The Cult of Mathematically Perfected Economy and its Ridiculous Stance on Inflation
(Left: Eleventh hour pretender Mike Montagne dreaming about how he invented both the 5000 year old struggle against Usury AND its ‘singular solution’)
Mathematically Perfected Economy invented nothing and is fatally flawed. It is ‘just’ another form of interest-free Mutual Credit, with a mindblowingly simple minded take on the all important issue of the volume of money (inflation) and is run by a blowhard of uncanny proportions to boot.
Ever since I started this blog, people have been claiming Mathematically Perfected Economy (MPE) is the ‘singular solution’ to Usury. Why? Your guess is as good as mine. MPE is just another interest-free credit proposal, like there are many, and 95% similar to several systems that have operated in the past or proposed today.
But both on this blog and on many other platforms I’ve seen Mike Montagne (the creator of MPE) maligning everybody he came across as ‘eleventh hour pretender’ and ‘plagiarist’, because they dare have some opinions on Usury and its solutions too. Of course I have not been spared his wrath either, but that’s ok: if you have not been called a plagiarizer by Montagne you count for nothing in this business.
A few months ago I posted an article on the management of volume of money and a few weeks ago I faced some of Montagne’s people on one of Facebook’s economics groups regarding this issue, and a little later himself. In fairness: talk about big mouths, blowing of steam, misrepresentation and ideology!
Should I have the choice between dealing with Libertarians and MPE drones, I’ll take the Austrianistas any day.
Unfortunately, I’ll have to fend off both………….
The Making of a Cult
How does one create a cult? Why, that’s easy!
Study of group dynamics shows that the group will automatically side with the Leader, because otherwise it’s the end of the group.
To build a cult, you take a group, become its Leader and foul-mouth everybody in the group that does not verbatim replicate your thoughts. You will scold, patronize, condescend, swear, all in front of the group, so the disobedient follower is shamed to the max if he disagrees. If a group member is loyal and faithful, he will receive praise, also in front of the group, so that the group too can affirm the good boys and girls.
This does two things: it drives away everybody who values independence, mutual respect and truth (and could thus be a problem for the Leader) and makes those that stay choose to be as blindly loyal as possible, to avoid the scorn of the Master and the taking away of privilege and group affirmation. These drones will then start to maintain group discipline by using the same tactics on those out of line. In exchange for elevated status with the group and the Leader.
It works the same everywhere, with the Jehovas, Charles Manson’s girls, Austrianism (just think of Gary North’s ‘monetary crank’!), narcissistic moms, cultish ‘personal development’ courses like Landmark, Essence/the Source and Avatar and, indeed, Mathematically Perfected Economy and its hero Mike Montagne.
Everywhere you go you find them, the obsessed Montagne MPE Minions, claiming to represent the ‘singular solution’ and even calling others plagiarists because they dare talk Usury and monetary reform without kissing Mike’s ring. Oh, and don’t dare disagree or find fault in MPE, because that lands you into real trouble!
I’ve heard of a couple of people who left because of this going on in the MPE Skype chat room and at other occasions.
So I guess it’s not surprising the interaction I had with them immediately degenerated into ‘fuck you Migchels’ and ‘you fucking maggot’.
MPE’s ridiculous stance on Inflation
Of course this kind of childish petulance can be easily overlooked, if they have the facts on their side. But this is simply not the case. It’s not even about the unmerited claims to MPE’s singular uniqueness, it’s about the very important question of volume of money and inflation.
Mathematically Perfected Economy rightly claims that usury causes rising prices. This is a well established truism, it’s very old. The initiated ancients probably already knew this. Islamic scholars have been saying it forever.
It’s simple to understand why: producers must pass on their cost for capital to their consumers.
I don’t know why Montagne claims he invented this, perhaps he discovered it independently, he did at any rate do some work on the underlying math, coming up with the P(rincipal) < P + I(nterest) equation, implying there is never enough money to pay off the debt plus interest, forcing a growing money supply.
Interestingly, this is impossible under a Gold standard, meaning that usury greatly worsens money scarcity under Gold and implying eternal deflationary pressures, off setting the upward pressures on prices that usury brings.
But, true as it may be that usury causes rising prices, MPE goes completely and utterly overboard and goes on to claim Usury is the only cause of rising prices!
Yes, you’ve read that right: MPE claims rising prices are never ever caused by a rising money supply, but says the money supply only rises to pay off ever higher interest charges and that these higher interest charges, and only these, are the cause of rising prices:
“Circulatory Inflation or hyper inflation: Never happens because the rate of circulatory deflation (caused by the interest drain, A.M.)…….. always, always, always exceeds the rate of any prior reflation by national debt, clearly evident by perpetually increasing sums of national debt upon further cycles of reflation which is indeed necessary today to service the prior sum of debt.” (Source)
Make no mistake: I’m a sucker for contrarian thought and always love it when people off handedly do away with truisms of the age. If they have the goodies to back it up, that is.
But to just simply say, as Montagne did in our discussion, that I can offer no proof ‘circulatory inflation’ (increasing volume) can cause rising prices, while ‘his’ math proves that usury does cause ‘price inflation’ (rising prices) and that thus the onus is on me to prove ‘circulatory inflation’ even exists is of course insanity. Nothing wrong with making bold claims, but nothing wrong with demanding some proof either.
When I mentioned the Continental, George Washington’s money and a famous case of money destroyed by printing, Montagne replied scornfully that I apparently didn’t know about British counterfeiting. But by saying this, he just flaunts his own ignorance. Why assume I would not know something so commonly known as British counterfeiting of the Continental?
