Transaction fees transfer wealth from poor to wealthy

[Impaler]

Gesell has a whole proposal to address land ownership and how it should be taxed, he says the fair tax is the un-improved value of land.  But I'd rather not get into the weeds on that right now.

With regard to money and interest you say "savers are then penalized for the interest crime of non-production loans", I'm not sure what you mean by this.  If you save money and keep it liquid (in the mattress) your enjoying the safety and liquidity that money provides (actually society provides it by being willing to accept money in exchange for goods).  If your saving appropriately by putting money in a Bank then the bank will pay you interest that will effectively reduce your demurrage costs, meanwhile the bank will loan money at near zero interest rates to safe credit worth borrowers and a higher rate to risky borrowers.  The difference between the rate of loans and rate of deposit interest will be the profit margin for the bank just as they are now, only the difference will be 3% - 0% rather then 6% - 3%.

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[godislove]

Yes, government should tax away any increase in the non-improved value of the property...the land value increase.  Because any increase in the value of the land over which a government rules (guides the economy), is a reward to the government (from local to federal) for making the (local and national) economy stronger.  I believe J.S. Mill argued this should be the ONLY tax.  A polarized distribution of wealth, monopolies, and unproductive finance, insurance, and even marketing/advertising (to be replaced with amazon-like review systems) should be taxed away so that that everyone works through the knowledge of physics (moving matter with energy) and artificial intelligence (doing it efficiently) to improve life instead of playing zero sum mind and money games.  I.P. laws should be made more restrictive to prevent "legalized monopolies" of obvious solutions (like "one-click shopping", which I implemented before Amazon).  

The money loaned out by banks in the Gesell system will quickly find its way into investment for productive activity or assets that can generate income without production.  Those who do a great job building a useful company but then lose the opportunity or desire to further build for the benefit of society will seek more control of society by buying assets that generate income.  Rent.  Instead of banks making loans, the finance system will be reduced but lean more towards landlords, driving up the cost of housing to get the unproductive free income.  We agree a proper land-value tax can fix this. But it would also fix the problem of banks loaning out at interest in a regular currency.  Rent or interest can occur in other things besides housing like utility monopolies (if they are not price-regulated like many are today).  Gesell system seems to be just shifting the asset bubble formation from "banks/finance" to "landlords".  From interest seeking to rent seeking.

Another thread is discussing a much more serious long term threat: the rise of the machines. The great depression was largely the result of machines and electricity replacing muscle on the farm and factory.  The solution was the welfare state, heavy taxes moving money around and printing money faster than technology could cause a decrease in prices by pushing workers into unemployment.  So we shifted towards jobs that needed more thought, many of them a waste. We shifted towards promoting construction because it could not be automated like the factory and efficiency gains were much smaller. But now computers have stopped the standard of living from improving since they were invented by replacing workers.  I exaggerate, since if the land value were taxed correctly and if health care were not a disaster, the work week could be half as long.  Instead, a lot of those smart programmers and a few physicists were used to help finance destroy society.  Anyway, there's no solution. Electrical motors are 3000 times less expensive than muscle (6 times electrically more efficient, working 5 times longer per day, and 100 times less infrastructure to create them and keep them going).  Today's computers are about a 100 million times more cost effective than brains at performing any routine task that can be programmed.  Brains and muscle are no longer needed for the economic machine except to provide the desire for things and to inject a little intelligence.  The machine will continue to use energy to move matter to make imperfect copies of itself until there is no more DNA-based life that has relevance to its progression.  The 6th great extinction on Earth is in full swing. We in an "unlikely" position to be here at the end watching it because of basic probabilities: this is the most likely time for a human to be alive to observe anything at all because the population explosion is at the end of the bubble of a species. Silicon for energy and thought, and steel, cement, and carbon nanotubes for structures to replace a lot of our water-based biology.

Cryptocurrencies are the tool the artificial intelligence companies will use to gain massive wealth, which means control of other people to do their bidding.  The wealth is not from genius or noble programmers, but from a long history of human development and the strength of these thinking machines we have created to replace ourselves.  A fully-electronic currency is key to A.I.'s "success".   Humans are a disaster for any economy, being so terribly unreliable and expensive to maintain.  "They must be replaced!" is the rallying cry of every company on wall street.  They need more people only when they have a great idea for eliminating a multiplicative factor of people outside the company in order to reduce the consumer's cost. It takes time to find a new use for the replaced people, as wealth and desire shifts.  If technology advances too quickly...   

[godislove]

That probably will put the average paying tx fee closer to $0.05 and the average tx fee (including free txs) closer to $0.03.

