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Author Topic: Another interesting thing - Barter  (Read 1967 times)
johnyj
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October 04, 2011, 11:55:18 AM
 #1

http://en.wikipedia.org/wiki/Barter

At the end of this article:

Difficulty in storing wealth: If a society relies exclusively on perishable goods, storing wealth for the future may be impractical. However, some barter economies rely on durable goods like pigs or cattle for this purpose


This is funny, seems using money to store wealth created an illusion: The goods were perishable, money is not, so money holds wealth longer. But what happens when goods are all perished and only money left?

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October 04, 2011, 01:08:27 PM
 #2

http://en.wikipedia.org/wiki/Barter

At the end of this article:

Difficulty in storing wealth: If a society relies exclusively on perishable goods, storing wealth for the future may be impractical. However, some barter economies rely on durable goods like pigs or cattle for this purpose


This is funny, seems using money to store wealth created an illusion: The goods were perishable, money is not, so money holds wealth longer. But what happens when goods are all perished and only money left?

From the same article:

Contrary to popular conception, there is no evidence of a society or economy that relied primarily on barter.[2] Instead, non-monetary societies operated largely along the principles of gift economics. When barter did in fact occur, it was usually between either complete strangers or would-be enemies.[3]
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October 05, 2011, 04:28:30 PM
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The abstract storage of value is an illusion. It relies on a constant (or growing) "demand for saving".
It comes from the illusion that money has value in itself. Cash-money is like a debt relationship between the holder and the rest of society (of money users), but that debt relies on a collective agreement instead of a private agreement between the borrower (the one who has paid for the product with a symbol of value) and lender (the one who has received a symbol of value in exchange for a product with real value).
LETS and Ripple are more natural than commodity money in this sense. It turns out that virtual (fiat) money may have preceded commodity money (gold):
http://blog.longnow.org/2010/04/22/debt-the-first-five-thousand-years/

But cash-money has the advantage of being far more liquid. Since this liquidity is given to you by a social agreement, is not strange that not paying for it (not having demurrage) is an positive externality with indirect catastrophic consequences:

1) Artificial scarcity caused by interest
2) Economic cycles caused by interest
3) Short-term thinking caused by interest

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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October 06, 2011, 02:10:52 PM
 #4

When people saving money, they are not storing wealth, they just stored a prof of work, and we know that past work worth less today due to higher and higher production quality every year, so basically inflation should be constant to reduce the value of past "prof of work"

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October 06, 2011, 02:42:42 PM
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When people saving money, they are not storing wealth, they just stored a prof of work, and we know that past work worth less today due to higher and higher production quality every year, so basically inflation should be constant to reduce the value of past "prof of work"

Interesting reasoning but...

Why not demurrage?
Why prices need to go up?

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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October 06, 2011, 03:24:39 PM
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When people saving money, they are not storing wealth, they just stored a prof of work, and we know that past work worth less today due to higher and higher production quality every year, so basically inflation should be constant to reduce the value of past "prof of work"

Interesting reasoning but...

Why not demurrage?
Why prices need to go up?


prices can go up and down

If today's product have higher quality than last years, even if they have a higher price, people will more easy to accept

If today's product keep the same price as last year while the quality improves, it will discourage the producer

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October 06, 2011, 05:11:59 PM
 #7

What I mean is...You say you want to reduce the value of past "labor certificates" or "proofs of work". And I ask why you want to reduce it through inflation instead of demurrage.
Does inflation present any advantage over demurrage?

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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October 07, 2011, 03:13:10 PM
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What I mean is...You say you want to reduce the value of past "labor certificates" or "proofs of work". And I ask why you want to reduce it through inflation instead of demurrage.
Does inflation present any advantage over demurrage?


Lol, this is just a personal preference, I like more, not less, "less is more" just sounds complicated  Grin

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October 08, 2011, 10:17:06 AM
 #9

So you think expocoin is equivalent to freicoin?
They're not equivalent.

https://bitcointalk.org/index.php?topic=36450.msg469848#msg469848

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
Etlase2
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October 08, 2011, 05:05:01 PM
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So you think expocoin is equivalent to freicoin?
They're not equivalent.

https://bitcointalk.org/index.php?topic=36450.msg469848#msg469848


Your example ignores a growing economy and a growing population. Not to mention that 5% inflation on the amount of coins awarded each year is not a 5% inflation of the money supply. Not even close.
Banks are not doled out fresh money by the fed in *coins. People (pools) spread the coins out evenly from the start. So there is little advantage to being "first."

