Bitcoin Forum

Why not ban Usury?

Before attempting to answer the question, I'll lay out a "best case"
for an economy. The USA has the best data, so it's the choice.

If the USA continues its present course, except that spending
on Defence and they somehow manage to keep the present trade balance
then I suggest the following outcomes in ten years time:
Wages and prices will double, there will be a ten percent increase
in population and in real GDP, and the national debt will increase
from $20Tn to 30Tn.

In real terms, defence spending halves, the trade balance halves,
and the US national debt falls by one third. Pensions and entitlements
increase in line with inflation, and employment remains near it's
present level.

While I expect things will turn out worse than that, if you want to
make a case for banning Usury, you'd best think of ways to improve
economic performance, because present economics relies totally on
the ability to charge interest. Bear in mind also, that when you
strip away things like the power to create debt, you may find that
things like GDP are no more substantial than the imaginings of a
collective delusion.

It seems to me that promoting cryptocurrencies, for example Bitcoin,
promotes the idea of a ban on Usury, because it would be difficult to
have one without the other. I'm keen to hear any views on why that
isn't a good idea.

Usury is not about not charging interest. It is ensuring that the interest charged is not exorbitant.
If you think of an interest-free, debt-free world, you are living in a fool's paradise. This is not going to happen, whether Bitcoin succeeds or not. There are always those who are in need of money and there will be others who are ready to lend for a small price. There is no case for "banning" the transaction between the two.

It is possible to loan bitcoins with interest, so I don't see your point.

In my opinion, there is nothing wrong with interest. Having money now vs. later has value, and people are willing to pay for that value. People should be allowed to pay interest in order to obtain a loan.


Also, the term "usury" generally means charging an excessive interest rate, though in the past it meant charging any interest (perhaps because any interest was considered excessive).

I don't get it the point, what the thing usury related to cryptocurrency?
Look at lending section, there are a lot some usury/interest by load bitcoin, it's not affect to bitcoin itself.

And what the way if bitcoin banning usury, however people still not really familiar with bitcoin?

Would you lend out your money to strangers without interest? I don't think so. There was an opportunity cost for lending out your money, whether it's in fiat or bitcoins. People should be allowed to charge for interest for the money relieved them. Consumers can then decide whether they'll accept the terms and if not they can try talking to another lender.

Interest is a concept that is deeply intertwined with the current inflationary fiat scam money system. If money would just keep its purchasing power or even increase in purchasing power like it is the case for precious metals and Bitcoin, expecting interest for just holding makes no sense. In the fiat scam system, interest and compound interest is a toxic force that demands ever increasing economic growth at any cost. People are enslaved because of interest and nature is destroyed by excessive resource usage just to fuel economic growth to be able to repay interest.

We don't need to ban interest. We just switch over to Bitcoin. Bitcoin is attractive, because it is not subject to interest-induced inflation. So it will be adopted in the terminal phase of the fiat scam we are experiencing today.

ya.ya.yo!

There are 'islamic banking models' which exist today and which tell you they don't charge interest. They are actually work arounds and they end up charging the customer a lot more than a traditional bank. So force-banning something like interest just won't work. It will exist under another name.

Usury  not related cryptocurrencies
if all bank is baned and close because use usury system
poor country can die, because is PDB can't is develop in country,  must loan to world bank and another country G to G
all country can give loan without return is imposible can give loan

You have an excellent point here; the fiat currency lost his purchasing power every year. I think interest is fair if they charge only a right amount, and people have the capacity to repay.

In the case of bitcoin with the limited supply of coin in circulation, the price will stay stable.

That is indeed true. My previous post should not be wrongly interpreted in regard that I would endorse Islamic banking. I do not endorse anything that is based on prohibition. I only endorse systems that provide for free choice of the individual.

To state it more clearly: The idea of "banning usury" to promote cryptocurrencies is a misconception. Cryptocurrencies will be successful exactly because of usury in the fiat system. It's free choice of market participants that will make Bitcoin successful - the possibility to choose a better system.

That said, you have to keep in mind that interest is only reprehensible as an embedded feature of the inflationary fiat slavekeeping mechanism we have today. When it comes to venture capital, interest is acceptable, because the risk taking of the creditor must be compensated.

ya.ya.yo!

@Yo - "Cryptocurrencies will be successful exactly because of usury in the fiat system."

It seems most of history is against you, in that bad money always drives out good money,
and as far as I know, every paper currency has ended in inflation. So, somehow,
cryptocurrency to the rescue?

You have a fair point regarding prohibition. I'll ask you to define exactly you choices to
avoid the present system. Can you pay your taxes with, say, bitcoin?  It seems
prohibition is already in place, I merely suggest a different prohibition to make you
look at the options from a different point of view.

I'm not sure if you really understood what I tried to express. I'm very much convinced that fiat currency will end in inflation. And that's exactly the reason of why Cryptocurrencies will become more and more attractive as a store of value. I think you're mixing concepts a little bit: Of course will people be eager to get rid of "bad money" and throw it on the market. But they will be interested to purchase "good money" (Bitcoin) with it. So history is clearly not against your or mine assessment of situation, because we have pretty much the same opinion. :D

The choices to avoid the present system are to reduce fiat use whenever possible. Governments will quickly become more willing to accept Bitcoin for tax payments, once they collect less taxes overall... ;)

ya.ya.yo!

Interest rates aka usury implies that the borrower will get more money from the economy than he had put it. If half of the people would borrow someone else money, from where the additional percent of the money would come? From heaven? Or from nowhere because it is impossible.

 Interest rates and not printing new money leads to a complete disaster and lack of money. Sorry bitcoiners to burst your bubble but if the world would to be financially stable it cannot and will not use only bitcoins.

The flaw in this oft-repeated fallacy is that it ignores the fact that money is a medium-of-exchange. Value is produced and consumed in an economy. As long as borrowers can produce enough value, loans can be repaid. It doesn't matter if there is a finite amount of money -- money is a tool used to exchange value. A loan can potentially be paid back using the same dollar over and over again.

quote
I  personally don't believe Usury is the problem.  Usury is just the price of credit -- everything having a proper price is OK as long as the market is not manipulated by state power.

The problem is the state power that artificially cheapens credit over the long term, to benefit the elites who issue debt.  When too much debt is issued, whose value is then supported by all kinds of manipulative and deceptive actions like inflating other bubbles and starting military adventures, we have problems.

In a constant-money-supply world, prices would just go down as real wealth accumulates.  Economic growth would be fuelled by credit, on which there would be no limit.  (The key here, again, is that credit be totally market driven -- any state intervention would create distortion and bubbles.)

The Great Fear of deflation that has been pounded into the minds of modern economists only applies to this world of centrally planned money.  Since too much money and credit have been created (from artificial, state-driven demand,) the economy has been distorted.  People have honed their skills and made investments based on the financially (artificially) inflated world that demands a lot of luxury for the rich, etc.  Once the bubbles are so big that market forces wake up and wipe out asset values, this demand disappears immediately and people lose jobs and savings.

Since the constant-money-supply world doesn't have the major man-made distortions to start with, asset value corrections would be minor in their impact and actually healthy for the economy.
unquote
@BobK71 - I have a problem with the morality of Usury. Usury can create a situation where
the borrower is unable to ever make good on the debt. Legally, the law is on the side
of the Lender, but that tends to encourage excessive risk taking. This seems wrong
from both a moral (and a technical) point of view.

I reach a diametrically opposed view on credit creation. Credit flows from it's source
to a sink, be that bankruptcy or discharge, and wealth provides the reverse circulation.
If anyone could set up a bank, and or print their own money, this would be less of a
problem because there would be competition to provide loans in various formats, much
like today's altcurrencies. The problem begins with the creation of a legal monopoly
on the printing of money. There seems to be some jumps in your logic where your
intermediate steps need to be validated before your conclusions can be reached. I
suspect your solutions only apply in a very narrow set of prior conditions.

We need to talk more about the constant-money-supply, but let's take one step at a time.

@Yo - The land of the Underpants Gnomes seems not too distant ...