If it's going to be that expensive, then there will be a huge opportunity in the 3rd world to develop sub-systems. The only way I can think of doing this is for local coins to be sold, secured, and stabilized by each government in its own currency.  International coin exchanges could then replace existing exchanges.   That would reduce bitcoin's utility and adoption, which is the sincere goal of transaction fees: to encourage a store of value rather than commerce.  This does not necessarily reduce bitcoin value because the local coins would retain ability to "print money".  So the poor will revolt against the regressive transaction "tax" the bitcoin "government" is enacting. It's not even as progressive as a flat tax.

This is an excellent example of where the free market fails.  The programmers and miners are thinking very logically with this "pay for use" fee.  Fair is fair.  But by reducing the size of the bitcoin community by strangling it where it is needed most (small transactions in 3rd world), the miners are reducing the total amount of fees they will receive. There will be fewer miners. This is exactly analogous to taxing the lower and middle class which reduces the number of wealthy people.  So the free market always acts to reduce the size of economies because it does not care about the health of the entire system, just the selfishness of the individual.  So the core programmers and miners should show more "love" for bitcoin as a economic system rather than thinking at an individual "selfish" level.

A flat tax would be a lot better, not based on byte use per transaction, but based on economic need per transaction.  In dollar terms, a $30M transfer needs the system a lot moer than a $30 transfer.  

[godislove]

I see JPMorgan is targeting the small $1 dollar transactions that bitcoin programmer's are trying to exclude with $0.03 transaction fees, so my suggestion that the government will have to do it is wrong.  Private companies can fill the gap and even provide stable value, at least until they exchange it back into bitcoin in case someone is afraid their local currency will inflate. 

[Siegfried]

Fascinating discussion, thank you.

[godislove]

Thanks, but now I'm thinking I've totally missed an important point: bitcoin can never be used for non-internet sub $5 transactions because of the time it takes to confirm.   Even litecoin is 2 minutes too slow. Certainly in the 3rd world any trickiness against a merchant on the street will be utilized.  Who wants to wait 2.5 minutes at a checkout counter?  The only solution I see is a cryptocurrency that has a central authority to immediately check the hash with its private key.  My last post in a different thread describes a way the central authority can also assign value and profit from keeping a stable value in terms of a basket of commodities. 

[zimmah]

Gesell has a whole proposal to address land ownership and how it should be taxed, he says the fair tax is the un-improved value of land.  But I'd rather not get into the weeds on that right now.

With regard to money and interest you say "savers are then penalized for the interest crime of non-production loans", I'm not sure what you mean by this.  If you save money and keep it liquid (in the mattress) your enjoying the safety and liquidity that money provides (actually society provides it by being willing to accept money in exchange for goods).  If your saving appropriately by putting money in a Bank then the bank will pay you interest that will effectively reduce your demurrage costs, meanwhile the bank will loan money at near zero interest rates to safe credit worth borrowers and a higher rate to risky borrowers.  The difference between the rate of loans and rate of deposit interest will be the profit margin for the bank just as they are now, only the difference will be 3% - 0% rather then 6% - 3%.

The actual profit margin of the bank is loaning money they don't even having, collecting interest on it (and the loans themselves). In my opinion this is theft.

I mean, how come a bank can just print millions out of nothing, and then ask you to pay them millions plus interest.

[godislove]

Good point.

If I understand it all correctly from reading "Web of Debt":  Your legal promise to pay the loan back plus the existence of the house as collateral (the mortgage) is the PAPER ASSET on their books that they use as their own collateral to get money from the Fed at low interest.  That paper asset is erased with your final payment.  As you pay them back, they are paying back what they borrowed from the Fed.   Your promise plus "your" property is THEIR asset.  It's totally incredible.  Unbelievable.  The government could have issued those loans directly and used the 2x or 3x house-value interest as the only tax most of us ever paid.

Now, the Fed has bought these assets and derivatives of these assets from the banks in the QE programs.    Once the Fed pretends it is forced to raise interest rates, these assets will collapse in value because the real estate will collapse (as will existing treasuries held by the Fed) from higher interest rates.  We have 4 times more house sq ft per person than we did in 1970 so do not think a big drop can't happen.  So then everyone will have to admit the Fed's assets are worthless and therefore all the printing has been genuine printing, not a simple exchange of assets like the Fed claims.  And we don't even get to see the money they are printing: it goes to protect the banks and inflate stocks.  In effect, the banks are now cashing out the increase in house prices.  When housing collapses, no one in the media will point to the banks, but that is exactly where the prior profit in the houses is going: the QE printing diverting it to the banks.  The great theft is ongoing in a more sinister way than the vast majority realize.