Operating system The 1% Solution

Operating System: The 1% Solution
The operating system for The 1% Solution is in the process of being created. If you wish to help in that creation please look over the broad outlines of the system below. This will be open source code so that it will be available and accessible to all.

Open an account and Issue the original stake
Tax Ouroboros 1% per day
Generate Nautilus Chips
Distribute DB

Process transactions

Debit account of purchaser
Credit account of seller
Prevent counterfeiting

Transaction Fees

1% to members
?% to operators
?% to government

Business and Corporate Accounts

Same as personal accounts without Daily Bread


Secure Personal Identity: one account per person
Secure against Counterfeit and all hacking

Merger Formulas

Unification of Groups

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What holds us back?

The Misconceptions that hold us back.
We can communicate instantaneously and deliver anything anywhere in the world overnight. That begs the question. Why don’t we? What are the brain farts that hold us back from making the care and welfare of my little friend Joanna as important as the rest of the world. Joanna spends her days on the streets of San Miguel de Allende selling chicklets with her mother and brothers and sisters. Why doesn’t she have economic power? That is the question we must answer, and not in ten years. Today. Now. This is not an academic question. This is the question of the ages and it is urgent. This is an emergency.
1. Our world is built around the belief that people are naturally Lazy.
Many believe that aid to the poor must be severely restricted or nobody will work. The vision of bums hanging out on the porch all day drinking beer on the public dime is terrifying to them. They will do anything to make sure it doesn’t happen.
The reality is that most people are ambitious and will strive to improve their condition. We arrange our society, actually denying food and shelter to ourselves, rather than let someone have a free lunch. The true motivation lurking behind this destructive myth is that if the poor are not desperate they will be able to demand higher wages and better working conditions.
2. The poor are subjected to the selective moral restriction that getting something for nothing is a moral hazard.
This false premise begins with the idea that the major form of help or subsidy in society goes to the poor. The opposite is true. The majority of all rewards in a functioning society do not go to the poor and the majority of these rewards are of the “something for nothing” nature.
Classifying what is called “Welfare” as a moral hazard leads to programs that are targeted to those “in need”. Such benefits to the poor are then “cut off” at the first sign of any prosperity, “for their own good” of course. This forces the poor into a choice between a low paying job and their benefits. Often they end up making less money by working than they would by doing what they need to do to remain eligible for welfare. Other members of society who receive rewards for which they did absolutely nothing are not subject to the same “moral hazard” scrutiny.
Such attitudes and the programs they elicit make it almost certain that they do not work to pull people out of poverty. Welfare recipients are demonized and separated. Ethnic and racial stereotypes allow a political divide and conquer strategy.
Getting something for nothing is not a moral hazard it is the foundation of society. The sole problem with getting something for nothing is that some get more than others. The fix is to give everyone the same.
3. Many people never get past “I’m OK, it must be fair.”
Most people’s analysis of the economy never gets past the idea that the “system” works because it has rewarded them. It’s not the rich who are the main problem here. It is not the people who were born on third and thought they hit a triple that hold us back. They are few. Much more serious are the people who were born on second and thought they hit a double, or the people who were born on first and thought they hit a single. Or the largest group of all, those who truly believe that all they need is a chance to come up to bat.
It is not that individual effort is not important, it is, and it should be rewarded. It is simply the completely false notion that every successful individual is the one primarily responsible for that success. No successful individuals start from nothing; each and every one had help. Each and every successful individual in modern societies has “something for nothing” subsidies. All societies have massive subsidies at every level and they could not exist without them.
4. We believe as individuals and a society that we can make plans into the distant future, 60 to 70 years in the future.
People believe that they can plan individually for their later year without regard to what type of society and economic system that requires. This type of planning requires a money system in which money holds its purchasing power virtually forever. In fact “Sound Money” is defined as money that holds its purchasing power regardless of the type of economy it requires to bring this about.
This requires a political philosophy and organization that will keep the purchasing power of money as its overriding goal in monetary and economic policy. In reality such systems guarantee only one thing, that the wealthy and their hirelings will be in charge of everything. Long term commitments to any other group are only honored if they are in the interest of the wealthy and their hirelings.
What I mean by hirelings are the people the wealthy hire to take care of their money. The Wealthy have better things to do with their time. These people are Bankers and Stock Brokers. They have great power because they handle all the money. We have just witnessed a “banker and broker” rebellion in which the hirelings of the rich went over their bosses’ heads and stole everything that was not nailed down. Without permission they raised themselves to the financial level of their employers by expropriating the operating capital of planet earth and are in the process of destroying every pension plan in existence.
5. The poor are responsible for their situation
The belief is widely held that the poor could extricate themselves from their poverty with a good work ethic. The truth is that the poor work longer and harder than any other group. The principle difference between rich and poor is that the rich have money and the poor don’t.
Poverty serves two functions. The first is as a threat for those workers and politically active who do not toe the line. The second is having available a large group that can be exploited, especially sexually, because of their need for money. There are no other natural reasons for poverty.
6. It is almost universally held that Thrift is Good
The Jewish Rabbi known as Jesus clearly understood the false nature of accumulated wealth. Money is not a stored commodity comparable to the food that animals use to get them through the year. Money is stored obligation, stored power. This stored power and obligation eventually destroy every natural relation in a society.
7. I don’t owe any one any thing.                                                                                 This is a very true statement for everyone who was raised by wolves. If, however, you speak a language, you use electricity, have water to drink, and are not subject to rape, theft, and murder on a daily basis, you owe a great deal.
8. Money is just the way it is.                                                                                         Money has a storied and quite varied past. It has taken many forms for many purposes. The absurd notion that as a world we must choose between a completely corrupt and criminal central banking system and some loosely defined concept of “the gold standard” is the most absurd belief of all.
Money can make many forms and perform many functions. Money is what money says it is. We all need to learn to speak money, otherwise it will get lost in translation.
The Remedy
These attitudes leave us unable to comprehend that we are rich enough to be generous and poor enough to be in need of help. We are operating at less than 1% of 1% of our potential. That’s less than 1/10,000th of what we are capable. When we open our eyes and we see that the person in the bread line and the person in the penthouse suite are the same person we will move past this situation.
For a society to function and endure it must put the welfare of the least well off person on an equal footing with rewarding a job well done. A Universal, Unconditional Citizen’s Dividend does exactly that.