1. Hyperinflation of, inter alia, the US Dollar, turning the world into Zimbabwe
and Venezuela.

2 ...

3. Profit!!! (Cryptocurrencies to the rescue!)

Step 1 _requires_ the loss of faith in the ability of a government to govern, and
a loss of control the supply of money leading to excess quantities of money in
circulation. There are prior conditions necessary for that to happen. It is also
possible that money flows into banks as interest, while unemployment soars, and
prices fall. Generally speaking governments never lose control, they just impose
mistakes. Following that logic, I see no reason to suppose that hyperinflation
must happen in the western economies anytime soon (even in the Euro area).

Logically, there seems no reason for Central Banks setting interest rates near
zero. The large quantities of debt on their books increase the sensitivity of the
systems to shocks and to any other changes. This increases risk within the system,
hence unless the Central Banks have good reason to believe they can control outcomes,
interest rates should be increasing to compensate depositors for the risks they face.

The problem is that the population at large, and many who post on these boards
are too trusting of banks, politicians, and governments. They promise "growth"
whereas they mean debt expansion providing profit to the few. This can continue
until the pockets of the savers are completely empty and the bankruptcies begin.

Really good points brought up here. The reason usury is fundamentally wrong is that lenders expect guaranteed returns when risk - and gain - should be shared by both lender and borrower.

Profit sharing or dividends systems are somewhat better, of course with more weight on the lender or investor. Though to me, since the borrower is the one with effort and lender only capital, even equal share of profit/loss is very fair.

What is Usury?I`ve never heard about this.

Paper money and central banks mean only one thing-debt.

All the world economies are addicted to debt.They need debt to maintain economic growth.

Are cryptocurrencies the solution?

You making a post about "banning usury" on an internet forum means absolutely nothing and isn't really worth a discussion. This is what banks and money lenders do. Of course companies offering exorbitant rates like pay day loans should be restricted, but since the beginning of time it has been around and it will continue long after you are dead. It sounds like you are trying to push the Muslim way of banking, they're welcome to it but the West has arguably been way more successful without it.

You can not ban usury, but with bitcoin you can "ban" fractional reserve, and that's MUCH MORE important

You really cannot "ban" fractional reserve.
If banks/companies which are trusted start accepting bitcoins, people would be ready to deposit. A portion of this can be lent out by the companies. Voila - you have fractional reserves.

That's why to properly use btc you need to always be in control of your private keys, no matter if you trust a company or not

usury is not the core of bank. and bank is the heart of economy for a country. it seem that a country can't ban the usury because if they do then their economy will be in danger, this world was growing wrong that usury now rule the whole economy and beat the non-usury thing. as you can see you can see it on many aspects even for shopping you must be offered an installments

yes it is a fact but i think when bitcoin will become mature and when bitcoin will become more popular and all the people will start using bitcoin then i think bitcoin will certainly reduce the use of other fiat currencies.

"Oh, Shit" said the King, and ten thousand arseholes heaved in the noonday sun,
for in those days the King's word was law, and the King ruled with an iron hand"
from, allegedly,  "The Night of the King's Castration" - anonymous authors.

If some recent data is correct, approximately 7 Billion bums are in danger of sunburn,
because this moment marks the beginning of the end of the Industrial Age, and sooner or
later, the world will be crapping itself.

http://www.economist.com/blogs/buttonwood/2017/01/light-bulb-moment
"Measuring productivity is far from easy; it tends to be the residual left over when all other factors have been accounted for. The OECD says it "can often be a measure of our ignorance". Still, the attached table is very striking. It comes from the US Conference Board (here's the link, with thanks to Gervais Williams of Miton and Andrew Lees of Macrostrategy Partnership for drawing it to my attention). And it shows that, at the global level, total factor productivity fell last year, was flat the two years before, and has barely budged since 2007. Before the crisis, it was growing at 0.9% a year."

I'll begin by thanking Coincube for the link to "Sacred Economics". I'd met Charles Eisenstein
briefly some years ago, before I had got a grasp of the numbers driving economics, so while
his thoughts on living in a world without money were interesting, I couldn't see his
philosophy surviving the wider community's onslaught. That vein of thought continues through
his arguments in that book for and against Usury, though very much biased toward doing right by
others and being able to assess the ultimate benefits to communities of any action. In some
ways it's Adam Smith's "Invisible Hand" but without the individual profit motive and with
limited competition.

We play games with winners and losers; we compete; in most cases we intuitively understand
the rules of the game. Hence when we play Monopoly, everyone knows here will be one
winner and many losers. We also understand that at the end of the game, when the winner is
declared, that the board folds, and together with the pieces, goes back into the box.
Nobody expects that the price of losing could be vital organs like kidneys, a liver, or
a heart.

Why should it be different in real life? Why participate in a system that creates unpayable
debt via Usury? Despite claims by some prominent Economists that our "debts don't matter",
any internet search for "India kidney Debt" will produce returns like this:
http://indiatoday.intoday.in/story/deep-in-debt-farmers-fuel-kidney-donation-racket-ap-india-today/1/256628.html
"According to Vijay Kumar, an employee working in Rentachintala milk chilling centre, there are at least seven other farmers who have been paid a few thousand rupees for "donating" their kidneys in Hyderabad. The reason for this alarming situation, Vijay said, is the big kidney sale racket that surfaced in the Palnad area between 1998 and 2000. The Palnad area, comprising Macherla, Kambhampadu, Rentachintala, Dachepalli and Piduguralla blocks, has mostly rain-fed cultivation. It is dominated by big farmers who lease out their land to landless farmers."

The consequences of unpayable debt are not always so extreme.
http://www.moonofalabama.org/2008/10/volkswagen-shor.html
"Shares in Volkswagen were nearly halved on Wednesday after the controlling shareholder, Porsche, took steps to ease a squeeze on short sellers that more than quadrupled the stock in days.

Porsche itself had prompted the meteoric rise in VW stock with its announcement on Sunday that it had effective control of 74.1% of VW, leaving less than 6 percent in the market.

"In order to avoid further market distortions and the resulting consequences for those involved," Porsche said, it intends "to settle hedging transactions in the amount of up to 5 percent of the Volkswagen ordinary shares.""

Thus an unpayable debt, a squeezed naked short, became payable though Porsche's
pragmatic decision to take its profits and sell some shares into the market.

"You can't get blood out of a stone/turnip" - Sayings like these, and the need for a fit
and healthy common man to fight wars, have, in the past, limited inhumanity's excesses.
Today, to judge by some of the more lurid posts om the internet, the profit from
harvesting the right cadaver could be over $100,000. Of course, things like Limited
Liability and Bankruptcy Law stand in the way of such excess profits. If it weren't for
these things companies could: grown and sell foods that over a lifetime, destroy organs,
creating a market for transplants; build transplant hospitals, prisons, airports, and
transportation; push the world's most impoverished people into unpayable debt via access
to credit; encourage governments such as that of India to declare fiat paper savings
worthless; make organ donor contracts enforceable in law.

Result : Profits! and Real Economic Growth! and higher GDP! What's not to like?

Well, generally, in the Western World, unpayable debt doesn't get paid, but that's
because Limited Liability and Bankruptcy Law have been grafted onto Usury. The system
still cranks out unpayable debt, and we've learned to live with it, mostly because
the economies have been growing, and inflation raises all the boats, just some more than
others. Banning Usury would reverse the flow of profit from the poor to the already
wealthy. It will not solve all our problems. There's more to this, but space, and time,
is limited.

The link above shows that world growth will probably reverse. I'm adding "probably"
because the world is in a place it's never visited before, a place with no foreseeable
good outcomes and unprecedented uncertainty.  A time when, if you can keep your
head when all around you are losing theirs, you haven't been fully  briefed.

 I have no idea what is Usury. Can somebody explain me in a short word what is it?

Where there's currency there's interest in offering and taking out loans. The challenge is ensuring that interest rates are fair to the borrower and the lender (for the risk they take on).

These things aren't influenced by the US economic health or deterioration.

