Topic: Banning Usury will promote cryptocurrencies - page 4. (Read 4372 times)

Yes but remember loans are time based. You do not just have to grow $105 worth of apples you have to do it in a year. If you can't and the bank is kind enough not to foreclose on you will need to grow $110.3 worth of apples in two years. You have committed yourself to 5% compounding growth.

To get that money you will have to pull it from the economy at large. Principal that is repaid to a bank is destroyed in a fiat system as its creation was a ledger entry to start with. Those funds are removed from the economy.

We do not have a gold based economy or a paper dollar one for that matter. Thus the only way to get your $105 dollars to repay your debt is for someone else somewhere in the economy to take out a debt to pay for your apples. Thus the requirement for eternal exponential growth.

If you want to read up on how this works you can do so here: Finance: Part 1, 2, 3

No, the scenario doesn't require "eternal exponential growth to keep the system going". As long as I can grow and sell at least $105 worth of apples with a $100 loan, the scenario can continue indefinitely.

And the fallacy of the one-dollar can pay all debt scenario is that it requires eternal exponential growth to keep the system going. In this case you have created a hypothetical example with exponential growth an apple orchard capable of growing fast enough to repay a single debt.

Nothing grows exponentially forever and over the entire economy usury demands this or the entire house of cards collapses. Thus we extend and pretend faking growth via more debt.

The hundred dollar loan itself was itself an act of redistribution. It was created out of nothing by the bank debasing everyone else's money in the process. Economy wide this process results in progressive redistribution of wealth to the wealthy until social stability itself is threatened necessitating redistribution.

Usury makes the rise of the welfare state inevitable.

Let's say that you loan me $100 to grow apples and I have to pay you $1 a day until you get $105. Now, suppose you buy an apple for lunch from me each day, and then I use that dollar to pay you for the day. With that single dollar, I can repay my loan completely.

The fallacy of the not-enough-money-to-pay-interest argument it ignores the fact that money is used to transfer value and it can be used to transfer value over and over again.

As I alluded to above, this is an often misunderstood point by people who are familiar with modern economies only (ie economies driven ultimately by state dictated monetary and financial inflation.)

In a constant-money-supply world that is free from state intervention in money or finance, there is no mathematical problem with interest (usury.)

In such a world, interest payments would simply represent the redistribution of wealth toward people who invested successfully.  As real wealth grew under a constant money supply, there would be a gentle and harmless deflation over the long term.

The Italian Renaissance probably resembled such a world.  But it was the last time such a world existed, because global bankers soon found it much more profitable to ally with large empires to blow state-sponsored imperial financial bubbles, than simply to lend money to good prospects.

Could you expand more on this?

Personally, I don't quite understand what you mean. If there is no new money entering or being created in the economy (and there are no defaults of the borrowers either), the debt system is not sustainable in the long run. In other words, one day there won't be enough money to pay the interest, and that would eventually cause the system to get reset writing off all or most of the debts

Felix Martin in 'Money: The Unauthorised Biography' mentions that debt does not become money until it is made transferable.  My expansion on this insight is that debt in its natural state is highly individual and depends on the particulars of each investment and the circumstances of each lender.  Truly free-market debt is thus highly non-transferable.  Debt becomes transferable only when the state backs it in some fashion, and from that point on, debt values are no longer based on their real-economy merits but on a bubble created by state power, and from this flows all our ills.  (The system always becomes a bubble because of the incentives faced by the powerful.)

When the state is not involved in 'managing' (read 'inflating') money, debts are only agreed when merited by growth of real wealth or productivity.  Interest is thus the reward for those investing wisely.  System-wide, debt would be at a much lower level than toady.  Under constant money supply, there would be a gentle and gradual deflation as real wealth/productivity grows via investment.  When there happens to be no growth to be had, there is no debt (ie everyone doing the same thing as yesterday.)  This must have been what Renaissance economies looked like.

I've been remiss and not had time to read the microfinance paper, but I'd like to keep what is a productive discussion going by offering what I have.


