Tuesday, December 5, 2017

From Appendix II: Knowledge Backed Securities (resolving fallibility)

Zen and the Art of Funk Capitalism

Knowledge Backed Securities

Karun Philip discusses a proposition that taking structured finance to the private skills-training industry can shorten the road back to global prosperity.

In this article I discuss the problems with the economic theory that claims that interest rate cuts will create money supply expansion that will re-start the economy, and then present a way that may help work around these problems.

Whom do we lend to?

On October 2, 2001 the US Federal Reserve cut interest rates once again to a 40-year low of 2.5%. In addition, private money is sitting on cash deposits in large quantities. There is now a large quantity of money in the banking system that economists claim will now be lent cheaply to successful companies, and this will stimulate new jobs and new demand. Great theory, but now look at the state of the successful large companies – they seem to be in no great hurry to borrow because they cannot see anything but decline in demand, and are lowering costs through layoffs, which will reinforce the reduction in consumer demand. There is plenty of capacity in the banking system to lend, but a lack of knowledge of where to lend it profitably and safely. And without growth in lending, there will be no economic growth.

The general consensus is that there will be a period of belt tightening that cannot be avoided. The debate is only whether it will be a short 6-month period, or a decade-long (and counting) experience like Japan’s.

Back to school

In every major downturn in the US, people have tended to go back to school during a period where they have been laid off and are finding it difficult to find a new job. If we take a look at this simple wisdom of ordinary people, we can begin to see how an efficient supply of capital to people to retrain themselves with economically valuable skills can be both profitable and sustainable. But instead of looking to college education which is general purpose in nature, we need to look at schools which train people in practical skills – these are the schools that would tend to provide a more predictable return on an investment in training than conventional college degrees. These schools typically provide a large return on capital to their students, but are unable to charge the full value of their training because of the limited purchasing power of their clientele prior to the training.

Loans for training courses

But lending money for training can be a safe and profitable business only if we employ the techniques of structured finance. There can be no guarantee that every student given a loan will be able to get a job of sufficient pay to service the loan. But we can collect and analyze data. By forming partnerships with training schools, lenders can build databases on the effectiveness of various types of training, in various parts of the country, and for people of various prior skills. These data sets will lead to the determination of how much default is to be expected, and thereby determine the price of the pool of training loans. The training school will be incented to provide such information since once the data is established and funding becomes available, they may be able to even increase the amount they charge for training, as long as they demonstrate a clear return on investment.

Operational innovations

The innovations from there can be endless. For example:

  • Make the training schools hold the equity tranche of the deal so that they are incented to discover ever better ways of making their training more effective.
  • Develop ways of credit scoring a training school and its prospective students to ensure that each type of person focuses on the type of career prospects that will maximize their particular aptitude.
  • If the training is proven to be sufficiently productive, consolidate older consumer debt such as credit card debt of the borrower into a training loan by lending the cost of training plus the cost of paying off the older debt.
  • Discover appropriate training schools for delinquent credit card debtors who can then pay back old debt as well as have the prospect of new earning power after the training investment.
  • Provide an online reference check to employers to validate the courses and performance of students who apply for a job. Defaulters and delinquencies can also be flagged on this reference check.
  • Provide an online rating of various professions, their average pay, the schools that train for that profession, and the banks that provide financing. This will enable people to find out what skills are most needed in the economy and how to acquire those skills.

Of course the standard tools of structured finance will also be applicable – pools of training loans can be split into waterfalls, interest-only pieces, etc. to tailor the supply of loans to the demand for risk and return in the capital markets.

Macro-economic effects

The data collection needed for building such a ‘Knowledge Backed Securities’ (KBS) infrastructure into place presents quite a massive task. But once it is underway, the macro-economic effects of such data being collected and used as a basis for new credit issuance ought to be quite dramatic. Over time, there will be almost endless prospects for investment in areas that are proven to be effective. The greater the pace of technological change, the more will be the need for workers in an economy to upgrade their skill sets multiple times in a career.

