of it as the "cost" of the system
> >> learning and revising your credit worth within the "flow" of money.
> >> In a fair system, the overall burden of the lesson is borne by
> >> everyone, and perhaps a little more by those responsible for
> >> monitoring credit ratings.  In an unfair system, well... take a look
> >> around!
> >>
> >> Essentially, the current problem is, not only is the monetary system
> >> out of the public's control, it failed to judge actual value worth a
> >> damn.  The solution presented is to monetize a bunch of debt--print
> >> money.  Yes, that will lead to monetary inflation, but that might not
> >> actually be such a big deal IF the socioeconomic system were also
> >> revised/reformed/evolved to be more equitable.  Right now, that AIN'T
> >> going to happen.
> >>
> >> Many battles I've seen between Austrian (take your pick on Mises.org)
> >> and Keynesian (people might recognize the name Paul Krugman) seems to
> >> often be fought over, around, in, or through, inflation.  The debates
> >> touch on the rest of the system, but so often come back to one side or
> >> the other's perspective on inflation.  In actuality, inflation just
> >> is, it's socioeconomic equity that really matters.
> >>
> >> -- Stan
> >>
> >> On Mon, Jan 5, 2009 at 1:34 AM, Michel Bauwens <michelsub2004 at gmail.com
> >
> >> wrote:
> >> > Hi Thomas,
> >> >
> >> > but your answer then leaves the question: where is the money gone that
> >> has
> >> > been wiped out as value from the stock market and housing prices?
> >> >
> >> > since in your account it is not lost, where is it and who has it?
> >> >
> >> > I find your answer to be very counter-intuitive and the opposite of
> what
> >> I
> >> > would assume.
> >> >
> >> > If you cannot repay it, it's lost, but if you repay it, it is again
> >> > available for further loans and as basis for fractional reserve, and
> >> > therefore, in my view, not destroyed.
> >> >
> >> > Michel
> >> >
> >> > On Mon, Jan 5, 2009 at 10:21 AM, Thomas Greco -- thg <
> thg at mindspring.com
> >> >
> >> > wrote:
> >> >>
> >> >> Money is created when banks make a loan; it is destroyed when the
> loan
> >> is
> >> >> repaid.
> >> >>
> >> >> The bailout will be inflationary because the debts that are being
> >> shifted
> >> >> from the private sector to the public sector are debts that cannot be
> >> paid
> >> >> by the original debtors. Government will take the loss, not by using
> >> >> tax
> >> >> revenues to repay them but by monetizing more government debt. That
> >> >> will
> >> >> dilute the value of all the money already in circulation.
> >> >>
> >> >> Tom
> >> >>
> >> >> ----- Original Message -----
> >> >> From: Michel Bauwens
> >> >> To: Nicholas Roberts
> >> >> Cc: Thomas Greco -- thg ; Peer-To-Peer Research List
> >> >> Sent: Sunday, January 04, 2009 10:55 AM
> >> >> Subject: Re: [p2p-research] Fwd: Where does the "lost" money go ? can
> >> >> we
> >> >> find it and get it back ?
> >> >> Hi Nicholas,
> >> >>
> >> >> Does the money have to 'go' anywhere ...
> >> >>
> >> >> Since it is created 'out of nothing' through fractional reserve
> >> >> banking,
> >> >> why can't it be destroyed just as easily, in the equivalent of a
> >> >> virtual
> >> >> fire?
> >> >>
> >> >> I understand from some remarks, 'the bailout won't create inflation
> >> >> because it's merely trying to replace lost money', that this money
> was
> >> >> effectively destroyed.
> >> >>
> >> >> Perhaps monetary transformation expert Thomas Greco has some insight
> to
> >> >> your question?
> >> >>
> >> >> see also http://p2pfoundation.net/Category:Money
> >> >>
> >> >> Michel
> >> >>
> >> >> On Sun, Jan 4, 2009 at 12:05 AM, Nicholas Roberts
> >> >> <nicholas at themediasociety.org> wrote:
> >> >>>
> >> >>> --
> >> >>> Nicholas Roberts
> >> >>> [im] skype:niccolor
> >> >>>
> >> >>>
> >> >>>
> >> >>> ---------- Forwarded message ----------
> >> >>> From: <nicholas at themediasociety.org>
> >> >>> Date: Sat, Jan 3, 2009 at 5:16 PM
> >> >>> Subject: Re: Where does the "lost" money go ? can we find it and get
> >> >>> it
> >> >>> back ?
> >> >>> To: Dean Baker <dean.baker1 at verizon.net>
> >> >>> Cc: Noam Chomsky <chomsky at mit.edu>
> >> >>>
> >> >>>
> >> >>> happy new year Dean
> >> >>>
> >> >>> who takes it out of circulation ? how ?
> >> >>>
> >> >>> is it destroyed ? made null ?
> >> >>>
> >> >>> how much of the wealth from a bubble gets accumulated by the rich
> >> >>> promoting the bubble ?
> >> >>>
> >> >>> how much gets taken out of circulation ?
> >> >>>
> >> >>> is there a good reference to this ? a website or book ? I am
> >> >>> interested in the formal process and also the reality...
> >> >>>
> >> >>> thanks in advance
> >> >>>
> >> >>> -N
> >> >>>
> >> >>> On 1/3/09, Dean Baker <dean.baker1 at verizon.net> wrote:
> >> >>> > Hi Nicholas,
> >> >>> >
> >> >>> > It's just like counterfeit money that has been seized by police.
> It
> >> is
> >> >>> > wealth that is taken out of circulation. It means in principle
> that
> >> the
> >> >>> > people who did not own stock and did not lose wealth can be better
> >> off,
> >> >>> > assuming that the demand generated by this stock wealth (people
> >> >>> > spend
> >> >>> > in
> >> >>> > part based on the wealth they hold in stocks) is replaced by other
> >> >>> > sources.
> >> >>> >
> >> >>> > regards,
> >> >>> >
> >> >>> > dean
> >> >>> >
> >> >>> > Nicholas Roberts wrote:
> >> >>> >> hi Dean
> >> >>> >>
> >> >>> >> this is a really obvious question, but I have yet to find a good
> >> >>> >> answer;
> >> >>> >>
> >> >>> >> where does the money "lost" in the stock and housing bubbles go ?
> >> >>> >>
> >> >>> >>
> >> >>> >> is it destroyed ? how and where ?
> >> >>> >>
> >> >>> >> is it transferred ? how and where ?
> >> >>> >>
> >> >>> >> is it accumulated ? by whom, how, where  ?
> >> >>> >>
> >> >>> >> can we get it back ?
> >> >>> >>
> >> >>> >>
> >> >>> >> are there any good flow diagrams that explain this in plain terms
> >> for
> >> >>> >> regular folks...
> >> >>> >>
> >>
> >> _______________________________________________
> >> p2presearch mailing list
> >> p2presearch at listcultures.org
> >> http://listcultures.org/mailman/listinfo/p2presearch_listcultures.org
> >>
> >
>
>
> --
> --
> Nicholas Roberts
> [im] skype:niccolor
>
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://listcultures.org/pipermail/p2presearch_listcultures.org/attachments/20090106/acdd1081/attachment-0001.html>