With truly free competition, any side that loses can walk out and choose another counterparty, so only win-win deals can be agreed.  I'm not exploited by my local pharmacy which is bigger than I.  But if there is some state-sanctioned anti-competitive behavior involved, then I can be.  The goal of society can only be to perfect free competition, when there are problems with it, and not to tie up the system in yet more state-sponsored knots.


This is true, and is why money can't be left to the state.  The growth of money and financial assets matches productivity and real-wealth growth when there are free supply and demand for them.  When the state is involved, the incentives for the elites are always to issue more money and debt while the system is stable, and destabilize the system, and/or exploit the rest of the population/world.


A quick scan through the paper suggests that microfinance is just another way powerful players who issue financial assets (which are ultimately backed by state or imperial power) to victimize the less powerful by forcing debt and inflation down their throats.  For the powerless, the proposition is lose-lose.  If you stay safe, you lose to inflation.  If you borrow or lend, you risk losing a lot in a crash of an artificially propped-up system.  Microfinance is just another way to find initial demand for the assets.  If so, this would be no different from the relationship between banks and people, or that between countries at the center vs. the periphery of the imperial system.  The key culprit, as always, is the state-bank alliance, which is in turn enabled by the state control of money.

I'm hoping to read the paper and comment afterwards.

"The idea that people can live off the interest of their mutual indebtedness, ......
is just another perpetual motion scheme - a vulgar delusion on a grand scale. Soddy
seems to be saying that what is obviously impossible for the community - for everyone
to live on interest - should also be forbidden to individuals, as a principle of
fairness." Daly, "The economics of Frederick Soddy" p475 quoted by
Charles Eisentein in "Sacred Economics" p134

There are a simpler explanations, just ask - "Cui Bono?"
The effects of American gold and silver imports in the 16th Century are well known.
Those closest to the source of inflation benefit most. Thus Banks, and credit card
companies, as the source of credit-as-money benefit fully from the inflation of the
monetary base. Those receiving credit are incentivised to spend quickly. For as long
as the Ponzi scheme expands, savers lose out to the extent that inflation exceeds the
interest paid on their savings. Monetary expansion is limited in theory by our
ability to collateralise resources, but once again practice differs from theory.

So much for the Macro Economy. What about the Micro Economy, and Who Loses?
In a strange sort of way, the supply of money creates its own demand, it's own
scarcity. The practice of Usury creates more debt via interest than there is
wealth to extinguish it, hence there is always someone in need of money. It follows
that the greater the scarcity, the greater the excess debt, the greater the risk,
and hence the higher the interest rate demanded. Thus those with the weakest
negotiating position, probably the poorest in the community, are the least able to
avoid being in debt and their risk of losing everything is higher.

When gold and silver coins were money, there was a natural limit on the extent to
which the common man could be exploited. When the King or Queen mismanaged the
economy, banks and governments went bankrupt. Along came fractional reserve banking,
and then fiat currencies. Both were an attempt to introduce a self-regulating system
while preserving Usury. As can be seen above, self-regulating Usury is an oxymoron.

Unfortunately, with another system failure about to be exposed, TPTB are placing
their hopes on restrictions on fiat currency, and when that fails, on banning cash
entirely.

Once inflated, nothing can stop a Ponzi scheme from imploding, hence arguments for
continuation are wasted. More relevant arguments for Usury stem from personal freedoms,
and that needs to be discussed further.

@BobK71 - "It's hard for me to find such breakage when both parties go into the deal freely and with knowledge of the enforcement mechanism."

In an ideal world a negotiation between two parties would result in an equitable and
moral deal: the party which gained most from the deal would offer the best terms for
settlement; and vice versa. That's economics. But this is only one of perhaps four
different outcomes in game theory and it assumes both a win-win dynamic and an equal
balance of power.

For a real world example, consider my broadband contract: I provide my ISP with three
months credit by paying in advance; I receive a weeks' credit in return. If I do
not pay within a week, my online existence is cut short. This is an existential threat.

A similar existential threat is implicit in all negotiations with the State, for the
State has a monopoly on legal violence. I'll also point out that as productivity and
GDP declines, the opportunities for win-win outcomes diminishes.