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Groups Who Might Use The 1% Solution

Groups Who Might Use The 1% Solution

          Casino Fortunatus

Colleges and Universities-the college itself or Student Unions

Credit Unions

Religious Organizations


Cities or Regions:  A Local Currency

Non-Government Organizations

Service Groups

Video Gamers: groups, clubs or co-ops

Gaming Companies or Consortiums of Gaming Companies

Virtual Worlds-Introduced as the official or alternative currency

Cooperatives: this includes existing cooperatives and cooperatives created especially  for the purpose of The 1% Solution

For-profit Businesses

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Compound Disinterest

Compound Disinterest

Money acts as the life’s blood of the economy.  It flows, surrounds, and defines the market.  When Money is working well it does the one thing that it does better than anything else, reward quality and a job well done.  But rewarding the talented and diligent only increases their advantage.  If left to its own devices money concentrates.  Money feeds back on itself.  Money makes money more powerful.  The process becomes most pronounced when the monetary system is completely dominated by those with an abundance of money.  Money becomes the tail that wags the dog.  The rich get richer and the poor get poorer, until the process finishes with a very few having all the money.  It has been the same in all money economies for thousands of years.

Concentrated money stops being a neutral medium of exchange.  The Free Market stops working.  For the Free Market to work money must be neutral.  Neutral money is disinterested and Indifferent.  Disinterested money does not have a stake in the outcome of any transaction.  Disinterested money does not seek an outcome that is best for money.  Indifferent money is no respecter of persons, it treats every one exactly the same.  Indifferent money has the same set of rules for rich and poor.

The combination of money and talent alone are enough to drive money into the hands of the few but once money gets started there is another power which doesn’t even need talent.  Money has interest.  Interest is a type of rent that one person pays another for the use of their money.  The person renting out their money for interest does not need any talent or skill and it doesn’t matter how they got the money, they can loan their money and collect interest.  Interest allows people who have money to maintain a powerful position in the economy by renting out their money.

There is simple interest and there is compound interest.  Simple interest involves a flat payment on an amount of money for a period of time.  Compound interest involves collecting the interest at certain points in the life of the loan and then collecting interest on that collected interest as well.  Money grows and grows and eventually the renting out of money overcomes all other activities.  Money becomes concentrated and most of the people of the world become servants.

Concentrated money raises social and political opposition.  These reactions to the concentration of money quite often turn into violent and bloody revolutions.  Sometimes the revolutionaries are pushed back and an official oligarchy, a rule by money is imposed.  Some revolutions sweep money away.  Oft times dictatorships based on race or ethnic identity follow.  Some try to establish and maintain money equality.

The problem with money equality is that money loses its ability to reward diligence, creativity, perseverance, and attention to detail.  Without this capacity to reward, money becomes meaningless.  Equal money can divide up a pie fairly, but it can do nothing to make sure that that pie is delicious or big enough for everyone.  When equality is enforced bureaucrats take on more and more power.  Political opposition develops.  People want the freedom to trade with whomever they want and they eventually get it.  This opens the road back to concentration and once entered it is relentless and seemingly inevitable.