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October 08, 2011, 06:05:40 PM
 #11

Your example ignores a growing economy and a growing population.
Yes, it's like that to simplify things. But what is wrong with the conclusions?

1) Monetary inflation makes prices grow exponentially.
2) Monetary inflation rises nominal interests while demurrage reduces real interests.

Not to mention that 5% inflation on the amount of coins awarded each year is not a 5% inflation of the money supply. Not even close.
How not?
Because of the lost coins or something?

Banks are not doled out fresh money by the fed in *coins. People (pools) spread the coins out evenly from the start. So there is little advantage to being "first."
Yes, expocoin would be far more fair than the usd. But still the process by which monetary inflation turns into price inflation is not automatic nor instant. Demurrage can be applied each block.
The most important thing is that the fact that a real capital will rise its price through inflation and a loan contract will actually lose real value is what causes the inflation premium component of the gross interest.
Inflation causes it but demurrage doesn't.
gross (or nominal) interest = real interest + inflation premium = basic interest (or liquidity premium) + risk premium + inflation premium
Demurrage decreases the basic interest while inflation just increases the inflation premium.


2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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October 08, 2011, 07:19:27 PM
 #12

Yes, it's like that to simplify things. But what is wrong with the conclusions?

A deflationary, demurrage-based concept is going to suffer from a whole lot of the same ills as bitcoin, imo. A wild, swingy ride all depending on who farted which way that day.

Quote
1) Monetary inflation makes prices grow exponentially.

This is simply not true. If inflation was kept in strict agreement with population and GDP increases, the prices of goods would remain level. Of course, fractional reserve lending basically means there is never any hope of that happening.

Quote
2) Monetary inflation rises nominal interests while demurrage reduces real interests.

Since when are inflation and demurrage exclusive concepts? You can have (monetary) inflation with demurrage, and you can have (monetary) deflation with demurrage. Your proposal for demurrage is merely a hackjob for fixing some of the problems with a deflationary currency. Invest instead of hoard, let other people pay the price for your money. Woot, so earth-shattering. I don't see how this fixes fractional reserve.

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How not?
Because of the lost coins or something?

I assume we're talking about a bitcoin-like currency. Using your example starting with 1 million coins in year 1, we have 286 million in year 50, in which 11 new million coins get released. 14 million would have to be released for a 5% inflation of the monetary supply. The inflation rate is ever-reducing instead of the amount of money ever-reducing. Would actually give the world time to adapt to the currency rather than forcing millions on those innocent early adopters.

Quote
Yes, expocoin would be far more fair than the usd. But still the process by which monetary inflation turns into price inflation is not automatic nor instant. Demurrage can be applied each block.
The most important thing is that the fact that a real capital will rise its price through inflation and a loan contract will actually lose real value is what causes the inflation premium component of the gross interest.
Inflation causes it but demurrage doesn't.
gross (or nominal) interest = real interest + inflation premium = basic interest (or liquidity premium) + risk premium + inflation premium
Demurrage decreases the basic interest while inflation just increases the inflation premium.

Inflation is not exclusive of demurrage. So these equations are all fine and dandy, but they don't mean anything. You are arguing for deflation, not demurrage. The cost of borrowing will work out to be exactly the same.

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October 08, 2011, 08:59:09 PM
 #13

A deflationary, demurrage-based concept is going to suffer from a whole lot of the same ills as bitcoin, imo. A wild, swingy ride all depending on who farted which way that day.
You mean a fixed monetary base currency. Freicoin is not monetary deflationary.
Demurrage will also discourage speculating with the currency.


Quote
1) Monetary inflation makes prices grow exponentially.

This is simply not true. If inflation was kept in strict agreement with population and GDP increases, the prices of goods would remain level. Of course, fractional reserve lending basically means there is never any hope of that happening.
This is true if monetary inflation is faster than growth. But anyway, the more important claim is the one about the different effects on interest.

Quote
2) Monetary inflation rises nominal interests while demurrage reduces real interests.