Much worse: it matters absolutely nothing whether the money supply grows because of Government printing or counterfeiting. The counterfeit notes will be used to pay and they will effectively add to the volume of money. If Montagne claims counterfeiting caused the hyperinflation of the Continental, he implicitly admits ‘circulatory inflation’ causes rising prices!
Hyperinflation in Zimbabwe caused by Usury?
Claims Australia4MPE: we’re just being brainwashed with this ‘circulatory inflation’ meme. Usury causes all inflation, including that in Zimbabwe. Unfortunately, in a 10 minute vid, he offers absolutely zero proof for this.
So let’s have a look: did Usury cause the hyperinflation in Zimbabwe? If this is the case, it must be true that “the rate of circulatory deflation (caused by the interest drain, A.M.)…….. always, always, always exceeds the rate of any prior reflation by national debt”.
This means that interest rates must be on par with the growth of money. The interest-rate determines the rate of ‘circulatory deflation’ and the amount of new money that must be printed to off set this.
However, in 2007, a year before the hyperinflation peaked, prices rose 6,600% in Zimbabwe and interest rates were raised from 650% to………800%. Proving that Usury was only part of the cause of the rising prices and not by far enough to explain the price levels, growing eight times quicker than the interest rate would suggest. (Source)
So no: it’s simply not true that the growth of volume is always smaller than the interest-drain. It most certainly was not the case in Zimbabwe. What happened there is that Mugabe and his Central Bank just printed whatever they needed to keep their soldiers and Government employees happy. And the IMF, of course. It was rampant printing that caused the hyperinflation in Zimbabwe, not Usury.
The Housing Bubble
‘Circulatory inflation’, says MPE, can only exist when the money is not backed by assets.
What is more: MPE claims people can spend as many promissory notes (the MPE equivalent of interest-free credit) as they want, as long as they have the assets to back them.
My basic critique in the previous article was, that people would spend promissory notes on buying assets on bubbly markets, meaning they would back their promissory notes with assets at already inflated and further inflating prices.
But, Montagne merrily replies: this can never happen in MPE, because asset bubbles are caused by Usury and there is no Usury in MPE, so all promissory notes will always be backed by assets at legitimate prices!
If anything, the housing bubble, which was caused by unchecked massive credit expansion because of very low interest rates, shows what will happen if people can get all the credit they want at low prices. The volume of money will start to grow. Uncontrollably start to grow and this will lead to rising prices and this will lead to optimism and people will start saying to each other: “this will go on forever, there is a structural demand for housing”. They will see housing is going up and they don’t want to miss out, buying some more, spending some more promissory notes into circulation, leading to even more money.
This is the basic positive feedback loop that causes asset bubbles. Not Usury!
Our three problems with money are usury, the manipulation of volume (boom/bust cycle, artificial scarcity of money) and the centralized control of credit allocation, meaning it’s bankers who decide who can invest in what.
MPE solves two of these three problems. Their promissory notes will devolve the decision making to the people. It will end usury.
But it’s take on inflation is ridiculous. Completely outrageous. They offer no proof whatsoever that circulatory inflation is not a major cause of rising prices. They maintain volume can grow unhindered if backed by assets, completely negating that these assets will be inflating as they are used to back ever more promissory notes.
They offer zero proof in denying that volume is not a key cause of rising prices, notwithstanding two millennia of serious inflations and the clear correlation with rising volume in these instances. For example the inflation of the 1500′s, when the Spanish were bringing in specie from the Americas. The Continental. The Weimar inflation (where the Reichsbank was printing money to pay off the tribute the Allies demanded at Versaille). The simple minded zero proof way that they do away with Zimbabwean hyperinflation is particularly egregious, because it’s pretty easy to get the associated data.
The fact that a growing volume of money can lead to rising prices and most assuredly will lead to rising prices in extreme cases is the commonly held wisdom of the ages held by economists of many persuasions. This does not make it true in itself, but they have a strong case and a good story is needed to negate all this. This MPE simply does not offer.
It does show that Usury also can cause rising prices and I fully agree that it was Usury that was the cause of the structural rise in prices after the war. But after the war too, there were purely volume related inflations, concurrent with the Usury effect. For instance the late sixties, with the Vietnam war and the Great Society. Or the housing bubble of the previous decade.
If you start a reasonable dialogue about these issues you can expect a couple of MPE drones to insult you everywhere, from Facebook to their blogs. Montagne will call you a ‘fucking maggot’.
And for what? Simply to hide his own insecurities and his stupidly overblown ego which actually needs to believe that not only is he the only one that understands the problem, he actually was the first to even see it AND the man to find the ‘singular solution’, from which all other ‘eleventh hour pretenders’ just aim to distract!
But the simple fact is: MPE is a disaster. Its implementation would lead to horrible inflation.
Meanwhile, MPE is completely useless in the wider monetary reform movement. Its leader is incapable of normal discussion of the issues. One can imagine the field day a serious Austrian or Mainstreamer, scarce as they may be, would have should they put in sufficient effort to understand MPE’s vocabulary, so that he can actually understand what they’re saying. It would discredit the entire monetary reform movement.
Thankfully we don’t need MPE. What we need is interest-free mutual credit based money, of which MPE is just one example, or debt free demurrage money.
With properly managed volume.
The Facebook exchange about the above issue can be found in raw format in a PDF: MontagneMigchels.