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261  Economy / Economics / Re: Learning from Imperial Rome on: December 23, 2013, 05:50:33 PM
Background and Definitions.

Language is a subject of interest to those studying Complexity.
Language, eg French, defines the Nation, and is distinct from
the Nation State. Arguments can be made that without words
to describe concepts, ideas cannot advance. (If you want the
science see the Sapir-Whorf hypothesis -
http://www.youtube.com/watch?v=GRMNrEo7CRw )

Arguably, money is also a language, but all those things that
arise from that thought will have to wait. There are some other
things about Complexity that need to be said.

If you have seen starlings in flight, you will know that they
behave differently to robins. Complexity suggests that without
prior knowledge, it is impossible to predict how each species
will behave collectively, given only the behaviour of the
individual. Hayek said something similar in his Nobel Prize
speech in regard to economics. We still persist in making
forecasts.

There are other unintended examples,- see "Father Ted - On Holiday"
http://s.ytimg.com/yts/swfbin/player-vflqv4MLv/watch_as3.swf
Three things come to mind:
* When modelling, never confuse the output of a computer with the
real world. (Revisit this later).
* Exponential change is unfamiliar to human thought.
* When looking at economic thought - "I just don't get it."
(In economics, everyone's a newbie).

Modern Monetary Theory - Banks, Minsky and Ponzi financing:
http://www.youtube.com/watch?v=0SPqMDMbRlo
In this video Dr Grasselli says "it's dead simple"
and I still don't get it.
http://www.youtube.com/watch?v=OgGritTEDB
His paper is here :
http://keenomics.s3.amazonaws.com/debtdeflation_media/2012/08/UWSPresentation.pdf

When a mathematician puts "bad" and "equilibrium" in one sentence, the words
can take on a meaning far beyond the reader's experience - somewhat like the
Ghostbusters' "that would be bad"
http://www.youtube.com/watch?&v=jyaLZHiJJnE

Still too demanding? Here Dr Michael Hudson talks about the earliest attempts at
money:
http://www.debtdeflation.com/blogs/2012/09/16/fields-institute-mmt-mct-seminar/
http://www.youtube.com/watch?&v=yQZGv2xL-fw
Ancient Sumer and Babylon - money was created to allow ale to be drunk and
paid for later. What went wrong?

Please - just focus on the facts for now. It's surprising how often people
can look at the same facts and reach diametrically opposed positions.
And I have to question some of the facts presented by Dr Hudson - the part
about the 'S' curves. The history may be correct, but the math is suspect.
Fortunately, this economy actually is dead simple.

Recognise that bronze age and later culture is under discussion. A standard
measure of barley was the cubic foot - the artaba. You pour barley into
a standard container, draw a straight edge across the top to remove the excess,
and you now have an Artaba of barley. By a magic similar to that of the
bitcoin mining rig, the Artaba becomes money. A similar magic was applied to
silver to produce the Shekel - a "guaranteed" quantity and quality of silver.
To make it really simple make 1 Shekel = 1 Artaba (of barley) through Royal
edict, and everybody understands how the system works.

In those times, as today, the quantities of barley and silver are finite.
The exponential growth in money identified by Dr Hudson could not continue for
more than a few decades - as indeed he suggests. Modelling the process
allows potentially infinite resources, but suggests that, left to itself,
the system will eventually move into catastrophic collapse. (Welcome to
world of fiat currencies.) Note also, that given the right initial
conditions, this happens with a silver-based currency.

These communities knew that their economy faced, potentially,
once-in-a-lifetime catastrophic failures. Their answer, it seems, was
to turn their economy into a sort of 2000BC real-world game of Monopoly,
where at some fixed points in time, the board was swept clean and
everyone re-started from "GO". You may be curious as to what happens
when somebody decides "this time it's different". Cue Greeks ...

Historically, the Code of Hammurabi and the Jubilee of Leviticus
predated the Greek economy and it's collapse. It seems the Babylonians
and the Hebrews managed to learn from their harsh lessons and adapt,
while the Greeks got no second chance. Rome, perhaps, thought that
the Greeks were just unlucky, or that Rome was different, or ...

Prior to the rise of Rome, interest rates were quite high.
Thus modelling those economies with an interest rate of 25 percent the economy
collapses after thirty years, and with an interest rate of 15 percent the
economy collapses after sixty years. Leviticus defines the Jubilee - Debt and
savings cancellation - as happening at 49 year intervals.

So, what interest rate will give a 300 year exponential rise in GDP followed
by a catastrophic collapse? Depending on other factors, a 2.43 percent
interest rate approximates to the rise and fall of Imperial Rome.

The initial conditions:

Firms loan =100
Firms deposit in banks account = 100
Money in Bank Vault = 12
Bank Capital = 5
Wages deposited in a Bank account = 9.1
Wages pa = 0.8088
Capital = 900
Labour productivity conversion factor 1.0
Population (workforce) = 1
Prices = 1
Employment ratio = 0.95

Four hundred and thirtyone years later - after zenith and collapse:

Firms Loan:  87.7689
Firms Deposit: 100.1007
Bank Vault: 595232962498.4783
Bank Capital:   1.7689
Workers Deposit:   0.0000
wage :   0.0000
Capital = : 606.1012
Alpha = : 409271.8157
Beta =:   8.6185
Price Level (inflation):   0.0000
Employment ratio :   0.0401

A quick calculation should confirm productivity increases of three
percent per year, and a population growth of 0.5 percent per year.
That is greater than the interest rate and the system still collapses!

So, away from the model, and back in the rela world, what really
happened in Imperial Rome?
262  Economy / Economics / Learning from Imperial Rome on: December 23, 2013, 12:36:01 AM
Before long, readers will wonder where this thread is going.
Here's the proposed route for "Learning from Imperial Rome":

1. Background and Definitions
2. Augustus
3. Tiberius
4. Claudius
5. Trajan
6. Marcus Aurelius and Lucius Versus
7. Caracalla
8. Aurelian
9. Diocletian
10. Lessons from Imperial Rome

The Executive Summary:
Would a cryptocurrency that resets in 49 years do
a better job than currencies presently in circulation?
Who would believe such an idea?

(BTW I believe there is sufficent prior art to invalidate any
patent application. And I have no plans to introduce a new
cryptocurrency ;-)
263  Other / Beginners & Help / Re: Shipping Industry on: December 20, 2013, 07:03:49 PM
"Perhaps a specific industry currency may be developed ..."

Such as Letters of Credit?

Lehman Brothers (and RBS) were the biggest players in Letters of Credit are before the GFC hit. You can imagine the mayhem that caused. Bitcoin could solve a lot of the problems but there are barriers to overcome.
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