Since when are inflation and demurrage exclusive concepts? You can have (monetary) inflation with demurrage, and you can have (monetary) deflation with demurrage.
I'm not saying inflation and demurrage are incompatible, I'm just comparing them.
As said, freicoin would have a fixed supply instead of monetary deflation. You can say bitcoin will have monetary deflation because of lost coins but I think you mean price delfation.

Your proposal for demurrage is merely a hackjob for fixing some of the problems with a deflationary currency. Invest instead of hoard, let other people pay the price for your money. Woot, so earth-shattering.
And expocoin would also be a "hackjob". I just want to make money holders pay for the liquidity they enjoy (a positive externality for them if they don't pay) in nominal terms and not only in real terms like monetary inflation would do. The rest of society pays indirectly for this.
Now that you mention the earth, suppressing the basic interest would also makes us think more long-term: 
https://bitcointalk.org/index.php?topic=5373.msg314987#msg314987

I don't see how this fixes fractional reserve.

The problem with fractional reserve is that by law we have to accept a 10% fractional reserve and banks don't have to compete between them with greater reserves. This is an unfair privilege for them.
With bitcoin, there's no such privilege and people don't really need banks for storing money or make transfers. I don't see any bitcoin bank with fractional reserve.
But other forms of credit also compete with money as medium of exchange. Do you have any problem with IOUs between partners?
Anyway, this is a completely different topic.

I assume we're talking about a bitcoin-like currency. Using your example starting with 1 million coins in year 1, we have 286 million in year 50, in which 11 new million coins get released. 14 million would have to be released for a 5% inflation of the monetary supply. The inflation rate is ever-reducing instead of the amount of money ever-reducing.
With your numbers, the inflation rate is constant (5%) and the inflation amount is increasing (1...11, 14...). I don't really know what are we discussing here.

Would actually give the world time to adapt to the currency rather than forcing millions on those innocent early adopters.
The effect for early adopters of expocoin and freicoin would be equivalent. The only difference is that demurrage reduces their hoarded wealth nominally and inflation only in real terms.

Quote
Yes, expocoin would be far more fair than the usd. But still the process by which monetary inflation turns into price inflation is not automatic nor instant. Demurrage can be applied each block.
The most important thing is that the fact that a real capital will rise its price through inflation and a loan contract will actually lose real value is what causes the inflation premium component of the gross interest.
Inflation causes it but demurrage doesn't.
gross (or nominal) interest = real interest + inflation premium = basic interest (or liquidity premium) + risk premium + inflation premium
Demurrage decreases the basic interest while inflation just increases the inflation premium.

Inflation is not exclusive of demurrage.
They're compatible, agreed. So what? Can't we compare them?

So these equations are all fine and dandy, but they don't mean anything.
They're more like definitions. Feel free whatever concept you need to define to explain me why I'm wrong.


You are arguing for deflation, not demurrage.
I had repeatedly argued about the dangers of price deflation that many bitcoiners tend to ignore:
https://bitcointalk.org/index.php?topic=28276.msg421352#msg421352

I think demurrage solves the problem:
http://www.freicoin.org/should-we-fear-deflation-when-there-s-demurrage-t7.html


The cost of borrowing will work out to be exactly the same.

No, it would be lower with demurrage than with inflation. With inflation they would be equivalent in real terms to the interest without inflation, but higher in nominal terms.
With demurrage interest would drop in real terms.
If you want to change my mind you will have to support your claim with something.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
jtimon
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October 08, 2011, 09:13:03 PM
 #14

You're not fooling anyone. You're totally arguing with yourself on multiple accounts.

No, I'm not Etlase2.
I wouldn't have the time to do what you say I'm doing and also it would be useless in my opinion.


2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
Etlase2
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October 09, 2011, 12:49:00 AM
 #15

I'm not saying inflation and demurrage are incompatible, I'm just comparing them.
As said, freicoin would have a fixed supply instead of monetary deflation. You can say bitcoin will have monetary deflation because of lost coins but I think you mean price delfation.

Yes, you're right. However, it is essentially the same thing when the money supply is fixed and the population increases.