The unemployment claims would become virtually zero because everyone would either be in a job, or at a training school (or not seeking work). The training industry could be the source and sink for labor, constantly measuring what types of labor and skills the economy needs, and then supplying that labor before shortages cause bottlenecks on the economy.

Training would become very competitive and only schools that provide the best and most effective training would survive the test of detailed data analysis from Wall Street. However, with the liquidity available for higher investments in training, schools would be able to afford the best salaries in the economy to attract the best talent as teachers. With a way to for those who have useful practical knowledge to monetize that knowledge, the ‘habits of highly effective people’ will emerge and spread spontaneously as the market seeks out ever more productivity in training.

The massive positive fallout of such a system should be sufficient for the Federal Reserve to encourage KBS to the extent of providing liquidity to AAA-rated KBS, much as it buys rated mortgage products. It could also provide limited reinsurance or lines of credit to pools of loans for the lower end of jobs, where defaults may otherwise be too high.

In general, by investing in market-based training loans, money supply injections from frightened investors or the Federal Reserve can be employed in a way that will rescue consumer credit, and set the stage for demand recovery in a newer, reconfigured economy after bad older investments are written off. The injection of market-monitored training loans into the economy will also stimulate capital investment from businesses that can safely assume that consumer demand will not retreat indefinitely into a shell. While this ‘new economy’ will continue to be one where no job is safe from redundancy, it can also be one where if one job disappears, many other potential jobs are sure to be around the corner. And if capitalism does its trick of increasing productivity continually, you can bet that the new jobs will afford a higher standard of living than the old ones.

