Hi 
Before the DAO proposal, HBD used to go above $1 in the bull market, then back down in the bear when speculation was gone. This means that people buying above $1 were making direct capital losses (if they didn't sell) on their HBD trade. That's fine. Content creators also made extra profit from the HBD price, and that profit came from large capital losses from speculators on HBD. Some speculators sold the top possibly.
The problem with all of that is the bear market. When it comes, speculation dries up, HIVE and HBD dump. The HBD supply goes above the debt ceiling (10% of hive's marketcap), and we get into the negative feedback loop: HBD no longer becomes worth $1 in real value, so its usecase as a stablecoin fails, so people sell it even below its real value. Traders then arbitrage HBD below its real worth, by buying and converting to hive. This causes more hive selling and inflation, which lowers the debt ceiling even more, and the loop continues.
This loop is very dangerous and may kill hive, or at the very least will cause massive losses to stakeholders as they get inflated away. (Unless they are the ones doing the arbitrage, unlikely for most people)
With the new proposal, we are forcing back the price down to $1 by printing, which sounds awesome because the DAO profits from the capital loss that speculators make. This means that we replaced the profit made by content creators and speculators who sell the HBD top, with pure profit for the DAO. That is perfect.
However, by adding interest on HBD held, we are making a very bad mix of incentives. Adding interest means creating inflation out of thin air for HBDs (if I'm wrong correct me on that, it would make my reasoning invalid). So we are going closer to the debt ceiling, much faster than in the previous bullrun, especially if this is successful and we raise interest rates even more. While last time, the price of HBD went down from double digits to $1, this time around, we won't even get that cushion. We will instantly enter the negative feedback loop caused by an undervalued HBD, precisely because we are using the DAO to profit from HBD > $1.
So we have a combination of two fcators now:
1- increased HBD inflation from the interest rates, bringing us close to the debt ceiling.
2- No cushion from HBD crash because it is capped at $1 through the new proposal.
This is very bad for hive, because it will get us closer to the debt ceiling of 10%. When we get there, HBD sell pressure causes a negative feedback loop once it becomes undervalued. By undervalued I mean trading below what it can be converted for, could be $1 or even less than that.
As the supply of HBD increases, we need a 10 times bigger increase in the hive marketcap. For every HBD printed, we need hive's marketcap to grow by 10$, FOREVER. I don't count the HBD coming out of the DAO as being printed, because those are just converted from hive inflation. Interest rates, on the other hand, are additional inflation and debt. Again, correct me if I'm wrong on that point, because it is central to what I'm saying.
If the marketcap doesn't grow as fast as needed, the 10% debt ceiling will be reached, putting massive sell pressure on hive and causing a higher hive inflation.
Therefore, the proposal will end up making profits in the bull market, but will make everything worse in the bear market, to a very high degree. This might sound counter-intuitive, but this is the reason why it's happening: we are converting, through the proposal, current buy pressure on hbd into buy pressure on hive, which gets converted into HBD (without sell pressure!). If the HBD is then spent by devs using the DAO during the bull market, we will have massive hive inflation problems when the speculation goes away and both HIVE and HBD go down in price. The hive sell pressure will come at the worst possible time, when no one wants to buy.
Even if we are burning the profits right away, this also makes everything worse. Again, it's counter-intuitive. But technically, we would be issuing debt to buy expensive and highly sought after hive tokens(in the bull market), to eventually repay that debt with cheap hive people want to get rid off (in the bear market). Massive losses can be made like that, if the price of hive crashes. And it will happen at some point, because we have to repay that debt when the debt ceiling is reached.
If instead, devs don't spend the profits before the bear market, and the profits remain as HBD in the DAO without being burned, then that HBD will just be "imaginary money" as it can never be spent. When HBD is already trading below its real worth, spending the HBD in the DAO will only make worse the negative feedback loop on hive. And it will be worse overall, because we would be spending hive which have a lower real value, in dollars.
HBD makes the hive run up more explosive and the hive downward spiral worse as well. With the proposal combined with interest rates, the run up is even more explosive and the downward spiral is again much worse.
What if instead we used that proposal to prevent the negative feedback loop from happening? Here's how. (we can even keep the interest rates if we do this)
Step 1 - As HBD goes above $1, print and make profits.
Step 2 - This is the crucial step. Get all the money OUT of the hive ecosystem. If you need to sell HBD for hive because of liquidity, instantly sell the earned hive for other stablecoins such as USDC or DAI.
Step 3 - We now have a treasury outside of the hive ecosystem, built purely from speculator capital losses on hbd, which is NOT exposed to risk on hive, such as bear markets and negative feedback loops.
Step 4 - If at any point HBD trades below $1, before the debt ceiling is reached, use the funds to generate extra profits from the arbitrage or even let the market arbitrage that, not necessary to maximize profits here as it can be risky.
Step 5 - Wait for the debt ceiling to be broken when hive crashes, i.e. wait for HBD supply to be greater than 10% of hive's marketcap. This will cause HBD's real value to be worth less than $1. For instance, suppose HBD supply reaches 20% of hive's marketcap. HBD real value is now $0.5. This is a perfect opportunity to repay hive debt without causing massive inflation and negative feedback loops.
Step 6 - Use that opportunity to buy HBD with the treasury funds above its real value. Using the previous example, buy HBD at $0.6 and convert back to hive. Obviously this is a losing arbitrage, because it will only provide $0.5 worth of hive per HBD bought, but essentially what we're getting rid of the excess supply of HBD, with profits made during the bull market.
Burning that excess supply is essential as it prevents us from going into the negative feedback loop. Also, it cost us nothing because we earned those profits by dumping on speculators who buy HBD for random reasons, hurting the value of HBD as a stablecoin and hive as a whole.
Once excess supply is removed and HBD is back below the debt ceiling, it will naturally rise up to 1$ and the sell pressure will now stop because it is functioning as a stable coin again.
Use the treasury which consists of stablecoins to generate yield. With 50% APY in DeFi it would be a waste not to do that. even if it goes down to 6% or so in the future, it's not bad. This will grow the treasury and give us even more money to fight the negative feedback loop on hive. I got the DeFi treasury idea from 
In his proposal,
RE: Why I set my witness HBD interest rate parameter to 3%