An intellectual's review

[Unimatrix11]

Originally posted by couerdelion


But before everyone had advanced credit systems, it was those with the more developed systems that had a huge competitive advantage. In particular, British military success over France in the period 1700-1815 was in large part a result of its ability to finance a war long after the French had been forced to the negotiating table.

But can you blame the banks for the war? No. It would really be no different from food supplies and the capacity of a self-sufficient nation to extend wars.

Regarding the economic value of lives lost, I often wonder why it is such a leap of faith to place numbers on these sorts of factors. I can perhaps understand why people might instinctive feel it morally wrong to do so but, in reality, everyone does this every day when they make their own economic choices.

Maybe I should ask a simple question:

“Would you give all your money so that some random person in the world would live?”

The answer is almost certainly “No”. If you cannot say yes to this, indeed if you do not instantly give pretty much any money you have now to keep as many others alive as possible that you are guilty of placing a finite value on life. And energy or time spent pursuing personal goals which could otherwise we spent keeping people alive devalues those lives. And yet to mention this is considered a heresy are great as any blasphemy you could used these days to insult any religion you might choose (you have a choice of seven)

If, however, you are innocent of all these failings, then you might be able to consider life to be of measureless value that could be exchange for absolutely nothing of finite value

If it were practical and i could see it happening my answer would definately be ´yes´ with no hesitation at all ! Of course life is of immeasurable value - it includes all there is, all there was and all that will ever be. To reverse your question - no amount of money can pay for a life. I wouldnt sell mine. duh ! Value SHOULD reflect utility - the utility of life encompasses all. In fact, personal goals and utility to others should be one and the same, if one was wise and truely happy.

The difference between food supply and banks is simple - the first is needed, the second not. And your example just shows how competition works yet again: The first to create the mess forces the others to follow. If the french had been wise enough not to implement a british-fashioned bank system, then they had to throw that wisdom over board due to england´s increased ability to wage war on them by its banking system (in my eyes the ability to wage war is not beneficial at all - it just makes it more likely). It just shows that even in 18th century a nation needed a protective layer such as a whole ocean in order to protect itself from the english-style banking system. In the beginning of the US, to be "free" had a whole lot to do with being free from such a banking system - it is the main reason for their struggle for independance.

Your example does not show more, than saying, that france lost the battle of 1940 because of the germans proper use of tanks. It was defenceless against them, as long as the didnt adopt the same doctrine. But it is that very doctrine that gave germany the initiative and made WW2 even possible (or rather it to last for 6 years rather than crushing defeat in a couple of weeks). Tanks and banks share more similiraties than just their spelling: They are both tools of power and both can, were and will be abused. A tool is never morale or none morale - it is their use that makes them one or the other. When banks are used to prolong wars and make a profit from it and thus try to prolong wars when they can, then banks are used for bad purposes. When this becomes a pattern, then it means, that banks thrive on war and are no longer just a tool of it, but rather vice versa - the war becomes the tool of the bank. Ends and means get reversed.

You know, in Germany we dont have guns (as private persons). If someone somehow gets a gun and then shoots somebody without one, it would be rediculous to assume that the solution would be to pass out guns for everyone in order to defend themselves. Or take car accidents - someone in a small car gets steamrolled by someone in an SUV - now everybody should be driving SUVs ?! Does it mean that SUVs are superior to small cars ? i dont think so, because neither the guns´ nor the SUV´s sole purpose is to kill people, but if frequently used to do that, they oughta get banned. But in reality, with the banks, the small cars get eaten by the SUVs... If on top of that, the SUV or the gun develope an automatic tendency to aim for people, then what ? i say: get rid of them as long as you still can. Of course that is pretty hard (even to imagine), when all that is left rolling in the streets are SUVs already, which never lost their original purpose, but developed into some kind of independent being, with its own drive for survival and power-expansion. In the end, we will be driving, where the SUV wants to go.

