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RE: The Mathematics of Fractional Reserve Banking

in #mathematics8 years ago

I am not at all an economist, but I have been working with non linear and recursive algorithms for years - the most absurd math is some of my favorite math ever.

A lot of time and effort, mine and others, have gone in to truncating infinite series, trying to solve Zeno's paradox, most commonly using the Newton Raphson method... Which is in theory, a way to divide all the way to zero.
But in practice, it doesn't really work that way.

I think there is a major problem with western thinking on the subject:
Nature is nonlinear. Our systems are almost entirely linear.
When I look down on a river valley, and see it filled with rectangles that don't integrate with their surroundings, I think that is even more absurd than "imaginary" numbers. ;)

I think imaginary and real numbers are aptly named, but it takes an open minded theorist to recognize that real numbers are imaginary, and that imaginary numbers are just as real as integers.

So the problem arises when we try to square the circle,
By taking an infinite series and rounding it off into an integer for simplicity of calculation. So we can get an answer out of it.

It doesn't matter if your approximation is off a bit in finite math,
But in an infinite series any miscalculation becomes infinitely wrong mighty damn fast. And if you're on the right side of the equation, you end up with all the money in your pockets.

So here we have an economy and monetary system supposedly based on production. There are many forms of production, but I want to focus on agriculture, not just because I'm familiar, but because it is a real world system that goes to infinity.

Say you plant a turnip, and it goes to seed.
That one plant will produce hundreds of seeds.
You plant all those, and hundreds of turnips grow, ten of thousands of seeds.
Plus turnips and leafy greens, that become food and compost.

So where your system began with one seed, valued at maybe 5 cents,
After a generation or two, you can make a substantial profit, because of the exponential inflationary nature of plant growth. Even your topsoil and land value can increase while your output and profits increase, if you are diligent.

Nature is full of infinite systems like this. Brimming over. :D
Finite math and fractional reserves will never be able to face the challenge of abundance, because they rest on a foundation that is faulty:

That linear math is real, and nonlinear math is imaginary.
Or, in order to measure circles, we have to make them into squares.

I call this the rectangle program, and the associated formulaic idea "Banker Math."
It provides ways for smart mathematicians to control the output of systems that would otherwise be "infinitely profitable" for farmers, to impoverish farmers while creating huge (and imaginary) profits for bankers [not through MM but through direct manipulation of subsidies, and leveraging stock prices through speculation].

At the end of the day, after all the math is done, there's still Maslow's hierarchy , the basis for demand that supply tries to meet.

The sooner we realize that once supply meets demand there is no room for middlemen to pinch pennies out of every exchange, the sooner we can apply mathematical models that function in nature and the real world to our economies, and do away with the monstrous myth of scarcity.

Thanks for your post, Complex, and the resulting thread.
I found it to be very informative, and also emblematic of the potential of the platform that even dissenting opinions were presented with charts and graphs and links backing up claims. Amazing!

I am up for a lengthy debate on boundary conditions and imaginary numbers anytime you want to tackle it, and if we could leave economics aside, that would please me even more. XD

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I'm an Applied Algebraic Geometer, so don't feel like you need to water down your posts for me (or my blog readers ... they will learn ...).

All in all, good comments. :D.

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