JCT: With interest piqued by Michael Moore's Banking Systems
Engineering Thesis?
my ally Marc Gauvin wrote:

--- In letssc@yahoogroups.com, Marc Gauvin <gauvin@...> wrote:
> Take a look at http://www.bibocurrency.org

Jct: Is http://bibocurrency.org your thesis?

> > How will we grade Michael Moore's Banking Systems Engineering
> > Thesis?

Jct: How will we grade Marc Gauvin's thesis?

Jct: Marc wrote back:

It is by myself and Sergio Dominguez PhD in Engineering Professor of
Control Systems engineering.

We applied Linear Time Invariant (LTI) stability analysis to standard
loan contracts. The criteria for stability in LTI systems is that
bounded inputs must yield a bounded outputs, in this regard these
"common loan practices" as defined in our paper and real life we call
them are on the most part simple interest with the condition that for
any outstanding principal debt there always exists a minimum
outstanding interest due.

So and to give the benefit of the doubt to the system we assumed the
best possible case for stability and based our analysis on individual
debt contracts being simple interest i.e. not producing exponential
outputs. In any case, the formal analysis shows that in both simple
and compound such contracts are in and of themselves unstable.

Once having established that these simple interest "common lending
practices" are unstable in and of themselves, we proceeded to show via
a walkthrough that the process of pledging wealth as collateral for
the issuance of new money in the form of current account entries in
the amount of principal loans everything is BIBO except in the case
where the total debt grows as a function of time and without resulting
in a corresponding increase in principal, the system as a whole
produces its only unbounded output always beyond any principal sum
available at any point in time (remember, the system demands interest
above and beyond all outstanding principal at all points in time).
This leads to a situation where any cycle necessarily will produce a
minimum excess of debt composed of both principal and interest! That
is it is never just principal or just interest. When this occurs the
system fails or it must refinance that residual debt with or without
new added collateral. It is when the latter occurs that the overall
system begins producing an exponential output, because ti is both
principal + interest being refinanced so that compounding takes place.
Now at the end of a non BIBO debt cycle there are two possibilities:

1) If new lien free collateral is brought to the system then new money
in the form of new loans can be created and the past excess interest +
principal debt can be satisfied.
2) If no new lien free collateral is forthcoming then the old
collateral must be used to back subsequent refinancing cycles each
time at a higher cumulative cost thus producing inflation.

But as stated above, the output becomes exponential and of course BIBO
remains untrue i.e the system is unstable. It is however interesting
to note that the inflation can be staved off if new collateral is
continuously added to the system (whether legitimately created or
robbed from other territories).

You will notice that your work is referenced as the conclusions are
similar if not identical, the differences are:

a) We do not immediately assume an exponential model which is
necessary when people notice that in practice loan agreements are not
exponential.
b) We explain in more detail the constant, irrational abuse imposed by
the banking system by demanding that wealth production keep up with
the exponentially growing debt seed planted on the outset, and absurd
imposition as it implicitly makes the assumption that somehow real
production can and needs to mirror an arbitrary exponential. This
does however serve to show how the system can be used as a wealth
accumulator like a vacuum.
c) We explain inflation as a function of refinancing while your work
does as a function of foreclosure. The reason for this is that
refinancing particularly at the onset of the life cycle of a currency
occurs as there tends to be more new wealth and initial debt seeds are
relatively small.

In any event, this and more work like it needs to be produced if for
no other reason to reconfirm these important results. You will enjoy
the experimental design provided in the annex of our analysis to test
our hypothesis:

Hypothesis
No matter the nature of wealth traded in an economy or the relative
success or
failure of economic activity or the nature or behaviour of the
participants,
“Common Lending Practices” as described in the formal stability
analysis will
always exhibit unbounded outputs in the form of residual interest
bearing debt
beyond the bounded value attributed to discreet and finite wealth and
beyond
the sum of money created in the form of the principal sum of loans.

This is important because the way science is being misused today is
precisely in applying scientific tactics outside of the scientific
method i.e. not providing experiments that can be independently
reproduced to uphold the hypotheses being pushed. This way science
has become the new religion. In short no matter what you throw at us
if you cannot produce an experiment that can be reproduced by anyone
independently it ain't science period. To catch a better and more
entertaining take on this a direct you to:
http://www.youtube.com/watch?v=LNOtiRB3uyk

Anyway, you will see that we have also published a first attempt to
providing a common technical spec for a stable (bibo) currency see:
http://bibocurrency.org/BIBO%20currency%20specification%20v4.5.pdf.
As I have suggested many times once there is a formal stable currency
spec then all other specs whether implicit or explicit can be
compared, more importantly the existing de facto spec that is for all
intents and purposes implicit needs to be explicit for all to see if
it is to prove any of its claimed virtues in open fora. Also, by
having a common technical spec then all otherwise independent
currencies that share that common spec instantly are interoperable.
For those who are interested to pursuing this endeavour see icseg.org
(International Currency System Engineering Group) follow the
instructions at the home page.

Finally, for those less inclined to read the formal analysis we have
another simpler more colloquial primer (http://bibocurrency.org/
stability%20video%20v%204.2.8.pdf) explains in detail everything most
anyone needs to know to fully be able to assess when a currency system
is stable and when it is not and why. It really isn't rocket science
but it still needs to be explained step by step and in the right
order.
Best, Marc

JCT: If it helps make poker chips easier to understand for the average
unenlightened reader...