Topic: I just created 100 pennies.. and loaned them out, you owe me 101 pennies….. - page 6. (Read 6041 times)

I also think it's interesting to understand the origin of interest. Before private property rights, say we live in a clan or a tribe or a feudal manor and we both produce grain. That is all we do. At the end of the year we combine our harvest and divide it accordingly. If I have a bad year that's ok because you might have a good year. All is well.

Introduce private property rights and now I own my farm and whatever I produce and you own yours as well. There now exists existential uncertainty that I could have a bad year and be worse off as a result - which didn't really exist before when everything was shared. So how do we mitigate this new risk? We produce and store a surplus of grain, so that given a bad year we can tap the surplus and be ok.

What happens if you have a particularly bad year and you deplete your surplus? You can come to me and ask to borrow some of my surplus. I will agree to this, but only with interest. Say I lend you 100 bushels, I require that back plus 10 more over the next few harvests. Why? Well it is not because I think you will default on your obligation. In these primitive times I could make you my bonded laborer or even have you killed. So what is it then that causes me to ask for interest on my loan to you? It is because if now I have a bad year, my surplus is smaller than it would have been if I hadn't given some to you. My existential risk has increased and that demands additional return to compensate.
Financial credit risk came along only later and this is simply a premium added above the base interest.

this is an important point that the vast majority of people on the boards are missing: the economy is a production engine. People catch and sell fish or make shoes or TVs or teach college etc.
Nobody yet gets paid in Bitcoin and if they do it is pegged to a dollar amount, say $100 a day in BTC.
Until people start producing things other than bitcoin (or altcoins) in Bitcoin-denominated contracts, it will remain NOT money.

Bitcoin is an economy insofar as it can be exchanged for goods but then those sellers mainly exchange them back to dollars or whatever. Even if somebody accepted bitcoin and then spent them in turn for something else, that producer bought the inputs for those goods in dollars so his costs (his liabilities) are in dollars, not bitcoin. Even bitcoin miners have to pay electricity and internet costs in dollars, so their profitability is measured in dollars.

This is a hurdle bitcoin will have to hop over before it can be anything but a speculative asset, digital commodity, or simple payment system.

100% of circulating money is debt.

If you can create 100 pennies, then you can create 100 more.  I catch some fish and sell it to you until my investment is paid off. 

Were now both better off

You can't borrow, you own all the pennies. No one else has any to loan you.

But they don't do it to enable banks to loan more money or to enable debtors to repay their debt...not explicitly

It's not possible until you create more pennies.

Is this supposed to get us thinking about the big bad evil banks? If so, your implication is misleading.

1. Invent governance, constitution and laws
2. Befriend elected government
3. Invent fractional reserve banking
4. Ask the government to print pennies whenever you fall short
5. profit

How about I pay you 100 and default on 1

Well its the most asked question when it comes to our beloved fiat, but it should be possible to resolve that issue.
When u have 100 pennies, one would assume that they have some value, and since all values are inter-changable, i wouldnt have to give you 100 pennies, but lets say 100 pennies and a service
in value of that 1 remaining penny and therefore complete my obligation.
I know this still doesnt explain where one could aquire all 101 coin, but since its impossible from start, it makes perfect sence.

cheers

Paul Krugman is getting a hard-on reading that^

I guess you had better stamp-out some more pennies! As the US Mint, they know how its done!

You think too positive, like 30% maybe if not less are educated about this, others just simply don't care.

I would fake 1 penny

opening a can of worms i see....

I expect by now, 50% of civilized citizen to know how money is just debt....

It's simple and we all know all central banks fed etc woks on this.

you would have to borrow some.
WE all know how the FED works here.

I just created 100 pennies and I loaned them out to you + interest… How is it possible for you to pay me the 101 pennies you now legally owe me if only 100 pennies are in circulation?