EDIT: Marx will tell you very exactly, when and how your 100.000 became 200.000. (Hint: YOU build the market ? or who builds it ?)

[couerdelion]

To clarify the final sentence, the market is built over a period of time. When it is half built, it may still have some value so I would argue that a lot of the increase in value in this case is incremental over time. That was the reason why I raised the question, "When"

But turning back to the value of life – and in relation to civ, I can assume that the typical player who hurls chariots against well entrenched archers places quite a low value on those lives – you are confusing two things. The individual’s personal value on life and society’s valuation. They are two different things.

To illustrate: How much value do I place on my own life? Well basically, I would guess that my valuation is everything I own, can borrow or steal to save it if I were faced with a dilemma of this nature – say paying for a life-saving operation.

But now we run into a problem because society doesn’t think I am worth that much. In fact, I somehow doubt any other individual does. Unless I am in the lucky situation to have a rich benefactor/relative who is willing to pay more than me to save my life. However, society has other priorities and the prolonging of my life may not be at the top of the list.

Whilst life in general may be of immeasurable value, individual lives have finite value. If this were not the case, society would be happy to forego any luxuries, holidays, computer games, to cover taxes to improve health care facilities to save more lives.

[nbarclay]

Originally posted by couerdelion

Maybe I should ask a simple question:

“Would you give all your money so that some random person in the world would live?”

This question isn't anywhere near as abstract or hypothetical as it seems. There are a lot of people who die in third-world countries for reasons that could be addressed at what people from developed countries would consider a very low cost to place on human life. But most of us, myself included, prefer not to think about it rather than sacrificing everything we possibly can to give to charities to help them.

What seems perverse to me is the kind of liberalism that claims that it is immoral not to spend enormous amounts of money to help the poor within a nation's borders, but that views people outside those borders as magically having far less value. Unfortunately, one of the side effects of replacing private charity with government-run social programs is that it creates political pressure to spend the money at home even if it could do a lot more good overseas, because the poor at home can vote while people overseas who are a whole lot poorer cannot.

One of the things that might be added to Civ someday is some kind of model for spending to help the needy. If nothing else, the events mechanism might occasionally have events where a nation suffers a disaster and asks for the rest of the world to help, although there are probably limits to how well that could be done with Civ IV events with the current event code.

[Blake]

Let me explain more about how loans work, and how 0% interest loans would work.

First, like it or not, the reserve currency is NOT important. In this age of electronic transactions, it's simple additions and subtractions. Note if the baseline is 0% interest, then banks can take loans from each other, at 0% interest :P.

Now note how a loan is created.

The loan is created, because there is collateral available, now here is a CRITICAL point:
That collateral must have value in the market. If someone is not willing to buy it, then it doesn't have value as collateral. This means that even with 0% loans, people still can't make loans willy-nilly, they can't take a loan and use the tree in their backyard as collateral, because no-one wants to pay money for the tree.

Furthermore, banks are still allowed to use discretion when issuing loans. It is INDISCRETION which causes things like inflation. This means, that peoples credit ratings still matter. Haven't paid off your old loan? No new loan for you!

0% loans does not mean, loans made willy-nilly. It requires collateral with real monetary value and the appropriate credit rating. The more skillful someone is at using loan money, they more they are allowed to loan.

Lets get to the most important thing, WHY 0% loans are a brilliant concept.

The problem with hte modern economy, is that the interest rate sets a "Minimum threshold of profitably", if any venture does not for example generate at least 11% profit, it is unprofitable to start with loaned money. this means that any venture must generate that 11% profit. Any which fails to, becomes bankrupted. And people must take these loans, because that's where the money supply comes from - if people stopped taking loans and putting themselves at risk of insolvency then the economy would collapse.
WHY is that a bad thing?

Well, first we have the overfishing problem; the only way to it is with ways which give enormous short-term profits. Anything else is severely unprofitable. Short-term profits are the only thing which matter, because they are required to prevent insolvency.