The tool of money is volatile.  It keeps smashing us on the rocks.  The human drive for freedom meets the human drive for equality in what seems like a fight to the death with no end in sight.  There must be a way to make money neutral without making it equal.  There must be a way to allow money to reward a good job without it ending up in the hands of a few.

Casino Fortunatus

The 1% Solution

The 1% Solution is a self-organizing system of Gambling Chips.  The goal of The 1% Solution is to keep the chips a Neutral Part of the Game and to keep everybody in the game Forever.   The 1% Solution will be Casino Fortunatus’s method of making sure the House always wins.  The difference at Casino Fortunatus is that you are the House.

The 1% Solution Chips will be a type of money.  Money occupies a rare space somewhere between the forces of growth and decay.  Each of these forces generates tremendous energy, enough energy to power money.  Existing or proposed moneys choose one or the other.  The 1% Solution chooses both.  Completely.  Separately.  Simultaneously.

The scientific and mathematical worlds owe a great debt for the knowledge of how things build up and how things break down to the process of compound interest.  Swiss Mathematician Jacob Bernoulli gladly borrowed this knowledge 300 years ago and it has paid great dividends ever since.  Sea shells, hurricanes, molecules, galaxies all follow the same pattern Bernoulli found in compound interest.  The debt is now come due and this special knowledge of growth and decay will create a whole new power in money, Compound Disinterest.

  Nautilus: Chips That Grow

Nautilus Chips are named for the Nautilus Shell.  The Nautilus Shell has the property of being able to grow larger and still keep its shape.  The Nautilus Chip system has two parts, an Equal Stake and a daily dividend called the Daily Bread (DB).   For those players starting on the first day Casino Fortunatus will create and distribute 100 chips per player.

Once received these chips are the property of the players to use as they see fit.  They can spend them or gamble with them or give them away.  After the first day the Stake will no longer be equal.  Some people will have more chips than others due to their activities of selling things or working for chips.  Some people will spend some of their chips and others all of their chips and have none left.  This is no different than the way things are now.

On the second day Casino Fortunatus will create a number of chips equal to 1% of the existing chips and divide them equally between the players.  This is the Daily Bread, an equal share of 1% of the existing chips paid to each player each day.  Receiving an unconditional daily dividend is different than the way things are now.  Everyone will have at least some chips every day.

The first Daily Bread will be 1% of the 100 Chip Equal Stake, so it will be 1 chip.  The number of chips per player has now grown to 101 chips. The Daily Bread (DB) on the next day will be 1% of 101 chips.  The DB is 1.01 Chips.  This brings the number of chips per player up to 102.01 chips.  The 1% increase is taken on the new total number of chips.  The total number of chips grows at 1% per day which makes the Daily Bread grow at the rate of 1% per day.  This is called Compounding.  This keeps the Daily Bread and the Total number of Nautilus Chips in a constant ratio of 1/100.  The total amount of Nautilus Chips is always 100 x Daily Bread.  Daily Bread is always 1/100 of the total number of Nautilus Chips.

At the end of a week the Average Stake has grown to a little over 107.2 chips and the DB to 1.07.  At the end of a month the Average Stake is almost 135 and the DB is 1.35.  Around the 70th day the Average Stake is up to 200 and the DB is 2 chips, 1% of the average stake.  This is the Doubling period.  Everything doubles about every 70 days.

The 1% Solution is Compound Disinterest because the Daily Bread dividend is completely disinterested in who gets it.  Everyone gets the Daily Bread with only one condition, you only get one.

Players who enter after the game has already begun will be given the Average Stake.  The Average Stake is always 100 x Daily Bread on that day.  If they come in on the 70th day their stake will be 200 chips.  Everybody starts in the middle.  The number of Nautilus Chips will have grown to 400 chips per player on the 140th day and the dividend will have grown to 4 chips per day.  Players entering on the 140th day will receive a stake of 400 chips.

The Daily Bread process dilutes the existing Nautilus Chips.  That dilution is compensated for by receiving the new chips.  The dilution falls heaviest on those people with the most chips.  It is exactly compensates those in the average position.  The new chips are the most benefit to those with less than average numbers of chips.

If you have spent chips and stop spending them you be nudged back toward average.  If you have earned chips and stop earning you will be nudged back toward average.  If you spend half your Daily Bread every day your account will stay at half of average.

Nautilus is a beautiful system.  Whether this is sufficient to counter the weight of money’s power to feed-back upon itself can only be answered by trying it.

Ouroboros: Giving Money a Half Life

Ouroboros, the Snake that eats its own tail, will harness Decay.  Each player will receive an equal stake of 100 chips when they enter the game, whether they enter early or later on.  There are always 100 chips times the number of players in the Ouroboros system.

