[p2p-research] excellent contribution on flow money by Martienvan Steenbergen

[Dmytri Kleiner]

On Thu, 28 May 2009, Martien van Steenbergen wrote:


> True. There is some threshold where it becomes important to measure and pay for borrow
> time, depending on context.
>
>       (So where is the difference to compound interest?
> 
> 
> Rent (normally) is lineair with time; you just pay for use over time.
> 
> Compound positive interest is exponential with time. A slow start, but an ever steeper
> line after its tipping point. You pay rent over rent. This is what will eventually kill
> it, or make it less attractive.

Hello, there has been far too much text in thread for me to follow it,
so my apologies if I am not understanding, but it appears the words
"Rent" and "Interest" are being misused here.

Economically speaking "Rent" is not a price paid for borrowing
something physical, and "Interest" is not a price paid for borrowing
money, rather both are are prices, and *all* price are composed of Rent,
Interest and Wages.

Rent is the economic return to "Land" which in economics refers to any
productive input of which the supply can not be increased by the
application labour. This, of course, includes Land.

Interest is the economic return to Capital, which is any productive
input that can have it's supply increased by the application of labour.
This does *not* include Money. Money is not a productive input at all,
but rather it is a debt instrument, it is a form of memory, money is
nothing more than a way of remembering debt.

It is important to understand that even prices paid only once contain
rent, it does not mean the price of borrowing something, but rather the
component of scarcity in price.

It is import to distinguish the colloquial "Adam's Rent-All" usage from
the historical/economic usage, rent form Old French "rendre": to deliver, to
yield

The price for borrowing physical objects or money includes both Rent and
Interest.

Gesell, like George and Proudhon on whom his work is based, is primarily 
concerned with the elimination of economic rent, and notes that Money,
being an artificially scarce commodity, captures (unearned) value as a 
result of it's scarcity, and that this scarcity is artificial and can 
be removed by designing better currency.

State-money, whether specie or fiat based, is artificially scarce, because
of limitations on who can create it, As the "interest" charged by money 
lenders is a return to scarcity, this is properly considered Rent and not
"Interest," -- A return on investment could only be considered Interest 
when it is retained earnings from the yield of Capital.

Thus the most significant component of the price of borrowing money is
Rent, and the solution is to eliminate artificial scarcity. Demmurage and
mutual credit are two ways that this is attempted, the former by
encouraging circulation (velocity) through negative interest, the later
by allowing currency to be created by all participants.


Cheers.






-- 
Dmytri Kleiner, aspiring crank

http://www.telekommunisten.net