Secondly, is the insolvency. In the context of a 0% loans, a business may not be very profitable, but it'll be a lot harder for it to go insolvent, if it has low expenses.

What this means, is not that people can afford to be lazy slackers, but that it opens up MANY new investment oppurtunities.

Lets say that someone wants to start a forest of a slow growing tree. For the first 20 years it produces no profit, then thereafter it produces a 25% (of the initial loan) income per year. Now, if the minimum threshold of profitability is 10%, such a venture can never be undertaken on a loan, someone would have to take a loan, earn money with a more profitable venture, and then start their hardwood venture.

To explain that - by year 20, a $100,000 loan at 10% interest, would have grown to $500,000, and the interest would now by $50,000 a year, far dwarfing the $25,000 income.

HOWEVER, with 0% loans, any venture becomes potentially profitable, if the loan manager approves of it - meaning, it has merit.
People would still be compelled to pursue the more profitable ventures.

Now the hardwood forest becomes profitable - and note, it IS a profitable thing to do! Once it's actually going underway it generates a lot of good money, it just takes a long time to get started.

The 0% loans, thus enable long term investment.

And again I repeat:
The collateral, must have monetary value in the economy, not any random crap can be used.
Credit rating matters, someone who doesn't pay off their loans, does not easily get new loans, or larger loans.
And we could include; oppurtunity. That really is the sum of those two things; there must actually be the oppurtunity to do something useful with that money, which you can prove to the loan-maker.

Final thing, inflation.

Obviously inflation must be controlled in such a system, the best way for this is obviously demmurage. Managed wisely, this will prevent inflation.

Final Final Thing:
Why using money as reserves for new money is retarded.
The purpose of money is to flow through the economy. That is it's ONLY purpose. To have money stagnate, anywhere, is actually foolish. It should flow, flow, flow! And create new wealth, all the time.

Final final final thing:
By 0% loan, I don't actually mean the interest rate is actually 0%, but that's what it starts at. No-one else is being paid part of the "servicing fee" the loanee pays. A reasonable interest rate would be quite low, ~3%. This is to cover things like the physical collateral of some loans being destroyed and the loanee becoming insolvent in spite of the easy terms.

[Chuckman]

Originally posted by Adam Weishaupt
might as well just put on the tinfoil hat and start spewing nonsense about the Earth being created in the last 7,000 years too.

Regards,
Adam Weishaupt

I know I'm jumping into the middle of this, but can you really trust a guy who doesn't understand that the hats are made out of aluminum foil, Reynolds Wrap quality aluminum foil to be precise. (And the best of those are made from the aluminum imported from that plant in Hamburg, Germany.)

[couerdelion]

Blake, your pretty much talking about state control of the financial markets. Far better to let the markets regulate interest.

What's also odd is that this is all in a time when financial conditions are relatively benign.

Incidentally, picking a single item, interest, is not particularly helpful. What is important in cost of money terms is more likely to be "real-interest" (ie interest less inflation).

2% interest and 0% inflation is not all that different from 4% interest and 2% inflation. So your 10% interest investing in forests would earn 250,000 plus inflation after 20 years and the inflation would probably be in the 5-7% region with that sort of interest. In other words, the sums don't work in the way you have expressed them.

The solution, of course, is to build war chariots and go capture som barbarian cities.

[nbarclay]

Blake, I don't think you're grasping the point that the market for loans is driven by the laws of supply and demand the same as any other market. All else being equal, when the cost of loans goes up, fewer people borrow. All else being equal, when the cost of loans goes down, more people borrow. Make borrowing free and a lot more people will borrow a lot more money - even with limits based on their collateral, credit rating, and earning power to repay the loans. For example, I seriously considered buying a house that cost about 25% more than the one I ended up with, but decided against it because I didn't want to pay interest on the extra money I would have had to borrow when I didn't really need a bigger, more expensive house.