Much of the real world implications of this, and my earlier reference to flows of
wealth and credit are exposed in the dealings of microfinance - see WP39_microfinance.pdf

I think it's evident that wealth flows to the wealthy, and credit flows to those sinking
deeper into debt. The exact mechanisms vary for each individual. Some are plainly wrong.

We should talk more, definitely.

I understand that debt is a form of investment where there is no legal, built-in adjustment as the hope of repayment goes down.  However, to be considered immoral, it has to break a well-defined moral code.  It's hard for me to find such breakage when both parties go into the deal freely and with knowledge of the enforcement mechanism.

FWIW, I'm intuitively in favor of the current enforcement mechanism in most of the West, ie the creditor is basically on their own.  Breaking a promise is no problem when both parties are aware of its possibility from the start.  (This is only true in and of itself.  Combine this with the modern system of state-driven asset inflation, and there IS a problem.)

I think I addressed the systemic-technical issue with usury in my posting above.

I guess I'm not totally understanding your point about credit and wealth.  Assuming you mean there can be no credit growth without wealth growth (ie growth in supply of actual money,) I'll say that your view may be colored by the past 4 centuries of more or less elastic money.  (Under metallic standards money was also issued out of thin air via public power, just slower.)  For many it's hard to imagine a different world, given this history.  Perhaps you have a logical model that proves your point, but I haven't seen or imagined one.

To me, the Italian Renaissance world of constant money showed growth could be driven by credit alone, even though far less credit was issued than by today's standards.  Also, the only legitimate (ie non-theft-based) driver of credit are actual economic facts and the response to them by actors free of state intervention.  If better and safer ships are invented, savers will be happier to lend to cross-ocean traders.  Absent that, there is no reason for this credit expansion.  It is therefore not up to any authority or expert to say how much credit growth there should be.  Only the myriad price signals in the free market can determine the proper level of growth.

The legal monopoly of money issuance is certainly a problem, but that is only one form of exploitation by the modern state-bank alliance.  The general problem is, as I mentioned, the artificial propping up of asset values by the alliance.  During the Spanish Empire of the 16th century, money was only gold and silver, but essentially the same modern problem existed, where the avenue of asset inflation was sovereign debt payable in gold and silver.

This kind of discussion would have to depend on the means of repayment enforcement.  Let us for now assume the mechanism is just like today (which BTW I believe is OK morally and technically): if the borrower can't repay, basically, too bad for the creditor.

Under this mechanism, the problem of too much debt would simply lead to debt value implosion, and debts would disappear through default.  Morally speaking, the lender should have been careful, since they knew there would be no enforcement from the start.

In an ideal world, that is, without the state-bank alliance manipulating the values of debts, people would be very careful to lend under this mechanism, so we should not have debt implosions on an economy-wide basis.  (This world last existed in the Italian Renaissance.  And interest was VERY high by today's standards.  The economy did more than OK.)

So Bitcoin should not have the problem you mention, any more than gold and silver did during the Renaissance.

Yes, but mainly via education.

Consider the resistance that would form against a fractional reserve bitcoin bank.
Ultimately the transparency of the blockchain and the ability to securely hold your own funds offchain would make this much harder to pull off than with fiat or gold. Not impossible but harder and thus less profitable. Cryptocurrency helps illuminate the nature of usury. Ignorance is the foremost enemy of progress.

The best parallels for how we can move beyond usury can likely be found in two prior historical transitions.

A) The transition from economies of slave labor to economies of surfs and feudalism.

B) The transition from feudalism to republicanism.

Ultimately, the process of moving beyond usury will probably be similar to those prior transitions. Painful, slow,  halting and unlikely to be completed in our lifetimes.

" Does the economics of cryptocurrency help provide an alternative and thus the ability to route around usury? "

I've also bought the book, and am in much the same place as yourself.

I'm less hopeful that cryptocurrency can route around Usury. As I said, Greshams Law suggests
that bitcoin will not replace counterfeit money without help. Maybe if another cryptocurrency was
specifically designed to tackle the problem, it might succeed, but its a bad idea.

