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Delphi Debacle: workers must work for 1/3 pay!

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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Wed 19 Oct 2005, 21:38:51

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('Free', '
')So, in hyperinflation times, did the rich get poorer, and the poor richer in comparison?
Everybody gets poorer in hyperinflation. The capital stock of the economy rots away while everyone tries to protect whatever wealth they have left by buying hard assets like gold and real estate.


Yes - but hyperinflation is a very special case which normally involves two or more currencies? The Germans printed money and created hyperinflation on purpose to serve their war debts. I think we shouldn't get into such special cases, because they are only confusing the general issue, the nature of money, interest, growth economy.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby jaws » Wed 19 Oct 2005, 21:42:56

$this->bbcode_second_pass_quote('Free', 'Y')es - but hyperinflation is a very special case which normally involves two or more currencies? The Germans printed money and created hyperinflation on purpose to serve their war debts. I think we shouldn't get into such special cases, because they are only confusing the general issue, the nature of money, interest, growth economy.

Weimar hyperinflation happened because the government did not tax people to pay its expenses (which included war reparations as well as socialist economic programs). Instead it printed the money to pay for its deficit. Each time they printed money, prices went up and the economy shrank, so the deficit went up, which means they had to print more money, and the inflation accelerated until hyperinflation.

It's a one-money phenomenon.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Wed 19 Oct 2005, 21:54:03

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('Free', 'Y')es - but hyperinflation is a very special case which normally involves two or more currencies? The Germans printed money and created hyperinflation on purpose to serve their war debts. I think we shouldn't get into such special cases, because they are only confusing the general issue, the nature of money, interest, growth economy.

Weimar hyperinflation happened because the government did not tax people to pay its expenses (which included war reparations as well as socialist economic programs). Instead it printed the money to pay for its deficit. Each time they printed money, prices went up and the economy shrank, so the deficit went up, which means they had to print more money, and the inflation accelerated until hyperinflation.

It's a one-money phenomenon.


Yes I agree, I totally went one the wrong path there, this indeed involved a central institution which controlled the amount of money, and with making more money, depreciated it. I guess that this is also where, at least partially your opinion comes from that central banks are always involved in inflation.

However, I think this is not true. Let's assume simple models, and I think the mechanism that I described will still happen. Money will get hoarded and scarce, sucking it out of circulation, which drives interest rates up, inflation and deflation will happen to the point of the total breakdown of the system.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby jaws » Wed 19 Oct 2005, 22:03:05

$this->bbcode_second_pass_quote('Free', 'H')owever, I think this is not true. Let's assume simple models, and I think the mechanism that I described will still happen. Money will get hoarded and scarce, sucking it out of circulation, which drives interest rates up, inflation and deflation will happen to the point of the total breakdown of the system.

Your simple model is wrong. If money gets hoarded out of circulation the interest rate will increase, increasing the cost of hoarding money! The higher interest goes, the more appealing it is to lend away the money you hoarded. Then when you lend money, that money is used by someone else to buy goods in the economy.

The money system is stabilized by the rate of interest. There is no inflation or deflation.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Wed 19 Oct 2005, 22:08:38

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('Free', 'H')owever, I think this is not true. Let's assume simple models, and I think the mechanism that I described will still happen. Money will get hoarded and scarce, sucking it out of circulation, which drives interest rates up, inflation and deflation will happen to the point of the total breakdown of the system.

Your simple model is wrong. If money gets hoarded out of circulation the interest rate will increase, increasing the cost of hoarding money! The higher interest goes, the more appealing it is to lend away the money you hoarded. Then when you lend money, that money is used by someone else to buy goods in the economy.

The money system is stabilized by the rate of interest. There is no inflation or deflation.


I think we are getting closer to the core of this all. Yes, all that you described, but the debtor also has to pay interest which is a transfer - so in the end he has less money to consume, less money in circulation and more money hoarded!

I have to go now for about 2 hours, please please read the following chapter, it's not long and nevertheless is explaining in detail whith simple models how I never could do it:

http://userpage.fu-berlin.de/~roehrigw/ ... chap3.html
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby rogerhb » Wed 19 Oct 2005, 22:17:44

$this->bbcode_second_pass_quote('Free', 'I') think we are getting closer to the core of this all. Yes, all that you described, but the debtor also has to pay interest which is a transfer - so in the end he has less money to consume, less money in circulation and more money hoarded!