When the banking system makes it possible for loans to add to the money supply, the only ways to keep the money supply stable are either to limit the total amount of money that people are allowed to borrow (which the current system does by manipulating interest rates) or to remove money from the money supply by taxing it away and throwing it in the trash can (which is essentially what a demmurage system does). I don't know about you, but I don't want my government taxing money away from me and throwing it in the trash just so banks can lend out more money to other people, at lower rates, without causing inflation.

Further, your proposal would make problems such as overfishing worse, not better. Your idea that fishermen could afford to catch fewer fish and pay back their loans over a longer period of time would only work if the number of fishing boats would be the same regardless of the interest rate. But the reality is that interest costs have an enormous impact on how many fishing boats it makes sense for people to buy. Drop the base interest rate to zero and the number of fishing boats that people would consider it worth buying, and that banks could safely trust people to pay back loans on, would increase significantly. The result would be more boats competing to catch all the fish they can before other boats catch them all.

P.S. Couerdelion, your idea of building war chariots and conquering barbarian cities is fine for Egypt, but what about the rest of us?

[Blake]

nbarclay, you're missing many points .

Now I want to give an example of why earning interest on savings is bad.

This example will be inflationless.

Lets say you have a plot of land, and there are two options:

1) Plant it in wheat (or generally, a seasonal crop)
2) Plant it in hardwood (or generally a crop which takes a long time to mature, but is worth a lot, in this case we'll say 20 years)

We are making the further assumption that there are no expenses here - the seeds are freely available, and the land is also.

Wheat will generate $100 profit a year, hardwood will generate $400 profit a year.

This means that after 20 years, the hardwood will be generating quadruple the profit per acre of land as wheat. Now, but here's the but. The money earned, is then banked. So lets say this plot of land is set aside for the "Retirement fund".

Now the question is, at what year does the hardwood generate a larger lump sum than the wheat?

0%: Year 27 (7x 400 = 2800, 26 x 100 = 2600)
1%: Year 29
2%: Year 30
3%: Year 32
4%: Year 34
5%: Year 38
6%: Year 47
7%: NEVER!


What happens at 7% interest rate, is that the lump sum built up by growing wheat for 20 years, earns more interest than the hardwood can ever catch up to.

This means that in that financial climate, it's not possible to grow the hardwood. That's why pretty much however high the prices and demand for hardwood rise, no-one will grow it, it can ONLY be logged unsustainably.

This is an EXTREMELY IMPORTANT CONCEPT.

Because what it means, is that when you start with the basis of 0% interest, all sorts of new investment opportunities become possible.

This is also why interest is fundamentally anti-sustainability. It causes long term investment to "fall off the horizon" at some point.

You will discover that when you go to 0% interest, and generally lower the interest rate, all sorts of new investment becomes profitable. And furthermore, it diversifies the economy. For example, a farmer may grow wheat for his day to day living expenses (on 3/4 the land), but have a hardwood forest to ensure a happy retirement (on 1/4 the land).

This is why what you think will happen to the fish; wont happen. People will be looking longer term at any oppurtunity (meaning, they don't need the money to live right now) and as I pointed out earlier - the fishermen will have a vested interest in protecting their fishstocks, they will want laws which protect the fish from overfishing, and so, the madmen who overfish will be persecuted.

Furthermore, the banks can analyze the situation, and conclude "No. There are too many fishing boats already. This will cause the other fishermen to be unable to pay off their loans and the fishing boats will have little resale value once the fish are gone - diminishing the value of the loan collateral".

There's obviously a similar horizon when talking loan-money. There's one threshold of profitability for people who have paid off their loans and have money, and there's another threshold of profitability for people who still need to take out loans. People with money will tend to aim for the longer term higher yield investments.

Think about this concept carefully - the horizons which almost arbitrarily make some investment unprofitable, investment, which if you look at a timeline, would clearly actually make sense. As in "Yes, it would be nice to have that resource available to society".

[Unimatrix11]

Hmmm... Yeah 0% interest when private people can obtain those loans doesnt sound i good to me either, but i guess that means i am missing some point in the rest of the idea.