I noted something in today's papers to the effect that "we" all want to eliminate fraud, dishonesty,
and cold-calling but the loss of thousands of jobs is a major and unacceptable consequence.
Does this sound much the same as banning Usury?

I'm intending to research some other relevant material:

A) The theological perspective - why Usury is acceptable today, and also its practice in the
Byzantine Empire.

B) The impact of Usury on poverty - microfinance seems to be the main topic
(see WP39_microfinance.pdf) - though remittances are also an area of concern.

You are very welcome. I am actually still in the process of reading this book having only gotten up to the chapter on usury which it nails. It has the best description of the cost and consequences of usury that I have read anywhere. I cannot comment yet on the later chapters.

The book is available for free to read online from the author here:
http://sacred-economics.com/read-online/

Or it can be purchased here:
https://www.amazon.com/gp/product/1583943978/ref=as_li_qf_sp_asin_tl?ie=UTF8&tag=theascentofhu-20&linkCode=as2&camp=217145&creative=399349&creativeASIN=1583943978

I read it up to chapter 6 online and then bought a copy. I am waiting for my hard copy to arrive to finish the rest.

Why participate in a system that creates unpayable debt via usury? The answer of course is that we should not its dumb if we value the long term success and progress of society. However, large scale change on this issue is probably not going to happen in our lifetimes usury is very profitable. Change would require a degree of wisdom that we do not yet have. Indeed the idea is not even conceivable without a currency system that does not have usury at its core and does not easily facilitate usury. Bitcoin is interesting as an option along these lines. Charles Eisenstein argues for a gift economy but I have not read those later chapters yet.



Because our entire economy is now dependent on it. We cannot simply get rid of it without economic collapse which would just lead back eventually to usury again. We can no more top-down abolish usury then the Roman empire could have abolished slavery. We must develop a functioning alternative first and then out-compete usury. Does the economics of cryptocurrency help provide an alternative and thus the ability to route around usury? I believe the answer to this question is quite possibly yes. This is one of the reasons I have an investment in bitcoins.

"I dont know how banning usury will promote crypto currencies because usury is a financial option and crypto currency is a trading option.They are not inter related to each other."

I have two answers to your concern. The first derives from Gresham's Law, and my
observation that Nations have been for some time in a competitive devaluation, a race
to the bottom, an attempt to weaken their currency, in effect to counterfeit their money.
In a market where no-one knows the fair value of a good, the price of the good falls.
There are other matters relating to the expansion of the money supply, but leave that
aside for now. Banning usury will strengthen fiat currencies, hence reducing their
competitive advantage against cryptocurrencies. The exact mechanism is open to debate.
It will move the balance of power from the banks toward the common people.

The second answer is that prior to a ban on Usury there would have to be a process
of education for the general public explaing precisely how fiat currencies and the
credit mechanism weaken the financial power of the common man. Despite all the turmoil
of the recent decade, some seem woefully illiterate in matters financial.

I may have misread your intent, but you seem to equate fiat currency and Usury in the
above quote. Also, you seem to have entirely missed my point that global growth is
no longer assured. 

Usury is a action where loan is given to person based on the condition that he should pay a certain percent of amount as interest irrespective of whether he gains profit or not.If usury is banned and interest free loans are given, it will be good but today we dont find any such options.In some islamic countries,islamic banking system is followed as an alternative option. I dont know how banning usury will promote crypto currencies because usury is a financial option and crypto currency is a trading option.They are not inter related to each other.

That is the current definition but in the past any charged interest in the principal was consider usury, and it is not difficult to understand why since in the past coins were made of gold so it made sense you received the same amount back but in this era of fiat that losses value every second then charging interest it is a must.

Where there's currency there's interest in offering and taking out loans. The challenge is ensuring that interest rates are fair to the borrower and the lender (for the risk they take on).

These things aren't influenced by the US economic health or deterioration.

Being against usury is great, but let the market decide what the rates should be. The borrowers can decide how much the loan is worth to them. And certainly don't ban lending. Lending keeps the economy growing. And smart borrowing keeps people out of trouble.

 I have no idea what is Usury. Can somebody explain me in a short word what is it?