Topic: Growth, Interest and Wage Inequality - To the austrian economists here (Read 6013 times)

Here are so many good people ^^
Many good analysis
Your comments and comments are so great
Need to learn more, Very nice ^^

This is the service the money owner is getting for free. I just bring it up to legitimate demurrage.


No. You're paying interest with every item you purchase. Not only on the liquidity needed to market it, but also the capital yields of the factories. One could think that while factories yield any profit, more factories are going to be build, but no. Building a factory takes money, and no one will exchange his money for a factory that yields less than what money can yield as a trade enabler. Not only your purchasing power is reduced, but also your wage, since consumers of wathever you produce have to pay for all this too.


That's not the main concern.
The fact that the money holder can hoard and save wild cards insted of products (everything at no cost), make him ask interest when uses money for enable trade.


It's going to be hard to make my point with 10 people, since they could easily rely on barter when money ask for its tribute, but let's have fixed production and fixed monetary base.


Good example. P equals B, so the money holders when P takes place are benefited and the holders at B (they don't have to be the same people).
Richguy has valuable information (when those events take place) that can sell. But again, this is not my point against interest.


I prefer to keep the deflation discussion in its own thread.

Here's my story:

We have many islands each with a Robinson in it.
At first every Robinson captures his own fish and builds his own nets.
But there's different fishes with different flavors and colors and barter emerges.
Since not everybody wants to build a boat, some Robinsons specialize and become merchants. Producers sacrifice part of their production to pay the merchants wages. If merchants wages are too high, more Robinsons will become merchants, if too low, some will quit the profession.
A wants to save but doesn't want his fish to rot. B wants to build his house so borrows the surplus of A, while he's building it. Interest could be zero, because A doesn't want his fish to rot. It will depend on supply and demand of credit, but there's no low limit above the rot rate. If A ask too much, next time B would prefer to save its own fish before his old house is broken to have time the build the new one.  
The utility extracted from "capitals" (the nets, the boats, the houses) just need to be equal to the costs, "capital" yields can drop to zero.
Everything's fine.
Builderguy builds houses. People sometimes give him materials and paid them a wage during construction.
Other times he save enough for the materials and his needs during construction and then rents the house. That was very profitable at first, but when more people began to do it and rents fell, that became just equivalent to build for a wage.
The only difference was when you received the fish. Some people who didn't know how to build houses employed him to build a house and rented it later, not for the profit, but because they had too much fish now and wanted to receive it periodically later. That's what happened to cleverguy when he invented a new net with a stick.
He got high profits at first that wants to preserve. Now that everybody has a net like his, there's no difference with other fishermen, their wage are equivalent again.
Everything's fine.

Then scarce everlasting money appears.
To be fair, every island contains the same amount of gold (say 10oz) and no one invents it, all Robinsons agree to use it at the same time.
With money, they become even more specialized and more complex production projects that needed higher degrees of collaboration are now possible. But their invention, although inanimate, doesn't perform its function for free.
Many Crusoes (like they used to do) save by storing things that doesn't rot and they will always be able and want to consume, let's say salt, wine, etc.
Since money is more useful for merchants than for other inhabitants of the archipelago, they start give their gold to merchants, who are accumulating no other thing than credit.
They know they've make a mistake when some merchants offer low prices to producers that have no money and can't wait to buy certain things.
Workerguy thinks "if they can abuse that way, is because there's a lack of merchants, I will become a merchant, eventually an equilibrium will be reached again".
All he needs is money, that he can get in the financial market just like they used to do when the loans were on fish.
He remembered that there were lower interest rates back then, but he things: "This is because of growth, the factory-ships that money has allowed us to build. The profits on investments are high and thus the demand for money. They will drop when profits do."