Being against usury is great, but let the market decide what the rates should be. The borrowers can decide how much the loan is worth to them. And certainly don't ban lending. Lending keeps the economy growing. And smart borrowing keeps people out of trouble.

That is the current definition but in the past any charged interest in the principal was consider usury, and it is not difficult to understand why since in the past coins were made of gold so it made sense you received the same amount back but in this era of fiat that losses value every second then charging interest it is a must.

Usury is a action where loan is given to person based on the condition that he should pay a certain percent of amount as interest irrespective of whether he gains profit or not.If usury is banned and interest free loans are given, it will be good but today we dont find any such options.In some islamic countries,islamic banking system is followed as an alternative option. I dont know how banning usury will promote crypto currencies because usury is a financial option and crypto currency is a trading option.They are not inter related to each other.

"I dont know how banning usury will promote crypto currencies because usury is a financial option and crypto currency is a trading option.They are not inter related to each other."

I have two answers to your concern. The first derives from Gresham's Law, and my
observation that Nations have been for some time in a competitive devaluation, a race
to the bottom, an attempt to weaken their currency, in effect to counterfeit their money.
In a market where no-one knows the fair value of a good, the price of the good falls.
There are other matters relating to the expansion of the money supply, but leave that
aside for now. Banning usury will strengthen fiat currencies, hence reducing their
competitive advantage against cryptocurrencies. The exact mechanism is open to debate.
It will move the balance of power from the banks toward the common people.

The second answer is that prior to a ban on Usury there would have to be a process
of education for the general public explaing precisely how fiat currencies and the
credit mechanism weaken the financial power of the common man. Despite all the turmoil
of the recent decade, some seem woefully illiterate in matters financial.

I may have misread your intent, but you seem to equate fiat currency and Usury in the
above quote. Also, you seem to have entirely missed my point that global growth is
no longer assured. 

You are very welcome. I am actually still in the process of reading this book having only gotten up to the chapter on usury which it nails. It has the best description of the cost and consequences of usury that I have read anywhere. I cannot comment yet on the later chapters.

The book is available for free to read online from the author here:
http://sacred-economics.com/read-online/

Or it can be purchased here:
https://www.amazon.com/gp/product/1583943978/ref=as_li_qf_sp_asin_tl?ie=UTF8&tag=theascentofhu-20&linkCode=as2&camp=217145&creative=399349&creativeASIN=1583943978

I read it up to chapter 6 online and then bought a copy. I am waiting for my hard copy to arrive to finish the rest.

Why participate in a system that creates unpayable debt via usury? The answer of course is that we should not its dumb if we value the long term success and progress of society. However, large scale change on this issue is probably not going to happen in our lifetimes usury is very profitable. Change would require a degree of wisdom that we do not yet have. Indeed the idea is not even conceivable without a currency system that does not have usury at its core and does not easily facilitate usury. Bitcoin is interesting as an option along these lines. Charles Eisenstein argues for a gift economy but I have not read those later chapters yet.



Because our entire economy is now dependent on it. We cannot simply get rid of it without economic collapse which would just lead back eventually to usury again. We can no more top-down abolish usury then the Roman empire could have abolished slavery. We must develop a functioning alternative first and then out-compete usury. Does the economics of cryptocurrency help provide an alternative and thus the ability to route around usury? I believe the answer to this question is quite possibly yes. This is one of the reasons I have an investment in bitcoins.

" Does the economics of cryptocurrency help provide an alternative and thus the ability to route around usury? "

I've also bought the book, and am in much the same place as yourself.

I'm less hopeful that cryptocurrency can route around Usury. As I said, Greshams Law suggests
that bitcoin will not replace counterfeit money without help. Maybe if another cryptocurrency was
specifically designed to tackle the problem, it might succeed, but its a bad idea.

I noted something in today's papers to the effect that "we" all want to eliminate fraud, dishonesty,
and cold-calling but the loss of thousands of jobs is a major and unacceptable consequence.
Does this sound much the same as banning Usury?

I'm intending to research some other relevant material:

A) The theological perspective - why Usury is acceptable today, and also its practice in the
Byzantine Empire.

B) The impact of Usury on poverty - microfinance seems to be the main topic
(see WP39_microfinance.pdf) - though remittances are also an area of concern.

Yes, but mainly via education.

Consider the resistance that would form against a fractional reserve bitcoin bank.
Ultimately the transparency of the blockchain and the ability to securely hold your own funds offchain would make this much harder to pull off than with fiat or gold. Not impossible but harder and thus less profitable. Cryptocurrency helps illuminate the nature of usury. Ignorance is the foremost enemy of progress.

The best parallels for how we can move beyond usury can likely be found in two prior historical transitions.

A) The transition from economies of slave labor to economies of surfs and feudalism.

B) The transition from feudalism to republicanism.

Ultimately, the process of moving beyond usury will probably be similar to those prior transitions. Painful, slow,  halting and unlikely to be completed in our lifetimes.

This kind of discussion would have to depend on the means of repayment enforcement.  Let us for now assume the mechanism is just like today (which BTW I believe is OK morally and technically): if the borrower can't repay, basically, too bad for the creditor.

Under this mechanism, the problem of too much debt would simply lead to debt value implosion, and debts would disappear through default.  Morally speaking, the lender should have been careful, since they knew there would be no enforcement from the start.

In an ideal world, that is, without the state-bank alliance manipulating the values of debts, people would be very careful to lend under this mechanism, so we should not have debt implosions on an economy-wide basis.  (This world last existed in the Italian Renaissance.  And interest was VERY high by today's standards.  The economy did more than OK.)

So Bitcoin should not have the problem you mention, any more than gold and silver did during the Renaissance.

We should talk more, definitely.

I understand that debt is a form of investment where there is no legal, built-in adjustment as the hope of repayment goes down.  However, to be considered immoral, it has to break a well-defined moral code.  It's hard for me to find such breakage when both parties go into the deal freely and with knowledge of the enforcement mechanism.

FWIW, I'm intuitively in favor of the current enforcement mechanism in most of the West, ie the creditor is basically on their own.  Breaking a promise is no problem when both parties are aware of its possibility from the start.  (This is only true in and of itself.  Combine this with the modern system of state-driven asset inflation, and there IS a problem.)

I think I addressed the systemic-technical issue with usury in my posting above.

I guess I'm not totally understanding your point about credit and wealth.  Assuming you mean there can be no credit growth without wealth growth (ie growth in supply of actual money,) I'll say that your view may be colored by the past 4 centuries of more or less elastic money.  (Under metallic standards money was also issued out of thin air via public power, just slower.)  For many it's hard to imagine a different world, given this history.  Perhaps you have a logical model that proves your point, but I haven't seen or imagined one.

To me, the Italian Renaissance world of constant money showed growth could be driven by credit alone, even though far less credit was issued than by today's standards.  Also, the only legitimate (ie non-theft-based) driver of credit are actual economic facts and the response to them by actors free of state intervention.  If better and safer ships are invented, savers will be happier to lend to cross-ocean traders.  Absent that, there is no reason for this credit expansion.  It is therefore not up to any authority or expert to say how much credit growth there should be.  Only the myriad price signals in the free market can determine the proper level of growth.

The legal monopoly of money issuance is certainly a problem, but that is only one form of exploitation by the modern state-bank alliance.  The general problem is, as I mentioned, the artificial propping up of asset values by the alliance.  During the Spanish Empire of the 16th century, money was only gold and silver, but essentially the same modern problem existed, where the avenue of asset inflation was sovereign debt payable in gold and silver.

@BobK71 - "It's hard for me to find such breakage when both parties go into the deal freely and with knowledge of the enforcement mechanism."

In an ideal world a negotiation between two parties would result in an equitable and
moral deal: the party which gained most from the deal would offer the best terms for
settlement; and vice versa. That's economics. But this is only one of perhaps four
different outcomes in game theory and it assumes both a win-win dynamic and an equal
balance of power.

For a real world example, consider my broadband contract: I provide my ISP with three
months credit by paying in advance; I receive a weeks' credit in return. If I do
not pay within a week, my online existence is cut short. This is an existential threat.

