Topic: Insight: I used to think lending at interest was evil... - page 3. (Read 5191 times)

I just have a couple of small comments, molecular.

FRB with Bitcoin is technically possible, and there are examples where it occurred in the past (albeit unintentionally or as a result of fraud, and was very short lived). Merely, I argue, the empirical features of Bitcoin (form-invariance) make it less likely for FRB to be widespread and/or have an effect on the money supply.

Many Austrians argue that without credit expansion, the business of banking (intermediary between lenders and borrowers) would have the same profitability as any other business, which on average means the market rate of interest. Even if you hold the opinion that FRB does not necessarily violate property rights, bankers are still benefiting from a legal privilege. Normal people cannot perform credit expansion: the regulators would fine you (or worse). Even during the "freebanking era" in the USA in the 19th century, banks were regulated.

well, people borrow BTC for whatever reason, I don't know. See this thread for example https://bitcointalksearch.org/topic/hashkings-lendingdeposit-125-insured-all-ppt-accounts-closing-on-819-66802

Although not evil to lend BTC, people will not borrow BTC if they expect the value of BTC will rise, they tends to borrow the thing that is dropping in value

+1

How I used to think about lending at interest:

Taking a systemic view (nodes of a graph containing money with edges representing debt), lending at interest must over time concentrate the currency in the hands of a few (essentially one node in the end). I deducted: The rich will get richer, the poor will get poorer and concluded: lending at interest is evil.

I deemed this view of mine validated by observing the rich actually becoming richer and the poor becoming ever poorer.

What I overlooked:

There's risk involved in lending, namely the risk of the borrower defaulting. Therefore above does not necessarily hold true, but why does it still seem to be true?

Why is it still true (that the rich get richer)?

Well, for other reasons: Mainly because these "rich" are able to lend out money they don't even have in the first place, and maybe more importantly because they are being bailed out every time a borrower has problems.

Also because at least some of them are in the business of just simply ripping people off and are able to get away with it somehow.

What I think now:

Fractional reserve lending with a lender of last resort that will bail lenders out at the expense of all other parties using the currency in question is evil.

And: stealing peoples money/assets is evil.

What I'm getting at:

Since fractional reserve lending is not possible with bitcoin and there is certainly no lender of last resort who can just print up more money, bitcoin-based lending/borrowing is not evil.

The lender is exposed to the risk: in case of default he is parted of his money, he can't be a cry-baby but has to take it like a man and just suck it up.

In a "good money"-based economy, the market will adjust the price of money (interest rate) such that lending is barely profitable and will reflect market participants needs.

any comments/corrections?

EDIT: added some strikethrough after realizing frb was possible with bitcoin.