But when he enters the commerce market he finds out that the wealthiest merchants weren't the better qualified merchants, those had just a higher wage. The wealthiest merchants were the ones that had and lend more money. The firsts who exploited the liquidity needs of both producers and other merchants.  
The wealthiest guy is Capitalguy, who didn't ever renounce to his first 10 oz, he preferred sell first and and buy later, whenever he saved, he did it in money, he was the first to lend it, he was one of the first merchants that realized that he can charge his customers, not only his services as merchant, but also the "time-value" of the money he's using to move wares from island to island. The difference between the price they pay the producers for the wares and what they charge consumers must be higher now and the increase must be equal to the interest on money lending. It didn't matter if they had borrowed it or not when they do their calculations. Those merchants who didn't understand that went out of business.
Builderguy 2 has noticed that rents have rise, because the no they are no longer build until the the total gains in rents are equivalent to the construction costs. Now they are build only until the annual gains in rents are equivalent to the annual gains in money lending for a given cost of construction. Well the house needs to yield more since, unlike gold, it doesn't last forever.    
Cleverguy 2, who invented the factory-ship thought that you can't profit forever from a good idea, but with this factory-ship is different.
With the nets, nets were made for every fisherman and the profit from owning the nets dropped. But now the profit from owning factory-ships never drops below the interest, since no one would spend his money in an investments that yields less than the interest. Some fishermen don't find a job because there's not enough factory-ships for all them to work. Some of them have to leave the sector like happened when the nets were invented. But with barter more nets are done while the yield of the net is positive. Now production of factory-ships stops when their yield go below the interest.

maybe I got it now. in contrast to barter, money is slightly "overvalued" because it is more flexible than say a goat. WIth money I can buy anything, with a goat I can only buy products that are offered by a guy acceting goats. I agree. Lets consider the case where I sell one month of work for a certain wage and buy stuff with that money, spending everything. Would you agree, that in this case the "money-premium" is irrelevant? I think the problem you are talking about arises when people are hording money, right? So they need an incentive to spend it (e.g. freigeld).

Lets see what happends in a village of ten people with a fixed amount of money:

10 people
different goods, a,b c, fix production!!
using money they agreed upon, say shells
fixed amount of shells: 1000 shells
There is constant demand and supply of a,b and c giving prices p_a, p_b and p_c.
Now I claim the following: If 500 shells are destroyed (and no new shells can be found), all three prices will double. this implies that you have to pay double and that you earn double when selling a good.

Now consider there is one rich guy who achieved to own 590 shells, but he saves/hordes the money and only uses 90 for his daily business. There is one thing happening that is in my opionion not considered by Gesell: With hording of half the shells (forever) the prices and wages double as in the above example. The richdom of richguy is theoretically double but he does not use it so everyday life of the 10 people is unchanged. Actually the other 9 had a profit "P" because the prices decreased due to richguys savings. Now lets say richguy wants to use the money before he dies and buys more goods than usual. If he spends all his money, the prices will go up depending on how many "productionperiod" he needs to spend everything. In an extreme case, he buys almost all of the  goods but the few that are needed for the other 9 to survive. But independet of the strategy of spending (one period all money vs. 10 periods 10% of the money), he does not get the goods for the halfed price and is in sum always paying a Premium "B". To understand that, keep in mind, that the production is fixed! I claim "P" equals "B". So richguy gets his well-deserved amount of goods that costed 500 shells in the beginning and nothing more.

So I claim, that hording is irrelevant, moneypremium is irrelevant and Gesell is irrelevant We could of course discuss, what happens on a larger scale, when we also consider that inflation and deflation takes some time to take place. Nowadays this gives central banks, banks and companies an advantage because we life in an inflationary world. This discriminates the ones farthest from the tap, e.g. pensioners and workers. I think yours and Gesells problem disappears when this problem disappears, which is when we life in a world with a fix amount of money which implies, that this money deflationates with the rate of economic growth. If your wage is constant but money deflationates, you can buy x% more goods, x being the rate of growth. So everybody participates in the growth with the same rate. In the real world, you at first don't participate in growth and also your wage is devaluated by the inflationrate i, so if you (as an worker or pensioner) can claim your fair wage/pension after say a year, then you where "taxed" (1+x)(1+i). Nowadays this is something between 5 and 8 percent. Its of course lower, if wages are adjusted faster. So actually I would say the third solution is a fixed amount of money.

I would say "the cost of the price going down to get rid of the goods".
The service that is paying for is going from the producer to the consumer without the need of direct barter.
If the ware doesn't pay that tribute to money, it get stuck with barter. Money doesn't have anything to lose, it doesn't need to flow; the wares are the ones in a hurry to get to the consumer.

Uups, I'm sorry, Those -------------- aren't supposed to appear.
I have edited my last post.

Before we get to solutions...
What is this highway tax? Is it the cost of transporting goods, the cost to recoup storing goods, or the cost of the price going down to get rid of the goods because they are taking up space? The only way I know of that a producer can "push" products out is by lowering the price until it is both, lower than the competitor's price, and lower than the costumer's "utility" price (I won't pay for something if I don't need it). I still don't understand what serviceexactly this tribute is paying for?