Thursday, December 10, 2015

Appendix I of the book: _A Rationalist's Guide to Religion_

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Appendix I – A Rationalist’s Guide to Religion
The second half of the second millennium AD was driven by a profound change in people’s attitude to religion. Prior to that era, practically everyone in the world believed in some religion and some form of God. But with the advance of science, logic, and technology, man was suddenly able to accomplish results that seemed to be at odds with prior notions of how an individual’s will cannot be achieved, and “God’s will” would prevail. Descartes’ geometry and rationalism became the poster child for the new age of reason, where religion would be treated as the enemy of truth and enlightenment. There was much evidence to suggest that religions were indeed guilty as charged – senseless wars and crusades were commissioned by heads of religious communities, priests abused their power over their flock in order to make a luxurious living, and tribal notions of the role of women, slaves, and unbelievers were perpetuated by conflating the power of religion with the personal predilections of the all-too-human priests and community leaders.
In the 21st century, the reaction to all these religion-inspired abuses seems to fall into two broad categories – those who profess to be agnostic or atheists, and those who claim to be ‘spiritual’ but not a part of any organized religion. Both camps generally do believe in the power and utility of reason. But there is still a gap between rationalism and the worldview of traditionally religious people. I attempt to bridge this gap and provide a rational explanation for many of the sayings found in all of the major world religions including Christianity, Islam, Judaism, Hinduism, and Buddhism. I try to show that there is an interpretation of religious words and beliefs that is different from how the professedly religious criminals interpreted their own religious texts.
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First, we must summarize the precepts of a rationalism that accepts fallibility. In the preceding pages we used simple deduction to establish the following basic theories that seem to be irrefutable.
Theorem 1: All theories are based on an incomplete set of facts.
Theorem 2: As a consequence of Theorem 1, all theories are fallible.
This necessitates an assumption of Axiom 0: Despite our fallibility of our
inferences, we will assume the material universe exists and gives us valid data via our perceptions. Although this is intuitively obvious, the provable fallibility of knowledge implies that we must formally call this an assumption in which we must have faith. We will continue to use this assumption until and unless it is refuted.
Theorem 3: Since justifications for violence or coercion are fallible, morality is
defined by a ban on coercion and fraud. The purpose of law is to detail the various forms of coercion and formally outlaw each type.
Theorem 4: Due to provable fallibility, institutions of law must follow due process
and presumption of innocence while enforcing a ban on coercion.
Theorem 5: Democracy is a process by which people who are coerced can
express such coercion and seek resolution. Without democracy, fallibility and inherent power structures will not allow feedback of the coercion of the powerless.
Theorem 6: Discovery of valid theories about the nature of material reality is best
achieved by critique of competitive theories, often resulting in synthesizing a new
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theory that encompasses the facts earlier ignored by each of the preceding theories.
Theorem 7: Allowing complete freedom of action other than those actions that
involve coercion or fraud will accelerate the discovery of valid theories.
Theorem 8: Competitive trading of bank loans will most efficiently discover the
business areas that work.
Theorem 9: Competitive funding of student loans and adult re-skilling loans will
achieve the most rapid and effective training of individuals so that they may increase their wealth even in rapidly changing technological environments.
Theorem 10: Basic welfare through food stamp loans for the indigent will not
distort the knowledge discovery process of free and competitive innovation. With basic food and nutrition security guaranteed, adult training will provide a path for economic development of all without continued subsidies.
Given these ten theorems and the accompanying axiom, all of which should be acceptable to a rationalist, we will now take a look at the precepts of various religions. To be sure, we will omit several precepts that the religions do have, but let us keep in mind that the original message of religions may have been altered or added to by theologians who may have misunderstood their own faith. I only claim that there is enough in each religion to find common ground between rationalism and religion.
Hinduism and Buddhism
It is worth discussing Hinduism first here, since it is perceived to be polytheistic. In actual fact, Hinduism is monotheistic and uses the name Brahman (sometimes speltBrahmaan
and not to be confused with Brahmin, the name of a communityto denote the notion of
