How the heck does anyone "pay you 20% interest" when the gold supply is only growing, on an aggregate basis, by 1-2%/year?
When you start talking about that fractional reserve stuff, then you're talking about creating debt-based currency. Which, by definition, becomes increasingly less and less gold-backed.
You can't just jack the velocity of gold to infinity, and create an environment in which interest exceeds that, on an aggregate basis, of that of the global supply of gold.
A very high velocity of money would result in interest rates trending towards 0% (ie: the gold changes hands so many times, and facilitates so much commerce, such that, a saver can make, and have loans repaid many times a year), whereas, a very low velocity of money would push interest rates towards precisely the expansion in the worldwide gold supply, ie: 1-2%/year.
This is what we're seeing right now in the economy; money velocity is falling, and with that fall, interest rates are rising dramatically. Government is desperately trying (and failing) to increase velocity, but they are largely being unsuccessful.
20% interest would only work, in a gold based scheme, when lending to an entity that has the ability to manufacture new gold, ie: through alchemy. 20% interest works in a fiat based scheme because new paper money can be printed up on demand from a printing press in the hands of certain entities.
Of course, certain types of loans would have different risk premia or discounts. Gold mines (or proxies thereof, in the commodities/mining sector), for instance, because they have the ability of producing new gold, would have a risk discount (they might be able to borrow at a negative rate of interest), while, for instance, the sandwich counter dude might pay a higher rate of interest. But the benchmark 'gold' rate could not sustainably exceed that of expansion in the gold supply.
When you start talking about that fractional reserve stuff, then you're talking about creating debt-based currency. Which, by definition, becomes increasingly less and less gold-backed.
You can't just jack the velocity of gold to infinity, and create an environment in which interest exceeds that, on an aggregate basis, of that of the global supply of gold.
A very high velocity of money would result in interest rates trending towards 0% (ie: the gold changes hands so many times, and facilitates so much commerce, such that, a saver can make, and have loans repaid many times a year), whereas, a very low velocity of money would push interest rates towards precisely the expansion in the worldwide gold supply, ie: 1-2%/year.
This is what we're seeing right now in the economy; money velocity is falling, and with that fall, interest rates are rising dramatically. Government is desperately trying (and failing) to increase velocity, but they are largely being unsuccessful.
20% interest would only work, in a gold based scheme, when lending to an entity that has the ability to manufacture new gold, ie: through alchemy. 20% interest works in a fiat based scheme because new paper money can be printed up on demand from a printing press in the hands of certain entities.
Of course, certain types of loans would have different risk premia or discounts. Gold mines (or proxies thereof, in the commodities/mining sector), for instance, because they have the ability of producing new gold, would have a risk discount (they might be able to borrow at a negative rate of interest), while, for instance, the sandwich counter dude might pay a higher rate of interest. But the benchmark 'gold' rate could not sustainably exceed that of expansion in the gold supply.
