To be fair to the other thread, I'll start a new one:

there's a reason that economics is often referred to as a "black art".

This following may interest some...

Every dollar issued, is a dollar owed. To make things more complicated, every dollar owed has interest owed on top of it. To pay the interest as well (and avoid your assets being taken back from you), you need to find more money than was actually issued. I call it a domino-effect of usury. This is why some people perceive 'money' as the root of all evil, but it is not the money itself.

The Lender, in this example, doesn't have or doesn't want to loan tangible assets (or services) to be traded. Instead, they take advantage of a privilege which is not awarded to the rest of the community. But rather than calling it 'counterfeit', they call it 'credit'. Left unchecked, the Lender, theoretically, can eventually claim ownership of everything. The 'elegance' of this system, however, is that the Lender does not have to micro-manage everybody. People will "Render unto [Lender]" autonomously.

Taxes are a different matter, yet can become just as insidious.

Because (currently) deflation will always be greater than inflation, more loans/extensions of credit are issued to keep the economy running. This is the "unsustainable" cycle, rarely talked about openly.

So, how do you remedy this domino-effect of usury?

It would require the Lender to demand less in return than it issued. Before you shout "That's impossible!", keep in mind that we are taking about money-created-from-nothing also known to the Lender as "credit". It would still be a mutually beneficial financial arrangement, but there would have to be strict conditions applied to prevent such a system from being taken advantage of. (Not that the current system isn't already being taken advantage of by the Lender.)

It's not a one-stop solution to everything, but it would be a very good start.

Ethically, 'odious' debt ought to be considered for forgiveness.

Email your congress(wo)man.

Did anyone read all that? Oh, they didn't? :(

I was saddened to see my eloquent post superseded seconds after I posted it.

I probably can't stress enough the benefits of the suggestion mentioned above in my previous post.

I'm not trying to sound 'Utopian' here. It is a positive first step toward economic stability (and possibly environmental stability).

">100% Debt" is being sold as a good thing - your instincts probably say otherwise. That's the kind of deal that is detrimental to your wealth. It's like a black hole of finances.

It may be difficult to re-regulate "insatiable-greed" but an effort to try, must be made.

Being able to 'own' money (rather than always 'owing' it) would reduce the need for 'artificial' occupations (i.e. jobs that must be created for the sole purpose of providing an income) and provide an opportunity to allow a voluntary reduction in working hours without sacrificing an affordability of the cost-of-living just as automation 'naturally'/gradually takes over workload & work duties.

Feel free to copy and paste in your email to your representative(s) :wink: If you trust me enough to do that for you, then trust me when I say your communique would be far more influential/powerful than one sent by myself.

Remember:

It's easy to be indifferent when you're financially sitting pretty, until the negative domino-effect becomes noticeable on a large scale. Please don't hesitate to message your representatives about the issues I have mentioned. (I promise not to hold my breath;-)

Please feel free to ask me a related question or try to stump the logic of my argument.

You haven't covered the "why".

1. Why is a credit-based economy unsustainable when it's been working so well the past few decades?

2. Why is debt a problem?

3. Why would a lender ever agree to that idea?

4. Why should we regulate usury instead of letting the free market handle it?

Oh, no reason. :D

1. It's working "well" depending on who you ask. Also, "credit" would still exist in that scenario.

2. There would still be debt, with the key difference being;

a) there would be less of it,

b) 100% repayment would finally be possible

c) and you'll have money left over.

3. Lenders wouldn't voluntarily reduce their profit margin, but they are willing to comply with the law.

4. The free market would still be free in that scenario.

1. Credit relies on lenders, I'd think most lenders would get cold feet on this.

2. But why? Why do we need to pay down the debt? Why do we need less of it, and why would we want extra money left over?

3. But having a negative interest rate would kill lenders, they wouldn't comply with the law, they'd just file for bankruptcy after their stocks plummet.

4. Not really, you're demanding regulation which impedes the free market.

I'm not aware of any area of capitalism that is not regulated. If there is; you'll have to let me know.

