Interest or not?

[W Jackson]

Hi

Some further thoughts:

Firstly:

Why no interest? Lets turn the question around - Why interest?

Correct me if I'm wrong - I have yet to become acquainted with an
economic theory (and some social) that does not work just as well, or
better, if we set interest=0 or inflation=interest.

As Ripple, or a system like Ripple, will one day redefine the way
banking is done - and interest is the major weakness of the existing
banking system:

Why build in interest from the start?

Secondly:

Ripple works around a certificate system. Existing systems determine the
identity of the party, but do not vouch for their credit worthiness.

A special web of trust type certificate system, vouching for
creditworthiness, would fit in with the decentralised objectives of
Ripple, and could be used to link nodes - similar to the existing web of
trust certificate systems.

regards William Jackson

=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
Scanned with Copfilter Version 0.83beta3a (ProxSMTP 1.4)
AntiVirus: ClamAV 0.88.4/3289 - Thu May 24 03:33:26 2007
by Markus Madlener @ http://www.copfilter.org

[Daniel Reeves]

To echo what Ryan has said about this before, it's not for Ripple to
dictate an interest rate.
It's up to you as a user to charge interest or not. It's also your
choice to refuse to connect to people who charge interest.

But I think interest makes a ton of sense. To use Ryan's terminology,
making good on obligations now is more valuable than making good on
obligations later. Interest quantifies that in a very fair and
mathematically elegant way.

Here's a simple example (as is often elucidating when pondering an
economic phenomenon, we'll strip actual money out of the example --
money after all being just a way to express obligations):
Suppose we agree to babysit for each other. You babysit for me for
10 hours this summer and I'll babysit for you for 10.5 hours next
summer. Would you take that deal? You get 5% more babysitting out of
me but what if one of us moves away or your mother-in-law moves in and
you don't need babysitting anymore? Or just the fact that we could be
dead in a year. Having obligations grow over time is quite natural
and fair since the future is uncertain.

--
http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel Reeves"

[David Watson]

Here is a rather in depth case for interest.

http://bastiat.org/en/capital_and_interest.html

It is fair when that which is loaned is actually earned by the lender
and when capital is abundant enough where capital can be loaned from
multiple sources to where there is competition.

When capital is scarce, and a man must borrow simply to live or when
one possesses capital due to an unbalanced monopolization, that is
when it seems to take on an evil form.

But to me, interest is just capital rental. If I save money and buy
land, then you want to cultivate the land, you must pay rent
(interest). It there is plenty of land around then the rent is low,
if not, it is high.

Study the "Law of Rent". And Henry George's "Progress and
Poverty" (available online).

On May 30, 6:47 pm, "Daniel Reeves" <dree...@gmail.com> wrote:
> To echo what Ryan has said about this before, it's not for Ripple to
> dictate an interest rate.
> It's up to you as a user to charge interest or not. It's also your
> choice to refuse to connect to people who charge interest.
>
> But I think interest makes a ton of sense. To use Ryan's terminology,
> making good on obligations now is more valuable than making good on
> obligations later. Interest quantifies that in a very fair and
> mathematically elegant way.
>
> Here's a simple example (as is often elucidating when pondering an
> economic phenomenon, we'll strip actual money out of the example --
> money after all being just a way to express obligations):
> Suppose we agree to babysit for each other. You babysit for me for
> 10 hours this summer and I'll babysit for you for 10.5 hours next
> summer. Would you take that deal? You get 5% more babysitting out of
> me but what if one of us moves away or your mother-in-law moves in and
> you don't need babysitting anymore? Or just the fact that we could be
> dead in a year. Having obligations grow over time is quite natural
> and fair since the future is uncertain.
>

> On 5/30/07, W Jackson <matabele_b...@yahoo.co.uk> wrote:
>
>
>
>
>
> > Hi
>
> > Some further thoughts:
>
> > Firstly:
>
> > Why no interest? Lets turn the question around - Why interest?
>
> > Correct me if I'm wrong - I have yet to become acquainted with an
> > economic theory (and some social) that does not work just as well, or
> > better, if we set interest=0 or inflation=interest.
>
> > As Ripple, or a system like Ripple, will one day redefine the way
> > banking is done - and interest is the major weakness of the existing
> > banking system:
>
> > Why build in interest from the start?
>
> > Secondly:
>
> > Ripple works around a certificate system. Existing systems determine the
> > identity of the party, but do not vouch for their credit worthiness.
>
> > A special web of trust type certificate system, vouching for
> > creditworthiness, would fit in with the decentralised objectives of
> > Ripple, and could be used to link nodes - similar to the existing web of
> > trust certificate systems.
>
> > regards William Jackson
>
> > =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
> > Scanned with Copfilter Version 0.83beta3a (ProxSMTP 1.4)
> > AntiVirus: ClamAV 0.88.4/3289 - Thu May 24 03:33:26 2007
> > by Markus Madlener @http://www.copfilter.org
>

> --http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel Reeves"

[David Watson]

Admittedly though "interest" is definitely a sort of evil in the
current American Federal Reserve System. But this is not because
interest itself is evil, but because the American system is a debt-
based fiat currency system, and the interest is actually applied
against all the money in circulation. This evil is compounded by the
unholy alliance with the US Congress and what are known as
supplemental spending bills, which essentially-through collusion with
the US Treasury-causes money to be printed with no backing. This adds
the other thieving evil of inflation to the equation.

In an asset-based monetary system, such as one based on land or gold
this could not happen.

Interest is a natural function of capital. It is when the monetary
system is corrupted at the root, that interest seems to be
responsible, but the interest function is corrupted by the fiat debt-
based system, it is not the fault of the interest function of capital
itself.

> > --http://ai.eecs.umich.edu/people/dreeves- - search://"Daniel Reeves"

[Joe Edelman]

An interesting alternative to interest is demurrage.

http://en.wikipedia.org/wiki/Demurrage_%28currency%29

see especially the line: "Mutual credit systems charging demurrage do
not end up with a pool of money, as they simply cancel the demurrages
on both positive and negative balances against each other."

http://www.theoildrum.com/story/2006/7/1/18145/05010
http://www.transaction.net/money/cc/cc05.html

--Joe

--
J.E. -- http://nxhx.org

[Daniel Reeves]

Not an alternative, just a special case (ie, demurrage means a
negative interest rate). Certainly people should be free to set a
negative interest rate on obligations, ie, gradually forgive debts
they are owed. I don't think it's very fair though. It's like paying
for something by writing a check in disappearing ink.

--
http://ai.eecs.umich.edu/people/dreeves - - search://"Daniel Reeves"