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Author Topic: Bitcoin and "religious" interest-less lending  (Read 2357 times)
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April 24, 2011, 10:44:27 PM
 #1

A while ago i saw on TV this thing about how according to the teachings of some religion (i think it was Muslim religion, not 100% sure though) charging interests when lending money to people was kinda like a sin; but then what happens if someone wanna lend an ammount in BTC, which medium and long term is expected increase in value?

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April 24, 2011, 11:23:48 PM
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Ya, it's part of Islamic religion. There's a whole banking system set up around it.
http://en.wikipedia.org/wiki/Islamic_banking

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April 24, 2011, 11:24:11 PM
 #3

A while ago i saw on TV this thing about how according to the teachings of some religion (i think it was Muslim religion, not 100% sure though) charging interests when lending money to people was kinda like a sin; but then what happens if someone wanna lend an ammount in BTC, which medium and long term is expected increase in value?

I'm quite sure religious zealots are focused on nominal interest only.

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April 24, 2011, 11:45:22 PM
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Loophole found Cool

Ya, it's part of Islamic religion. There's a whole banking system set up around it.
http://en.wikipedia.org/wiki/Islamic_banking

It's also part of Judaism, and Christianity.
http://en.wikipedia.org/wiki/Interest#History_of_interest

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April 25, 2011, 01:59:28 AM
 #5

Loophole found Cool

Ya, it's part of Islamic religion. There's a whole banking system set up around it.
http://en.wikipedia.org/wiki/Islamic_banking

It's also part of Judaism, and Christianity.
http://en.wikipedia.org/wiki/Interest#History_of_interest

I heard it wasn't part of Judaism, but definitely part of Christianity and Islam, which is allegedly one of the historical reason Jews are associated with banking, since the Christians and Muslims had to go to the Jews for loans.

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April 25, 2011, 10:37:35 AM
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I heard it wasn't part of Judaism, but definitely part of Christianity and Islam, which is allegedly one of the historical reason Jews are associated with banking, since the Christians and Muslims had to go to the Jews for loans.

An interesting thing in itself - Even large groups of people can choose to not pursue economic ventures they deem immoral, but if there's a profit to be made, someone will turn such reticence into a competitive edge.

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April 25, 2011, 11:49:23 AM
 #7

I think the "interest" has some pernicious effects that may have motivated religions to forbid it.
I posted these links in this forum before but just in case someone is interested:

http://finanzcrash.com/english/aberrations.html

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

The forces of market are more powerful than religion, that's why Judaism and Christianity had to give up and forget this precept.
Personally I think the liquidity premium can only be avoided in a scarce currency with stable prices and demurrage.
Not scarce currencies (such as LETS or Ripple) may not need this to avoid 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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June 07, 2011, 11:09:50 AM
 #8

I think the "interest" has some pernicious effects that may have motivated religions to forbid it.
I posted these links in this forum before but just in case someone is interested:

http://finanzcrash.com/english/aberrations.html

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

The forces of market are more powerful than religion, that's why Judaism and Christianity had to give up and forget this precept.
Personally I think the liquidity premium can only be avoided in a scarce currency with stable prices and demurrage.
Not scarce currencies (such as LETS or Ripple) may not need this to avoid interest.

Interest can't be avoided ever, and it is an essential economic mechanism to account for time.

It doesn't matter if the currency is inflationary or deflationary, it is still better to have it in your pocket then someone elses. Hence there should and will always be a price to pay if you want to deprive someone of easy on demand access to his property for length of time.

I noticed you writing something about a tread where interest was discussed, but the link was wrong and didn't find it. If there is a better tread where you discuss this please direct me to it.

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June 07, 2011, 12:05:04 PM
 #9

I think the "interest" has some pernicious effects that may have motivated religions to forbid it.
I posted these links in this forum before but just in case someone is interested:

http://finanzcrash.com/english/aberrations.html

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

The forces of market are more powerful than religion, that's why Judaism and Christianity had to give up and forget this precept.
Personally I think the liquidity premium can only be avoided in a scarce currency with stable prices and demurrage.
Not scarce currencies (such as LETS or Ripple) may not need this to avoid interest.

Interest can't be avoided ever, and it is an essential economic mechanism to account for time.

It doesn't matter if the currency is inflationary or deflationary, it is still better to have it in your pocket then someone elses. Hence there should and will always be a price to pay if you want to deprive someone of easy on demand access to his property for length of time.

I noticed you writing something about a tread where interest was discussed, but the link was wrong and didn't find it. If there is a better tread where you discuss this please direct me to it.

That's called a fee.

I have already sketched the loans I'm going to give out.

See proposal link in sig.