Regarding debt as opposed to not having debt, which would you prefer for yourself? Which would you prefer for businesses? Which would you prefer for the Govt. which demands taxes of you? Asking me "Why be debt-free?" is like asking me "Why be wealthy?" - I realize you might just be making fun.

"Negative interest rate" refers to something else.

I made a hint about a 'privilege' in one of my posts (above). It is not a privilege that the average person has. It is a financial-institution privilege. I truncated/condensed that paragraph when perhaps I should have expanded it. I'll try to find/write a different explanation in the meantime.

Regulation is not boolean. What you want to do is regulate interest ceilings. Lenders (and their shareholders) will leave the market if that's the case.

I'd prefer to not have debt, but that's unrealistic. At the scale of the government, I prefer them to have debt because we're a debt-based economy. If we didn't have debt, I'd demand we spend more because we have the opportunity to, and there's investments that are more important than debt.

Credit is important for economies for the same reason currency is important.

Currency handles the problem of simultaneous values and simultaneous needs. The farmer has a bunch of chickens and eggs, but wants to buy a car. As goods neither can be easily satisfied: the farmer could not reasonably turn over $20,000 worth of chickens and eggs at once, and the car dealer has no use for it. Currency allows sell goods or services in one place for an exchangeable item, then when enough of those items are accumulated, turn over the exchangeable item for another good or service.

Credit takes this to another level. The person does not need to have accumulated all the money right there, nor do they need to turn over the funds instantly. The promise to deliver the funds within 10 days, or 30 days, is generally enough. Credit tools like checks and credit cards mean the individual does not need to walk around with $20,000 in cash to buy the vehicle, and if this were necessary anyone going to and from an auto dealership would fear getting mugged.

Longer-term credit takes it farther still. The longer the credit terms the more costly it is, but without it, it is unlikely that buildings could be built and companies could be founded because the initial costs are typically far more expensive than an individual is likely to have at any particular time.

As for lending laws, the are important. Ages ago when everyone in the town knew everyone else, the townsfolk knew who was good for payment and who was not. The grocer could easily extend credit to a familiar face, but a stranger passing through town needed to pay cash. Society is large and it is unlikely any particular group knows any other group, so credit-reporting agencies ask for details about people's credit history, process it, and offer it back as credit scores. Historically a small amount of bad information could destroy someone's ability to obtain credit, so regulations were created to ensure histories were kept fair, people could challenge inaccuracies, and if credit was denied the individual could have an opportunity to review the credit records for accuracy.

Most locations have laws about predatory practices, but some people are desperate for money for various reasons and may have real needs for credit but would otherwise not have it available. This is a difficult area to balance. Sadly, some people in society need to be protected from themselves, but those protections need to happen without harming those who don't need protection. Back in small town days everyone knew who those people were who were constantly trying to mooch off society, who would try to get loans far beyond what they could ever repay. They could tell the difference between the person always scamming for money and the farmer who was reliable but had a sudden need outside the norm. The people still exist but larger society is less able to handle these except through restrictive rules. Fortunately most of these rules can be worked around with paperwork and simple legal maneuverings so they help protect those needing protection without harming those with more realistic needs.

Laws regarding fraud are important, both as a protection for the consumer against fraud by lenders and protections for lenders against fraud by consumers. Many credit laws are aimed at stopping crime and fraud. Pawn shops typically must have a "police hold" on items in case the items were stolen, auto loans and home loans are generally required to perform title searches and lien searches to ensure the property is actually owned by those who would use it as collateral. Lenders are required to provide documentation about financial health so customers can ensure the bank is financially sound. And so on.

Short-term debt is the grease for the economy. If short-term debt is not available it is very difficult for transactions to move. The larger the transactions, the more difficult it is to move without short-term debt. Long term debt enables the moving of very large pieces within the economy.