A similar existential threat is implicit in all negotiations with the State, for the
State has a monopoly on legal violence. I'll also point out that as productivity and
GDP declines, the opportunities for win-win outcomes diminishes.

Much of the real world implications of this, and my earlier reference to flows of
wealth and credit are exposed in the dealings of microfinance - see WP39_microfinance.pdf

I think it's evident that wealth flows to the wealthy, and credit flows to those sinking
deeper into debt. The exact mechanisms vary for each individual. Some are plainly wrong.

"The idea that people can live off the interest of their mutual indebtedness, ......
is just another perpetual motion scheme - a vulgar delusion on a grand scale. Soddy
seems to be saying that what is obviously impossible for the community - for everyone
to live on interest - should also be forbidden to individuals, as a principle of
fairness." Daly, "The economics of Frederick Soddy" p475 quoted by
Charles Eisentein in "Sacred Economics" p134

There are a simpler explanations, just ask - "Cui Bono?"
The effects of American gold and silver imports in the 16th Century are well known.
Those closest to the source of inflation benefit most. Thus Banks, and credit card
companies, as the source of credit-as-money benefit fully from the inflation of the
monetary base. Those receiving credit are incentivised to spend quickly. For as long
as the Ponzi scheme expands, savers lose out to the extent that inflation exceeds the
interest paid on their savings. Monetary expansion is limited in theory by our
ability to collateralise resources, but once again practice differs from theory.

So much for the Macro Economy. What about the Micro Economy, and Who Loses?
In a strange sort of way, the supply of money creates its own demand, it's own
scarcity. The practice of Usury creates more debt via interest than there is
wealth to extinguish it, hence there is always someone in need of money. It follows
that the greater the scarcity, the greater the excess debt, the greater the risk,
and hence the higher the interest rate demanded. Thus those with the weakest
negotiating position, probably the poorest in the community, are the least able to
avoid being in debt and their risk of losing everything is higher.

When gold and silver coins were money, there was a natural limit on the extent to
which the common man could be exploited. When the King or Queen mismanaged the
economy, banks and governments went bankrupt. Along came fractional reserve banking,
and then fiat currencies. Both were an attempt to introduce a self-regulating system
while preserving Usury. As can be seen above, self-regulating Usury is an oxymoron.

Unfortunately, with another system failure about to be exposed, TPTB are placing
their hopes on restrictions on fiat currency, and when that fails, on banning cash
entirely.

Once inflated, nothing can stop a Ponzi scheme from imploding, hence arguments for
continuation are wasted. More relevant arguments for Usury stem from personal freedoms,
and that needs to be discussed further.

I've been remiss and not had time to read the microfinance paper, but I'd like to keep what is a productive discussion going by offering what I have.


With truly free competition, any side that loses can walk out and choose another counterparty, so only win-win deals can be agreed.  I'm not exploited by my local pharmacy which is bigger than I.  But if there is some state-sanctioned anti-competitive behavior involved, then I can be.  The goal of society can only be to perfect free competition, when there are problems with it, and not to tie up the system in yet more state-sponsored knots.


This is true, and is why money can't be left to the state.  The growth of money and financial assets matches productivity and real-wealth growth when there are free supply and demand for them.  When the state is involved, the incentives for the elites are always to issue more money and debt while the system is stable, and destabilize the system, and/or exploit the rest of the population/world.


A quick scan through the paper suggests that microfinance is just another way powerful players who issue financial assets (which are ultimately backed by state or imperial power) to victimize the less powerful by forcing debt and inflation down their throats.  For the powerless, the proposition is lose-lose.  If you stay safe, you lose to inflation.  If you borrow or lend, you risk losing a lot in a crash of an artificially propped-up system.  Microfinance is just another way to find initial demand for the assets.  If so, this would be no different from the relationship between banks and people, or that between countries at the center vs. the periphery of the imperial system.  The key culprit, as always, is the state-bank alliance, which is in turn enabled by the state control of money.

I'm hoping to read the paper and comment afterwards.

Felix Martin in 'Money: The Unauthorised Biography' mentions that debt does not become money until it is made transferable.  My expansion on this insight is that debt in its natural state is highly individual and depends on the particulars of each investment and the circumstances of each lender.  Truly free-market debt is thus highly non-transferable.  Debt becomes transferable only when the state backs it in some fashion, and from that point on, debt values are no longer based on their real-economy merits but on a bubble created by state power, and from this flows all our ills.  (The system always becomes a bubble because of the incentives faced by the powerful.)

When the state is not involved in 'managing' (read 'inflating') money, debts are only agreed when merited by growth of real wealth or productivity.  Interest is thus the reward for those investing wisely.  System-wide, debt would be at a much lower level than toady.  Under constant money supply, there would be a gentle and gradual deflation as real wealth/productivity grows via investment.  When there happens to be no growth to be had, there is no debt (ie everyone doing the same thing as yesterday.)  This must have been what Renaissance economies looked like.

Could you expand more on this?

Personally, I don't quite understand what you mean. If there is no new money entering or being created in the economy (and there are no defaults of the borrowers either), the debt system is not sustainable in the long run. In other words, one day there won't be enough money to pay the interest, and that would eventually cause the system to get reset writing off all or most of the debts

As I alluded to above, this is an often misunderstood point by people who are familiar with modern economies only (ie economies driven ultimately by state dictated monetary and financial inflation.)

In a constant-money-supply world that is free from state intervention in money or finance, there is no mathematical problem with interest (usury.)

In such a world, interest payments would simply represent the redistribution of wealth toward people who invested successfully.  As real wealth grew under a constant money supply, there would be a gentle and harmless deflation over the long term.

The Italian Renaissance probably resembled such a world.  But it was the last time such a world existed, because global bankers soon found it much more profitable to ally with large empires to blow state-sponsored imperial financial bubbles, than simply to lend money to good prospects.

Let's say that you loan me $100 to grow apples and I have to pay you $1 a day until you get $105. Now, suppose you buy an apple for lunch from me each day, and then I use that dollar to pay you for the day. With that single dollar, I can repay my loan completely.

The fallacy of the not-enough-money-to-pay-interest argument it ignores the fact that money is used to transfer value and it can be used to transfer value over and over again.

And the fallacy of the one-dollar can pay all debt scenario is that it requires eternal exponential growth to keep the system going. In this case you have created a hypothetical example with exponential growth an apple orchard capable of growing fast enough to repay a single debt.

Nothing grows exponentially forever and over the entire economy usury demands this or the entire house of cards collapses. Thus we extend and pretend faking growth via more debt.

The hundred dollar loan itself was itself an act of redistribution. It was created out of nothing by the bank debasing everyone else's money in the process. Economy wide this process results in progressive redistribution of wealth to the wealthy until social stability itself is threatened necessitating redistribution.

Usury makes the rise of the welfare state inevitable.

No, the scenario doesn't require "eternal exponential growth to keep the system going". As long as I can grow and sell at least $105 worth of apples with a $100 loan, the scenario can continue indefinitely.

Yes but remember loans are time based. You do not just have to grow $105 worth of apples you have to do it in a year. If you can't and the bank is kind enough not to foreclose on you will need to grow $110.3 worth of apples in two years. You have committed yourself to 5% compounding growth.

To get that money you will have to pull it from the economy at large. Principal that is repaid to a bank is destroyed in a fiat system as its creation was a ledger entry to start with. Those funds are removed from the economy.

We do not have a gold based economy or a paper dollar one for that matter. Thus the only way to get your $105 dollars to repay your debt is for someone else somewhere in the economy to take out a debt to pay for your apples. Thus the requirement for eternal exponential growth.

If you want to read up on how this works you can do so here: Finance: Part 1 (https://bitcointalk.org/index.php?topic=529603.0), 2 (https://bitcointalk.org/index.php?topic=564088.0), 3 (https://bitcointalk.org/index.php?topic=586125.0)

In a truly free monetary and financial market, let's say you found a new plot of land and borrow $100 to grow apples.  The interest you owe is $5.  People like apples so much that they eventually pay you not just the $105 you owe but also $200 for your profit.  A little of society's wealth is redistributed to you and your lender for the innovation you've provided.