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the one God. All other 'gods' in the Hindu pantheon are considered only aspects of the one Brahman. Modern Hinduism is actually a revivalist movement that began in the 8th century AD, before which Buddhism had largely replaced Hinduism in the Indian subcontinent. The founder of the revivalist movement was Sankara, who in the 8th century AD walked across the country explaining his interpretation of the near-extinctknowledge contained in the Vedas, an interpretation he named Advaita orNon-Dualism, which is the central concept in the Vedas. He set up four centers for scholarly research into the Vedas, which over the next 400 years were the driving force behind the Hindu revival. In the 11th century, however, Sri Ramanuja overturned the conventional Sankara interpretation of the Vedas and offered an entirely new way of interpreting the Vedas, which he called Visista Advaita or "A Special Theory ofNon-Dualism". The main difference was the definition of truth. According to Sankara, the concept of Maya means that material reality is an illusion and it does not really exist. Accordingly, he claimed that the concept of Brahman or ultimate reality was equated to enlightened human consciousness. God, or Brahman, was a human-likeentity, but one which any human could become one with through attaining enlightenment. Ramanuja found this interpretation entirely inadequate. He defines the word ‘God’ by saying "the material universe is the body of God." For the rationalist, this implies that saying "God exists" is no more adventurous than saying "material reality exists." For Ramanuja, Maya then refers to the fact that human interpretations of our perceptions are fallible. But despite the fallibility, we must assume that the material universe is real – i.e. we must have faith that the material universe exists, that 'God' exists. This corresponds exactly to the rational deductions we make using incompleteness, fallibility, and logic.
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Ramanuja went on to make various other interpretations of the Vedas using the twin axioms that the material universe is real, but our inferences are fallible. He explained the difference between vidya, or knowledge, and sat, or truth. Truth is what exists --the material universe. Knowledge is our interpretations of our perceptions of the truth, of reality. But each theory we have may be true -- sat -- or false -- asat. Holding a false belief is therefore described as avidya. To discriminate between vidya and avidya, Ramanuja recommended the tool of criticism or discrimination. He said that though 'God' -- the material universe -- was only one, it is not homogenous. In fact, God (reality) is infinitely variegated and the human brain is a device that in essence is one capable of perceiving differences. Words are what we assign to the perceived differences, and language evolves based on ever finer perceptions of difference.
The other major departure from Sankara's interpretations was in the interpretation of the Vedic phrase "Tat tvam asi" or "That! Thou art!" The post-Sankara mainstream of Hinduism interprets that to mean that the individual consciousness is God -- that consciousness precedes material existence. Ramanuja turned that on its head and said it just means that we as individuals also exist in the material world, and therefore we a part of God (material reality) -- we are not everything God is, but since we materially exist, we are a part of God. But human beings -- or any sentient beings that have a perception engine such as the brain and use it to develop language -- are surely a special or divine part of reality. Sentience is therefore something that has degrees -- even animals have a brain and perceive reality, but they do not have language. The ultimate degree of sentience is a being that realizes that they are using a brain and language and understands the relationship between reality (sat) and knowledge (vidya)
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about reality. The phrase "Aham Brahman" or "I am (a part of) Brahman/God" affirms the importance and uniqueness of sentience (chit) as distinct from the insentient (achit).
The Buddhist derivatives of Hinduism use the concept of fallibility to detach a person from material needs. But Hinduism reiterates in the Bhagvad Gita that though one need not be overly attached to anything, this does not mean that enlightenment will come through pure detached meditation. It is only by engaging reality and interacting with it that one can understand the truth of the fallibility of one's knowledge and will and the supremacy of material reality. Reading words and ignoring material reality is insufficient and can only lead to misinterpretations. One must exercise one's free and fallible will and see which of the things we will are consistent with reality and which ones have adverse and unanticipated consequences. Each person then finds a unique and personal path to enlightenment that is best suited for the experiences and situations faced by that person. But given incompleteness and fallibility, there may be many things that a person wills but is unable to achieve -- in the face of this, one can use the techniques of detachment to accept that reality has its own way and one might instead turn away from achievements and simply contemplate the many wonderful aspects of reality and nature.
In the face of fallibility, free will is also the method by which people can build a culture and society that is sustainable. Here is where the concept of non-violence -- ahimsa --comes into play. Actions that do not coerce another sentient individual do not have adverse consequences. Such non-coercive free actions that become popular and imitated form the basis of a culture, and a means to prosperity and richness in life. Conversely, any act of coercion against another individual has adverse consequences (adverse karma). Thus natural law (dharma) is based on the varied consequences of a
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ban on coercion. As society becomes more complex, new laws can be discerned by using the principle that coercion is what needs to be allowed, but free will must be given full reign beyond that restriction. But note that the law (dharma) is discerned from critically observing the nature of reality -- not decided arbitrarily by a fallible individual or group.
Judaism and Christianity