Well there is also the notion of Islamic Banking: https://en.wikipedia.org/wiki/Islamic_banking_and_finance which does seem to work at least. It's just something I read about which is sort of interesting and I'm not too sure how it would work in practice. The basic idea is that the notion of a lender being able to claim ownership/taking interest is not directly allowed.

I hope this example clarifies (please bare with the oversimplification):

Lender $0

Non-Lender $0

The Lender "credits" the Non-Lender with $100, but the Lender expects $110 in return.

In this deal, the Lender is overvaluing its contribution and the Non-Lender is undervaluing its contribution.

You probably want to scream at the Non-Lender not to accept those terms. (too bad the Non-Lender cannot hear your counsel)

Any amount above zero returned to the Lender is profit, since it started with nothing.

The Non-Lender is stuck in an endless cycle of being 10% in debt.

-

Suppose the Lender only asked for an equal amount in return, 100%, again this only benefits the Lender. The Non-Lender, believing that it is unable to create credit of its own, will always be beholden unto the Lender.

-

Suppose the Lender only asked for 99% in return. Now money can stay in this economy and The Lender has made a $99 profit instead of a $110 profit. The Non-Lender has made a profit of $1.

-

Lender $0

Business A $0

Business B $0

The Lender will "credit" all businesses with $100 and expect a 110% return. Business A may do work for Business B for $10 and become debt free. Business B will need an extension of credit or go bankrupt. Business A may decide to also become a 'lender' at this point, borrowing from the Lender to loan money to Business B, forcing Business B to endless borrow from one lender to pay the other, not realizing that the total amount of money is actually all being borrowed from the original/central Lender.

Instead, if the Lender only demanded 99% in return, the Lender would make a $198 profit and money can stay in the economy.

--

I hope this gives you some idea as to what is taking place in the economy today and the potential benefits that could take place.

Under-100% repayment "inflation" loans would include limits, so as not to be abused.

Just because I might have missed something from the original thread:

What is the Lender exactly in your scenario? Is he able to "print money" (or in more general terms, create value from thin air)?

Because your calculations make me think he is. Else he would sit at -100$ when lending someone 100$.

Did you adjust for the inflation caused by injecting additional money into the system? Or do you have a theory on how to prevent that effect (which would mean that as soon as 100$ are injected into the system, EVERYONE just lost some cents on the 100$ they currently hold... meaning that unless there is a deflation going on, you will most likely just exchange money already in the system (thus getting -100$ when lending 100$) instead of inserting new money into it, even if you as a lender would have the ability to do so)?

What is the ultimate goal of your proposed new system (which I do like on an ideological level)? To lower the debt that currently drives a lot of stuff?

Are you sure that this will only make things better? How?

If the ultimate goal is to stop the "upward movement" of money, with the rich becoming richer and the poor becoming poorer... IDK if this is really a good idea. It might not hurt, but will it help?

Lets see how it could help:

a) If people are less likely to get credit because credits are not the insane money makers for financial institutes anymore they are today, they might START LIVING WITHIN THE CAPABILITIES OF THEIR OWN FINANCIAL SITUATION! Instead of trying to make up for their lacking finances with debt, trying to live in (relative) luxury today, forgetting that the payday will come later.

The easiest way to make the richer even richer has always been to exploit the stupid. This might close one avenue on how the stupid are exploited today. They might not appreciate it though (at least not until their "credit day dream bubble" bursts)....

b) The few transactions of lending money and credit going on would be not for profit anymore... which, in my book, is always a good thing. Investement should be driven by other factors than profit, else we have all the broken schemes going on again that led to the last financial crisis.

If you invest into a company because you think that the services they develop could be helping your company grow in the future, that is real win-win investment. If you can get a small profit out of it, there is nothing to say against it of course. But if that profit is the only driver behind your investment, we get all kind of weird things going on again.

Big Profits always lead to shortterm thinking... small or nonexistant profits could lead to stagnation... or, maybe, to real longterm thinking in some cases.

