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I fail to understand how one could invest in anything without the concept of interest. Without the notion of investment, then you're limited to short-term supe

I fail to understand how one could invest in anything without the concept of interest. Without the notion of investment, then you're limited to short-term superficial things that you can do or build.

sigilis 3y ago
In the context of the system where the currency was used, financial investments were not safe. It was the Great Depression, the inflationary nature of currency at the time made the only long term non superficial things structures, land, and goods. In the end, the things people do and build are what money is for. It’s a medium of exchange and a store of value. If it fails at these things, the making grain to feed people or housing them still has intrinsic value. You just need a working medium of exchange to avoid having to use barter for everything. If people trusted the town’s scrip more than the national currency, then they would use that. Investment in such a system would be in real objects and the means to produce them. Assuming people still cooperate and will accept your weird scheduled devaluation currency, then industrial society could continue to function and may even thrive, given people are incentivized to spend money which is the definition of economic activity. Also, other financial instruments might not be affected. Shares of stock, for example, would be worth what people would pay for them. It’s just big piles of literal dollars that you should get rid of expeditiously.
lo_zamoyski 3y ago
If you’re talking about usury, then you have confused investment with lending. Lending money is not investment. When a bank gives you a loan, they aren’t investing in your house. They’re supposed to be helping you buy a house. Interest on a loan is theft as no value is being provided by the bank in return for that interest (as opposed to service fees for the labor of issuing a loan, for example). Some call capitalism state-sponsored usury. I’m not sure I’d go that far. But money is sterile, “barren metal”, as “The Merchant of Venice” calls it. It cannot multiply. Only labor multiplies value. Wrt the article, while the author does seem naive and no systematic thinking is demonstrated, you could store away valuable commodities, like gold. But it won’t breed for free. For more gold, you must work, or steal.
- JackeJR 3y ago
  Not sure I buy the interest is theft comment. Interest is paid for opportunity cost.
- antihipocrat 3y ago
  Lending money is an investment. You lend money with the expectation of getting more back over time (principal + interest). There is a risk that the borrower won't repay the loan, and this is priced in to the interest rate being charged.
- mgaunard 3y ago
  Let's say I have 1 million. I can use it for example to buy beer brewing equipment and a warehouse, which allows me to start a beer business which generates income. Or I can lend it to someone. But then I can't do my beer business and am losing that potential income source. If I don't get anything back from my lending, then clearly I'm losing out. You seem to be thinking that the fact there is a bank involved somehow changes things. It doesn't, a bank is just another private entity, albeit operating within a regulated framework. It doesn't make money out of thin air. Money it gives to you for your house is money that cannot be invested in other opportunities.
  - hgomersall 3y ago
    Creating money out of thin air is exactly what a bank does. It's basically the definition of a bank: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
    - mgaunard 3y ago
      A national/central/reserve bank is very different from a normal bank. To such a bank, national tender is actually pretty much a bond, and therefore they can issue more of it. No such bank sells mortgage products to retail customers.
      - 3y ago
wesleyd 3y ago
My mental model of historical/religious objections to usury (which in this context refers to _any_ interest at all), is it's the lack of shared downside that they hate. Presumably because without ways to escape the debt, interest turns into slavery [0]. Investment - in which the supplier of capital participates in the downside - has pretty much always been fine? (Taleb's "Skin in the game" talks about this a lot. _Great_ book.) The lack of shared downside is pretty much universally objectionable - nobody likes anybody getting something for nothing - and different societies deal with it differently. Some societies just flat out banned lending for interest. Most societies today allow lending, but have get-out clauses, like bankruptcy, to prevent de facto slavery. The US has particularly generous (to the debtor) bankruptcy laws, AIUI. Aside: Europeans are often horrified at the US's putative bankruptcy system for surprise medical bills, because they imagine bankruptcy is like it is in their country - where you lose everything, including even your home, you have basically no way of starting over, you can't be e.g. a company director for potentially years, and you carry a stigma for life, and even your kids might carry the stigma. Yes, the US's medical bankruptcy thing is pretty horrible, but bankruptcy in the US isn't anywhere _near_ as terrible as it is in e.g. Ireland. You likely won't lose your house; you're not going to starve; you can totally start over, there needn't be _any_ shame involved. Most debts will be just ... written off, some will be "restructured". It's very pragmatic, AIUI. (ICBW about all this, and I've no doubt there are horror stories, but I suspect they are very much the exception. Counterpoints welcome!) Still, most states in the US ban "usury" - "too much" interest. [0] Even societies that tolerated slavery didn't want it for "people like them".
imtringued 3y ago
Criticising interest itself is kind of meaningless. I agree with that, but if you think about It the interest rate has a tendency to go to zero on its own. Positive interest indicates that that the future economy will be larger if money is invested in the present. If you have an aging economy you can't expect the interest rate to be positive. So the argument should be in favour of complete capital markets with positive and negative interest. During a boom you expect positive rates and during a bust the rates would be negative.

