The phenomenon of interest is at the heart of Silvio Gesell’s diagnosis of our economic problems, as well as his prescription for their solution. However the word “interest” itself is problematic. As it is typically used, it is somewhat vague and ill-defined. In order for it to be a useful concept for the purposes of understanding how the economy works, we need to take the time to arrive at a more precise, scientific definition of the word. Otherwise we will end up hopelessly lost in analytical confusion that ultimately boil down to semantics.
First of all, I must say that I have huge respect for you, I really admire your work. However, this time I do not share the same opinion with you.
Gesell described interest as a plaguespot of an economy and I think he meant that we need to completely eliminate it.
“Free-Money, that is to say, money free to circulate, money free from the anomaly of interest.” (p. 119)
Your division and explanation open doors to unearned income.
3- expected inflation) In one of your previous articles, you said that inflation is different from demurrage because it is inconsistent and unpredictable. So how borrowers and lenders can precisely decide expected inflation and deflation? The decided rate will always be different from the occurring rate. Therefore usury will be always there.
Also, “The currency office will not be dormant like our present monetary administration which with indolent fatism expects the advantage of swindlers, speculators, and usurers; it will intervene decisively to establish a fixed general level of prices, thereby protecting honest trade and industry” (p. 123)
2- risk premium) Since it is not possible to decide which part of money contains a risk premium and which part contains pure interest, I think it should be illegal to demand all kinds of excesses from the debts. In order to earn risk premium people must seek to invest in real business (e.g. starting their own company or making a partnership etc.). Higher risk must offer higher dividends but not interest. (briefly, the main difference between these two: the company pays dividends if there is a profit but interest must be paid regardless of all scenarios.)
4- Administrative costs) It might be legit to demand this cost however, it should not be a ratio that limitlessly grows with the amount like interest. But it should be a pre-decided fixed rate.
So one might say what would be the point of lending money if it is a 1:1 ratio payment? The lender will avoid the deprecation of his money with demurrage. (Please remember the story of Robinson Crusoe by Silvio Gesell.)
Hello Mr. Sidman,
First of all, I must say that I have huge respect for you, I really admire your work. However, this time I do not share the same opinion with you.
Gesell described interest as a plaguespot of an economy and I think he meant that we need to completely eliminate it.
“Free-Money, that is to say, money free to circulate, money free from the anomaly of interest.” (p. 119)
Your division and explanation open doors to unearned income.
3- expected inflation) In one of your previous articles, you said that inflation is different from demurrage because it is inconsistent and unpredictable. So how borrowers and lenders can precisely decide expected inflation and deflation? The decided rate will always be different from the occurring rate. Therefore usury will be always there.
Also, “The currency office will not be dormant like our present monetary administration which with indolent fatism expects the advantage of swindlers, speculators, and usurers; it will intervene decisively to establish a fixed general level of prices, thereby protecting honest trade and industry” (p. 123)
2- risk premium) Since it is not possible to decide which part of money contains a risk premium and which part contains pure interest, I think it should be illegal to demand all kinds of excesses from the debts. In order to earn risk premium people must seek to invest in real business (e.g. starting their own company or making a partnership etc.). Higher risk must offer higher dividends but not interest. (briefly, the main difference between these two: the company pays dividends if there is a profit but interest must be paid regardless of all scenarios.)
4- Administrative costs) It might be legit to demand this cost however, it should not be a ratio that limitlessly grows with the amount like interest. But it should be a pre-decided fixed rate.
So one might say what would be the point of lending money if it is a 1:1 ratio payment? The lender will avoid the deprecation of his money with demurrage. (Please remember the story of Robinson Crusoe by Silvio Gesell.)