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> inflation... shrinks debts Generally interest rates negotiated between lender and borrower take expected (or even actual) inflation into account, so that onl

> inflation... shrinks debts Generally interest rates negotiated between lender and borrower take expected (or even actual) inflation into account, so that only works when inflation runs well above expectations, or interest rates are artificially suppressed through subsidized lending. > incentive not to rent seek In the literal sense I'm not sure this is the case either. Inflation drives up the value of income-yielding assets, which is why people are scrambling to buy real estate and stocks. > incentive not to hold money This is also questionable, because making money a hot potato drives people into hoarding other things like gold and then bartering with them (defeating the purpose of money), and investing in highly speculative assets like, err, Evergrande.

Ericson2314 5y ago
> Generally interest rates negotiated between lender and borrower take expected (or even actual) inflation into account, so that only works when inflation runs well above expectations, or interest rates are artificially suppressed through subsidized lending. Hold up. You are correct in that demurrage does not affect the spread between loan rates and the "risk free rates. But that does not mean the absolute rates of interest are neutral! Consider, if money halves annually, but the loan obligation is 55% (-45% interest), I cannot just sit on my loan and get richer. But I can run a very unprofitable business and still pay back my loan! From a financial standpoint, you might say "no you hold up, what's 'profitable' mean now?" And financially, yes, one would wonder. But there still is intended to be price stability, which means roughly that a steady state business should still be running roughly break-even. (You could still do a the Sraffa or Leontief input-output stuff too.) From a quantity of money standpoint, less money ==> no price stability, so the above is a contradiction! But money should be increasingly injected into the system too. Basically at the end of the day, this is a surplus recycling mechanism to try to create a financial steady state corresponding to a real world steady state, so leverage is only needed for actual societal-self-modification. I wish I could explain/understand better. Hopefully I will end up taking a class with these things. > This is also questionable, because making money a hot potato drives people into hoarding other things like gold and then bartering with them (defeating the purpose of money), and investing in highly speculative assets like, err, Evergrande. Yes, that ways Keynes's critique in the end. The question is whether the state is strong enough to just enforce that debts must be payable in the demurring currency. For Keynes the answer is no, but he probably would have said the same thing about pure Fiat currency. Looking at the Russia sanctions, Chinese social credit system, etc. I think it's easy to argue "yes" today.

Ericson2314 5y ago

> Generally interest rates negotiated between lender and borrower take expected (or even actual) inflation into account, so that only works when inflation runs well above expectations, or interest rates are artificially suppressed through subsidized lending. Hold up. You are correct in that demurrage does not affect the spread between loan rates and the "risk free rates. But that does not mean the absolute rates of interest are neutral! Consider, if money halves annually, but the loan obligation is 55% (-45% interest), I cannot just sit on my loan and get richer. But I can run a very unprofitable business and still pay back my loan! From a financial standpoint, you might say "no you hold up, what's 'profitable' mean now?" And financially, yes, one would wonder. But there still is intended to be price stability, which means roughly that a steady state business should still be running roughly break-even. (You could still do a the Sraffa or Leontief input-output stuff too.) From a quantity of money standpoint, less money ==> no price stability, so the above is a contradiction! But money should be increasingly injected into the system too. Basically at the end of the day, this is a surplus recycling mechanism to try to create a financial steady state corresponding to a real world steady state, so leverage is only needed for actual societal-self-modification. I wish I could explain/understand better. Hopefully I will end up taking a class with these things. > This is also questionable, because making money a hot potato drives people into hoarding other things like gold and then bartering with them (defeating the purpose of money), and investing in highly speculative assets like, err, Evergrande. Yes, that ways Keynes's critique in the end. The question is whether the state is strong enough to just enforce that debts must be payable in the demurring currency. For Keynes the answer is no, but he probably would have said the same thing about pure Fiat currency. Looking at the Russia sanctions, Chinese social credit system, etc. I think it's easy to argue "yes" today.