Martien van Steenbergen on Flow Money

“Peer money” approaches are proven to be a very controversial topic in our p2presearch list.

Here is a contribution by Martien van Steenbergen explaining why compound interest should be replaced by ‘flow money’.


“Compound positive interest is a system wide exponential pump that increasingly flushes money from the poor to the rich. It compells us to grow beyond sense. It results in Obsessive Compulsary Growth Disorder, if you will.

This can be proven by mathematics, simulation and experience (as we all feel right now).

Don’t get me wrong, growth, development, evolving is good. But only asymptotinc s-curved growth, not only exponential unlimited growth.

If you want to destroy a community, introduce a monetary system where money can be owned (‘saved’) and with compound positive interest. Introduce it in such a way, that people are willing and able, eager even, to play this system. Mankind has succeeded in that.

Our current monetary system is like a cancer with metastasis into the smallest corners of our system. It cannot be treated. No irradiation, and no cutting will help. In fact, it will only fuel its self-destruction. Future monetary crises and crashes will happen more frequent, faster and will be deeper. The worst has yet to come, Schopenhauer would say.

Compound positive interest also makes each and everyone extremely short-sighted. The economy at large warps itself into short-term profits and utter efficiency. Exact the opposite of sustainability, durability and long-term wealth (in the non-financial meaning).

It’s extreme focus on efficiency makes the system as a whole brittle and oversensitive to small changes. Flourishing systems have their dynamic balance somewhere in the middle between chaos and order—chaordic—with a slight preference for the chaotic side. Chaos is creativity searching for order. Likewise, order (efficiency) is destructivity searching for chaos. The sweet spot is an area (not a point) in the middle.

This short-sightedness is due to the economist’s Net Present Value calculations. Suppose you invest €1000 to obtain an annual revenue of €100 during a period of 15 years, so €1,500 in total you might think.

An economist however will tell you that €100 in a year will be worth €91 now (with an interest rate of 10%). The €100 in year 2 will be worth €83 now and in year 3 €75, and so forth. The €100 in year 15 is worth a meager €24 now. All in all, in 15 years, the total Net Present Value of the revenue will be €761, resulting in a loss of €239. In other words, not a profitable investment.

This affects our behaviour to short-term financial gains. Combined with the interest pump from poor to rich, this leads to an instable and brittle system.

Enter ‘flow money’ (a.k.a. demurrage of liquidity tax). Technically, flow money is a negative compound interest. Using exactly the same calculations and formulas as our economist did in the previous example and an interest of –10%, the first €100 is worth €111 now, the 2nd €123 and the 15th €486, adding up to a total of €3,857 and a profit of €2,857! Break even is during year 7.

Together with the effect that your balance trickles away (into a larger commons fund), this affects our behaviour in such a way that we will:

1. tend to spend our money sooner rather than later (since our buying power now is greater than tomorrow), resulting in a lot of employment opportunities, no more unemployed; and we’ll chop the forest later rather than now, since we don’t want the money now as it will seep away;

2. prefer sustainable, durable, resilient an dlong-term projects over short-term ones; it gives all of us vision; we can see clearly now;

3. closing the gap between the rich and the poor; in fact there are only wealth people and som very wealthy people; and our planet replenishes itself too.

If we can also get rid of the capacity to ‘own’ money, and we only use money for payment and measuring products and services, than no one is poor. Use money just like we use centimeters. We’re never short of centimers (or inches or lightyears for that matter). Everyone is as wealthy as their activity in the community, small and large.

Your monetary balance does not matter anymore, since it is of no value to own money; you can’t even own it. What does matter is the number of times you touched zero when trading (either or not changing sign), since at precisely that moment you have contributed to the community the exact amount as the community contributed to you. You are in balance with your environment (that serves you so good and abundant).

Every time you touch zero, your ‘trustwidth’ increases, since you just proved to balance your consuption woth your contribution. The trustwidth is parameterized by your turnover until now, a (damping) factor and a connectivity index (derived from the relative number of others you traded with; to avoid kartel and free riding). Just like with flow money, your trustwidth diminishes, decays, over time. So you need to stay active and add value to your environment to keep up your trustwidth.

The trustwidth (like bandwidth) are the ‘credit’ and ‘debet’ limits for safe trade. Of course, if you like risk, you can go beyond someone’s trustwidth, but you know that you risk losing your extra investment.

It’s just like scaling up micro credit to meso and macro credit. With our current technology level, it is a relative pievce of cake to implement a global digital chartal spreadsheet system (which is all we need; mind-boggling cheaper than all these expensive banks and their emplyoees who don’t even understand their own products anymore).

This (non-monetary) balance is essential on all scales as well. Just as the individual needs to balance receiving and giving to the community, the import and export of countries should enjoy a dynamic (chaordic) balance. Overshooting in either direction destroys your credibility als a good citizen or global player. Too much import increases your ‘debt’ to other countries, your promise to do something back. Too much export hoards employabilty, depriving other countries from adding value and wealth to the world at large.

The balance and trustwidth are similar to energy economics (a topic on this list some time ago if I recall correctly).

My quest is to find:

* the extremely elegant formulas that take any financial transaction log and calculate the trustwidth between which a player can safely trade;

* how to connect two ecowebs that have so far been developing independantly and suddenly touch;

* design an immune system that keeps the system as a whole healthy, even when (severely) attacked;

* the distributed, decentralized, peer-to-peer layers of infrastructure and humanstructure that make it feasable and completely self-everything (organizing, healing, supporting, etc).

* the way to have a holarchy emerge that use a cascade of flow money for ever larger commons activities, up to the global level, while embellishing local wealth and unfolding.”

Leave A Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.