Quote
And expocoin would also be a "hackjob". I just want to make money holders pay for the liquidity they enjoy (a positive externality for them if they don't pay) in nominal terms and not only in real terms like monetary inflation would do. The rest of society pays indirectly for this.
Now that you mention the earth, suppressing the basic interest would also makes us think more long-term: 
https://bitcointalk.org/index.php?topic=5373.msg314987#msg314987

"This proves that the structure of money has an impact in our way to value things over time." - I very much agree with this point. I don't think it proves anything, but I agree with it. It would be interesting to see how it plays out, but not at a bitcoin-esque level.

Quote
The problem with fractional reserve is that by law we have to accept a 10% fractional reserve and banks don't have to compete between them with greater reserves. This is an unfair privilege for them.
With bitcoin, there's no such privilege and people don't really need banks for storing money or make transfers. I don't see any bitcoin bank with fractional reserve.
But other forms of credit also compete with money as medium of exchange. Do you have any problem with IOUs between partners?
Anyway, this is a completely different topic.

How can a bitcoin bank not have fractional reserve? What bitcoin and any other digital currency that isn't controlled by the government solves is things like the FDIC and 1.5 trillion dollar bail outs. Banks do have to compete, and they have to take the loss themselves on any bad loans. Bitcoin has no way of stopping fractional reserve, just like gold-storage banks originally did it (because of the profit from demurrage, lol).

Quote
With your numbers, the inflation rate is constant (5%) and the inflation amount is increasing (1...11, 14...). I don't really know what are we discussing here.

You can't predict price inflation from monetary inflation. If the monetary inflation rate is an ever reducing amount compared to the total amount of money, it is very unlikely that prices would inflate anywhere near what you suggest. The currency would eventually be price deflationary assuming a steady economic/population growth. This is the same thing that will/has happened with bitcoin/freicoin except it will hardly benefit early adopters since the money supply is not so heavily weighted towards the beginning of the distribution.

Quote
I had repeatedly argued about the dangers of price deflation that many bitcoiners tend to ignore:
https://bitcointalk.org/index.php?topic=28276.msg421352#msg421352

I think demurrage solves the problem:
http://www.freicoin.org/should-we-fear-deflation-when-there-s-demurrage-t7.html

Good luck. IIRC you guys argued about having a reduced amount of demurrage for X years or whatever to start. Don't let the greed go to your heads!
And BTW, I think constants are a terrible idea.

Quote
No, it would be lower with demurrage than with inflation. With inflation they would be equivalent in real terms to the interest without inflation, but higher in nominal terms.
With demurrage interest would drop in real terms.
If you want to change my mind you will have to support your claim with something.

It isn't possible to predict exactly how this will play out, but when you take that money, you are owing the fee plus interest in demurrage. In inflation, it is the inflation plus interest. As far as actual currency goes, there won't be a difference. But where I quoted you above I believe a difference will be made. I think combining demurrage with a fixed supply of money is not the solution though. It's putting a band-aid on bitcoin.

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October 09, 2011, 12:58:20 PM
 #16

I'm not saying inflation and demurrage are incompatible, I'm just comparing them.
As said, freicoin would have a fixed supply instead of monetary deflation. You can say bitcoin will have monetary deflation because of lost coins but I think you mean price delfation.

Yes, you're right. However, it is essentially the same thing when the money supply is fixed and the population increases.
How does population affects prices?
I think only through economic growth.

Quote
And expocoin would also be a "hackjob". I just want to make money holders pay for the liquidity they enjoy (a positive externality for them if they don't pay) in nominal terms and not only in real terms like monetary inflation would do. The rest of society pays indirectly for this.
Now that you mention the earth, suppressing the basic interest would also makes us think more long-term: 
https://bitcointalk.org/index.php?topic=5373.msg314987#msg314987

"This proves that the structure of money has an impact in our way to value things over time." - I very much agree with this point. I don't think it proves anything, but I agree with it. It would be interesting to see how it plays out, but not at a bitcoin-esque level.
Why not at a chain currency level?
I think it is more just and likely than at a state level.
If you want to see demurrage in action at a local level, there's plenty of examples:

http://en.wikipedia.org/wiki/Chiemgauer
http://www.transitionnetwork.org/projects/totnes-pound
http://www.qoin.com/achtergronden/regiogeld-chiemgauer-christian-gelleri.html
http://regional-economic-communities.info/
http://www.complementarycurrency.org/ccDatabase/

Quote
The problem with fractional reserve is that by law we have to accept a 10% fractional reserve and banks don't have to compete between them with greater reserves. This is an unfair privilege for them.
With bitcoin, there's no such privilege and people don't really need banks for storing money or make transfers. I don't see any bitcoin bank with fractional reserve.
But other forms of credit also compete with money as medium of exchange. Do you have any problem with IOUs between partners?
Anyway, this is a completely different topic.

