Topic: The debt based Economy - page 2. (Read 671 times)

In terms of development to advance a company, there is no way that can be done if you do not have the capital to expand. debt is capital to make economic improvements in order to run the wheels of production by making a profit and being able to pay debts. there's nothing wrong with getting into debt for good and it's used to being done and it's not a strange thing in the economy.

Money is a manmade construct and it doesn’t exist except as an arbitrary concept. There is no such thing as a medium of exchange in nature, it has been created as a necessity to live in an organized society as a means of making cooperation easier. But as a made up construct, the idea that money created out of debt is bad is false. There’s nothing inherently bad about that. Deflationary currencies will never be the future. They’re too restrictive for a growing and well-functioning society. The money supply has to expand to accommodate a growing consumer base otherwise there is pressure on decreasing economic activity over time. There’s a reason we left the gold standard.

So if we change the system that money will be not Born from the debt?
What will be other way then?
And how it will be controlled how much money is given away to people to use it.


This Question is specially for those who is against this debt based economy?

You are right about DeFi. Decentralization has both benefits as well as drawbacks. At one side, DeFi allow us to create modelled economic functions like borrowing/lending, market operations, etc and commit the rules to blockchain via smart contracts so they work as defined no matter what. But at the same time, blockchain is heavily abused by spammers/scammers who create good-for-nothing contracts in order to earn quick bucks and there is no way to stop them because blockchain is decentralized.

In the future it might be better if the money is not from debt. Money may come from services performed, such as miners, who confirm every transaction and get the reward. and all of that is not controlled because of decentralization.

So if we change the system that money will be not Born from the debt?
What will be other way then?
And how it will be controlled how much money is given away to people to use it.
This Question is specially for those who is against this debt based economy?

For DeFi, which in reality, are only experimental cryptocurrency-play-things and glorified Ponzi Schemes, it's OK. But for actual central banking, and monetary issuance? I believe it just adds complexity, but with little added benefit.

Although, I'm not an economist, I'm just a pleb. Hahaha.

Most of the countries in the world have a debt-based economy, this can be a good thing if country have good governments too.
But the reality is that the corruption rate is quite high in various countries. This make debt-based economy comes at risk,
if the government is not good at managing state finances, the citizens who will become victims of course.

Let's go back in the past and just do barter. You pay what you have in exchange for the things that you are about to get food, water and other necessities. It's real-life trading of goods and services you have for another goods and services that you want.

But, I still can see that debt could start out with that kind of economy. Changing the system will require you tremendous resources and power. There's no coming back and this kind of economy will remain.

So if we change the system that money will be not Born from the debt?
What will be other way then?
And how it will be controlled how much money is given away to people to use it.

On this Rothbard wrote,
In contrast to directly used consumers' or producers' goods, money must have pre-existing prices on which to ground a demand. But the only way this can happen is by beginning with a useful commodity under barter, and then adding demand for a medium to the previous demand for direct use (e.g., for ornaments, in the case of gold). Thus government is powerless to create money for the economy; the process of the free market can only develop it.

Ok! Nice question! Being an Economics enthusiast, I have surely given thought to that in past. I have come up with a revolutionary although quite complicated idea. I have named it 'Weighted Layer Classification of Money'.

So under current Debt based economy, money can be generated out of thin air due to the working of 'money multiplier'. By keeping X amount in reserves, banks can further lend the money they received as deposits. This process continues till (1/reserve rate) rounds. In the end, if reserve rate is 10%, for every $100 there will be 100 * (1/10%) = $1000 money in the economy. It leads to inflation, fall in PPP, ever-increasing debts, high rates of interests and many other problems.

Under Weighted Layer Classification of Money, I suggest to have 3 to 5 layers of money. So rather than having one currency in the economy, I suggest to have 3 to 5 different currencies in the economy.

Under 3-Weighted Layers Classification,
-there will be one prime currency, let say, Dollar. The value of this currency will be floating.
-then there will be first secondary currency, let say Follar. The value of this currency will be fixed to 0.80 * Dollar.
-then there will be second secondary currency, let say Gollar. The value of this currency will be fixed to 0.60 * Dollar.

Banks can accept deposits in any of the three currencies. However, lending structure will be as following:

For every 1 Dollar received as deposit, bank can only lend 1 Follar.
For every 1 Follar received as deposit, bank can only lend 1 Gollar.
Banks cannot further lend the Gollars received as deposit.

Interest on Borrowings will be charged in same layer. So if bank lent loan in Follars, it can only charge interest in Follars.
Interest on Deposits will be paid in one-below layer. So if bank accepted deposits in Dollars, it has to pay interest in Follars except for Gollars.

Using this system, there will be a weighted control on how much money can be generated in economy plus borrowing activities can still be performed in economy. We cannot create zero-debt economy because debt is also a backbone of the economy. In the absence of debt structure, many ventures won't able to get launched which will seriously affect economy.

Actually, this is an overview of the model I proposed to a DeFi project which contacted me for a suggestion of a system for their lending/borrowing functionality. I thought this could be a good fit to this thread so I posted here. However, there is lot more technicality involved which I think is out of this thread's scope so I won't discuss.