They aren't produced.


Even if the selling price is below the production costs.


Yes, they don't need profit, but they need to pay the interest to be traded within the market. You could see interest as a distribution cost.


Yes, but not only that, even if the wares don't expire they are something that the producer doesn't want. They must find their way to the customer and they have to pay the "highway" tax.
The selling price must include the production costs, the proportional wage of the merchant and the tribute to money for letting all this happen. If the game stops, money is the only one immune, so it can exact a profit from its privilege.
There's two solutions:

1) A negative incentive to money for not stopping the game, Gesell's proposal.    
2) Don't let money stop commerce, that is non scarce money like LETS or Ripple.

I think we should use both to have a more diverse and resilience monetary system.
Gesell only saw the first possibility, and though that government was the only one who could issue his freigeld.
Bernard Lietaer's Terra could be implemented privately and it has a demurrage that covers the storage costs.
I like Terra as a stable reference currency for contracts, but I don't like the "storage of a basket of assets" to back a currency concept.
In fact, I don't like the concept of backing a currency. Money doesn't need to be backed. The "intrinsic value" of gold is not needed.
The block chain shows us that private hands can issue "fiat" money. By fiat I mean unbacked here, "let it be" (that's what fiat means), not that is empowered by a state.
That's what I think is the best of bitcoin. Is a "fiat" money that doesn't "belong" to any state. And private currencies were usually backed before. I think there's also local currencies that are issued through charities.
I think non mutual credit (scarce) moneys should be all this way.
And I also think that between scarce moneys, wares would chose free moneys to not pay interest and be sold for less and faster. Faster, because the buyer has an incentive to think faster (or before having even sold his own wares) what he wants in exchange for (indirectly) his production.
By the way, money does not represent any particular ware/labor, it's like a wild card.

I'm stuck in the mindset that if wares don't cover fixed and variable costs (costs of producing the wares), they aren't sold. If they do, they are sold even if profit is $0, simply because wares produce a benefit by their existence/use value. Interest doesn't come into this at all...


So, essentially, a representation of a good or a representation of someone's time/work can be stored in a medium that lasts for ever at no cost. I think I'm getting this part, but where is the profit coming from? The difference between the retained value of money, and the decreased value of the expiring good it used to represent?

Money can take the basic interest from the wares. If the wares don't pay the interest, they aren't sold. And the wares lower its price until they're sold, that's their nature.
The supply of money is scarce (or that money concrete money dies by hyperinflation) and no sector has produced it (forget our current regulated financial system): the whole community has given it the value.
Money takes profit because its scarce and it (unlike wares and the time of workers) last forever at no cost.

This! ^^^  That right there is the part that keeps making me go "What?" What do you mean by "money making profit?" Money by itself doesn't make profit, and money lent makes profit that is equal to interest based on the borrowers risk rate and the supply of available money to be lent. Is the second part, the supply of available money, the part you are calling "money profit" that you are against?

I didn't meant that part.


With this I mean that the existence of capital yield for a given type of capital proves that the demand for that capital is not fully satisfied and that capital yields aren't profits, because if they were, competition would vanish them.


Here again, if they were profits they would tend to disappear or remain only when there's growth as you claim. If it can't go to zero by competition, I would prefer to not call it profit or that we pick another word to distinguish that kind of profit (the one that tends to zero).
If the basic interest/liquidity premium/liquidity profit is equal to the average growth of the economy, Why must money profit as much as the average growth without risk?


I agree with those claims, although I would say that is necessary that the growth comes somehow from innovation.
What I don't agree with is that the interest would disappear without growth.


Yes. Somewhere I said something like "That basic interest exists within depressions proves that doesn't need growth to be there".
Correct me if I'm wrong.
Is your argument that we've never had a global depression and that the interest only came from the growth in other countries?

Combining the three statements, you say:

capital yield > interest > capital yield > 0
Which can't be.