Once received these chips are the property of the players to use as they see fit.  They can spend them or gamble with them or give them away.  After the first day the Stake will no longer be equal.  Some people will have more chips than others due to their activities of selling things or working for chips.  Some people will spend some of their chips and others all of their chips and have none left.  This is no different than the way things are now.

All of the chips in the Ouroboros System will be skimmed at the rate of 1% per day.  This causes each account to shrink at the rate of 1% per day.  The proceeds from the skim are returned to the players as an equal dividend each day.  This dividend, the Daily Bread (DB), will always be exactly 1 chip (1% of 100).  Receiving a steady dividend every day is very different from the way things are now.

If one spends their Daily Bread dividend every day then that person’s account will begin to shrink.  The first day this will be 1 Ouroboros Chip, 1% of 100.  This will leave only 99 Ouroboros Chips on the next day.  Taking 1% of 99 is only 0.99 Ouroboros Chips which leaves 98.01 chips.  The next day the account will only shrink by 0.98 Ouroboros Chips leaving 97.03.  It will take a little less because each day you are taking 1% of a shrinking amount.  It will continue to diminish each day thereafter.  On the 70th day there will be 50 chips of the original stake left.  70 days is the Half-Life of Ouroboros Chips.  This is inverse compounding.  .

In addition to the 50 chips you have left from the Original Stake at the end of 70 days you will have received 70 chips worth of Daily Breads.  But you will not have 120 chips; you will have exactly 100 chips.  Each of the chips you have received in those 70 days has also been skimmed at the rate of 1% per day.  Those received early on will have lost almost half and those later on will have lost very little. These constantly sinking 70 chips and the 50 left from the original stake will add up to exactly 100.

Idle accounts will be skimmed one chip a day and will receive one chip a day.

The 1% skim is a flat proportional tax on all chips.  Those with fewer chips in their accounts will pay less.  Those with more chips in their accounts will pay more.  Ouroboros is indifferent.  The Daily Bread will remain equal no matter how many chips you have.  Ouroboros has no interest in who receives the Daily Bread.  The rich will get an equal share.  The lazy will get an equal share.  Children will get an equal share.  Plumbers will get an equal share.  Bums will get an equal share.  The infirm will get an equal share.

Ouroboros is Compound Disinterest.

Peer to Peer

Voluntarily associate with others who wish to do this and share your experiences with other groups.  Those are the Rules.  Laissez les bons temps Roullez.


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How Money Works



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70 Rules, The Unfinished Game

70 Rules, The Unfinished Game

The Unfinished Game

I have just finished reading a wonderful book, The Unfinished Game, by Stanford University Mathematician Keith Devlin (http://www.amazon.com/The-Unfinished-Game-Pascal-Seventeenth-Century/dp/0465018963). The book takes a penetrating look at the correspondence that occurred between 17th century mathematicians Blaise Pascal and Pierre de Fermat (yes the last theorem guy). The two great minds had taken up communication in an effort to solve a mathematical puzzle that had been around for at least a couple of centuries prior to their efforts. The Problem of Points, also known as the problem of the Division of Stakes, is a mathematical problem that drew Pascal’s attention in the 1650s. Briefly stated the problem seeks to determine the fair distribution of the wagers in a game of chance that has been interrupted before its conclusion.

The collaboration of Blaise Pascal and Pierre de Fermat over the Problem of Points is widely credited as being the beginning of Probability Theory.   The ability to use mathematics to make intelligent assessments about future events changed the world. Probability became an indispensable tool in a wide array of human endeavors but especially in science and business. Whole new disciplines in sciences and whole new industries in the world of commerce flowed from the letters the two men wrote to each other 450 years ago.

My introduction to Professor Devlin was his publishing of “A Mathematician’s Lament” by Paul Lockhart, on his Math Web Site Devlin’s Angle. Lockhart’s Lament is a passionate plea for the teaching of math as a beautiful and interesting subject. Lockhart believes that the proper approach to Mathematics is as an art and should be approached in a playful and joyous manner. Mathematics should be its own reward. This has been a goal of mine as well. Lockhart now teaches Mathematics in Elementary School.   If this has piqued your interest I also recommend Lockhart’s beautiful book Measurement, which demonstrates what he means (http://www.hup.harvard.edu/catalog.php?isbn=9780674057555).

My journey down this path began in 1984. I read a book called Mathematics and the Imagination (http://www.amazon.com/Mathematics-Imagination-Dover-Books/dp/0486417034) by Edward Kasner and James R. Newman. I have been entranced by mathematics ever since. I became an Elementary School teacher as well and tried my best to make math available to my students in this manner.

