Isn't the point for this club not to be deflationary?
No. If we were targeting stable prices we wouldn't have a fixed supply. What we target is stable velocity.
Our concern is price cycles motivated by interest rates cycles inherent in everlasting cash. When capital yields are lower than interest rates lending stops precipitating a deflationary spiral that will reverse the situation by not producing more producing goods (capital) until they're badly needed and yields can pay interest again. War and natural disasters (by destroying capital) can rise yields too. That's the little truth in the broken window fallacy, but it doesn't take much to understand that destruction can't be good for the economy and I don't think I have to convince you on this.
With a money that keeps moving at zero interest rates (freicoin), capital yields can drop to zero as they naturally tend to.
Central bankers can manipulate the financial market through money creation, but that just creates bubbles. That can make the impression that is all good again for those who believe that "it's all about confidence" but savers have in fact less incentive to invest over hoard, so little is done to restore velocity. Each new bigger quantity does less. They either have to accept interest and cycles or wait for all that piled cash to come back to the market on a hyperinflationary race. In that sense, people like Max Keiser are right when they say that low interest rates (he really means manipulated low rates) are in fact deflationary. There's much talk about "system liquidity" but too little on money velocity.
When I said earlier that they could be sold directly for bitcoin or fiat I was trying to make the point that even skeptic merchants should rationally accept them (well, when the market is deep enough for their operations). Just like bitcoin skeptic merchants should accept bitcoin through bitpay or a similar service (in fact, I found that argument very useful when explaining bitcoin to people). Sorry, I probably expressed it in an unclear way.
Keynes said about demurrage that it's a similar provision for economic stimulus as inflation. But inflation is easier to implement.
He was wrong on this point too.
I read some Austrian economists think that demurrage money results in bubbles. And indeed, long-term investments are encouraged. So which would that possibly be? Land, real estate...
Seriously? Please, post here the link. I've been looking for a serious austrian critique to Gesell's theory on interest for years and I found nothing.
Most of them haven't read anything are happy just saying "Look, Keynes was somehow inspired by a crackpot that proposed negative interest rates, but he doesn't even need a serious critique".
And indeed, Gesell recognized that problem. That's why he proposed a land reform. He wanted land to be administered as a co-operative. How can that happen with Freicoin? Also, you'd have to turn anything long-term investible into co-operatives then. So why don't we call the child by its proper name at last and do socialism?
Well calling one of the man that earlier and more insistently advocated for free trade among nations, against protectionism and public subsidies a communist (that's what you really mean by socialist) is at the very least daring. He was a proud "free market socialist" in the same sense Proudhon was. I would say he was an anticapitalist.
Probably all these terms are specially hard to understand for north americans, where free market is usually equated to capitalism and socialism to marxism. Just like it's hard to explain anarchocapitalism here in Spain, where anarchism is usually equated to collectivism and cooperatives. Just read the
introduction of the book that inspires this currency to know a little more about the feelings Gesell processed for Marx. There you can read: "The abolition of unearned income, of so-called surplus-value also termed interest and rent, is the immediate economic aim of every socialistic movement."
So unless you're in favor of
economic rents you would also fall into the socialist category according to that definition.
In any case, cooperativism is not incompatible free market. And free land is not based on cooperativism but on the state. His point is that like money-capital, land is pure capital (and unlike producing goods, whose capital status is
transferred from money-capital). Don't want to talk much about land taxes, but here's his main advocate:
http://en.wikipedia.org/wiki/Henry_georgeThe middle point is good, if people are used to demurrage money they should tend to look for durable investments NOT denominated in a demurrage money.
I don't see how demurrage money is necessarily bad as a unit for contracts. It's not the same as inflationary money. If you are owed 1000 usd and there's 10% inflation you will lose 10% on real value. But if there's no price inflation you won't lose even if the reference currency has demurrage. If you are owed 1000 frc to be paid next year, you are owed 1000 frc to be paid next year, no matter the demurrage rate. If the borrower wants to sit on the money and pay the demurrage instead of invest it on something productive that's his problem.
That said (and as I've said multiple times on mutual credit/Ripple contexts), my prediction is that in the future credit will be mostly denominated in stable indexes and basket of commodities (not necessarily stored anywhere) rather than floating cash. Indexes like 1970usd or Lietaer's Terra. Maybe the contract says somthing like this:
"A receives 10 terras in freicoins (X fricoin) today from B. A will have to repay 10 terras in freicoins (quantity to be calculated at the time of settlement) next year to B".
That would allow to ignore the inflation premium when calculating the interest. Ideally the risk premium would be the only interest component.
Sorry for this long post, I really should write a blog and link to it...
jtimon,
you are doing it right, well done, you have made the market by making a bid.
Thank you !!
