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Author Topic: Lending BTC is very risky  (Read 4575 times)
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September 02, 2012, 10:09:23 AM

By frivolous, I meant that the dividend interest that you get from your investments needs to be spent on consumption fairly quickly (within a year?).
Ahh so you are talking about a system of forced dividend spending.

I guess your rationale is increasing consumption/economy kinda like inflation does, but without the government interference?

That is actually pretty good, but what if:

1. Some tech will become viable in 2 years.
2. The world is in trouble.
3. The market wants to save its real resources until the new tech has been developed.

With forced spending you would be fueling some wasteful bubble even though the market knows it should save for a few years until the next really good idea appears.

Yes forced dividend spending, which would work with or without a central government. The focus is on removing the noose of compound interest. The system would not force the spending of salary earnings - this can be accounted by either using two currencies (one for salary eg btc, one for dividend interest eg fiat) although that may prove clumsy, or one currency and checked during "accounting" time.

For example, if a person earns $50k from salary, and $20k from investments, they should be able to show $20k worth of "consumption spending" for that year...the $50k can be saved, invested or spent as they wish (or taxed first if in a govt system). If they only spent $15k in consumption of the $20k earned from dividends, the $5k left over can either be paid in tax or given to charity / someone else who can consume it. I don't imagine many people would let that money go to charity/tax, so it will most likely go into actual consumption, but those who simply earn a lot more than they can consume will end up giving up rights to that "excess" income for the sake of allowing the economy to function. This would actually help the standard of living. The high income still get first pick of the economy, and once they've had their fill the rest can divide what's left, so to speak. Retirement would also depend on asset building via savings from salaried work.

The inflation system has a very good reason for existing, from a business perspective. It's just not good from a saver's perspective. Savers make a big sacrifice by saving - they work, and choose to enjoy less than their counterparts (usually) to either buy something significant, or fund something productive ala business investment. Once investments start growing, however, things can become significantly easier, and it's tempting to re-invest dividend income into further investments. This is exactly what accelerates the removal of consumable money floating around, and the debt spiral can either be stopped, or at least slowed down, by this forced consumption.

I don't really see this interfering with the market in the scenario you presented. If resources are known to be valuable in 2 years time, they would likely have already been purchased or priced out of normal plebeian reach by the speculative market...unless I'm missing something in the question. Capital for new ventures can still be borrowed. When a company makes a consumption sale (someone buys to use without the intention of selling for a profit), that income can come from either someone's savings or their dividend income, and both count as normal revenue for the company; this is then split according to company needs to pay expenses / debts, and then net profit is split between investors, and counts as their individual dividend income which they must spend. If a company wishes to expand, it would be best to raise further funds from existing investors "salary incomes", or from a bank, than reinvesting this profit. Companies storing cash "for the win" hurt the economy just as much as anyone else, and this money should be flushed out for use by the economy - in a central government system, I would have to do the maths to confirm but on the surface I think low tax rates would be the go.

The important thing to mention about your scenario, is that speculation is not consumption spending. If it's bought to later sell at a profit, it was not bought for consumption, and so must then have been purchased with savings or a new bank loan. The important resources will still be "their true value", but it won't unnecessarily impact the existing economy's ability to manage it's existing debt.
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