I pretty much agree with the gross interest consisting of risk premium and profit. The aggregate profit I would call growth of economy. If there is nothing to grow (Japan by the way is a great example, as mentioned here before!), profits of all firms tend to zero (a few may last a bit longer and grow faster and quickly reach the equilibirum). So one could assume, the interest still consists of the risk premium. This is theoretically correct, but if there are no borrowers, there is also no risk premium. Also it becomes almost inifitely easy to pay back loans, since interest tends to zero. So both components of interest tend to zero. Imagine a market where nobody wants any money! There can neither be interest nor can there be use for the money-owners.
One could loosen the assumptions here and say "in reality, it never reaches zero", because of several reasons:
-there is always some rate of technological development
-there is always someone who needs money because he did miscalculation within his budget
-there is always someone who thinks he can make money from investment even if he can't

Nevertheless, the implications of my theory remain valid: Higher growth rates lead to higher wage gap, higher wealth gap and to a higher worth of money and education.
Japan actually is a really nice example because some "numbers" of japan appear at the top of some ranking, e.g. Japan in the 90's was the second most equal contry of the world (only highly redistributing denmark had a lower gini coefficient).
japan has the highest government debt in the world. this might have different reasons, but the reason the debt remains is, that due to low interest its somehow irrelevant.
japan has the worlds highest wealth per capita (200.000$). Fits in my theory. Wealth isnt s valueable within a low interest framework, so you need more to provide for the future AND that high wealth did not lead to higher gap in income as one could assume in a high interest environment.

I am lazy but somewhere you wrote something like "how can there be interest while a depression".
I am not sure if we ever had a worldwide recession at a time where we also surveyed data about interest and growth. In the latest recession there still was economic growth in the average world (I think around 4%). The only thing that makes my model somewhat unrealistic is, that large differences in interestrates are possible between countries. e.g. why doenst china suck up all the low interest money of japan and US and boost their growth a little? interestrates should then converge; again this is somewhat prohibited by customs and central bank policies. Maybe this is already happening on a larger scale as I think and it just takes its time.

You were arguing that the capitalist somehow deserves to profit forever from owning money, an invention he didn't made.
If you prefer, consider the whole community the owners and the money holder just a tenant. But in this case, the tenant is not charged and he rents the property for profit. 


No, is free as in freedom (freigeld in german). It may or may not be free to borrow. I didn't invent the term nor made the translation to English.
But I think he means free for trade:
"If the mediator of exchange, the capitalist, is deprived of the power of interrupting the exchange of wares for the purpose of exacting basic interest - as is achieved by Free-Money - money must give its services free of cost and the wares can be exchanged as in barter, without the payment of interest."
I guess he would consider Ripple and LETS free money too.


No, merchants take their cost plus interest, just because they can.
As proof, merchants that borrow the money they need can pay the interest to their lender and still compete with merchants who own their own money.
"If a commodity is to be burdened with basic interest it must of course be capable of bearing this burden, that is, it must meet with market conditions permitting the payment of its cost price, plus basic interest, out of its selling price"


No. The basic interest is discounted from their wages.
From the same short text:
"Wares collect basic interest from the consumer, not for the producer but for the possessor of money (medium of exchange), somewhat as a postman collects the price of a cash-on-delivery parcel."


So the liquidity premium/basic interest doesn't exist? It's only profit that tends to zero by competition, inflation and risk premiums for money?
Do you at least agree that it would cause (if it existed) the undesirable effects I'm describing?

But why does it matter who printed the money, if it's just a tool of exchange for work I produce, and I am the one who decides how to use it and what interest to charge on lending it?


Every time you say "free money" it makes me cringe. You mean specifically "free to borrow" money, right? I still don't know how that could work, since those who have will always charge rent to whose who don't...



And this is the part that I just don't get. Money itself yields nothing, unless it's put to work producing goods or services. Merchants take what they feel they deserve for providing services such as manufacture, storage, and transportation. Workers only sacrifice if they buy on credit, and only what their banks believe is their risk premium. If you take the gross interest, and subtract assumed inflation rate and the risk premium, the only thing left would be profit, which in our vastly large, liquid, and competitive currency market, is pretty much 0. That's profit on just currency lending alone. But most profit comes from either sale of services or goods. Paper itself doesn't give a profit other than through someone else's work, and that someone else is free to chose where they get their paper in an extremely competitive and saturated market. So I just can't wrap my head around this claim. Where is this hidden, and seemingly impossible, profit coming from? Is it a relic of when banks were few, information wasn't easily exchanged, and banks could get away with charging you way more for the loan than your risk called for?

No. The rental car agency has produced or bought the car. The money owner has bought the money, but nobody (but the state?) can produce the money on its own.
Even if the state produces it, we could still reject it.
If you're thinking about gold-money, you can mine gold, but you need the whole society to treat it as money.  


Yes. Liquidity is very important, that's what I said. With free money you still have liquidity, but nobody profits from it.