Let's say, the next year, no new land was discovered for apples, and indeed no one finds anything new to do.  Then there is no debt in the economy.  Everyone does the same thing, and pays and receives the same monies as before.  There needs not be exponential growth of debt.

The reason the modern (state-driven-inflation based) economy needs a growing money supply is that people never really liked the apples enough to pay that much for it normally, but the inflation made people feel rich, throw caution to the wind, and buy them anyway.  If the debt mountain stops growing, all the apple growers who have no real demand anyway will now close down, and jobs will be lost.

Then the society has no usury. They not only have sound money (not debt based) but have chosen to willingly cease participating in usury altogether including fractional reserve banking. So yes there is no longer is a need for endless exponential growth in this example as that need comes from usury. This hypothetical has very little in common with our current society and economy.

But you still fail to explain why this system won't crash eventually or credit runs dry, i.e. no more economic growth due to ever increasing deflation (in other words, deflation outperforming economic growth)


In other words, it can be said that you just include the interest into the price of your apples

In this manner, the interest can be excluded completely from consideration by simply diminishing the profit margins you obtain by selling your merchandise. But the question still persists, namely, where do your profits come from? In this system when someone wins (i.e. earns) someone seemingly loses, at least in monetary terms, right? I mean the profit margins, of course, not the money which apples themselves cost to produce. In this way, profit margins amount to bank interest (though this shouldn't be misconstrued as if I were against producer profits altogether)

Of course, this story has little resemblance to how we live today, because our entire system is based on theft by the elites.

This society has no usury *for that year*.  Maybe, in the following year, someone finds a good new investment again, and usury (interest) is paid again, because there is a new loan.  No one has chosen not to participate in usury.  The (small amount) of interest gently and slowly redistributes wealth to finders of new demand over time.  There will be a slow deflation over time. This is not a problem as it is not the same kind of deflation we face in today's artificial-demand economy.

Where is the crash going to come from?

If people stop lending their saved hard money, it just means no new investment gets funded.  There is no problem because all the demand is real, ie not driven by (ultimately) policy of the state-bank alliance.  Demand doesn't need to collapse simply because no new investments are made.  People still want the things they wanted yesterday.  No new investments simply means the society won't get wealthier, for now.

Remember, this is a very different world from today's state-driven-inflation world.

Contrast that with today's world, where there are enough people working on projects that really won't see any demand without the state-bank alliance's propping up of financial assets and demand.  If, for whatever reason, investments stop, these people will lose their jobs, and the people who serve *their* 'needs' which again is mostly propped up demand also lose their jobs, etc.

So the key is whether demand is natural (ie free-market based), or propped up by the state-bank alliance.

Well, I assume a hypothetical situation when the system runs out of money. Indeed, in reality this is unlikely to happen since in that very case people will just switch to direct barter or use another means of payment. Though the latter could still bring down the system to very primitive levels. Let's assume that people can't use barter and no other money is allowed either. Ultimately, that will cause stagnation to the point where every new generation of population will be poorer than the preceding one simply because all money gets accumulated in fewer hands (remember no barter is allowed)...

In the end, this system is bound to disintegrate down to pure natural economy with little or no trade

The profits and the ability to pay interest come from the value created by growing the apples. Ideally, the grower wouldn't spend all of the profits on interest (otherwise there would be no benefit from getting a loan), and both the lender and the borrower are better off than if the loan were never made and the apples were never grown.

I understand that. And I don't claim that the producer shouldn't get any profits. But this is not the real issue. The real issue here is that the amount of money in circulation doesn't change. Say, the consumer and the producer have $100 each at the start (let's break free from the borrower/lender dichotomy for simplicity), and the consumer also happens to work for the producer. So, at the end of the production cycle, the producer should get income of $105 and pay $100 to the worker (who is also the consumer). The consumer gets paid $100 for his work as well as pays himself $105 for apples. Now the producer has $105 while the consumer only $95. Both were not sitting idly, but in the end the wealth got redistributed, and someone (the producer) ended up wealthier while someone else (the consumer who is also the worker) poorer, any way you look at it. By the end of the next cycle, the producer will have 110 dollars while the consumer (the worker) just 90 dollars, until the worker can't pay for apples at all

And how could this system be sustainable in the long run?

I agree that more productive people gain a disproportionate share of the wealth, and it is not sustainable. It eventually results in revolution where the haves become have-nots.  But this has nothing to do with a fixed money supply.

How does that have nothing to do with a fixed money supply?

I basically proved to you that the reason for this system to be unsustainable is exactly because of a fixed money supply. If you don't really see how it is the crucial point here, assume that there is a dynamic money supply. In that case, the profits of the producer will be from the new money created, i.e. at the end of each cycle new 5 dollars will enter the system, and the producer gets this money while the worker still has his 100 dollars and is able to buy the same amount of apples each cycle without becoming poorer. The producer can then expand production and start growing oranges as well as hire two children of the worker for this new production. So more wealth get created in the end with everyone becoming wealthier in real as well as nominal (money) terms

It appears that you are assuming that all the wealth in the world is backed by money, but that is not the case. If you determine the total wealth in the world, you will find that it far exceeds the total amount of money in the world, by orders of magnitude. The wealth of the world grows because people are productive and they create value and not because there is more money.

Accurate, based on those numbers, I think the only caveat to this though is that it assumes there is someone who doesn't take out debt yet still actively spends their money and allows for others to pay off their own debt. When everyone gets into debt, people have to completely stagnate and pay their debt back, taking away from economic activity, resulting in a lack of money to pay interest back with.

Usury is so-so in my opinion. It's not like banks or anyone will make money without it, and banks won't provide interest at the rates they do now.

I'm not assuming that, and that should be pretty straightforward from my post

But, to tell the truth, I expected that you would try this trick since this is what I'm used to hear in such cases. This new money which the producer receives (and which will be created by banks through loans in real world) is his profits. These are the same profits both in the case of a fixed money supply and in the case of an adjustable money supply. But in the former case they come at the expense of the consumer (the worker) by impoverishing him (basically, taken directly from him as I have shown) while in the latter case the consumer wealth remains arguably the same

In a truly free economy:

- People save hard money.
- People don't invest more than they can afford to lose in risky ventures.
- Purchasing power is preserved (if not slowly increased over time,) so there's no fear of not having enough to retire if one plans and saves adequately.

In this economy we don't run out of money (so no need for barter, etc.) and I also don't see any way we're concentrating wealth in a few hands.

I would add that the reason it is considered haram (forbidden) is because it is considered immoral to make money from predatory loans. For much of the history of Christianity usury was also forbidden. However there is so much money in it that exceptions have been rationalized over the centuries.

There is not any other option in a fixed money supply environment

In fact, this has always been the case when, for example, gold had been the hard money. Ultimately, it led to wars, revolutions and interventions when accumulated wealth had been redistributed, only to get accumulated in few hands again over time. You yourself essentially confirm that when you say that people save hard money. Basically, that's what happens to Bitcoin right now. Regarding the economy running out of money, I want you to comment on my previous (https://bitcointalk.org/index.php?topic=1719364.msg17686553#msg17686553) post

I love how religion bends to accommodate changing times.  ;D
When the typical money lender was a tight-fisted jew (think Shylock) most people were against it. Now you have faceless banks charging all that they can.

First let's talk about your previous post.  There is no reason the consumer should want to spend $105 when they are only earning $100 (who would want to keep eroding their savings?)

So the follow-up issue becomes, if everyone saves a portion of their earnings every year in hard money, I imagine your claim is that the circulating money must keep dwindling.  This is not the case in steady-state.  It doesn't matter if the exact mechanism is that retirees become net consumers, or that someone who just landed a big profit or inheritance spends a lot for a while, or what not.  The market incentives are for the steady-state of total societal savings to be constant, so in steady-state net savings must match net consumption.  (If net savings become too high, prices will come down so the balance is restored.  When prices come down, not only are you enticed to buy, but you also realize you don't need so much for retirement, so you spend more.)