I had used the Pascal-Fermat connection as the intro in an essay on my other principle interest, the nature and structure of money. So when I saw that Professor Devlin had tackled The Problem of Points I was eager to see what he had to say. The Unfinished Game has not disappointed. He makes Pascal and Fermat come to life. He explores the Problem of Points from both a historical and theoretical point of view. I was especially happy to see my favorite mathematician Jakob Bernoulli in a starring role. Galileo has a cameo.

Things also took a dramatic turn for me when Professor Devlin concluded his book with a glowing description of a Nobel Prize in Economics won by Robert Merton and Myron Scholes. Professor Devlin uses their accomplishment as an example of how the work of Pascal and Fermat continued to open new vistas in human activity. The two mathematicians received the prize in the 90s for their model predicting the “Value of Derivatives”. I have my own take on the two and their accomplishments and to say that it is the diametric opposite of Professor Devlin’s puts it mildly. I’ll get back to that.

A very special surprise for me was the appearance of Luca Pacioli, the third time this year that he has figured prominently in my studies. He was the first person to publish anything about the Problem of Points. He worked out his own solution which did not gain much acceptance in the mathematics community, but he wrote up and published it 150 years before Pascal and Fermat took up the question. If you haven’t heard of Luca Pacioli you’re not alone. He is odds on favorite (that’s a probability cliché) to win the contest for highest ratio of Importance/Obscurity in the history of Western Civilization.

It’s not that he is unknown. In some circles he is well known. I was using Leonardo da Vinci’s pencil sketch of a Luca Pacioli wood carving of the icosidodecahedron in my own book without crediting Luca. The reason was that I did not know about him. I don’t think I am alone. I had seen several da Vinci pencil sketches of the Platonic and Archimedean Solids. What I eventually discovered was that they were sketches for Luca Pacioli’s book La Divina Proportiona. This book dealt extensively with the Platonic Solids and the Golden Ratio, (the Divine Proportion, the mean and extreme ration, the Golden Section). These are two of the main topics of my book, Mathematical Measures, Mathematical Pleasures, Mathematical Treasures. (http://www.amazon.com/Mathematical-Measures-Pleasures-Treasures/dp/0615743757, free download at http://mathfortheages.com/wp-content/uploads/2012/06/book-final-edit-11-122.pdf)

I am a firm believer in paying attention to any person or piece of information that shows up in two completely different contexts in which I am interested. Pacioli had just hit the jackpot. If the Problem of Points was the third time that Luca Pacioli had been on my radar, and Leonardo da Vinci’s pencil sketch of the icosidodecahedron the first, then there must have been a second.

70 Rules

We, my classmates and I at King City Joint Union High School, were saying it a lot in June of 1970. 70 Rules. It rolled off our tongues. High school graduates are full of themselves. We almost believed it. So for a few weeks before and after graduation you could hear 70 Rules coming from cars dragging main or shooting the loop. We didn’t make the phrase up. When we were freshmen we had heard 67 Rules. When we were juniors it was 69 Rules. (You’ll notice I skipped a year. Not an accident). By the time 70 Rules died down I was left to start considering what to do with the rest of my life. Plan A had been dead for months now and Plan B was nowhere in sight.

One year earlier my Plan A had been to matriculate at Stanford University in the fall of 1970. For this plan to have worked a whole series of events would have to have taken place. These events did not take place. I was not headed for Stanford. It had always been a stretch anyway. As with most of my fantasies of adolescence there was a young lady involved. Alas.

As the summer of 1970 moved along I began to miss my classmates. They are the only group of people I have ever loved. My identity was with them and my identity had disappeared.

By the fall of 1971 I managed to end up at Rocky Mountain College in Billings, Montana. Rocky is the only institution I have ever loved. It saved my life. From 1971 to 1975 it was my Alma Mater, my Soul Mother. It took me in and sustained and nurtured the talents and skills that I had brought with me. I left it a better person than I entered, any step up from useless is not a long journey. But what it also did was to help me regain a spark of curiosity that sustained me for a decade until something else took its place.

Rocky Mountain had a legacy. It was originally Billings Polytechnic. It was started by the Eaton Brothers as a Religiously affiliated college that would accept any and all in the State of Montana and its neighboring states that wanted an education. It was called the College of the Open Door because you could arrive without a penny in your pocket and leave with a college education if you were willing to work. Billings Polytechnic had a working farm in which poor students could earn their tuition with the sweat of their brows. That legacy remained and I thank God that it was still there for me.

My tenure at Rocky Mountain College helped me gain a position in the Master’s Program in the Department of Agriculture and Resource Economics at Oregon State University in Corvallis. Oregon State was in the athletic conference Pac 8 at the time and I got to see the teams from the “Farm” come and play. Neither school was much of a threat to anyone at the time, but the convergence allowed me to wax nostalgic about my Plan A. I hadn’t made it to Stanford, but I had made it to a school that played them in sports on a regular basis. Maybe a Phd. would be in my future.