I fail to understand how one could invest in anything without the concept of interest. Without the notion of investment, then you're limited to short-term superficial things that you can do or build.

sigilis 3y ago

In the context of the system where the currency was used, financial investments were not safe. It was the Great Depression, the inflationary nature of currency at the time made the only long term non superficial things structures, land, and goods. In the end, the things people do and build are what money is for. It’s a medium of exchange and a store of value. If it fails at these things, the making grain to feed people or housing them still has intrinsic value. You just need a working medium of exchange to avoid having to use barter for everything. If people trusted the town’s scrip more than the national currency, then they would use that. Investment in such a system would be in real objects and the means to produce them. Assuming people still cooperate and will accept your weird scheduled devaluation currency, then industrial society could continue to function and may even thrive, given people are incentivized to spend money which is the definition of economic activity. Also, other financial instruments might not be affected. Shares of stock, for example, would be worth what people would pay for them. It’s just big piles of literal dollars that you should get rid of expeditiously.

lo_zamoyski 3y ago

If you’re talking about usury, then you have confused investment with lending. Lending money is not investment. When a bank gives you a loan, they aren’t investing in your house. They’re supposed to be helping you buy a house. Interest on a loan is theft as no value is being provided by the bank in return for that interest (as opposed to service fees for the labor of issuing a loan, for example). Some call capitalism state-sponsored usury. I’m not sure I’d go that far. But money is sterile, “barren metal”, as “The Merchant of Venice” calls it. It cannot multiply. Only labor multiplies value. Wrt the article, while the author does seem naive and no systematic thinking is demonstrated, you could store away valuable commodities, like gold. But it won’t breed for free. For more gold, you must work, or steal.

JackeJR 3y ago
Not sure I buy the interest is theft comment. Interest is paid for opportunity cost.
antihipocrat 3y ago
Lending money is an investment. You lend money with the expectation of getting more back over time (principal + interest). There is a risk that the borrower won't repay the loan, and this is priced in to the interest rate being charged.
mgaunard 3y ago
Let's say I have 1 million. I can use it for example to buy beer brewing equipment and a warehouse, which allows me to start a beer business which generates income. Or I can lend it to someone. But then I can't do my beer business and am losing that potential income source. If I don't get anything back from my lending, then clearly I'm losing out. You seem to be thinking that the fact there is a bank involved somehow changes things. It doesn't, a bank is just another private entity, albeit operating within a regulated framework. It doesn't make money out of thin air. Money it gives to you for your house is money that cannot be invested in other opportunities.
- hgomersall 3y ago
  Creating money out of thin air is exactly what a bank does. It's basically the definition of a bank: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
  - mgaunard 3y ago
    A national/central/reserve bank is very different from a normal bank. To such a bank, national tender is actually pretty much a bond, and therefore they can issue more of it. No such bank sells mortgage products to retail customers.
    - 3y ago

wesleyd 3y ago

My mental model of historical/religious objections to usury (which in this context refers to _any_ interest at all), is it's the lack of shared downside that they hate. Presumably because without ways to escape the debt, interest turns into slavery [0]. Investment - in which the supplier of capital participates in the downside - has pretty much always been fine? (Taleb's "Skin in the game" talks about this a lot. _Great_ book.) The lack of shared downside is pretty much universally objectionable - nobody likes anybody getting something for nothing - and different societies deal with it differently. Some societies just flat out banned lending for interest. Most societies today allow lending, but have get-out clauses, like bankruptcy, to prevent de facto slavery. The US has particularly generous (to the debtor) bankruptcy laws, AIUI. Aside: Europeans are often horrified at the US's putative bankruptcy system for surprise medical bills, because they imagine bankruptcy is like it is in their country - where you lose everything, including even your home, you have basically no way of starting over, you can't be e.g. a company director for potentially years, and you carry a stigma for life, and even your kids might carry the stigma. Yes, the US's medical bankruptcy thing is pretty horrible, but bankruptcy in the US isn't anywhere _near_ as terrible as it is in e.g. Ireland. You likely won't lose your house; you're not going to starve; you can totally start over, there needn't be _any_ shame involved. Most debts will be just ... written off, some will be "restructured". It's very pragmatic, AIUI. (ICBW about all this, and I've no doubt there are horror stories, but I suspect they are very much the exception. Counterpoints welcome!) Still, most states in the US ban "usury" - "too much" interest. [0] Even societies that tolerated slavery didn't want it for "people like them".

imtringued 3y ago

Criticising interest itself is kind of meaningless. I agree with that, but if you think about It the interest rate has a tendency to go to zero on its own. Positive interest indicates that that the future economy will be larger if money is invested in the present. If you have an aging economy you can't expect the interest rate to be positive. So the argument should be in favour of complete capital markets with positive and negative interest. During a boom you expect positive rates and during a bust the rates would be negative.