Proposal: http://forum.bitcoin.org/index.php?topic=11541.msg162881#msg162881
Inception: https://github.com/bitcoin/bitcoin/issues/296
Goal: http://forum.bitcoin.org/index.php?topic=12536.0
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June 07, 2011, 01:27:40 PM
 #10

It doesn't matter if the currency is inflationary or deflationary, it is still better to have it in your pocket then someone elses.

Agreed. The inflation rate is factored in the interest but even if its negative (deflation), it can't lead to negative nor zero interest rates because, as you say, the owner would just prefer to keep the money.

Quote from: rahl
Interest can't be avoided ever, and it is an essential economic mechanism to account for time.

Yes. It can be avoided with demurrage. That's why I proposed freicoin. See Freigeld.

Quote from: rahl
I noticed you writing something about a tread where interest was discussed, but the link was wrong and didn't find it. If there is a better tread where you discuss this please direct me to it.

I've discussed interest in various threads, but I guess you mean this link:

http://forum.bitcoin.org/index.php?topic=11582.msg163681#msg163681

I didn't have the chance to participate in that one though.

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June 07, 2011, 09:52:13 PM
 #11

Yes. It can be avoided with demurrage. That's why I proposed freicoin. See Freigeld.

That is extremely vague but I already see so many problems with it I don't even know where to start.

I know if a whole bunch of projects like bank co-operations and stuff that are ideologically opposed to capital gains and think they are operating without interest rate. The thing is all of them have interest rates.

They just changed from charging interest rate in money to charging in saving points or something else that you need to get before or have to do after you get these interest free loans.

Islamic banks do all kinds of stuff to charge interest. Profit sharing in venture loans. In collateralized loans they can have property transfers where the bank get any appreciation in the property value during the loan and if the property might not appreciate they just buy it and leasing it back for a rent. All of this is equivalent to charging interest rate. It is just a matter of how the price system is structured and what the price is paid in. The interest rate is still very much there.

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June 07, 2011, 11:10:31 PM
 #12

Yes. It can be avoided with demurrage. That's why I proposed freicoin. See Freigeld.

That is extremely vague but I already see so many problems with it I don't even know where to start.

I know if a whole bunch of projects like bank co-operations and stuff that are ideologically opposed to capital gains and think they are operating without interest rate. The thing is all of them have interest rates.

They just changed from charging interest rate in money to charging in saving points or something else that you need to get before or have to do after you get these interest free loans.

Islamic banks do all kinds of stuff to charge interest. Profit sharing in venture loans. In collateralized loans they can have property transfers where the bank get any appreciation in the property value during the loan and if the property might not appreciate they just buy it and leasing it back for a rent. All of this is equivalent to charging interest rate. It is just a matter of how the price system is structured and what the price is paid in. The interest rate is still very much there.

You're talking about JAK and Islamic banking.
I'm talking about eliminating the time resistant feature from money which makes interest "unavoidable".
I'm talking about Silvio Gesell. Since the wikipedia page for freigeld seems vague to you, let me know what you think about the book. Well, you can skip freeland (first two parts).

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June 07, 2011, 11:21:04 PM
 #13

(Note: I just finished reading the Old Testament straight through.)

Jews aren't supposed to charge interest on loans--to other Jews. It's fine to charge interest on loans to others (as well as to enslave them indefinitely, slaughter them if they seem like they might be a threat to the Jews, slaughter them if they entice the Jews into worshipping idols, etc., etc.).

I haven't yet read the New Testament or the Koran but I wouldn't be surprised to find similar clannishness.

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June 08, 2011, 12:01:19 AM
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You're talking about JAK and Islamic banking.
I'm talking about eliminating the time resistant feature from money which makes interest "unavoidable".
I'm talking about Silvio Gesell. Since the wikipedia page for freigeld seems vague to you, let me know what you think about the book. Well, you can skip freeland (first two parts).

That wiki page was better. I however do not see the difference between this and fiat money. We already have negative real interest rates on savings accounts in most western countries and they have been like that for decades. It is just hidden by the poor way CPI is calculated but the actual purchasing power of the money + interest in a savings account is decreasing.

The problems is that it need to be enforced by coercion since no one will willingly accept a currency that has this feature. It artificially stimulates demand which leads to malinvestement and it also forces people to act on poor information because they have to get rid of there money causing even more distortions in the capital structure and even worse information. Basically the same problems as inflation.

The ability to hoard money is highly valuable. It is better if people hoard there money when information is poor, since this will save resources from being used towards wasteful ends. It is better if people keep there money until the market has figured out which goods are actually needed. Also increased savings and hoarding sends signals to entrepreneurs to go for long-term investments which makes them better prepared to meet the demand when it actually arrives.

