What I want is to either demonstrate or refute Gesell's theory on interest using praxeology. To refute it is necessary to demonstrate that a fixed money supply without demurrage can't produce monetary cycles.
Refuting Gesell's (or anyone's) theories will do nothing to prove that. You can't prove a negative, not even with praxeology. Just because you might be able to disprove a theory, does not imply that your alternative theory is correct.
Sorry, yes. Proving that an unelastic supply without demurrage can't produce monetary cycles would be only one way of refuting Gesell's theory but you could attack other parts of it as well and, as you point out, that would not prove or disprove the rest of the theory.
If I prove that an unelastic supply without demurrage sistematically produces monetary cycles, I'm not proving the whole gesellian theory on interest neither, but It would be in a privileged possition, since that is one of the things that the theory predicts.
But austrians (if they did somewhere, I think they didn't studied it because they assumed that was equivalent to "keynes-money") refuted Gesell's freigeld by assuming that, being fiat, the government would abuse it. They didn't attacked a public money with fixed supply and demurrage. That abuse can't happen with freicoin. So using praxeology, what's wrong with demurrage?
Such abuse might not be possible with friecoin, but nor is it possible with bitcoin. Bitcoin exists & has a real market, friecoin does not. Freicoin presumes to impose a cost upon savers within it's own economy, bitcoin does not. A simple praxeology argument goes something like this.
You're dodging the question and answering to another question. You're saying that freicoin would not be competitive, that's a nother question qe can discuss. But what I meant with my question is...
Austrians have teached us how "keynes-money" is flawed and how it causes imbalances in the economy.
Given that you perceibe demurrage as a flawed property in the design of a money, if freicoin were the only currency in the world, how would demurrage cause inefficiencies and harm the economy?
When I answer to that same question for bitcoin, how would be bitcoin flawed if it were the only currency in the world and how would it harm the economy?
Bitcoin would produce monetary cycles in which deflation would be destructive. The sequence of events, again, would be:
1) Capital accumulation and sustained prosperity will make capital yields drop
2) Low interest rates would incentive hoarding
3) Hoarding would cause deflation, incentiving hoarding further and discouraging borrowing.
4) The destruction of the finantial market (the clearance of all the debt/credit) and the destruction of capital would lead to a new price equilibrium in which real capitals have higher yields again.
What's wrong with my reasoning?
Bitcoin eixists & has a value. I can save in bitcoin for less risk to capital than I can in the not yest estqblished friecoin. As an indificual saver, I have every incentive to favor bitcoin over freicoin. All savers are individuals, in fact all economic actors are individuals. Savings leads to capital, capital leads to production, production leads to growth, growth leads to savings; but it all starts with savings. If the incentives for savings don't exist, neither does the economy.
But it is logical for borrowers to prefer freicoin, as they will get lower interest rates. And there's also logical for merchants to accept them, they can use them for their next expenditures and get an insignificant lost.
See above. The fact that vborrowers would prefer friecoin is irrelevent until there is some saver to borrow from. Likewise, merchents are interested in payments, and that is irrelevent if the freicoin has no base of savers to give it value.
That's the other question, wheter or not would be freicoin competitive against bitcoin. I think it's hard for me to prove anything here and we will probably have to wait until freicoin gets implemented (for me or someone else) to find out.
Please, let's distinguis between saving and hoarding, since lending is a way of saving.
You claim that "everything starts with hoarding", but I disagree. Everything starts with trade. All a currency needs are users, people that accept it.
In fact, hoarding a money makes no sense if it is not first used as a medium of exchange.
So before borrowers lenders and anything else what's needed are merchants.
Say there's something like bit-pay for freicoin, the merchant accepts freicoins but are sold inmediately for bitcoins and that's what the merchant receives.
Say I'm the only one buying freicoins for bitcoins and I do it at a very low rate, for example, 0.000001 btc per fcn. The merchant doesn't care about the price, he just set its prices in usd or btc but the very fact that he accepts them make them valuable.
Then some merchants can keep take them and spend them directly instead of using bitcoin or usd as a proxy. It would be possible for that one rationaly prefers to lend freicoins than to sell them for bitcoins or take the demurrage loss. And borrowers will prefer (once they can spend them) to borrow freicoins because they're going to invest or spend them directly and won't pay much demurrage fees, while at the same time will be able to negotiate lower interest rates. Hoarders will never prefer freicoin but who needs them?