So, I would like you to demonstrate how, in a truly free market like this, under constant supply of money (which is BTW only one possible scenario of a truly free market), any kind of instability, including implosion, can occur.

In a truly free economy, steady state dominates.  Only when some special insight is discovered, that serves the population something new at the right price, do we have an investment.  Investments are therefore a much smaller portion of the economy compared to today, as they should naturally be in a healthy system.

Maybe, because otherwise he will starve to death?

You see, ultimately it doesn't matter whether he wants to spend or doesn't since, first, the amount of money in the economy is fixed, and, second, the profits of the producer can't be negative (or else he just won't produce). Given these two conditions as binding, you have to face the fact that the consumer should necessarily be eating away his savings. Remember, profits should remain positive for this economy to work in the first place, and no additional money gets injected (that would make up the producer's profits). So before we proceed any further, you should either accept that (and thus we can't possibly proceed any further) or try to escape from this setup using some arcane logic that I'm not aware of. Basically, you have to explain where the producer's profits come from (namely, those 5 dollars)

Next, let's discuss the above.

I'm not sure if you meant physical gold/silver or gold/silver standards.  In the case of using physical gold and silver as money, both Medieval Europe and post-1500 China have proved to be stable economies.  When technical and commercial innovations took off during the Renaissance, the economy prospered, while still on physical gold and silver as money and very low amounts of credit compared to today.

In the case of the gold (and indeed silver) standard, you're correct to point out many problems.  But remember this is not a free monetary system either.  It is an older and more stable version of today's system but essentially the same.  (In fact we might be heading back there if this system implodes.)  The gold standard was also a system of artificial asset inflation driven by the state-bank alliance.  The mechanism of exploitation was issuing paper money while claiming all of the issued paper can be redeemed for gold at the fixed price.

No arcane logic is necessary!  Your model is inadequate because we have both net consumers and net savers in an economy (including a truly free one.)  By casting everyone as a net saver (or at least everyone being at an age where one must save,) your model lacks the complexity to capture the required details.

That is why I kept pulling you to a different conceptual framework.

No, I didn't mean anything such

As I have already once complained, you don't need to attribute to me what I didn't explicitly say or what can be without fail implicitly construed. In this case, there are no such implications. I'm just pointing out that the monetary model with a fixed money supply is condemned to fail eventually. In reality, there are a lot of other factors that may obviously kick in. One of such factors is, for example, establishment of a fiat system, which provides an adjustable money supply and efficiently as well as effectively resolves the tragic fate of a fixed money supply system, without sticking to revolutions or wars, which this system is bound to end up with. Just in case, you can't possibly consider the economy of Medieval Europe as stable given constant wars that had raged and been waged all over the continent. Basically, it was economy based on invasion and expropriation

This is not the model which is inadequate here

And this is not my model altogether in the first place. It is in fact a model of a monetary system based on a fixed money supply, and which is inherently broken here. Other than that, I didn't quite understand what you mean by distinguishing between net consumers and net savers. If you are just going to complicate matters to seemingly justify such a system (i.e. make it look sustainable), that won't do since in any model constrained by a limited supply of money (let alone a model with an outright fixed amount of money in circulation) you still have to answer the basic question where the producer's profits would be coming from

I am sorry if I misunderstood what you meant.  But, without knowing the exact nature of the system we're discussing, we can't really talk about the stability of such a system.

What you asserted (now in bold), I gave a counter-example using the history of physical gold and silver as money.  Is that not enough?

The producers profits would be coming from net consumers -- retirees, rich people spending more than they make, people who now find themselves with surplus retirement savings given their age, because prices have come down due to your deflation, etc.  These elements are missing in your model.

You can't possibly capture this aspect of an economy by using only actors who must save.

Perhaps you can refine the model a little?  But I doubt you can come up with one that is unstable, since we have an alternative model (that you don't want to use) that demonstrates stability.

The stability is not only theoretical.  The history of gold/silver as money, including the Renaissance, also provides practical evidence that a constant money-supply system is capable of stability, as long as it's left alone by the state-bank alliance.

If we are talking about real world examples, wherever and whenever gold (or silver, for that matter) had been used as base money, it didn't end well. I don't really know about China (but I don't think they are an exception), but you can't possibly refer to Medieval Europe as an example proving your point since the economy of Europe back then was mostly an economy based on subsistence production. In other words, it was stable at the lowest possible point providing mere survival for the majority of population...

You can easily see that by population growth (or rather lack thereof) in those times

What are you really talking about?

Renaissance happened when Europe was filled with cheap gold from Americas. Gold basically worked as fiat in the economy back then. There were only two events in the history of Europe when gold was cheap as dirt. The first time it was after the Black Death in the 14th century when half of the European population had been wasted (exactly when your Renaissance started) and after discovering Americas when Inca's gold had flooded Europe. Your reference to it actually disproves your point

Interest in something risky, especially with the price increases BTC offers, it appears that it's a needed norm to reward those holding it for long periods of time. In all honesty there's much to expect with the future of financial services in this economy because of how big the hype bubble is transforming surprising startups into successful companies.

Just like with the Internet and Social Media there's a lot to expect before it comes in to our hands faster than anticipated as always with anything global.

It's awesome watching new ideas form about what money is and how it should be used.
I'll put something up on the "Economic Totalitarianism" thread in a day or two, but
maybe this theard gets there first. For now, I'll posit a better "Orchard" model. I'll set
some variables closer to the real world, others are set to limit the model.

In an ideal Island world, the king owns all the land, and leases are for sale at zero rent.

There are only two orchards, side by side, and the trees are a thousand years old.
One orchard is up for sale, and is bought $20 cash and $80 loaned from the bank.
The loan carries 10% interest because the bank expects the orchard to go bust,
but demands the orchard as collateral.

The other orchard is owned by the bank, has a similar loan on the books, but
has interest set at the Internal Rate of Return (IRR) some 2%. This comes
about because the bank is closer to the source of the monetary expansion.

To create a "static" economy, both orchards use slave labour so there is no
compeditive advantage and the slaves eat all the apples, sold in a free market.

In year 1, the money in circulation is $200.
In year 2, the bank calculates $210 in circulation, and demands interest be paid. 
   
The bank makes a profit of $3 on its orchard, and rolls over the loans, increasing
the the external loan to $83. When the external loan approaches $100, the bank
will foreclose, and put the orchard up for sale, again.

That can't happen if Usury is prohibited. 

Interesting...  I assume each orchard made a profit of $5 from the apples for the year.  It is interesting why the external orchard chose to take out the loan owing more interest per year than yearly profits.  Any ideas?  There may be something I am not getting.

Do you refer to gold/silver standards, or physical gold/silver used as sole money?  The difference is crucial.

As I've pointed out, gold/silver standards are merely an earlier form of today's system, devised by the state-bank alliance, with the same problems.


We can discuss the lack of growth in the Middle Ages later.  It does have to do with the lack of monetary inflation, but not in the way commonly thought.

The example I gave does provide a counter-example to the assertion that a constant-money-supply system is unstable by nature.

Remember, it was 1492 that Columbus saw the New World.  At this time the Italian Renaissance cities were about to be eclipsed in growth and power by Spain.

I've never heard of the theory that the Black Death (and, presumably inflation-by-inheritance started by those left alive) was the driver of the Renaissance.  If it was a factor, it was a one-time jolt, because throughout the Renaissance city states, money was only physical gold and silver.

The reason that the city states had to keep money hard was simple: their small sizes couldn't possibly contain any capital flight in the event of a bubble burst.  If they had issued paper money backed by gold, as the British empire did, the instability inherent in such a system (similarly to today's 'fiat' system) would simply have driven the Venetians and Milanese to buy gold and silver from the rest of Europe.

Only after establishing global empire, can the state-bank alliance force their system on the people for a reasonably long period of time.