Turning now to Christianity, the key aspect for the rationalist reader is to see that Jesus was speaking of what he felt was the correct interpretation of Jewish scripture. That is, he was not negating that God/reality drove Abraham and Moses to speak what they discerned to be the truth, but simply saying that the popular interpretations at the time were incorrect in some ways. He acknowledged that it was the same God that he was speaking of. Now if we see that material reality is that 'God' then it is not irrational at all to agree that they were all talking about the same source of knowledge --material reality had always been there and was still there and would always be there and its basic nature had not changed and will never change.
The New Testament of the Bible is best understood as a set of theses written about what Jesus was talking about. Given that these were written by fallible human beings, one can expect that there are misinterpretations of what it was that Jesus was actually talking about. For instance, if material reality is what is meant by the term 'God', then it is not unreasonable to assert that God exists, and only one God exists. Many of the other phrases attributed to Jesus can also be reinterpreted using the concepts of material reality as God and human knowledge as fallible interpretations of perceptions of reality. The gospel of St. Thomas is one such source of phrases attributed to Jesus-- that this
gospel by one of the apostles of Jesus was left out of the Bible is one consequence of
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the difficulty that people faced interpreting Jesus' words. Didymos Judas Thomas was known as the doubting Thomas after all, so it is not unreasonable to assume he was the best critical thinker among Jesus' followers. His gospel contains some sayings that are in other gospels and others that are missing. Here are some of them with the rational fallibilistic interpretations:
Jesus said, "If your leaders say to you, 'Look, the (Father's) kingdom is in the sky,' then the birds of the sky will precede you. If they say to you, 'It is in the sea,' then the fish will precede you. Rather, the kingdom is within you and it is outside you. When you know yourselves, then you will be known, and you will understand that you are children of the living Father. But if you do not know yourselves, then you live in poverty, and you are the poverty."
Given the definition of God as the whole of material reality, this is a very obvious statement. The 'kingdom' of God' is not elsewhere -- it is everywhere within us and around us. When we know ourselves -- that our knowledge is fallible due to the nature of our brain, perception, and language -- then we will understand that we are part of reality (children of the Father). If we do not know ourselves -- if we think our opinions are infallible -- then it will lead us to many acts of coercion against others and ultimately ourselves.
Jesus said, "The person old in days won't hesitate to ask a little child seven days old about the place of life, and that person will live. For many of the first will be last, and will become a single one."
Again, the fallibility of knowledge is a lifelong fact. Yet since material reality is real, the perceptions of everyone, including a small child, are important and contains information
about reality. It behooves even the wisest man to ask the most ignorant what their
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opinions are. After all, those opinions are there because of the impressions created on that mind by some aspects of reality that the wise man may have missed. By asking and questioning, the wise man can find out ever more about reality/God.
Jesus said to his disciples, "Compare me to something and tell me what I am like."
Simon Peter said to him, "You are like a just messenger."
Matthew said to him, "You are like a wise philosopher."
Thomas said to him, "Teacher, my mouth is utterly unable to say what you are like."
Jesus said, "I am not your teacher. Because you have drunk, you have become intoxicated from the bubbling spring that I have tended."
And he took him, and withdrew, and spoke three sayings to him. When Thomas came back to his friends they asked him, "What did Jesus say to you?"
Thomas said to them, "If I tell you one of the sayings he spoke to me, you will pick up rocks and stone me, and fire will come from the rocks and devour you."
This is an interesting story of why Jesus may not have been able to speak as plainly in the logic and materiality that is commonplace today. The worldview of people in that region in those days was such that they may have simply gone insane hearing that reality was God. What Jesus may have been trying to do is speak about fallibility and materiality in terms that were well understood and taken for granted in that community at that time. He also is clear that it is not him that is teaching -- he is trying to say that reality will teach all those who accept it and engage it. Actions have consequences, and
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in living them out we will always learn the same lessons in every age past and every age to come.
Jesus said, "You see the sliver in your friend's eye, but you don't see the timber in your own eye. When you take the timber out of your own eye, then you will see well enough to remove the sliver from your friend's eye."
Again, this becomes clear when we consider fallibility. Until we recognize that our own opinions are fallible, we cannot remove any infallibilist illusion that our friends are suffering from.
Jesus said, "I took my stand in the midst of the world, and in flesh I appeared to them. I found them all drunk, and I did not find any of them thirsty. My soul ached for the children of humanity, because they are blind in their hearts and do not see, for they came into the world empty, and they also seek to depart from the world empty. But meanwhile they are drunk. When they shake off their wine, then they will change their ways."