What does the lender do with the interest? Spend it, lend it or hoard it?

If he is a lender, he is either likely to spend it, ie living of the interest, or lend out that money again to earn more. It is unlikely that he lends once then only hoards the interest.
"Complex problems have simple, easy to understand, wrong answers." - Henry Louis Mencken
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Thu 20 Oct 2005, 00:00:11

$this->bbcode_second_pass_quote('rogerhb', '')$this->bbcode_second_pass_quote('Free', 'I') think we are getting closer to the core of this all. Yes, all that you described, but the debtor also has to pay interest which is a transfer - so in the end he has less money to consume, less money in circulation and more money hoarded!


What does the lender do with the interest? Spend it, lend it or hoard it?

If he is a lender, he is either likely to spend it, ie living of the interest, or lend out that money again to earn more. It is unlikely that he lends once then only hoards the interest.


Exactly, you nailed it! He is not hoarding the interest if he has the chance to lend it again and get interest on interest! The result is exactly the exponential mathematical function, which will will always lead to instability.

Now of course you can say that in the real world this doesn't happen under perfect conditions, for example he might lose all his savings etc. - but the overall result is what counts. (like oil depletion rarely follows the exact bell curve, you get what I mean...)

If you look at the statistics you see clearly that the "rich get richer" and the "poor get poorer" - increasingly!. This is not some vile machination of some Illuminati or alien reptiles, but it is inherent in the system. They can't help getting richer!

Now I want to add some thoughts about the central banks - yes it is their fault that money is unstable, and no it isn't. Yes because they make the wrong decisions all the time, and no because they have no chance to do so differently! Why?
Because they don't even know what they are doing, and they have no instruments to do the right thing!
They can't keep the money stable, because of the unclear definition of money, the ambiguous character. How do you want to keep the buying power of money approximately the same if you add money to the equation (accounts), which isn't even circulating and doesn't buy anything?

Money both is a medium of exchange - a vehicle, an institution, a public service. And at the same time it is private property, everybody can do what he wants with it, save it, hoard it, lend it, take it out of circulation, changing the equation! This can't work!
Helmut Creutz uses the example of a car where the driver of a car has several people with him who can change the speed at their will.

As long as this ambiguous character of money isn't changed, we will always have huge problems with instability.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby jaws » Thu 20 Oct 2005, 00:07:22

Free, you're making a false assumption to think that the lender is only hoarding money with no purpose in mind. The purpose is to spend it later! His stash of money doesn't grow exponentially, he only saves some in order to spend it later (or to leave to his children after his death so they can consume it). It is growing exponentially while he is still saving, but his intention is to stop saving and consume at some point.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby rogerhb » Thu 20 Oct 2005, 00:12:12

$this->bbcode_second_pass_quote('Free', 'E')xactly, you nailed it! He is not hoarding the interest if he has the chance to lend it again and get interest on interest! The result is exactly the exponential mathematical function, which will will always lead to instability.


Not if there is a finite amount of money in circulation. If there is a finite amount, the lender would not be able to pay back the loan plus the interest, would default and then all the nasties to claw back that loan start occuring.

But there isn't a finite amount because we have fractional-reserve-banking. Where banks actually create money booked against the debt.
"Complex problems have simple, easy to understand, wrong answers." - Henry Louis Mencken
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Thu 20 Oct 2005, 00:30:38

$this->bbcode_second_pass_quote('jaws', 'F')ree, you're making a false assumption to think that the lender is only hoarding money with no purpose in mind. The purpose is to spend it later! His stash of money doesn't grow exponentially, he only saves some in order to spend it later (or to leave to his children after his death so they can consume it). It is growing exponentially while he is still saving, but his intention is to stop saving and consume at some point.


What if you are so rich you can't even consume it? This is not theory. Look up how many percent of the population possess how much percentage of total wealth. (Again, I am not advocating anything here regarding fairness, this aspect is not important here.)

Sure, the accumulated wealth may be lost at some day. But that's not the point - you said it yourself - of course the guy who accumulates won't just let it sit there and do nothing with it - he has to have a purpose!