If you want to go with your two inflations of European gold, how about: the first inflation was taken advantage of by Italian city states which implemented a constant-money-supply system, and resulted in the Renaissance.  The second inflation was taken advantage by the Spanish empire, which implemented a state-driven asset inflation (via sovereign debt) which eventually sent the country into debt implosion and prolonged decline.

Imperial Spain hadn't discovered the central bank and debt-as-money to be held by the public and foreign vassal states -- two innovations in financial repression that only came later.  Its implosion was ugly.

The external orchard chose to take out a loan because they were unable to accurately assess the profit potential of the orchard. They were unable to make this assessment because of fundamental economic distortions that are introduced by fractional reserve banking.

I don't think we can talk about gold or silver standard (namely, gold exchange or gold bullion standard) when we refer to Roman Empire


In fact, there is a theory which states that capitalism as such was launched by severe population decrease (depopulation) after the Black Death epidemic. It basically says that the plague destroyed closed castes of craftsmen who didn't allow outsiders into their family businesses. When there had been no families hanging around any more, hired labor became the dominant form of production. Before the Black Death, it had been mostly small-scale artisan production

What you seem to be possessed with (i.e. the Italian Renaissance) was actually a minor event in the economic development of Europe


Your examples are not representative since they all happened in an open system with a lot of other factors affecting it

The reason for writing the Orchard model in the way that I did was to draw attention
to the creation of credit by the bank. Once upon a time, banks were very careful
with their lending, and bank bankruptcies were a feature of the commercial world.

A real-life example of the Orchard model:

http://www.abiyamo.com/why-does-nigeria-import-so-much-rice-instead-of-just-growing-it-bbc-asks-worlds-most-populous-black-nation/
"Members of the Rice Farming Association of Nigeria say they can only access high-interest loans from commercial banks. Joseph Jatau Kudu has been farming near the town of Doma in Nasarawa State since 1982. He says the banks charge as much as 30% to lend money. 'It's too high. We end up earning nothing,' he says. Without the capital to mechanise, workers must do everything on his 15-hectare farm by hand. Sometimes the tractors are not available. 'So now I'm using manual labour. It's not as effective as in the case of using a tractor and it's one of the reasons I can't expand.'

History records that rapidly expanding the money base via Usury used to be a sure way
to get into trouble. Hence today's monopoly on the issuance of fiat credit notes,
is somewhat like the ability of a Bookmaker to offer bets on every horse in the race.
No matter the outcome, the risk to the Central Bank is so small it's almost not there
at all, because the Bank can always pay its own liabilities. 

Usury is not supposed to be risk-free. And it isn't. It just moves risk to approximate
the power balance between Creditor and Debtor. That in turn means that politics,
not economics or law, may be the final arbiter when unpayable debt must be extinguished.

There are multiple entwined issues here.  Money is unreasonably tight in peripheral countries in many scenarios -- this is another way countries are victimized by the imperial system.

If we return to our model of an ideal system, as long as debt is not propped up by the state in any way, high interest will just be the market signaling that perhaps new farms shouldn't be built, for one reason or another.  It's not written in the stars that all humans should enjoy great living standards, and to pretend so would make things worse.


This was only true if debt came with state-backing.  E.g. Spanish-Empire sovereign debt started at a 'cheap' interest of 15 to 20% per year when the empire was in ascendance.  While Renaissance Italian interest was probably higher, Renaissance debt didn't implode.  Debt that is priced at free-market rates tends to be good.  (Such a simple idea, so many centuries of misery from ignoring it.)


The problem is not usury, but is, as you refer to, the various state-driven distortions of the financial market: monopoly, propping up of debt, lack of clarity WRT debt resolution (deception made necessary by state backing of debt,) etc.

The Roman Empire was just another example of collapse by state-driven asset (monetary) inflation.  This was by no means a constant-money-supply system.

The monetary units were defined by the state (denari, etc.) but the precious metal contents of same-denomination coins were progressively diluted to enrich or bail out the elites.  Money was not this or that much weight of gold or silver.

This just goes to show that the incentives inherent in state intervention in money, just as today (or under gold/silver standards, for that matter) lead to collapse.


Assuming this theory is correct, I'm sure there were all kinds of events that paved the way for the modern age of high living standards (among them, for example, William Tinsdale's illegal translating of the Bible into English, which started a literacy revolution in England.)  But among the really key factors must be: (1) the discovery of the actual technologies and processes that allow real wealth to grow; and (2) a well-functioning financial system to fund the investments necessary to grow the economy.

The Italian Renaissance was able to have both, with only physical gold and silver as money.  It crucially demonstrated that a 'flexible' money supply was not necessary.

In these key aspects it was unique in human history, because top bankers soon learned how to leverage Renaissance technology with imperial power and financial inflation to create empires.  The empires dominated the world from then on, and there has been no more pure progress.

Usury is the illegal action or practice of lending money at unreasonably high rates of interests.Usury is a financial option and cryptocurrencies are trading option.They are not inter related to each other.We can inturn say that promoting crypto currencies and providing people a new source of income would free people from Usury.

Well, you basically just confirm what I'm trying to say

Or do you really think that if the Roman gold coin had been heavily debased through ages, the European Medieval and post-Medieval rulers wasn't doing essentially the same? I guess they were doing just that, though on a much larger scale than any Roman emperor could ever dream of. In fact, financing wars through inflation (or debasing currency as in the case of the gold coinage) is a viable economic means after all, if not downright inevitable (which history repeatedly shows). Really, if a nation wages a war against another nation (or one city against another) and ultimately wins the war, all expenses are covered by looting the other nation. But if it loses it just gets looted itself (such is life)

http://s020.radikal.ru/i714/1702/32/d4b0ee7b072a.jpg

That pretty much sums it up

Assuming what you're trying to say is "if we are talking about real world examples, wherever and whenever gold (or silver, for that matter) had been used as base money, it didn't end well":

China is a counter-example (i.e. in addition to Renaissance city states.)  China had gone through the entire Western debacle with state issued money by the 15th or 16th century (inflation, financial repression, etc. over the previous few centuries) that it decided to use physical silver for money sometime during the Ming dynasty.  I guess it must have been so disillusioned with state issuance that the silver wasn't even coined.  Ingots were weighed and cut on the street.  The system functioned for centuries until the British Empire naturally saw it as a threat to its world system.  The problem of China was not being able to resist the British militarily in the 1840s.

The problem is not gold and silver per se, but the state's propping up of its own issued money or debt, whether fiat, 'backed by' gold/silver, or physically embedded gold and silver.

When you have a money that the state cannot (or realizes it shouldn't) manipulate, you're (literally) golden.  Part of the problem is allowing the state to define the monetary unit.  Once transactions are denominated in the state-defined unit (dollar, franc, etc.) the system is open to such manipulation, although state-defined units are harder to prop up in multipolar worlds like Medieval Europe than in, say, pre-15th century China.

And then we are right back to my example which proves that any economic system based on a fixed money supply is unsustainable in the long run. I don't know much about China of that period, so I can't say anything specific. But for it to be a viable example, you should confirm two things. Namely, that the amount of silver in circulation was in fact constant (more or less) during that time span and that the level of well-being didn't substantially decrease. If silver really helped them, why the British were able to so easily conquer them?

Maybe, they shouldn't have used silver as money (if they had been, in the first place)

Pardon me for scratching my head, but how does your 'example' prove anything?  I just gave two historical examples of constant money-supply systems that were more than stable (in the case of China, lasting for 3 centuries before being dissolved by external forces.)

Such examples are extremely rare because any existence would be under attack from the imperial system.  (E.g. the IMF stipulates that if you want to enjoy the help that comes with membership, you can't use gold.)

No non-Western country could be the military equal of Britain.  Britain's power came not just from decent fundamentals, but also from the international bankers' choice to push it as the global top dog.  We have to remember that in this situation 'flexible' money is a powerful performance-enhancing drug.  It also always addicts the country and lead to eventual implosion or decline.

It's probably more correct to change a couple words and say 'any economic system based on a state-controlled money supply is unsustainable in the long run.'