The human mind finds it hard to absorb the lesson of its own fallibility. It is not interested in learning about fallibility. The brain is chemically addicted to knowing with certainty, and it does not listen easily to those who claim otherwise. People are in that sense drunk. When they awaken and realize the fallibility of their opinions, they will cease to coerce others.
Jesus said, "If the flesh came into being because of spirit, that is a marvel, but if spirit came into being because of the body, that is a marvel of marvels. Yet I marvel at how this great wealth has come to dwell in this poverty."
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This is a direct comment that reality precedes consciousness. When a person finally realizes that the material is primary and starts to study reality, including people, with humility, then it is surely a marvel. Yet we are unwilling to accept this basic truth and dwell in the consequences of the coercive acts that we justify to ourselves as necessary.
Jesus said, "The Pharisees and the scholars have taken the keys of knowledge and have hidden them. They have not entered nor have they allowed those who want to enter to do so.
This is a comment that attacks the institutions that spring up after anyone successfully preaches the consequences of fallibility. The priests who seek power convert it into an anthropomorphic god and place themselves as the knowers of true and infallible knowledge. They will not enter the enlightenment of fallible rationalism and will not allow others to either.
His disciples said to him, "When will the rest for the dead take place, and when will the new world come?" He said to them, "What you are looking forward to has come, but you don't know it."
This is again the denial of heaven as some place other than the material reality we are already in. We only need to realize it.
Jesus said, "Congratulations to the poor, for to you belongs Heaven's kingdom."
This is an insight that people who are poor know intimately that their knowledge is fallible and that material reality is real. Wealthy and powerful people do not easily recognize this because their will is often achieved, and often at the cost of known or unknown coercion.
Jesus said, "Whoever has come to know the world has discovered the body, and whoever has discovered the body, of that one the world is not worthy."
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Again, the assertion that discovery of the nature of material reality and our own physical and mental nature is true enlightenment. But it is thankless in a world of people who are drunk on infallibilist opinions.
Simon Peter said to them, "Make Mary leave us, for females don't deserve life." Jesus said, "Look, I will guide her to make her male, so that she too may become a living spirit resembling you males. For every female who makes herself male will enter the kingdom of Heaven."
This is a surprising bit of modern gender equality. A traditional woman could remain sheltered in false security of assuming her opinions are infallible as long as there was a man who protected her and remained vigilant to unexpected events in an uncertain world. But when women choose to become 'men', or in other words to shoulder the responsibilities one has to in negotiating an uncertain world on one's own, to take risks and still act without coercing others, then she becomes as enlightened in all respects.
There are many more parts of the gospel, and over time it ought to be possible to find an interpretation for many of them in the light of fallible materiality, and to dismiss some of them as the misinterpretations due to the all too human weaknesses of the writers. But there is sufficient similarity to suggest that experience in the real world was what led the Jewish and Christian prophets to say what they did in the context of their times. The definition of the word 'God' as material reality itself brings rationality to vast tracts of mystical writing.
Turning now to Islam, we first need to decide which of the writings to look most closely at. Islam has two primary sources of knowledge -- the Koran, which is the word of God
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as spoken to Mohammed, and the Hadith which is the narration of the life of Mohammed as told by various priests after Mohammed's death. Clearly, as in the vedic and biblical analysis above, we can expect many mistakes and coercive intrusions of fallible human opinion in the Hadith, and can therefore focus on the words that Mohammed claimed were of God/truth/reality. But it is also true that the Hadith contains many wise sayings. But even a faith-based logic dictates that in order to infer which of them are correct and which incorrect, one would have to critically examine them and eliminate any that contradict the core words of the Koran itself. Indeed, in all the Muslim countries prior to the invasion of Crusaders from Europe, there was freedom of worship for all faiths, free debate on all issues, due process in law, and respect for individual freedom. Faith in the Koran was expected only by choice and not by force.
The central tenet of Islam is the same one as fallibilistic rationalism -- i.e., that human knowledge is fallible. The reasoning from there leads to all the same conclusions of modern liberalism that we discussed in the theorems at the beginning of this essay. The Koran contains many exhortations to retain faith that God's will (reality's 'will') is what is true and individual will is fallible. It says that those who persist in infallibilist illusions will come to a bad end. But like any religion, and especially after the trauma of massive and bloody invasions from Europe in the Middle Ages, power tends to get usurped by priests who would be dictators and who imagine they have infallible knowledge. With Islam, it is ironical that they hold up the very book that emphasizes the fallibility of the individual while asserting that their word is law.