I think, before any such utopys could become a reality though, our current financial system needs to go. Which is actually currently in a phase of shifting. That MIGHT change some things that currently seem to be set in stone. I predict most currently big financial institutes will become very minor players in 10-20 years, and some players in the tech industry will replace them.

Why? Because most big banks and traders never really did the shift to the new digital realities, nor do they understand the new realities. Even today, most bankers and traders could easely be replaced by algorithms and computers. They could be outsourced to India... given how much many bankers understand of finances (which is sometimes really poor... most of them do NOT have a PhD in economics... and it seems at least SOME have quite the opposite of that), that is actually quite viable.

Instead, even 20 years after the first wave of tech outsourcing proved that outsourcing at least in this industry does the opposite of improving quality while not lowering cost, the outsourcing is going on year after year. Cost cutting is mostly affecting IT as far as I can tell.

(Note: I am not saying outsourcing CANNOT work. Again, if you have competent people making the decisions on WHAT to outsource to WHOM and how to handle COMMUNICATION and PAYMENT, it might actually work out well... but then again, you need people competent in IT to make these decisions...)

Financial Institutes still seem to cling to the old notion that "money" needs to be their core competency, while IT is just a needed evil. I predict that Google, MS, Apple, Facebook and others will prove them wrong in the next few years.

I also predict that most big financial institutes will not be able to fight back. The important tech startups in the financial sector will be bought up by the likes of Google way before banks and traders will have noticed their importance... because they lack the competency in tech. The financial big shots themselves will not be able to advance their tech fast enough to even keep the distance... because they again lack the competency in tech.

Big financial institutes have been so focused on cost cutting and outsourcing IT and doing all kind of moot projects hoping for a magical bullet that would keep them relevant in these new times that they are less capable than ever to keep up with the new challengers entering their sector.

I am undecided if its a good or a bad thing.

There's a solution to the dollar/loan/interest problem. Incidentially, just yesterday, I've been offered a great opportunity to get early access to a new crypto currency. Something like bitcoin, only less shady, less nerdy, more respectable, and suitable for the mass market. You can invest as much as you like, but even as little as $100 and turn these into $1000 in short time. But the best thing is, you have a currency that is free of the troubles of dollars, isn't that great? To add to the good stuff, they will do splits regularly, and at every split your amount of money doubles. So, I suggest you put all your money into that. (You might be inclined to believe that I'm joking, but no... that's really what I've been offered.)

There's a solution to the dollar/loan/interest problem. Incidentially, just yesterday, I've been offered a great opportunity to get early access to a new crypto currency. Something like bitcoin, only less shady, less nerdy, more respectable, and suitable for the mass market. You can invest as much as you like, but even as little as $100 and turn these into $1000 in short time. But the best thing is, you have a currency that is free of the troubles of dollars, isn't that great? To add to the good stuff, they will do splits regularly, and at every split your amount of money doubles. So, I suggest you put all your money into that. (You might be inclined to believe that I'm joking, but no... that's really what I've been offered.)

Sarcasm? Or talking about a real offer you received, but being Sarcastic about it?

If not, can you elaborate more on how this thing should work? Because:

1) All we can go by currently is that you mentioned "Bitcoin"... if it should work anything like bitcoin did to "turn 100$ into 1000$", you better don't waste your time and money on it. It worked with bitcoin because it was new. It worked for people who got in early, invested big (into mining rigs and/or actual bitcoins) and stayed in right up to before the whole bubble bursted. That might happen again to some lesser degree with other cryptocurrencies... but don't rely on it.

2) I would never, ever, EVER invest a single dollar into something I don't understand to some degree myself, and expect to make profit with it. I am no big fan of Warren Buffet, but this quote of his, "Never invest in what you don't understand" makes so much sense to me. A lot of people would have prevented huge losses if they would have taken the time to analyze their investments.

3) If somebody tells you he can turn your 100$ into 102$ I will totally believe that. If he wants to turn it into 120$, I will ask about the risk. Still totally possible. If he wants to turn it into 200$ I would start to ask more questions. That starts to sound fishy.

Now, as to the 1000% increase....