So after he bought all those yachts, islands, what's he gonna do with it? He will invest it so he gets a return! That's the whole point I am trying to bring across. Wealth gets accumulated, grows exponentially and is missing at the other side of the economy. Sure it gets reinvested into this other side- but with interest returns - ad infinitum ... NOT!
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby rogerhb » Thu 20 Oct 2005, 00:39:57

$this->bbcode_second_pass_quote('Free', 'S')ure it gets reinvested into this other side- but with interest returns - ad infinitum ... NOT!


What happens if this chap has all the money in the system and nobody can repay the interest let alone the principal?
"Complex problems have simple, easy to understand, wrong answers." - Henry Louis Mencken
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Thu 20 Oct 2005, 00:44:54

$this->bbcode_second_pass_quote('rogerhb', '')$this->bbcode_second_pass_quote('Free', 'E')xactly, you nailed it! He is not hoarding the interest if he has the chance to lend it again and get interest on interest! The result is exactly the exponential mathematical function, which will will always lead to instability.


Not if there is a finite amount of money in circulation. If there is a finite amount, the lender would not be able to pay back the loan plus the interest, would default and then all the nasties to claw back that loan start occuring.

But there isn't a finite amount because we have fractional-reserve-banking. Where banks actually create money booked against the debt.


Exactly! Although, well, this is one thing I don't understand to be honest, are they really creating money?
Anyway if the economy grows at the same rate as the amount of money this is no problem, the money stays stable.
Who is controlling this? The central banks - but they can't control it, because they don't know how much real money is circulating (buying), are guessing, fucking up and then they create all artificial money-sums like M3, but this doesn't help anything.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Thu 20 Oct 2005, 00:48:54

$this->bbcode_second_pass_quote('rogerhb', '')$this->bbcode_second_pass_quote('Free', 'S')ure it gets reinvested into this other side- but with interest returns - ad infinitum ... NOT!


What happens if this chap has all the money in the system and nobody can repay the interest let alone the principal?


Of course it never gets that far in the real world. The economy will break down long before - bubbles, crashes, deflation, you name it. That's the point - the whole system is unstable from the beginning, because of the special type of money we have.

The problem is not that some people are richer than others - it will always be like that, and it is even fair (in my opinion). But it is not fair to get something for nothing - that's interest.

What if there would be no interest - an expiration date on money? You still could get richer, by getting better qualification, doing good, working more, making inventions, you name it - but you wouldn't get something for nothing - you would be forced to spend the money you earn, because otherwise you would lose it - what's so bad about that?
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby jaws » Thu 20 Oct 2005, 01:37:40

$this->bbcode_second_pass_quote('rogerhb', 'W')hat happens if this chap has all the money in the system and nobody can repay the interest let alone the principal?

He chokes on his money because he has nothing to eat since he just saves money and does nothing else?

That is a ridiculous scenario of course. If ever someone accumulated all the money in a system, it would cease to be money. By necessity everyone else in the economy would invent another form of money to facilitate exchanges.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby CARVER » Thu 20 Oct 2005, 06:22:59

$this->bbcode_second_pass_quote('jaws', 'M')oney as a good fulfills a need that other goods cannot. ... You are restricting your consumption and selling your production in exchange for money. You work and get no benefit from that work, except the promise of future consumption.


So money is a good, and you can sell your goods (your money) in exchange for more goods (money) in the future. The one that buys your goods (your money) will have to produce more goods (money) to pay you back the goods (money).

So let's do a little example. I have got more assets than I need at the moment and I have $2000. You don't have enough assets and only $80. That $80 is not enough to buy the needed assets from me, but I am willing to give you a loan of $1,000 at 10% interest, so next year you need to pay me back $1,100. You use all the money you now have to buy assets/goods from me. You use it to produce more assets/goods. Now the problem is that you can produce more goods, but you can't produce the good you need: money. Because you are not allowed to produce money, you can only buy money in exchange for goods (or take another loan). And the price (in money) of goods is not fixed. So you can produce all the goods you possible can produce, if I am not willing to exchange it for at least $1,100 then you won't be able to pay me back. And if you can't pay me back, I can now claim everything you have, because you are obligated to sell your assets/goods and I am the only one that has the money, so I can set the price to whatever I want and you just have to accept it (according to the rules).