If you don't want to accept my proof, I simply can't force you

Other than that, there are always external forces present, and somehow countries that stick to a state-controlled money supply overcome countries that are using hard currencies backed up by, say, precious metals. After all, money is only a tool, even if fiat is just a powerful performance-enhancing drug. No one knows about clean athletes, but you can't become an Olympic champion unless you are juicing (where it applicable, of course). In any case, the winner takes it all

Where is your proof?

"Overcome" is not the same thing as "achieve true happiness."  In fact, I would argue quite the contrary.  Theft is ultimately just as bad, if not worse, for the thief as it is for the victim.

If the United States of America will use bitcoin then they could no longer reproduce us dollars which is more than the prescribed amount to be circulated. The united States of America is constantly printing us dollars so the public could not notice that their nation is already bankrupt. With bitcoin at hand the public can monitor how much remaining btc are in the hands of the government and they will also see how the government are spending the funds.

Maybe, in this (https://bitcointalk.org/index.php?topic=1719364.msg17686553#msg17686553) post

But then again you are free to disagree, but unless you somehow manage to make a viable rebuttal (you didn't so far), I will stick to my guns, obviously. Regarding "achieving true happiness", this is a matter of convention really. The rich also cry, but as the proverb goes, money may not buy you happiness, but it is still more comfortable to cry in a Mercedes than on a bus

I didn't think you would still consider this a 'proof.'

As I mentioned, you can't model this economy properly by only having actors who must increase their savings.  And I answered your question (ie the profits will come from people outside your model.)  I'm still waiting for your response to that.

I'm sorry, but at this point, I have trouble believing that you want to be convinced of anything you don't already think.

Are you serious mate?

When I tell you that your examples don't work in real world, you throw out the window my arguments since they don't work due to "external factors", and right now you use the same argument to challenge my point. I don't think this is an honest approach. Anyway, there are no people outside the planet Earth so your reference to "people outside your model" remains as invalid as ever before. I basically said everything what I wanted to say, but you may think as you please

Correct.  The big picture is that the international banking elite latched onto the US as ally to use its imperial power to artificially support the values of its printed dollars, Treasuries, bank debt, etc.

Before they did this to the US, they did it to Britain, and before that the Netherlands, and before that Spain.  Each time, the empire ends tragically, one way or another, as the world eventually refuses to support the value of the paper.

I am dead serious.

So a physical-silver monetary system that survived for 3 centuries and only got eroded after a British invasion is inherently not stable?  It is 'an example that doesn't work in the real world?'

While your 2-person model of the economy where both must keep saving money is 'proof' of anything?

The real question is how well it survived

I didn't hear about any economic miracle in respect to post-Mongol China. If it was mostly agrarian society, which seems to be the case (compare with England ca. 1840), then your example is meaningless since in such a society money itself is mostly irrelevant. It could survive without any money altogether, be it fiat, silver, gold, or whatever. Regarding my model, you can include in it as many people as you see fit, but if it can still be reduced down to a 2-person model, that makes no particular sense either

Your point was that a fix-money-supply system is logically provable to be inherently unstable.  Have we moved the goal post?

Not to mention, the Renaissance had great progress with a physical gold and silver only money system.  But of course that was an unimportant example in your book(!)

BTW money seemed to be important in 'agrarian' China.  The reason for going to physical silver was partly that hyperinflation after centuries of the state-issued money had reduced much of the economy to barter.  Under physical silver, the few decades before the British invasion of 1840s were also known for general prosperity.

You still have not addressed the core issue with your model, that having only actors who must increase their savings will naturally not work with a fixed money supply, so that the model was unrealistic and actually could be argued to have been chosen for its conclusions.

That fixed-money-supply is unstable is an establishment-promoted myth that has become something of an orthodoxy today, in a world where the 'top' mainstream economists are essentially bought off by the establishment (that is, surely blind on purpose unless they are so obtuse as to miss the elephant in the room.)

I don't quite understand what you mean. Anyway, you should keep in mind that if you want to logically disprove something you should yourself use logic but not refer to examples. Regarding your examples themselves, the Italian Renaissance cities are irrelevant as such since their economies are not sustainable on their own at all, in the first place. They were basically bankers and traders (read resellers). Without the rest of the world, they would quickly die out in a matter of months if not weeks. And which book are you talking about?

The producer-consumer example was my invention, just in case


I assume that all other actors ain't relevant. If you disagree, explain how they should be


Talk is cheap, show me how it is actually sustainable

Sorry, you're the one who has to prove that a fixed-money-supply economy is inherently unstable, since that was your assertion.  I only have to provide counter-examples.

I am not asserting the stability of anything, since there are so many factors, that you can't guarantee stability, without looking at all of them.  But I'm proving that fixed-money-supply systems are not inherently unstable by giving you two counter-examples (Renaissance city states and 3 centuries near the end of Imperial China.)

Trade was only one of many supporting factors for the Renaissance economy.  Every economy has them.  I suppose you're going to say that if a Medieval crop economy was subject to destruction by climate change, it would prove that fixed-supply-money is inherently unstable? ;D  Or that the economy was no example of a stable, fixed-money-supply system?


See my original statement.  I guess I'll just have to keep waiting.


In this case, I'll stick to cheap talk.  Thank you very much.

This certainly won't do

I think that I have logically proven my point. Ultimately, this is irrelevant (since you still consider my arguments as not sufficient). What is relevant here is that you can't just pop up and claim that my point is shaky or invalid. Basically, you should either disprove it by showing that it is internally wrong and inconsistent using the same logic as I used (which you simply can't since it is logically perfect) or somehow prove that this model, though internally consistent and coherent, is not applicable to real life. Obviously, your so-called example are not disproving (or proving, for the record) anything in any conceivable way


It doesn't matter if it was only one of the factors in the Renaissance economy. What actually matters here is that it was not in the least sustainable on its own and greatly depended on the outside world. That pretty much renders your example useless. It is like claiming that you live on your own while in fact you live in the basement of your parents' house


Honestly, I can't fathom what you mean by me "having only actors who must increase their savings". Just in case, it is about consumers and producers. Essentially, it is not about saving, it is about having enough means for pure subsistence

I laid out as plainly as possible why your model is unrealistic.  Yet you "honestly can't fathom."  I hope this model is not the sole basis of your "proof," but I can't seem to recall there's anything else.

Unless we have anything new to add, wouldn't you agree this discussion has come to the end of its useful life?

You must be kidding (really)

In fact, in your place I would try to address the lack of sustainability in the economies based on a fixed-money supply on reality, not on references to "savers" (which you still didn't explain what they have to do with this model). In reality (as it actually happened for some time during 19th-early 20th centuries), the constant loss of nominal amount of money received by the consumers as wages in such an economy can be offset through the growth in productivity. In that case, the less amount of money would still be able to buy more or the same quantity of goods, and thus we can't claim that this economy wouldn't be sustainable (at least, as long as the real purchasing power of an average wage remains essentially the same)

Not entirely sure what your point is here, but if you think 19th and 20th century gold standards constitute a 'fixed-money-supply' system, the discussion will be wrong from the start.

I refer to Industrial Revolutions

Two of them occurred in the 19th century. The first encompasses the period from the late 18th till your date of the British Empire expansion (1840). The second occurred in the last quarter of the 19th and the beginning of the 20th century as I said. Gold standard (http://www.investopedia.com/ask/answers/09/gold-standard.asp) is synonymous with a "fixed-money-supply" system (at least, as long as the supply of gold itself is constant and governments actually stick to it). Though you are free to choose any definition of that as you feel like (this is not a school and I'm not a teacher)

The gold standard was a 'fixed-money-supply' system only by elite propaganda (with mainstream economists singing the supporting chorus.)  Paper money was printed all the time and various manipulations were used to keep the system stable.  That was why Britain only had enough gold to redeem 3% of its paper money at the start of World War I.  (Does this look like any effort to keep money 'sound' in reality?)  That was why the system collapsed entirely by 1971.  The system was no different from today's in essence, just with a slower pace of asset inflation.