Is it important that is my definition or Gesell's ?
Liquidity premium = basic interest:
1) A component of the gross interest, when you subtract the inflation and risk premiums.
2) The mother of all capital yields. The yield of money.
3) What merchants can take from the wares.
4) What workers have to sacrifice to exchange their products for what they need/want.


Well, that chapter is almost at the end of the book. He assumes that you have read the previous parts.
Mathematicians and philosophers do it too. First define concepts and then make more complex propositions based on those concepts.
I find his style pretty clear though.
You could read the whole book but you don't have to: you can ask me whatever you don't understand and I'll try to explain it to you.
You haven't quoted any false sentence from the chapter. Do you agree with everything?

By the way, you don't even have to read the first two parts on land to understand free money. In the Spanish translation, the first two parts were at the end, and I didn't noticed that until I saw the English translation.    

Is that like "rental car provides the service, rental car agency that maintains the fleet or cars take the profit?"


But, without liquidity, economic activity would grind to a slow pace, since everyone who needs capital for whatever purpose will have to wait a long time until their request for such is fulfilled (like putting a buy price at MtGox, and waiting for hours until your order is filled, if it ever does)


Very good question.
The easy answer (just like the borrowers would do it) doesn't apply here, because we're supposing that we're in a recession environment in which no borrower can make any investment that yields more than the liquidity premium in any sector of the economy. A very extreme scenario, by the way, I bet impossible within capitalism.
That's what merchants do. They make profit on liquidity through the wares. If they're borrowers, they pay it to their lender.
[/quote]

Using exact definitions of the words, a "liquidity premium" is basically what the money holder can get on a spread in a currency market. If no one is borrowing/buying money (no trading of currency), the spread will be irrelevant, and thus might as well be 0. What's your definition of this liquidity premium? I think mis-communication as to what you mean by that is what may be causing problems in this discussion.
By the way, I've come to the conclusion that Gesell is a TERRIBLE writer, since the book tends to have a lot of words with little explanation regarding the assumptions behind them. What is YOUR definition and explanation of it?

Money provides the service, lenders take the profit. Also they enable other "capitalists" to take it too.
Since money impedes the yield of other capitals to drop below the liquidity premium you don't have to be a lender to enjoy the privilege of profit without contributing.


I focus on it because I don't want to attack the risk premium.
No, liquidity is so important that influences all the economy and capital accumulation.


Very good question.
The easy answer (just like the borrowers would do it) doesn't apply here, because we're supposing that we're in a recession environment in which no borrower can make any investment that yields more than the liquidity premium in any sector of the economy. A very extreme scenario, by the way, I bet impossible within capitalism.
That's what merchants do. They make profit on liquidity through the wares. If they're borrowers, they pay it to their lender.

Probably it would be simpler if you quote the sentences that you consider false in Gesell's book directly.
That chapter is not long and talks precisely about what we're talking here right now.

So, which is it? Money holders/lenders don't provide any service, or money holders/lenders enable commerce?

You are also apparently focusing in on the "liquidity premium" as the main evil of interest. Is liquidity, aka easy access to capital, a useless/worthless service?


How can you make a profit on liquidity without lending???

Ok, let it be a product then. But the bus company produces the tickets, its value (by giving a service) and takes the profits from selling it.
Money, on the other hand can be produced by nature (gold), by a state (national currencies) or by a free software program (bitcoin). Is the whole community of users who "produces" the value of money (by offering goods and services in exchange) but only the money owner takes the profits from it.
Money provides the service of finding a path (of value transfers) between the buyer and the seller. By by the implied contract of accepting money, all its users can be directly connected.
Money, as you said, serves as a substitute for direct barter. But the capitalist doesn't produce anything of value by lending money, he just gets the yield of a capital "produced" by the society as a whole.
Well, that's not very accurate. The banker provides a services and must charge to, at least cover his costs of operation. This includes the risk premium, that can be reduced with collateral.
But lenders take the liquidity premium without providing any service to society. The money holder has the power to enable commerce and he will exploit this advantage in his favor.
The mistake was for the society to tell the money holder when he received it: "You have a certificate that the society as a whole owes you something. You can redeem it for whatever you want and whenever you want. Now you have the ability (at zero cost) to impede the ability of others to give something of value to society through this mechanism. You can exploit this necessity of others members. Now you can charge the liquidity premium".
A capitalist with enough funds can live his whole live (no matter if there's growth or depression) without providing any service to society and still have his fund untouched.
He can't do it because is his right, but because we allow him to do it, we give him that power through the way we've designed money. We got to take this power back.