Ofcourse it is highly relevant what is done with the fee. Inflation is just spending the fee on arbitrarily selected political special interest which is even less useful then just dumping capital goods in a lake. If the fees are used to maintain and secure the currency and payment systems it is an entirely different matter since the fee in such a case could provide a net benefit to the users of the money and they will choose to use it. Also if the fee is spend on stuff like secure vaults and issuing electronic payment cards it only reflects actual costs of doing business and real demand and does not distort the market.

But I can't see a scenario where there is an actual loss incorporated in the currency where people accept it without being under coercion and if they are the fee will go to political special interest...

I read the guidelines for the currency in that book and I am even convinced it is just inflation. If everyone lowers the domination of there own currency by stamping it the price level will increase because there is less money in circulation. But the issuer is supposed to keep the price level stable ... so they print some more money. How is this in anyway different from just printing more money to begin with?

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June 08, 2011, 10:20:02 AM
 #15


That wiki page was better.

No, the book is better.

Quote from: rahl
I however do not see the difference between this and fiat money. We already have negative real interest rates on savings accounts in most western countries and they have been like that for decades. It is just hidden by the poor way CPI is calculated but the actual purchasing power of the money + interest in a savings account is decreasing.

The inflation rate (forget what people do because they trust government's CPI forecast) should be added to the basic interest (also called liquidity premium) when negotiating a loan. The demurrage rate should be subtracted from it.

Quote from: rahl
The problems is that it need to be enforced by coercion since no one will willingly accept a currency that has this feature.

False.
There are currencies with demurrage being used today without coercion. It has been used in the past too, with great success.

Quote from: rahl
It artificially stimulates demand which leads to malinvestement and it also forces people to act on poor information because they have to get rid of there money causing even more distortions in the capital structure and even worse information. Basically the same problems as inflation.

Well, money is always artificial. It just doesn't grow in the trees. What makes time resistant money more natural than money that decays like most goods?
In my opinion, what causes malinvestments is not the increased demand (decreased demand for money) but the transfer of wealth caused by "quantitive easings". Investments are made while the prices are adjusted.
By the way, they're made with the aim of improving liquidity, which can be made through demurrage.

Quote from: rahl
The ability to hoard money is highly valuable. It is better if people hoard there money when information is poor, since this will save resources from being used towards wasteful ends. It is better if people keep there money until the market has figured out which goods are actually needed. Also increased savings and hoarding sends signals to entrepreneurs to go for long-term investments which makes them better prepared to meet the demand when it actually arrives.

People can hoard other things, not just money. For example, goods they're going to consume in the future or IOUs from their providers.
By buying goods they will need, they provide information to the market. Information is better with demurrage because there's less hoarding.

Quote from: rahl
Of course it is highly relevant what is done with the fee. Inflation is just spending the fee on arbitrarily selected political special interest which is even less useful then just dumping capital goods in a lake. If the fees are used to maintain and secure the currency and payment systems it is an entirely different matter since the fee in such a case could provide a net benefit to the users of the money and they will choose to use it. Also if the fee is spend on stuff like secure vaults and issuing electronic payment cards it only reflects actual costs of doing business and real demand and does not distort the market.

Thats why I prefer freicoin to freigeld. Gesell thought that an unbacked currency cannot be created without a government. There wasn't bitcoin nor block-chain back then.

Quote from: rahl
But I can't see a scenario where there is an actual loss incorporated in the currency where people accept it without being under coercion and if they are the fee will go to political special interest...

In freicoin, the demurrage fee goes to miners.

Quote from: rahl
I read the guidelines for the currency in that book and I am even convinced it is just inflation. If everyone lowers the domination of there own currency by stamping it the price level will increase because there is less money in circulation. But the issuer is supposed to keep the price level stable ... so they print some more money. How is this in anyway different from just printing more money to begin with?

Demurrage also increases prices because velocity of money increases.
Gesell proposes central banks/governments to manage the money supply. According to him, they would have more control over prices since hoarding is discouraged. Thus they are directly (and completely) accountable for inflation and deflation if the currency has demurrage.
Freicoin would have a constant monetary base.
 
I think Gesell's is the more accurate theory on interest of all. Please, let me know its flaws if you read the book.

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June 08, 2011, 11:49:11 AM
 #16

False.
There are currencies with demurrage being used today without coercion. It has been used in the past too, with great success.

That proves nothing. The central bank currency was simply even worse...
The Chiemgauer experiment the fees seems to used to promote the currency, this is not at all the same thing. If the fee is necessary to maintain the currency it should be there to reflect cost of doing business but have a fee for the sake of having a fee have no benefit and if there are no costs like this involved with the money taking a fee would just destroy it and distort the economy.