So why are you not allowed to create additional money when you create additional goods? That money is backed by those goods, so you would not get price inflation. You can use that money to pay me back. I can use that money to 'buy' those goods. When the goods get consumed, the money that was backed by those goods, should be destroyed again. A mutual credit system.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby CARVER » Thu 20 Oct 2005, 06:24:33

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('rogerhb', 'W')hat happens if this chap has all the money in the system and nobody can repay the interest let alone the principal?

He chokes on his money because he has nothing to eat since he just saves money and does nothing else?

That is a ridiculous scenario of course. If ever someone accumulated all the money in a system, it would cease to be money. By necessity everyone else in the economy would invent another form of money to facilitate exchanges.


So we should be legally allowed to invent another form of money to facilitate exchanges. That would also mean that we should not be obligated to pay tax in the official national currency, but can pay it in our newly invented money.

So we are allowed to create complementary currencies in local communities, and issue it ourselves (mutual credit system). That way we can solve the problem of scarcity of money while there is plenty of work. That work does not get done when there is no money available to start with, because it is difficult to negotiate a trade involving a group of people (If you do that for him, he will do that for her, she will do that for me, I will do that for you). It has proved to work very well, and raise the standard of living.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby CARVER » Thu 20 Oct 2005, 09:57:29

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('CARVER', '.')..........
- Extreme concentration of wealth. If you have money it keeps growing. If you spend less than the interest you collect, then it grows forever without you having to do anything.
..............
Sounds like a great theory, at least on paper. So the rich can stay rich forever..hmmm? But if history is any guide....fortunes rise and fall. No need to give examples, I think we can all think of wealthy people from history whom today their descendants are no better off then middle class.

However this whole notion that you can make money from interest is absolutely ridiculous. In the long run inflation will out run whatever interest you can make. Futhermore money generated thru interest is taxed like income...so once you subtract that out, putting money into the bank is a slow but sure fire way of losing it. :-D


Try it, your money keeps growing. The number in your bank account only gets larger and larger. Income tax can make the number grow less fast, but it still grows. However the value of that money, that is a different thing. That depends on inflation. You are right fortunes rise and fall, people can get too greedy and make mistakes, the system can become instable, the government can interfere (taxes), accidents (fires), crime. That however doesn't mean that the system does not give the rich an advantage. Without intervention the system has a tendancy to lead to extreme concentration of wealth and that is a common cause of collapse of civilizations.

However in a gift economy people tend to form a community in which people take care of eachother and in which people work together. (History and present shows it to be very effective).

'Community':
cum = together
munus = the gift

Hence 'community' = 'to give among each other'.

As a general rule communities tend to break down whenever non-reciprocal monetary exchanges replace gift exchanges. Take the scientific community for example. They used to freely exchange information (and other things). Not anymore, now they keep it secret and patent it. In finding a cure for aids or bird flu, for example, do you want them to work together or do you want them to compete? Not even a common enemy/goal unites us, we are still more focussed on fighting eachother.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby jaws » Thu 20 Oct 2005, 12:52:27

$this->bbcode_second_pass_quote('CARVER', 'S')o we are allowed to create complementary currencies in local communities, and issue it ourselves (mutual credit system). That way we can solve the problem of scarcity of money while there is plenty of work. That work does not get done when there is no money available to start with, because it is difficult to negotiate a trade involving a group of people (If you do that for him, he will do that for her, she will do that for me, I will do that for you). It has proved to work very well, and raise the standard of living.
There is no problem of scarcity of money. The scarcity of money is the primary reason why money is the ideal good for conducting exchanges. It has a stable scarcity and thus prices expressed in money are easy to calculate.

If there is unemployment in a community it is because prices are too high, not because there is not enough money.

Lowering the scarcity of money is what the governments use to justify their creation of inflation. The outcome is a boom followed by a bust and depression, every time. It creates more unemployment in the long run.
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby Free » Thu 20 Oct 2005, 14:00:49

$this->bbcode_second_pass_quote('jaws', '
')There is no problem of scarcity of money. The scarcity of money is the primary reason why money is the ideal good for conducting exchanges. It has a stable scarcity and thus prices expressed in money are easy to calculate.

If there is unemployment in a community it is because prices are too high, not because there is not enough money.