I loved the study of Economics, but I could not see myself as an Economist. My approach to Economics was always very similar to Lockhart’s approach to mathematics. For me Economics was and still is an art. I went outside the purview of my department for a thesis topic. “The Workforce Incentives of the Aid to Families with Dependent Children”. My thesis remained unfinished for almost 40 years. The subject just kept getting broader. I finally finished it to my satisfaction. It is titled “The 1% Solution” and can be read at my website worldmeetworld.wordpress.com. It was The 1% Solution that brought me to such a completely different reading than Keith Devlin has on the work of Merton and Scholes. Or maybe I’m still just trying to get to Stanford.

The Rule of 70

Luca Pacioli was what is known as a Polymath. He made major contributions in a wide range of areas. I’ve mentioned Probability and Geometry, he was also a Monk, Philosopher, and a Physician, but perhaps his most important field of endeavor at the time was his impact on business practices and accounting. He is considered the Father of Modern Accounting, and Double Entry Bookkeeping. He also created many tables for businessmen that dealt with calculation of interest on loans.

One useful tool that Luca Pacioli made available was a simple method to determine the length of time it would take for a loan to double. It was called the Rule of 70, also the Rule of 72 and the Rule of 69. These “Rules” all dealt with calculations of compound interest. They are actually all the same Rule, the multiple versions and names have to do with the ease of use. 72 is more compatible with the 12 month calendar, but the actual number of the rule is between 70 and 69, to be more exact, approximately 69.4. I like that phrase, “to be more exact, approximately.”

If a loan was let at 5% simple interest it would take it 20 years to double. Five percent per year for 20 years yields 100%, 0.05 x 20. The Rule of 70 tells us that if it was compounded yearly it would take only about 14 years (.70 x 20) to double. You can do the math one year at a time. At the end of the first year you’d have 1.05. Paying 5% on 1.05 yields 1.1025. Paying 5% on 1.1025 will yield 1.1576 at the end of the third year. Etc. Or you can just take (1 + .05) to the 14th power to get 1.97. It doubles in slightly over 14 years. Compounding yearly for 20 years yields 2.65. Compounding every six months yields 2.685. Compounding monthly yields 2.7126… The more often you compound the closer you get to e, 2.71828…

Increasing the frequency of compounding increases the return on the loan but the rate of the increase slows each time. These two opposite tendencies run up against a limit. It runs up against one of the most famous and well used limits in the world of mathematics. (1 + 1/x) to the x, as x approaches infinity. This is the formula for the transcendental number e, 2.71828…..   e is irrational, which means it cannot be stated as the ratio of two whole numbers. e is the base of the natural logarithms, I prefer the spelling logarhythms.

Logarhythms were invented by Scottish Mathematician and Theologian John Napier, Baron of Merchiston. He did this about 40 years before Pascal and Fermat began their correspondence. The table of logarhythms did not figure in their discussion but they did in those of the man who took their work and combined it with the work of Christian Huygens and made Probability Theory a Discipline in Mathematics. This man was named Jakob Bernoulli.

Bernoulli figures heavily in Professor Devlin’s book and is given the credit he so richly deserves. Bernoulli was a member of Mathematics’ most important family dynasty. No less than 7 Bernoullis made major contributions in mathematics in the face of 4 generations. Arguably the most important was Jakob.

Jakob Bernoulli was the first to recognize the connection between the transcendental number e and compound interest. The formula for e is (1 + 1/x) taken to the x power as x approaches infinity. This is 100% interest compounded continuously.

is called the exponential function. e is nature’s growth constant. It is also the constant of radioactive decay. When graphed it yields the logarhythmic spiral. The shape of spiral galaxies and hurricanes. Jakob Bernoulli so loved the logarhythmic spiral that he left instructions to have one carved on his tombstone only to have an Archimedean Spiral carved instead.

More than a 100 years before Napier or Bernoulli or Euler became aware of e Luca Pacioli had published on the Rule of 70. The Rule of 70 comes within a breath of e.   The time for e to manifest itself is compound interest is called the e-folding time. The time for a loan to double is called the doubling time and it is 0.693 times the e-folding time.

Frederick Soddy

The mathematical process of doubling and halving became known in science as the “Half Life.” The “Half Life Period” was a term coined by Earnest Rutherford in his work on radioactive decay with Frederick Soddy in the early 20th century. They were both Nobel Prize winners in the physical sciences.