So do you agree that the capital yield not being zero is a prove that the demand of that type of capital is not fully satisfied?


By scarce I mean that it cannot be produced on demand by anyone who needs it. Although Bernanke makes that USD look abundant, they're still scarce in that sense.
I mean scarcity as opposed of the abundance of mutual credit systems like LETS or Ripple. So that scarcity is not solved through monetary inflation.


The Fed can lend at zero by increasing the money supply. Normally you would be a fool if you don't charge the liquidity premium when lending the money you own. But they don't own it, they just create it.
But the real saver asks for his liquidity premium. These measures distort the financial market destroying partially the information that you were talking about earlier, but don't end with the liquidity premium.
They lead to more catastrophic effects than the basic interest itself (which they don't eliminate because they cheat the financial market without completely destroying it).


I know. There's no (meaningful) division of labor without money. But, like with intellectual property, I don't think that someone has to specially profit from this invention. Math is also an "incredible service" but I can create all the numbers I want in my notebook while I cannot create money.
I need society for my money to have value, but the concept of money is not scarce.


I have heard that no one would accept a currency with demurrage many times in the forum. I guess I can't do anything but to provide examples of working systems with demurrage for that.
Then we just can try it and see what happens. I just don't want to start freicoin while I'm the only one in the world that believes in the block chain and demurrage at the same time.
Anyway I'm more concerned with the belief that it would have a negative impact to the economy like creating poverty.


Cool. I think Ripple can eliminate the liquidity premium too.
I have heard that Ripple would create inflation and though you may think the same. It doesn't make much sense to me because ripple IOUs can be denominated in anything, including "the dollar in 1920" (calculating inflation), and reference currencies similar to terra.


There's many example of such currencies in the list. I can't tell how many because the list is huge. In the "Cost-Recovery Mechanism" they have descriptions like the ones I told you.

http://www.chiemgauer.info/
http://augusta-regional.de/
http://www.regiogeld.de/
http://www.dreyecker.de/

They're mostly in Germany and, as far as I know, are all local complementary currencies.


Well, you can think in the old gold system if you prefer it. I still think that Bernanke's actions don't eliminate the liquidity premium and create other problems.
I agree. A problem in the present system is the way money is distributed and managed.


That makes perfect sense.
The problem is that we can't reach the point where nobody borrows because there's no capital to invest in. Before reaching that point we reach the point where nobody lends, because holders can make more profit from their liquidity than what they could get from borrowers.
That point, even with no growth, is well above 0% (2%, 3%?).

Money is a product because it produces a service. Just like a bus ticket allows me to take the bus, money allows me to trade with other people. Money is just a product. The fact that the product raises from social interaction as a kind of implied contract or agreement does not change the fact that money is a product.


No exactly with all the rest, but yeah, there are level of substitution.


Depends on the system. If you mean in the present monetary system, no, money is not artificially scarce (except in some puntual moments), the problem is the distribution and management.


Well, the Fed has the federal fund rate at 0 right now... The thing is that the yields of nothing never get to 0. Its a tendency.


See, this is where you have it wrong. Money produces a service of very important value. It allows people to trade (avoiding barter). This is an incredible service that I think you take for granted, but without it developed human civilizations could not exist.


I was assuming that a working currency changes to Freicoin system. If it has to start from zero, I dont think it would be widely adopted, maybe only by ideology. And in case it was adopted by ideology competition would end up taking over.


Maybe I have the system wrong, but monetizes a service or a product. If I give you a product, now I have credit with you at Ripple. Now I can use that credit with someone that thinks you are trustworthy. Well, yeah, you are monetizing the debt. Its still fine. There is nothing wrong on trading the debts.


Youll have to be more specific. The list is huge.


See above.


Actually no. The interest are not mantained artificially high. The problem in the present system is the way money is distributed and managed. Again, the Fed has the fed fund rate at 0%.


I think you are getting it upside down. Money produces a yield because there are people willing to borrow it. If nobody borrows money does not produce interest.

Now if there are no real world projects that are profitable at a certain interest rate, nobody will borrow. Therefore money will yield absolutely nothing. What savers will do (through the financial system) is lower interest rates until they find someone willing to borrow, meaning that the yield of capital will be higher than the interest of money. Does that makes sense?