Quote
Well, money is always artificial. It just doesn't grow in the trees. What makes time resistant money more natural than money that decays like most goods?
In my opinion, what causes malinvestments is not the increased demand (decreased demand for money) but the transfer of wealth caused by "quantitive easings". Investments are made while the prices are adjusted.
By the way, they're made with the aim of improving liquidity, which can be made through demurrage.

The market is likely to opt for a very durable and cheap money because this is an essential part of good money. They should be cheap to hoard. Yes qualitative easing stimulate liquidity which is a very bad thing when people don't know what to buy or where to invest...

Quote
People can hoard other things, not just money. For example, goods they're going to consume in the future or IOUs from their providers.
By buying goods they will need, they provide information to the market. Information is better with demurrage because there's less hoarding.

No they can not hoard other things because they may be the wrong things and can not be converted to something else as easy as the money. Also apart from interchangeability people are going to want to hoard in the most durable and cheapest to store commodity around, which will be the money.

Quote
In freicoin, the demurrage fee goes to miners.

That may or may not be better then transaction fees. The market will choose. But I still don't see the point with this system. A commodity money has built in costs and a fiat currency is always inflationary. So really there hasn't been a currency ever that behaves like this Gesell fellow says current money behave and he want to avoid. All money are subject to security costs and either storage/transaction fees or inflation. The problem he is trying to solve has never existed.

Quote
Demurrage also increases prices because velocity of money increases.
Gesell proposes central banks/governments to manage the money supply. According to him, they would have more control over prices since hoarding is discouraged. Thus they are directly (and completely) accountable for inflation and deflation if the currency has demurrage.
Freicoin would have a constant monetary base.

The velocity of money is irrelevant.

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June 08, 2011, 02:29:27 PM
 #17


Quote from: rahl
That proves nothing. The central bank currency was simply even worse...
The Chiemgauer experiment the fees seems to used to promote the currency, this is not at all the same thing. If the fee is necessary to maintain the currency it should be there to reflect cost of doing business but have a fee for the sake of having a fee have no benefit and if there are no costs like this involved with the money taking a fee would just destroy it and distort the economy.

That proves that people can accept freemoney without coercion. The Worgl experiment also proves that a freemoney can beat even a deflationary currency: merchants preferred the national currency, but very few people paid them with that.   
Chiemgauer's demurrage goes to administration cost but also (because the administration cost are not that high) to charities.

Quote from: rahl
The market is likely to opt for a very durable and cheap money because this is an essential part of good money. They should be cheap to hoard.

Not sure what you mean by "cheap money". Are you talking about interest or how many goods you can get with a unit of a currency?
Many people think that durability is a needed property of money because precious metals are durable and they happen to be the best forms of commodity currencies.
I think that the gold resistance against water, fire, acid, etc, was more important than the resistance against time for it to become the de facto world currency of ancient times. Well, not that ancient, just before the dollar took its place. 

Quote from: rahl
Yes qualitative easing stimulate liquidity which is a very bad thing when people don't know what to buy or where to invest...

I don't think liquidity is a bad thing. If there's no liquidity there's no trade.
I think printing leads to malinvestments because of what I said earlier: miscalculations caused by distortions in general prices and unnoticed transfers of wealth.

Quote from: rahl
No they can not hoard other things because they may be the wrong things and can not be converted to something else as easy as the money. Also apart from interchangeability people are going to want to hoard in the most durable and cheapest to store commodity around, which will be the money.

If they hoard the things they will consume, they're not the wrong things. People should think about what is going to be needed in the future, hoard it and take the profits for this arbitrage.
When people accept money in exchange of goods and services, they have a proof that they have served society in one way or another, but Why should the whole society wait indefinitely for that individual to decide what he wants from society in exchange?

Quote from: rahl
Quote
In freicoin, the demurrage fee goes to miners.

That may or may not be better then transaction fees. The market will choose.

True. I bet people would prefer bitcoin to save and freicoin to trade.

Quote from: rahl
But I still don't see the point with this system. A commodity money has built in costs and a fiat currency is always inflationary.

Well...First we should define what fiat money is. The most common definitions are:

1) Issued by a government and non backed.
2) Non backed.

Bitcoin, LETS and Ripple (among many others) are non backed moneys that aren't issued by any government.
 
Quote from: rahl
So really there hasn't been a currency ever that behaves like this Gesell fellow says current money behave and he want to avoid. All money are subject to security costs and either storage/transaction fees or inflation. The problem he is trying to solve has never existed.

The problem he's trying to solve is interest, and is as old as money. By the way, LETS (and therefore Ripple) also solve this problem but in a different way: by removing scarcity from money instead of time resistance.

Quote from: rahl
The velocity of money is irrelevant.

No, it isn't.

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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