Lowering the scarcity of money is what the governments use to justify their creation of inflation. The outcome is a boom followed by a bust and depression, every time. It creates more unemployment in the long run.


Yes and no. Money would be the ideal medium of exchange if it is neither scarce nor affluent.

You are absolutely right, it only would have to be stable. But why it isn't?

Because its scarcity, its superiority over all other goods, makes it not the ideal medium of exchange any more (if you think money is getting more valuable, would you spend it if you can avoid to?), but rather the ideal medium for savings, hoarding! The janus-face of money, medium of exchange (vehicle, public domain), and private good!

And with more hoarding it gets more scarce! But if the money is not circulating any more, of course this leads to a big problem with demand, a deflationary crisis which feeds itself!
This leads to real big unemployment, not only high prices! Look at germany: The economy is stagnating, more and more people unemployed. But Germany has one of the lowest price levels in Europe! Why? Because there is not enough money for the people to spend! Prices get even lower, and wages go down (in real terms) etc. It's a deflationary crisis...

Of course the central banks want to avoid this at all costs! So what to do? You already told the answer of the central banks, print more money! But what happens? Money gets pumped into the economy, inflation gets high, and suddenly there is a real big incentive to spend the money, buy goods, invest! So not only the money the central banks supplied is on the market, but suddenly all this hoarded money gets unleashed, and its too much money on the market! But the central banks couldn't know that or prevent that!

This is it in a nutshell what leads to the big up and downs, the bubbles and the crashes. Money as a medium of exchange can't work as long as you can suck it out of circulation, use it as your own private good, without being "punished" for it. This is where a money with "negative interest", "expiration date", would fit in...
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Re: Delphi Debacle: workers must work for 1/3 pay!

Postby CARVER » Thu 20 Oct 2005, 14:19:44

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('CARVER', 'S')o we are allowed to create complementary currencies in local communities, and issue it ourselves (mutual credit system). That way we can solve the problem of scarcity of money while there is plenty of work. That work does not get done when there is no money available to start with, because it is difficult to negotiate a trade involving a group of people (If you do that for him, he will do that for her, she will do that for me, I will do that for you). It has proved to work very well, and raise the standard of living.
There is no problem of scarcity of money. The scarcity of money is the primary reason why money is the ideal good for conducting exchanges. It has a stable scarcity and thus prices expressed in money are easy to calculate.

If there is unemployment in a community it is because prices are too high, not because there is not enough money.

Lowering the scarcity of money is what the governments use to justify their creation of inflation. The outcome is a boom followed by a bust and depression, every time. It creates more unemployment in the long run.


Not everything consumes limited goods. Information does not get consumed for example. When you explain capitalism to me, you have not lost that information. You still have that information, and now I have the information as well.

Let's say I only have enough money to buy my basic needs. I have no money to buy more. The same goes for my neighbor and for the guy across the street. I would like to get an education, but I can't pay for it. I can play music but nobody wants to pay me for it. My neighbor used to be teacher, he would like someone to fix things in his house. The guy across the street is a handy man, he likes to learn how to play an instrument. In this case it is easy to come up with a trade. I teach the guy across the street how to play an instrument, if he repairs things in the house of my neighbor, if my neighbor teaches me. This way we get work done that would otherwise would not be done, so this does not create inflation. In this example it is possible to do it without money, because it only concerns 3 people. But what if we would do such a thing in a small community, like say a couple of thousend people. Without money it would get very complex to work out such a trade involving, say 500 people. But since we don't have any additional money available for it, that is not a possibility. We now have a money scarcity problem while there is enough work that could be done.
A local complementary (mutual credit) currency could make this a lot easier. We could issue it ourselves. I do something for you, my account gets credited, your account gets debited. When you do something for someone your debt goes away, and the other person gets debited. This way a lot of work can now be done, that otherwise would not have been done. Our standard of living improves, and it does not create inflation of the national currency. This has proved to work very well in places all over the world. Raising the standard of living in the local community by working together.
This could also work without money in a gift economy, but then it is easier for people to take advantage of it (only taking and not giving). With a local complementary currency, you can check the accounts of others. So you can see when somebody is taking advantage of the system and then you can decide not to trade with him again. That way everybody gets stimulated to participate.
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