At the height of his promising career in the physical sciences Soddy left to begin a crusade to challenge the structure of the world’s monetary system. He was solving what he considered the most pressing problem that humanity faced, Money. “In four books written from 1921 to 1934, Soddy carried on a “campaign for a radical restructuring of global monetary relationships”,ring a perspective on economics rooted in physics.” Wikipedia

When the trained scientist Frederick Soddy began to understand how money worked in his world he became angry. He not only wanted banking reform he believed the bankers should be put in jail.

Soddy took Probability Theory and the principles of compound interest and revolutionized chemistry. He then took his knowledge of the Physical world and brought it back to the world of money from whence it came.   He brought it back as a revolutionary who has largely been ignored.

The Continuous Game

What Blaise Pascal and Pierre de Fermat explored was a gentlemanly and fair distribution of wagers based on some ability to gauge one gentleman’s position vis a vis another gentleman’s position in an uncertain situation, a game of chance. The uncertainty derived from the fact that the rules of the game being played had not taken the situation of the interruption of the game into account. The rules very well could have. A rule could have been: if the game is interrupted then whoever is ahead gets the whole pot. Or, if the game is interrupted then the pot is divided on a percentage basis of the points already scored. Both of these solutions would be correct and fair as long as the rules are known ahead of time and participation is voluntary.

The imposition of fairness is a value judgment. The proper place of value judgments is in game design, the setting of the rules. There is no mathematically correct choice between either of these other choices and the solution that Pascal and Fermat proposed.  What Pascal and Fermat determined was fair was what they considered the rules should be in an interrupted game. They believed that in interrupted games each player should be compensated for their relative earning potential. What they really determined is the expected value of each player’s position in a game that is not interrupted. That they did it mathematically is a testament to the power of the tools they brought to bear. The interruption is simply an arbitrary place in time but it is a place in time that turned out to have profound implications. What Pascal and Fermat invented in addition to Probability Theory was Meta-Game Theory, the mathematical analysis and synthesis of chance of human intention. The significance and value of the latter has barely been touched.

Real problems arise when the rules of the game are malleable and participation is anything but voluntary. This is the situation in which the modern world and many of its inhabitants find themselves in today. They have no choice except to participate in a game that is called the economy. The game is rigged and notions of fairness do not enter into its design. Their other choice is starvation for themselves and their families.

Robert Merton and Myron Scholes waded into the “game of economy” with an equation that was used to estimate the value of an investment instrument known as the Derivative. The first red flag should have been the pretentious allusion to the work of Newton and Leibniz in the name Derivative. Merton and Scholes and colleague Fischer Black used the most sophisticate tools that mathematics had to offer to create a predictive model, an equation that would yield information on how the market for this new method of investing would play out. It would help to establish the Value of Derivatives.

Derivatives are so known because they constitute a process by which people do not invest directly on assets, they are one step removed. People and institutions invest on some sort of grouping or packaging of an underlying asset. The packaging may or may not include bets on the future value of the underlying asset. The packaging has developed to the point that it can basically include anything.

It’s just like two guys sitting at a bar and betting on whether the next guy who walks in will be wearing a black or white coat or if a guy goes to the bathroom whether he will relieve himself in the left or right urinal. This is still just plain wagering. But if the modern world of communication gets involved and thousands of their friends begin to place side bets and then those side bets and the original bets are packaged and you can also bet on those packages, you have a basic idea of what Derivatives are. This is still a harmless use of an afternoon. It even has some vague similarity to the gentlemanly context in which Pascal and Fermat operated.

The game in which Derivatives operates, the game which Merton and Scholes and Black analyzed was not a harmless afternoon; the stakes were food, clothing, and shelter for the people of the world. And had they stopped at analysis that would have been idle academic speculation. But they did not stop at analysis, they put themselves in the game. They added their academic cover for a group known as Long Term Capital Management.   A group of very high rollers made fistfuls of dollars in the Derivative markets in the 90s until they didn’t. Then their equation proved to be a complete and utter bust for themselves and their partners. And this would have been fine as well, except for what happened next. The financial establishment bailed them out.

Their equation was not used to seek fairness in a gentlemanly contest. Their equation was used to give advantage and power to the already advantaged and powerful in a game of life and death. By placing their considerable mathematical skills in the service of derivatives and derivative traders they have sought to give unfair advantage. Derivatives are designed to obscure. They are the white collar version of the pick pocket. They help some people make a killing. They lead other people over a cliff. The difference between the game that Merton and Scholes analysed and the one that Fermat and Pascal analisied is that the main outcome being predicted by Merton and Scholes was the behavior of other people. The “predictions” they put into play quickly became a prime mover in the behavior of other people. They essentially became dice shavers for those who knew how they were being shaved. I have no indication that either knew what they were doing but they were at the very best useful idiots. This is not scholarship worthy of being associated with Fermat and Pascal.

