Comment by ChrisLomont | Hacker News Reader

Comment by ChrisLomont | Hacker News Reader

This article makes many claims which are demonstrably not true. For example, this claim, used in many articles like this, is simply wrong:

>Borrowing money and the ability to pay it back depends on an economic system with future growth,

The common "argument" for this type of thinking is that if you borrow $100 and have to pay back $110, then in the future there has to be more money. This ignores the time value of (labor/money/invention...) as follows:

Fix money in the world at $200, owned by B (representing the external system to actor A).

A borrows $100 from B, owes $110 in a year. Now A,B = 100, 100

A then works (say even for B), earning $50 over the year, and used $40 to live on (spent wherever, say to B if you like). Now A has 100+50-40 = $110, B has 100-50+40 = $90.

Now A pays off B, returning the 110, and the state is back to start A,B = 0,200.

There is no need for more money to pay off interest, because time and labor and other things have value.

This articles uses this misunderstanding as proof for needing infinite growth then extrapolates to the system has to fail.

It's simply not true. Over the years I've had to explain this to many, many friends under the same thinking, and most of them get it and stop the "we need infinite growth!" mindset (at least for this type of argument).

> There is no need for more money to pay off interest, because time and labor and other things have value.

An historical example of needing more money because an economy ran out it and people couldn't get any to do financial transactions:

* https://en.wikipedia.org/wiki/Great_Bullion_Famine

* https://en.wikipedia.org/wiki/Great_Slump_(15th_century)

See also the Great Drepession for another problem with a fixed money supply:

> However, Temin (1989) argues that, once these destabilizing policy measures had been taken, little could be done to avert deflation and depression, given the commitment of central banks to maintenance of the gold standard. Once the deflationary process had begun, central banks engaged in competitive deflation and a scramble for gold, hoping by raising cover ratios to protect their currencies against speculative attack. Attempts by any individual central bank to reflate were met by immediate gold outflows, which forced the central bank to raise its discount rate and deflate once again. According to Temin, even the United States, with its large gold reserves, faced this constraint. Thus Temin disagrees with the suggestion of Friedman and Schwartz (1963) that the Federal Reserve's failure to protect the U.S. money supply was due to misunderstanding of the problem or a lack of leadership; instead, he claims, given the commitment to the gold standard (and, presumably, the absence of effective central bank cooperation), the Fed had little choice but to let the banks fail and the money supply fall.

* https://www.nber.org/system/files/chapters/c11482/c11482.pdf

The first two example as best I can tell are of a decreasing money supply due to export of currency to other places. That is fundamentally different than having a fixed supply of money.

>See also the Great Drepession for another problem with a fixed money supply:

Sure but the system worked for the whole 1800s with basically no inflation during that time. It may not be ideal but "works for over a century" is pretty good to me.

The system did not work for the 1800s. Inflation and deflation boom and busts in the 1800s were so severe and destructive that it led to central banking to avoid those problems.

Here's where you can start looking at the data

https://en.m.wikipedia.org/wiki/List_of_recessions_in_the_Un...

Yet society survived and thrived which is the definition of a working system to me.

Yet the people were vastly worse off than under the current system.

Which would you prefer to live in?

Here's some of what it was like to live then for comparison https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4577070/

That’s a liquidity problem, which is different.

The PP was talking about inflation of money supply.

For reference, you can have liquidity problems and an inflationary money supply at the same time.

>An historical example of needing more money because an economy ran out it and people couldn't get any to do financial transactions

Yes, an economy can hit a liquidity crisis, but it's not because the reasons the article claims.

And deflationary spirals are also not because of there is not enough money to pay old interest.

These are two completely different things.

The reason modern economies do not want fixed monet supplies is because the other problems it causes: the GD taught the world the problems of a deflationary spiral, which is why all modern central banks target slight inflation. This has led to more stability than previous systems.

And, as money inflates, and as economies grow, there is need for more money to allow trade to function efficiently.

But none of these reasons are due to there simply not being enough money to pay old debts plus the interest.

The article above seems vastly far from this understanding of modern economies and why things are done the way they currently are.

Borrowing and repaying with interest are growth. You don't need growth to renovate your home while working for the same wage for 30 years, if you can afford to pay back on those wages.

working does not create money. The hole is simply shifted around while it grows infinitely.

>working does not create money

Working creates value (well, working on something others value...), which is priced and then traded using money as the medium, correct?

>The hole is simply shifted around while it grows infinitely.

I'm not sure what this means.

Some work produces short term value, some long or very long.

If it is long the value (and the proof value can be created) can be collateral for money creation but only as debt.

On a personal level you can earn and make payments. It seems very simple.

Collectively we are sinking deeper into debt. It cant be any different if debt is the only way to pay for debt.

The new money changes hands and becomes our excuse to create more debt.

Think of it like this: Say we want to enslave humanity and keep everyone working for our personal benefits.

There is no better system than to convince everyone they owe us just a little bit more every month.

The self check to see if you've bern brainwashed would be to ask who should create the currency. Gov could do it no strings attached.

Or you could let private entities enjoy the privilege to create that money you work for out of thin air in unlimited quantities for their personal gain.

It would make a world where resources, equipment and labor are not really worth much.

It takes 30 years to pay for a home because your work isn't worth much.

Take any "primitive" village where everyone owns their home and their land. They have debt too but it is owed to other villagers who had to deliver something in exchange.

Their labor is nowhere near as productive as ours. How is it possible that they survive at all?

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