Frecioins could have a lower price but still conduct more trade by circulating faster.
Theorecically, yes. But a true money serves two distinct functions at different times for different people; first as a storage of value, and then as a means of payment. Note that the storage of value must come first.
I disagree again. Means of exchange comes first. By no means bitcoin started as a store of value.
I'm not only against trying to provide the function of store of value when designing a money, I don't even think that can be achieved. All monies can be demonetized. Gold is not an exception, no matter how valuable is its commodity component of its total "value". Say 90% of the total value of today's gold comes from the fact that it is still money and 10% comes from its industrial uses. If it were demonetized, you won't lose everything, only 90%!! What a store of value...
Nothing wrong with hoarding real stuff. From the financial point of view I was counting those as spending (like investments with non-loaned money). From the saver's perspective they can be considering savings and an insurance.
But saving money doesn't prepare society better for a rainy day. A society that hoards 40% of its monetary base is not better prepared for a rainy day than one which hoards 5% of its money supply.
Think of an island of farmers that hoards money during good times. When a disaster happens all habitants take their money out to buy food but there isn't. Where's the storage of value here?
SAvings isn't about preparine society
, it's about preparing individuals
. Praxeology shows that society doesn't even exist, it's just a colloective concept to dexcribe a massive number of individuals. Furthermore, savings witihn any currency cannot insure the saver from the breadkdown of civilizations, but only from smaller, local catastrophies. Insuring oneselef from the end of the world is impossible.
Yes, society is a collective concept. So it is the market or the economy. So what?
My point is that while storing oil or food is like an insurance (not only for the individual but for the economy as a whole). Hoarding money only insurance the individual in relation to the rest of economic agents but the economy as a whole is not better prepared or insuranced in any sense for the fact that "the economy as a whole has more money hoarded".
Money is information about who have produced and consumed what.
No, that would be currency, not money.
Can you tell me the difference according to your definitions?
Let me guess, if you unearth it after 1000 years and it still has value is money, if not currency.
Or better yet "precious metals are money, the rest are currencies". What a useless definition.
Let me guess more, bitcoin is also money and not just a currency because it is an electronic commodity.
I'll wait for you own version, but I, like the austrian Jesús Huerta de Soto, think that a definition of money that leaves the usd out does not make much sense. He says something like "today paper is money we like it or not".
And cash-money (as opposed to credit-money) is just an implicit agreement among all its users, that will keep on accepting it. That agreement has been broken a lot of times in history and could be broken (demonetization) for gold just like has been broken for silver or fiat (usually through hyperinflation).
This is provablely false. Gold & silver have both had a positive trade value for 6K & 4K years repectively. They are both money, although they have not alwasy been currencies. Note the differencers.
I call money to anything that owes part of its value to the fact that is used as a medium of exchange.
I agree that gold has been money for most part of our history, but that's not that easy for the history of silver.
My point still is that gold can be demonetized
(lose the component of its value that comes from being money) and, because I'm optimist, I think it will eventually demonetized
. It will be still valuable as an industrial commodity though.
The point is that the agreement (be it enforced [fiat] or voluntary) is flawed if it presents unfair externalities,
Define an 'unfair' externality. And when you're done with that, explain to me (as an individual saver) why I should care about fairness. If you can get this far, you might be half way to understanding Praxeology.
I shouldn't have used "unfair", that's kind of implicit in the term externality. Not as hoarder, but just as a money user, you shouldn't like to pay for things that others enjoy. And if it is an externality, it is paid for somehow, no matter how difficult it is to see it.
According to Gesell we're paying for it with monetary cycles and with capitalism, which impedes capital yields to drop towards zero, that is, which impedes the demand for real capital from ever being fully satisfied.
springs economic rents and causes monetary cycles. If the material upon which that agreement is made does not present a compulsion to circulate (for example, gold), the agreement will suffer from those diseases.
I'm not against the free market, what I want is to make those voluntary agreements more efficient within the free market.
I can agree that you are not against the free market, as you understand it. You just don't understand it.
I also think that you fail to see how capital-money undermines competition, the free market and prosperity.