What’s true about the modern world is that it is always an unfinished game for some people. For others the game is long since over, or never started, because a requirement of playing the game is that you have to have money. For some people the purchasing power of money is zero, because they have no money. For some people the Value of Derivatives is Infinite because they have no money. Just as Blaise Pascal and Pierre de Fermat examined the tool of their game, Dice, anyone in academia who wishes to make any predictive statements about markets should have some knowledge of the nature and use of money. Money is the dice of the market.

Creating a money that is as indifferent and disinterested in the outcome of the game as a good pair of dice is a necessary prerequisite to introducing any notion of fairness into the economy.   That is a worthy use of the legacy and tools that Luca Pacioli and Blaise Pascal and Pierre de Fermat and Jakob Bernoulli have left us. The 1% Solution is an effort to do just that, create a money that is as disinterested and indifferent to the various players in the game economy as a pair of “Fair Dice”. The whole world is invited to come play.


Keith Devlin has done a great service to the world in drawing attention to a moment in the history of mathematics that is worth exploring and savoring. The lives of these two men are a beacon to the capacity of the human mind.

If he can find the time I would hope that he could give my approach a look and a comment. And if he invited me to Stanford I’d probably accept. I’d only be 44 years late.

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Be a Moneteer

Moneteer- A Pioneer in creating a monetary system through knowledge and mutual effort.

Most of the decisions about your life are being made outside the political system in which you participate.  These decisions have to do with the design and operation of the money that you use.  This state of affairs will continue until you take the trouble to be informed not only about the system under which you live but of the historical and proposed options that exist for money.  The ability of the financial elites of the world to loot with impunity is dependent on an ignorant and complacent public.  Do not let this state of affairs continue.

Do not blindly take up the first new ideology that comes your way but become aware of what is being done today, what has been done in the past, and of all proposed solutions in the realm of money.  Become a Moneteer.  A Moneteer is a person who has made the conscious decision to make oneself knowledgeable about money and to become an active co-creator in the money system in which one lives.

There will be those who say these efforts are foolish and naïve, but the exact opposite is true.  The one truth that strikes fear in the hearts of those who operate the money system is that it is the combined actions of the regular Mary and Joe’s of the world that give money its power.  Once this becomes clear and money is forced to give a strict accounting, the Con-Artists who depend on an ignorant public will lose their power.

If this sounds a bit like the Wizard of OZ, challenging a power that operates behind a curtain, then you are perceptive.  The author of the Wizard of OZ was L. Frank Baum, who was a follower of 19th century economic reformer Henry George.  During the last part of the 19th century George’s book, Progress and Poverty, was the number one seller in the United States.

Sylvio Gesell, Argentian/German businessman invented a type of money, Stamp Scrip, that was designed specifically for the situation in which the world finds itself today.  U.S. Senator John Bankhead proposed it for America during the Depression.

Being a Moneteer does not mean that you should blindly follow these or any other reformers but that you should at least know who they are and what they had to say.  Blindly following and blindly rejecting any ideology is used by those who would control the weak and ignorant.

Nobel Prize winning French Economist Maurice Allais has stated that there is no difference between the modern world of finance and the practice of counterfeit.  If a counterfeit gang had taken over your town or country wouldn’t you look into it?  How about if one took over the entire world?

Everybody Knows.  Leonard Cohen has stated clearly the truth of the modern world.  Everybody Knows that the game is rigged, that the notion of “free market” is a hollow, cynical assertion.  The world is being pushed into a crisis of deprivation because a set of numbers tells us that there is no alternative.  This set of numbers are what the world calls Money.  There are other sets of numbers, there are other Money’s.

Be a Moneteer.  Moneteering will involve the investigation of every money system that has ever been proposed.  It will involve setting up public experiments with these Money’s and the reporting of how each works.  Do not be a patsy.  You and your neighbors can make your own money system from a position of knowledge.  In money, knowledge is power.  Be Knowledgeable.  Be Powerful.

Study and understand the following.

Commodity Money

The Austrians

The Gold Standard

The Monetarists

Alexander Del Mar

Irving Fisher and the Chicago School

The 1% Solution

Stamp Scrip

Sylvio Gesell

Senator John Bankhead

The 1% Solution

The Keynesians

Fiat Money

The Chartalists

Modern Money Theory- L. Randall Wray

American Monetary Institute- Stephen Zarlenga

Community Currencies

LETS- Local Economic Trading Systems

Time Dollars

Study all of these and use the knowledge you attain to add to the list.  Encourage your friends and neighbors to do the same.   Then you will be a  Moneteer.

Economics has been limited to the study of the effects of money on people.  Isn’t it about time that we began to investigate the effect of people on money?

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