The Importance of Stability Analysis to Both Conventional and Alternative Money Systems

By Marc Gauvin

Copyright ©14/6/2014 (updated 19/01/2015)

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For all those who want to solve in some way or another the problem of money either via the creation of a system in a community or to somehow attenuate the disastrous impact of the prevailing system that undoubtedly is deeply unstable, it is imperative that we all understand the exact definition of stability from the theory of dynamical systems and its application in engineering that for good or for bad is highly successful. Below, I share a few key points that have at least helped me to reach the conclusion that not only mutual credit is good but that it is the only option that meets the following ASTA3 requirements (Abundant Stable Transactions: Any Place, Any Time, Any Person):

Some stability considerations:

With respect to stability, we must recognize the following points that sadly are not being recognized in many disciplines and environments that nonetheless are well intentioned and well meaning:

First, we should clarify that according to stability theory and its practical application in complex systems in all branches of science, there is NO RELATIVE STABILITY simply things are or are not stable.

Second, you cannot talk of complementing instability since complementing is to facilitate or accommodate the instability. YOU CAN ONLY INTERVENE IN INSTABILITY TO COUNTERACT IT, thus forming a new stable system.

Third, the interest function is independent of 'circulation' it is an arbitrary output multiplier.  That is why for systems that depend on circulation of tokens, it is insufficient to only consider eliminating interest to establish stability. In other words, debt stability alone only implies stability if and only if money is not a circulating object but an independent output of transactions.  Such a model happens to be consistent with the underlying logic of money as a measure vs a commodity

Fourth, and this is very important, in a common environment AN UNSTABLE SYSTEM CANNOT CO-EXIST WITH A STABLE ONE. That is, in a common environment two systems one stable and the other unstable, without the stable system intervening in the unstable one, the unstable system will destabilise the stable system. If a violent drunk is not restrained the drunk's behaviour will reap havoc in the environment, one can only counteract the erratic drunken behaviour interacting with it.

What does this mean for the social and alternative currency movement? I'm afraid a lot, it implies that if the goal is clearly to solve the generic problem of fair and STABLE economic representation for all i.e. according to ASTA3 requirements, then we need to focus on the technical issues, first because if we don't, then we are merely doing politics and demagoguery and we are not solving the technical problem, and second we are losing our ability to defend ourselves and our initiatives against the current system.

The risk we run is that many people with good intuition and impeccable intentions but not knowing certain things, can end up spending huge amounts of effort and personal resources in vain.

The strategy that we undertake must be one of reason, balance and measure, unity and efficiency of common efforts, and this begins with the sharing of conclusive and accurate knowledge. For this, it is imperative not to ever censor truths in support of a supposedly more "realistic" strategy, this is one of the biggest fallacies that prevents healthy and constructive evolution of processes of change. How can the suppressing of certainty be more "realistic"?

Stability in systems for the stable and abstract representation of measures of value (money, coins, etc..) Is the key to success, without such stability everything is in vain.

Without stability there is no measure and without measure no credibility. Instability represents the major weakness of the current system and the tremendous advantage of mutual credit systems is precisely their stability not through opinion but by the proven science of stability. But the stability of these systems is vulnerable, if the science of stability is not strictly observed. For more on this I propose the following articles:

The Money Action-Problem-Solution Fallacy

And for the more technically inclined:

Passive BIBO Currency Distinguishing Claims

I want to leave you with a practical example of unintuitive misconceptions about stability that I keep hearing repeated. It is said that only compound interest is unstable while simple interest is stable. This is a mistake, both are unstable just that you can adapt to the second (theoretically) while you can't adapt to the first.

But the issue does not stop there, a distinction needs to be made between on the one hand the instability of an isolated single transaction and on the other hand a system of multiple transactions, such as when we chain multiple transactions of just simple interest the result will be a global system of compound interest. But what is even more surprising is that without any interest and when transactions are linked in a chain, just by setting a single one time fee but as a percentage of each transaction, the result is a global system of compound interest as a function of the number of links in the value chain as opposed to as a function of time. A value chain being a chain of services required to create a final consumer product. I hope this serves to illustrate the importance of the science of stability to both conventional and alternative money systems.

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