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You fail to understand a basic economic principle: resources are not unlimited. It would be nice if we could distribute income in the form of interest-free loans, but doing so would come at the cost of someone or something. You have to understand that the interest rate acts a pricing signal. It says that I am willing and able to give up a certain amount of resources because the opportunity cost of selling them to you at such a price is less than or equal to the benefit of trade. If I give them to you for free -- or give them to the government to give to you -- then I will not even be producing a normal profit (the point at which I am receiving just enough benefit to cover all of my opportunity and explicit costs).
Quiet!
You only get one pair of clothes. And they'll be grey.
I don't think there is anything wrong with interest / renting. However the issue is the game is rigged. For instance, why is your mortgage interest tax deductible? All that does is essentially use the tax payer to partially pay for people's mortgage interest - and only in special cases IE when it is a big bank.
To answer the above replies, I consider myself an Economic Atheist - the "science" of econmics is no different than religion in my mind - something I don't believe in. So yes, not only do I not understand economics, I don't believe in it. It's just a bunch of rich old men that sit around justifying a few super-rich in a sea of poor, plain and simple.
But to put my post in proper context, I'm exploring "alternative" economic systems for the purpose of writing a science fiction novel, not as a political statement. I suppose there aren't too many "free thinkers" in this forum, at least not so far...lol.
And besides, anyone ever heard of the FED, who controls interest rates simply by fiat? It's really all about control - them against us. Someday, the "us" will win out against "them" - I can only hope I'm lucky enough to see that in my lifetime.
You're writing fiction. So the answer to your question is yes.
In the real world, the answer to your question rests solely with the lender. Lenders aren't required to charge interest. The issue is what will motivate someone to lend. If there is nothing simple such as the monetary gain from interest, then the motivation has to be something greater. Great challenge for a writer.
You're writing fiction. So the answer to your question is yes.
In the real world, the answer to your question rests solely with the lender. Lenders aren't required to charge interest. The issue is what will motivate someone to lend. If there is nothing simple such as the monetary gain from interest, then the motivation has to be something greater. Great challenge for a writer.
FYI. This isn't an economic question.
Of course it's an economic question. And the reason to create money de novo centrally without debt or interest would be for the 'greater good', whatever that might be. I don't know if it would be. Banking might no longer be a private enterprise.
Of course it's an economic question. And the reason to create money de novo centrally without debt or interest would be for the 'greater good', whatever that might be. I don't know if it would be. Banking might no longer be a private enterprise.
No, it's not an economic question. The OP is writing fiction. He/she can create a fictional world that has fictional rules. For all we know, in the OP's fictional world the reasons to lend without interest could be selfish, evil, maleficent, etc. Maybe the lender is trying to control people. In facts, banks don't even have to be involved. Ever hear of peer to peer lending?
Those of wealth have money. They got their money by either inheriting it or working very hard for it. Someone worked hard for the inheritance years prior.
If a wealthy person wishes to grow their wealth they invest their money in some fashion. Investment usually means a return on the money invested. It's like gambling, you have some skin in the game, and returns are your reward. Does one put in 40 hrs a week at the salt mill for the fun of it? Not likely.
So it goes with investments. Unearned income is commonly known as passive income and everyone should strive to have such. If no one invested we would be hunters/gatherers rather than industrial. I don't understand the concept of 'something for nothing' unless it be a friend/family member gifting one.
Wealthy people do not invest in business to create jobs, they do so to make a profit. Profit is not defined as 'commonly created wealth' and I doubt ever will. That will never come to be as people will cease to invest in anything.
A few posting here must be somewhat soured by some financial dealing in their lives or they wouldn't have such strong feelings against how wealth grows and money changes hands. The want for governing bodies to have control over your wealth is putting yourself on a road to ruin as any governing body will take your funds and never look back.
It is simple, reclaim "economic rent" and "unearned income". Use this to pay for all public services. Commonly created wealth pays for common services. Very sensible - very simple. Economic rent confuses many. It is where there is no enterprise and or cost of production. In short someone else made the wealth, which invariably is the community - commonly created wealth.
Then the existing money system can continue. Of course reclaiming commonly created wealth does not get rid of a bad banking system, a bad planning system, etc. But it is one hell of a great base to come from providing a stable economic base that eliminates boom and busts and encourages enterprise. If too much "economic rent" and "unearned income" is reclaimed for public use, then this can be given back in the form of a Citizens Dividend.
Like Great Britain tried in the days of "Half-Baked Harold" Wilson and his groupies in the Lay-Boor Party's ascendancy? Before a brave, and dignified woman named Thatcher took out the trash and got things moving again!
I'm certainly no economist ... but I think the better question is whether or not we could come up with alternatives to the current system, while still preserving the incentive to lend money?
So many business projects out there are just far too big and costly to undertake without the ability to borrow a large sum of money to get them going. (For example, take cellphones... The cellular infrastructure was massively expensive to deploy, and wasn't predicted to turn a profit for many years of operation.)
How would you convince others to lend you that kind of money, if those people didn't have some financial incentive to do so?
I think the Federal Reserve clearly has a broken system in place, and our currency survives on a combination of blind faith and manipulation. But that said, I don't really see the basic concept of interest on money being a "root evil"?
We've seen at least a few experiments in "lending by community" with such web sites as Prosper.com, which I think were interesting. (Basically, you let people post messages explaining their financial lending needs and details of how they planned to repay the debt. Then, others on the site could bid to loan certain dollar amounts at varied interest rates. When enough people agreed to lend money so it reached the total being asked for, the loan was considered "filled" -- and additional bids after that would simply push down the interest rate until the "lending auction" closed.)
I'd say Prosper was generally more of a failure than a success, but primarily because it didn't really provide money lenders with enough ability to go after those who defaulted on their loan obligations. Especially when a loan was filled with 50 or 60 people, each putting in a small portion of the total value of the loan -- collections were too hard to pursue.
I like your posts a lot, but economics IS a science, just a poorly understood and squishy one. Still, there are empirical data points, there are models of behavior both observed and projected, and basically everything that makes one thing a science makes economics a science.
It's just that, again, the science is more poorly understood than most. This is because a functioning model has to specify so many variables from so many other scientific fields (material resources and hard science, weather, behavioral psychology and neuroscience, spending habits, and more things than could be listed in 100 pages). It's more like theoretical physics in the late 19th or early 20th century than it is modern agricultural biology or semiconductor technology.
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