The second plank of Islam is the emphasis on ethics. It is not considered permissible for a Muslim to act unethically. Now, the issue is reconciling this second tenet of Islam with its first, namely, that knowledge is fallible. If one goes by the Hadith which currently
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includes both wise and foolish statements, and conclude that only life in full accordance with the entire Hadith is ethical, and all other acts are unethical, then we would be relying on the words and actions of fallible men rather than the word of God as per Mohammed. Indeed, there are Hadith reform movements in modern Islam that are active all over the world. But like the other religions and modern liberalism, Islam concurs that coercion of any individual is unethical. This definition of ethics as full freedom of action other than coercing other individuals is one that is compatible with all religious “words of God” and yet can be justified purely rationally as well. Islamic law in the Middle Ages was extremely cognizant of fallibility and was faithful to presumption of innocence and due process for all. Modern nominally Islamic dictatorships are actually not in line with either of these two basic tenets of Islam and its dictators are possessed by their own infallibilist illusions -- in Islamic terms they are in the grip of the devil and not God. The third plank of Islam, like Christianity in some respects, is the absolute necessity for basic welfare. Abject poverty is considered completely unacceptable and against everything that is holy. But while this is achieved through charity in Islamic societies, it also leads to a concentration of power that can distort the market discovery process. With the alternative of food stamp loans run by a democratic government, as suggested in this book, the same outcome of basic welfare can be achieved along with a preservation of competitive discovery of ever more productive techniques.
One of the aspects of Islam that is relevant to modern liberalism is its treatment of banking. It holds that banking with unlimited liability of the borrower is unethical. Instead, an aspect Islamic banking called 'salam' allows a form of lending that attaches particular asset collateral. The risk of default is then carried by the named asset alone, and not the entire savings and assets of the borrower. For instance, a farmer can sell part of next
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year's crop at a discount to the expected market value of the crop. If the crop fails, the creditor must absorb the loss. This is identical to the modern asset backed securitization market in banking. If a homeowner defaults on a mortgage he will lose the house, but will get any extra proceeds from the sale of the house after paying back the lender. Asset backed lending, as discussed in the main section of this manuscript, is therefore completely compatible with the tenets of Islamic banking ethics, and in fact was practiced throughout the Muslim world even in the days of Mohammed. And as discussed in the book, asset backed banking is data driven rather than relationship driven -- anyone meeting the criteria will get the loan, not just the cronies of the individual banker. This discretion of an individual banker is the main source of unethical behavior in modern banking, and its decline actually increases the safety of the banking and monetary system by using data to ensure that the quality of loans made is high.
The last remaining aspect of Islam that is relevant to this discussion is education. Education is highly valued in Islamic countries. In the early days of Islam before the Crusades, education was liberal and allowed dissenting views, debates, and participation of scholars from all faiths. Muslim countries were the ones who preserved the Greek classics of Socrates, Aristotle, Plato, and the others. Without this preservation, and its retrieval by secret societies from among the Crusaders, the Western Enlightenment and the resulting liberalism and scientific progress could never have taken place. But in order to retain an education system that constantly questions conventional wisdom and seeks out ever better theories of reality, competition is essential. The system of securitized education loans that are traded publicly therefore is the one that would be consistent with the central tenet of fallibility in Islam. Education loans too are essentially asset-backed loans, where the asset is the knowledge that is
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imparted to the individual. If the knowledge were good, then the person would be able to earn enough to pay back the loan. Otherwise, the creditor would have to bear the loss. Since the responsibility for loan quality is on creditors who are successful competitors, quality of loans will be higher because they are in a better position than the ignorant student on which training courses to fund.
Thus the central tenets of Islam of fallibility, ethics, welfare, ethical banking, and education are all tenets that are compatible with modern liberalism. Combined with the discussions of material reality as God in order to make sense of religious writings, and the insights of other religions from Hinduism to Christianity, there is a compelling case for modern rationalists to understand religion in a way that was for a long while unthinkable. By creating a connection between ancient wisdom and modern science, it then becomes possible to reconcile the misunderstandings that have caused numerous unnecessary wars and much injustice.