How can a bitcoin bank not have fractional reserve? What bitcoin and any other digital currency that isn't controlled by the government solves is things like the FDIC and 1.5 trillion dollar bail outs. Banks do have to compete, and they have to take the loss themselves on any bad loans. Bitcoin has no way of stopping fractional reserve, just like gold-storage banks originally did it (because of the profit from demurrage, lol).
But what's wrong with fractional reserve if it is voluntary?
And what are the profit opportunities of running a fractional reserve bitcoin bank?
I don't it is going to happen.

Quote
With your numbers, the inflation rate is constant (5%) and the inflation amount is increasing (1...11, 14...). I don't really know what are we discussing here.

You can't predict price inflation from monetary inflation. If the monetary inflation rate is an ever reducing amount compared to the total amount of money, it is very unlikely that prices would inflate anywhere near what you suggest. The currency would eventually be price deflationary assuming a steady economic/population growth. This is the same thing that will/has happened with bitcoin/freicoin except it will hardly benefit early adopters since the money supply is not so heavily weighted towards the beginning of the distribution.
My assumptions may be wrong, but given certain assumptions about growth (0%) and monetary inflation (5%) I can predict price inflation.
Yes, also assuming fractional banking and other forms of credit that compete with money and contribute to rise prices don't affect prices.
But the point is monetary inflation causes price inflation.
Are you denying that?

Quote
I had repeatedly argued about the dangers of price deflation that many bitcoiners tend to ignore:
https://bitcointalk.org/index.php?topic=28276.msg421352#msg421352

I think demurrage solves the problem:
http://www.freicoin.org/should-we-fear-deflation-when-there-s-demurrage-t7.html

Good luck. IIRC you guys argued about having a reduced amount of demurrage for X years or whatever to start. Don't let the greed go to your heads!

I don't really get your point here.

And BTW, I think constants are a terrible idea.
That's why I want to remove the basic interest.

Quote
No, it would be lower with demurrage than with inflation. With inflation they would be equivalent in real terms to the interest without inflation, but higher in nominal terms.
With demurrage interest would drop in real terms.
If you want to change my mind you will have to support your claim with something.

It isn't possible to predict exactly how this will play out, but when you take that money, you are owing the fee plus interest in demurrage. In inflation, it is the inflation plus interest. As far as actual currency goes, there won't be a difference. But where I quoted you above I believe a difference will be made. I think combining demurrage with a fixed supply of money is not the solution though. It's putting a band-aid on bitcoin.

Yes, if we have certain assumptions, we can make a theory exercise.
I'm assuming the lenders act rationally, which is not always the case.
The difference between demurrage and inflation is in loans.
If the money holder wants to protect himself from demurrage he can either invest in real capital or lend.
To protect himself against inflation lending doesn't help. Unless he charges an inflation premium.
That's why inflation would rise the nominal interest. The real interest would be similar to real capital yields.
Now why demurrage would make drop real interest and capital yields.
This is harder to explain and understand.
First you have to accept that there is a minimum interest that can be raised from liquidity itself.
Since monetary inflation is not translated into price inflation instantly nor uniformly through all the products and capitals, you can protect yourself from price inflation buying the right things at the right time and selling them later. So this minimum interest still applies.
But with interest you have to invest or lend to save. If interest doesn't have a fixed minimum, capital yields can drop through competition and reach 0%.

Even if you don't believe that demurrage has any advantage over inflation. Is there any advantage that monetary inflation has over demurrage?

I know your proposal is not expocoin, but another one that changes the block chain regular dynamics. I haven't read it yet because it's a 22 document and lacks a summary of how it works.
Also I'm personally very skeptical about bitcoin technical improvements outside bitcoin. From the little I have read, I suspect your proposal is something similar to this one:
https://bitcointalk.org/index.php?topic=7182.0
And I don't think that proposal is feasible.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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