Interest rates.

Quote from Cache Landing:

Slider,

I'm not tryin to be rude but you really should study finance and economics a bit and then rethink your "system".

In your system, the government determines and sets the cost of borrowing. If they set it at zero and lend freely, it encourages people to be incredibly aggressive in their borrowing. This is precisely what happened when the FED dropped rates to 1%. People overleveraged and we are now paying the price.

Anyway, government lending at 0% is entirely backed by the government's ability to tax. In order for the government to lend, it must have the money in the first place. If it prints money to lend then we realize inflation which you claimed was caused by the banks in your first post. It isn't caused by banks, it is caused by more money chasing fewer goods.

If it doesn't print money to lend, then it must borrow money, take money, or both. Allow me to elaborate.

It can borrow money from foreign nations. These nations aren't going to lend at 0% because they will expect something for their opportunity cost of not investing in their own nation. Since the g-ment is lending to me at 0% but still must pay a premium to the foreign nation, they must then tax the people to raise the extra cash. So the interest that I should've been paying is replaced by tax and everyone pays it.

OTOH, it can borrow from the people in the form of muni bonds, but the people aren't going to lend money to the g-ment for free because they are giving up the opportunity to invest elsewhere. So again the g-ment must tax in order to repay the purchasers of the bonds.

Or the g-ment can avoid borrowing all together and simply tax the people up front and then use that money to make loans at 0%. The is essentially callled communism. The government decides how much of my money I don't need, and how much of my money you do need, and then they force the transfer. Good for them because they don't go into debt and you still expand your business. Bad for me because I'm now lending money to you at 0% and lost all freedom to chose my own investment or grow my wealth. IOW, I'm forced into giving to (not investing in) your business because the g-ment thinks it is a good idea.
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I am not trying to be mean either but the actual problem is not that I did not go to economics it is that you have alot of preconceived notions because of the way you were taught about how interest works. You're ideas are clouding your way of thinking and making it seem much more complicated than it really is.

People do not decide how much they can borrow if they did economies would fall apart in a week. The debt problem of the private banks right now is their own fault by overextending themselves and giving out risky loans that should not have been made. When there is no interest borrowing would be no where near as risky as their would be less market fluctuations.

Inflation is caused when the interest a bank gives you is less than the inflation. When people realize their money will buy less tomorrow than today they invariably decide to trade it for something that holds its value better. When you take interest rates out of the equation the average inflation will not change much.

The best way to think of this type of system is that it is not money but barter notes that are very hard to counterfeit.

The only thing the government would have to do is make sure that there was enough barter notes to cover the goods it is meant to buy.

The government's role in lending would be to make sure the loan is not too risky and printing the notes.
 
I think what slider is asking is why most of the money circulated is some type of loan?

because global economy is based on leverage, specially america's

the more you are trusted the more leverage you get, america was trusted so they get higher leverage

get good connections and you will get tips on when to buy or sell, that is what leverage is for, it really makes the rich richer and sucks the f*ck out of the average person

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now he is asking why can't we have a system where no one can collect interest and so there are hardly any loans given to anyone, so basically no one gets leverage and so it is fair play

but slider, many would argue it is actually fair to give leverage to the person who has proven to be trustworthy, that way there is opportunity for him who proves himself reliable (actually for him who has good connections), yes and so that is how we build the land of opportunity
 
Loans could still be given to businessmen with experience just like now. The two things that would change would be no more interest and much less inflation in the market.

There was a period 2-5 years after the Great Depression when everyone was surprised that prices were actually going down. Say they worked a day and were able to buy a a dinner they were surprised a week later when it would buy them 2 dinners. This happened because we find more and more efficient ways to do things as time goes on.
It probably took an hour to can some peaches 100 years ago but now it would take 2 seconds. That should continually lead to cheaper prices over time but they are going up and the reason is the massive interest that is owed to the banks.

Today on T.V. they reported that a mans cost of living went up $4000 but his salary went up $1500 this is not an uncommon story right now. It makes no sense because things should get cheaper due to at least a small increase in efficiency.

When you consider the amount of money that private banks made off of everyone who bought a house you realize that it is insane to continue this way. A 30 year $200,000 costs $300,000 in interest. We work our whole lives to pay that off and the bank makes it by giving us some paper. If we default they still take our house the amount of risk verses the reward shows that this is a big scam. The only time they ever risk anything is when house prices goes down which has happened once the Great Depression other than that they go up on average.
 
No Slider,

the problem is that you are suggesting a world in which progress is very slow, while taking for granted a world in which progress has been quick. Your problem doesn't seem to be with the issuer of the currency or the currency itself, it seems that you have a problem with the fractional reserve system. I agree that there is a problem with this system, but not to the extent that I would eliminate it as you would.

