Topic: Banning Usury will promote cryptocurrencies - page 2. (Read 4372 times)

Assuming what you're trying to say is "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":

China is a counter-example (i.e. in addition to Renaissance city states.)  China had gone through the entire Western debacle with state issued money by the 15th or 16th century (inflation, financial repression, etc. over the previous few centuries) that it decided to use physical silver for money sometime during the Ming dynasty.  I guess it must have been so disillusioned with state issuance that the silver wasn't even coined.  Ingots were weighed and cut on the street.  The system functioned for centuries until the British Empire naturally saw it as a threat to its world system.  The problem of China was not being able to resist the British militarily in the 1840s.

The problem is not gold and silver per se, but the state's propping up of its own issued money or debt, whether fiat, 'backed by' gold/silver, or physically embedded gold and silver.

When you have a money that the state cannot (or realizes it shouldn't) manipulate, you're (literally) golden.  Part of the problem is allowing the state to define the monetary unit.  Once transactions are denominated in the state-defined unit (dollar, franc, etc.) the system is open to such manipulation, although state-defined units are harder to prop up in multipolar worlds like Medieval Europe than in, say, pre-15th century China.

Well, you basically just confirm what I'm trying to say

Or do you really think that if the Roman gold coin had been heavily debased through ages, the European Medieval and post-Medieval rulers wasn't doing essentially the same? I guess they were doing just that, though on a much larger scale than any Roman emperor could ever dream of. In fact, financing wars through inflation (or debasing currency as in the case of the gold coinage) is a viable economic means after all, if not downright inevitable (which history repeatedly shows). Really, if a nation wages a war against another nation (or one city against another) and ultimately wins the war, all expenses are covered by looting the other nation. But if it loses it just gets looted itself (such is life)



That pretty much sums it up

Usury is the illegal action or practice of lending money at unreasonably high rates of interests.Usury is a financial option and cryptocurrencies are trading option.They are not inter related to each other.We can inturn say that promoting crypto currencies and providing people a new source of income would free people from Usury.

The Roman Empire was just another example of collapse by state-driven asset (monetary) inflation.  This was by no means a constant-money-supply system.

The monetary units were defined by the state (denari, etc.) but the precious metal contents of same-denomination coins were progressively diluted to enrich or bail out the elites.  Money was not this or that much weight of gold or silver.

This just goes to show that the incentives inherent in state intervention in money, just as today (or under gold/silver standards, for that matter) lead to collapse.


Assuming this theory is correct, I'm sure there were all kinds of events that paved the way for the modern age of high living standards (among them, for example, William Tinsdale's illegal translating of the Bible into English, which started a literacy revolution in England.)  But among the really key factors must be: (1) the discovery of the actual technologies and processes that allow real wealth to grow; and (2) a well-functioning financial system to fund the investments necessary to grow the economy.

The Italian Renaissance was able to have both, with only physical gold and silver as money.  It crucially demonstrated that a 'flexible' money supply was not necessary.

In these key aspects it was unique in human history, because top bankers soon learned how to leverage Renaissance technology with imperial power and financial inflation to create empires.  The empires dominated the world from then on, and there has been no more pure progress.

There are multiple entwined issues here.  Money is unreasonably tight in peripheral countries in many scenarios -- this is another way countries are victimized by the imperial system.

If we return to our model of an ideal system, as long as debt is not propped up by the state in any way, high interest will just be the market signaling that perhaps new farms shouldn't be built, for one reason or another.  It's not written in the stars that all humans should enjoy great living standards, and to pretend so would make things worse.


This was only true if debt came with state-backing.  E.g. Spanish-Empire sovereign debt started at a 'cheap' interest of 15 to 20% per year when the empire was in ascendance.  While Renaissance Italian interest was probably higher, Renaissance debt didn't implode.  Debt that is priced at free-market rates tends to be good.  (Such a simple idea, so many centuries of misery from ignoring it.)


The problem is not usury, but is, as you refer to, the various state-driven distortions of the financial market: monopoly, propping up of debt, lack of clarity WRT debt resolution (deception made necessary by state backing of debt,) etc.

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.

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


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


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

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.

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.


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.

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.

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. 

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.

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

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

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.

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?

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

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

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.