Banning Usury will promote cryptocurrencies

[BobK71]

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.

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

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.

[odolvlobo]

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.

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

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

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.

[CoinCube]

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.

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

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

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.

[odolvlobo]

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.

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

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

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.

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.

[CoinCube]

[quote

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, 2, 3

[BobK71]

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.

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.

[CoinCube]

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.

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.

[deisik]

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.

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

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

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)

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

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

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)

[BobK71]

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.

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.

[BobK71]

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.

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

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

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)

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.

[deisik]

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

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

[odolvlobo]

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

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

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)

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.

[deisik]

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

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

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)

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?

[odolvlobo]

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.

[deisik]

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

[odolvlobo]

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.

[Yakamoto]

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.

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

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

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.

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.

[deisik]

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.

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

[BobK71]

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

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

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.

[RodeoX]

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.

That is indeed true. ...

ya.ya.yo!

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.