Banning Usury will promote cryptocurrencies

[deisik]

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

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 post

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[botany]

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.

I love how religion bends to accommodate changing times. 
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.

[BobK71]

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

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 post

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.

[deisik]

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

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 post

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?)

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)

[BobK71]

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

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 post

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.

[BobK71]

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

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 post

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?)

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)

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.

[deisik]

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

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 post

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

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

[deisik]

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

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

[BobK71]

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 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)

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?

[BobK71]

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

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

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.

[deisik]

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 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)

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?

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

[deisik]

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.

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

[Shady]

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.

[minor-transgression]

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. 

[BobK71]

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.

[BobK71]

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.

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.

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

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.

[BobK71]

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.

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

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.

[CoinCube]

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.

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.

Credit creation makes it appear as if the supply of "saved funds" ready for investment has increased, for the effect is the same: the supply of funds for investment purposes increases, and the interest rate is lowered. Borrowers, in short, are misled by the bank inflation into believing that the supply of saved funds (the pool of "deferred" funds ready to be invested) is greater than it really is.

When interest rates are artificially low, entrepreneurs are led to believe the income they will receive in the future is sufficient to cover their near term investment costs. In an environment where the money supply is continually expanding via debt, entrepreneurs mistakenly conclude that investments are really available for long term projects when in fact the pool of available funds has come solely from artificial credit creation that can and will be contracted at will by the banking sector. Entrepreneurs see spending in the economy and assume consumer demand exists for their projects when in fact consumer demand is artificially and unsustainably elevated.

As bank credit percolates through the economy it moves downward from business borrowers to landowners and capital owners who sold assets to the newly indebted entrepreneurs, and finally onto other factors of production like wages, rent, and interest.
...
Some investments made during the artificial monetary boom were inappropriate and "wrong" from the perspective of the long-term financial sustainability. Others should be sound but nevertheless fail due to the economic distortion and contraction triggered by sudden credit tightening.

The boom is revealed for what it is, a period of wasteful malinvestment, a "false boom" where the investments undertaken during the period of fiat money expansion are revealed to lead nowhere but to insolvency and unsustainability. Seizure of collateral and general price deflation or reduction in inflation ensues. The longer the false monetary boom goes on, the bigger and more speculative the borrowing, the more wasteful the errors committed and the longer and more severe will be the necessary bankruptcies, foreclosures and depression.

As we have seen, an increase in the supply of money benefits the early receivers, that is, the government, the banks, and their favored debtors or contractors, at no point is this more true than at the bottom of the business cycle when asset prices are artificially depressed and only favored borrowers are allowed to borrow. It is at the bottom that favored insiders can still borrow allowing assets to be purchased at depressed prices.

Money in whatever form it takes gold, dollars, or bitcoin is ultimately a signaling system a channel for information to travel through.

Knowledge and Power by George Gilder
https://www.amazon.com/Knowledge-Power-Information-Capitalism-Revolutionizing/dp/1621570274

Capitalism is not chiefly an incentive system but an information system. We continue with the recognition, explained by the most powerful science of the epoch, that information itself is best defined as surprise: by what we cannot predict rather than by what we can. The key to economic growth is not acquisition of things by the pursuit of monetary rewards but the expansion of wealth through learning and discovery. The economy grows not by manipulating greed and fear through bribes and punishments but by accumulating surprising knowledge through the conduct of the falsifiable experiments of free enterprises. Crucial to this learning process is the possibility of failure and bankruptcy. In this model, wealth is defined as knowledge, and growth is defined as learning.

That new economics—the information theory of capitalism—is already at work in disguise. Concealed behind an elaborate mathematical apparatus, sequestered by its creators in what is called information technology, the new theory drives the most powerful machines and networks of the era. Information theory treats human creations or communications as transmissions through a channel, whether a wire or the world, in the face of the power of noise, and gauges the outcomes by their news or surprise, defined as “entropy” and consummated as knowledge. Now it is ready to come out into the open and to transform economics as it has already transformed the world economy itself.

Let us imagine the lineaments of an economics of disorder, disequilibrium, and surprise that could explain and measure the contributions of entrepreneurs. Such an economics would begin with the Smithian mold of order and equilibrium. Smith himself spoke of property rights, free trade, sound currency, and modest taxation as crucial elements of an environment for prosperity. Smith was right: An arena of disorder, disequilibrium, chaos, and noise would drown the feats of creation that engender growth. The ultimate physical entropy envisaged as the heat death of the universe, in its total disorder, affords no room for invention or surprise. But entrepreneurial disorder is not chaos or mere noise. Entrepreneurial disorder is some combination of order and upheaval that might be termed “informative disorder.”

Shannon defined information in terms of digital bits and measured it by the concept of information entropy: unexpected or surprising bits...The accomplishment of Information Theory was to create a rigorous mathematical discipline for the definition and measurement of the information in the message sent down the channel. Shannon entropy or surprisal defines and quantifies the information in a message
...

In the Shannon scheme, a source selects a message from a portfolio of possible messages, encodes it through resort to a dictionary or lookup table using a specified alphabet, then transcribes the encoded message into a form that can be transmitted down a channel. Afflicting that channel is always some level of noise or interference. At the destination, the receiver decodes the message, translating it back into its original form. This is what is happening when a radio station modulates electromagnetic waves, and your car radio demodulates those waves, translating them back into the original sounds or voices at the radio station.

Part of the genius of information theory is its understanding that this ordinary concept of communication through space extends also through time. A compact disk, iPod memory, or Tivo personal video recorder also conducts a transmission from a source (the original song or other content) through a channel (the CD, DVD, microchip memory, or “hard drive”) to a receiver chiefly separated by time. In all these cases, the success of the transmission depends on the existence of a channel that does not change significantly during the course of the communication, either in space or in time.
...

The problem with fractional reserve is that it allows multiple simultaneous claims that are expected to be honored but in reality cannot be. Thus it allows fraudulent claims or noise into the channel. The ultimate consequence of this is an increasing distortion of the underlying signaling mechanisms in the economy.

Yes of course depositors also benefit some to from the scheme. It is everyone else in the economy who suffers. Fractional reserve banking is different than central banking. However, fractional reserve is ultimately a process that increases economic distortion or noise. This is why it was recurrently associated with economic crises and bank runs. Historically this distortion directly paved the way to our current central banking (an even greater distortion) and there is no reason to think the same processes would not immediately recur if we could somehow reset the system back to a gold or silver standard.
 

[deisik]

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.

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

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

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.

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

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

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

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.

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

[minor-transgression]

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.