Essentially, that is what you are talking about. Not the elimination of interest, but actually the elimination of fractional reserve lending. You should realize though, that even in the days of your beloved "greenback" there was fractional reserve lending. At the time it was 50% instead of the 10% required today. Increasing the fractional reserve requirement has the effect of slowing an economy down. In your example we would essentially increase it to 100% which makes rapid growth impossible.

So you are sitting here researching this topic and exchanging in dialogue on a computer/internet that wouldn't exist for another couple hundred years under your proposed barter system.
 
Quote from slider123456:

Loans could still be given to businessmen with experience just like now. The two things that would change would be no more interest and much less inflation in the market.
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You don't understand, there is no such thing as no more interest. Opportunity cost will be compensated for somehow. Generally, it is with taxes in your system. So which system is more fair, one in which the borrower pays interest, or one in which the public pays interest as tax?
 
Quote from Cache Landing:

No Slider,

the problem is that you are suggesting a world in which progress is very slow, while taking for granted a world in which progress has been quick. Your problem doesn't seem to be with the issuer of the currency or the currency itself, it seems that you have a problem with the fractional reserve system. I agree that there is a problem with this system, but not to the extent that I would eliminate it as you would.

Essentially, that is what you are talking about. Not the elimination of interest, but actually the elimination of fractional reserve lending. You should realize though, that even in the days of your beloved "greenback" there was fractional reserve lending. At the time it was 50% instead of the 10% required today. Increasing the fractional reserve requirement has the effect of slowing an economy down. In your example we would essentially increase it to 100% which makes rapid growth impossible.

So you are sitting here researching this topic and exchanging in dialogue on a computer/internet that wouldn't exist for another couple hundred years under your proposed barter system.
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I can guarantee you I would be much much happier in a slower system than having to work 2 hours extra every week that goes by to have the same quality of life. Our quality of life is worse now than it was 30 years ago. 30 years ago 1 man could support his wife and two kids easily now both parents have to work in order to get the same quality of life and it keeps getting worse. If the money the banks get stayed in our pckets that would rapidly reverse. As I pointed out above the banks make $300,000 dollars on a &200.000 loan half of our production goes to them. If we got rid of that interest we would only have to work 4 hours a day to pay of that house instead of 8 or we could work 8 and pay it off in half the time.
 
Quote from slider123456:

I can guarantee you I would be much much happier in a slower system than having to work 2 hours extra every week that goes by to have the same quality of life. Our quality of life is worse now than it was 30 years ago. 30 years ago 1 man could support his wife and two kids easily now both parents have to work in order to get the same quality of life and it keeps getting worse. If the money the banks get stayed in our pockets that would rapidly reverse. As I pointed out above the banks make $300,000 dollars on a 30 year $200.000 loan half of our production goes to them. If we got rid of that interest we would only have to work 4 hours a day to pay of that house instead of 8 or we could work 8 and pay it off in half the time.

I am not muslim but would strongly suspect that one of there civilizations was enslaved to interest like we are now and that is why the usury was put into the muslim religion
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Quote from slider123456:

I can guarantee you I would be much much happier in a slower system than having to work 2 hours extra every week that goes by to have the same quality of life.
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You would be much happier. Not me. You. You are willing to constrain the happiness of everyone on the planet to your own preference.

So not only are you unable to grasp the concept of opportunity cost (and instead cast it some sort of an evil conspiracy much like the primitive man would attribute thunder to the work of gods), you also seem to believe that how you would like to live is how the world will want to live.

Thank god your system hasn't a snowball of a chance of making any sense.
 
Quote from sjfan:

You would be much happier. Not me. You. You are willing to constrain the happiness of everyone on the planet to your own preference.

So not only are you unable to grasp the concept of opportunity cost (and instead cast it some sort of an evil conspiracy much like the primitive man would attribute thunder to the work of gods), you also seem to believe that how you would like to live is how the world will want to live.

Thank god your system hasn't a snowball of a chance of making any sense.
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You are telling me you would rather work longer and longer hours for the same quality of life then work less for the same quality of life or the same hours for increasing quality of life. You would rather give banks huge percentages of your income to provide a service you could get for a much much lower cost.

I do not believe most people on this planet want to work more and more hours every year for the same quality of life. This would not necessarily slow down our technological innovation and would most likely increase it It would be up to each individual what they wanted to do with their extra free time
There is no conspiracy theory go to a mortgage calculator and you will see $300,000 dollars in a 30 year $250,000 loan. If we did not pay interest all the money we have paid as interest would be in our economic system. Instead it is being lent back to us for us to pay interest on it again. Do you know how much money that would be in the history of this country? Do you think an efficient bartering system is worth that kind of money.
 
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