I think, first of all, to counter the problem of the limit of growth of the overall economy, we should set a limit to personal growth; maximum income and maximum property. Say 1M$ per year and 10M$ total max... that should be sufficient for anybody... everything above that gets taxed 100% - period. So the capitalist fisherman would cleanse one or maybe two lakes and then he´d be at his max... if he´d still decide to run the busines (for whatever reason), he´d at least only "enrich" the community. Also he could not accumulte that much money, that in case the community wanted to stop him, it couldnt anymore, because he´d be able to buy house-members or judges (or otherwise use his money to manipulate public opinion).

If the state decides to take a loan from a bank - and it should only be able to do so, when 2/3 or so of parliament vote for it, to avoid over-loaning for short term election purposes - the state should set the interest rate, because the state represents the public interest, highest of all man-made. (If banks were in governmental control, then it would be so anyways - who would charge himself interest ?). The state should furthermore be entitled and, in contrast to the sell out trend of state-control institutions we have at least here, more often exercise to take control of specific branches of the economies when public interest or other urgent matters require it (see the Chavez-oil-example Adam brought a couple of pages ago).

But what makes this all bad idea in reality is the fact, that the market is pretty united throughout the world, while politics is not. Thus the compitition between nations to lure in corperations, which makes any legislation like that in any specific country look like national suicide. What we need is something like a UN-document: "The Rights of Nations"... WOW - what an idea... Of course that one could encompass a lot more topics, like when the UN is entitled to interfere and when it is not - and the drafting of which could be a wonder in Civ (or a resoultion or something, but in Civ )

[couerdelion]

But you are still moving interest rates without regard to inflation, Blake. And with the way that current central banks work, interest would only move above a level of 7% if inflation were quite high.

Actually, there is another point you are missing that a 20 year project would not be funded with short-term money. It would use longer term borrow which, in this case, would be much lower and would probably give a reasonable indicator of long term inflation. So your interest rate would need to be much lower because it should be a “real interest rate” (i.e. interest less inflation)

Notwithstanding this, even if we were talking about real interest rates, the admittedly high value of 7% does change investment priorities. In fact, that is what it is supposed to do. High long term real rates of return generally reflect a lack of confidence in a given market. More generally, we would have associated this with your typical low-grade emerging market. But even in the more stable developed world, high interest rates are supposed to dampen investment opportunities. Not just the hardwood venture, but many other investment opportunities become unprofitable because interest rates are high – usually to cool an overheating economy. With reduced investment, inflationary pressures in the market are supposed to abate and interest rates are then supposed to come down thereby allowing some more investment opportunities that otherwise would not work.

p.s. In the hardwood venture, there may also be an unintended underpricing of the forestry work where this has benefits to the environment or wider societal benefits. Politics being what they are at the moment, we are still lacking anything approaching a coherent pricing framework for these sorts of benefits so business unfortunately has little incentive to do what most outsiders would consider the “right” thing. Get the right fiscal/environmental framework and a lot of things might change.

[couerdelion]

Yeah good idea Comrade Unimatrix. Set arbitrary limits on welath based on subjective measure.

As for parliament voting for the state to take a long this depends anyway on the constitution or executive rights but in general, they can always borrow from the markets, which they do anyway.

Chavez is a prime example of an autocrat who uses "public interest" as a pseudonym for his own personal interest.

p.s. Those who can't send War Chariots, will have to make to with Chariots. Those who do not have horses, should get them.

[Velociryx]

p.s. Those who can't send War Chariots, will have to make to with Chariots. Those who do not have horses, should get them.

Or, barring that, grab Cats + Longbows....takes a little longer, but a good resourcesless way to get what you want.

-=Vel=-

[Unimatrix11]

Originally posted by couerdelion
Yeah good idea Comrade Unimatrix. Set arbitrary limits on welath based on subjective measure.

As for parliament voting for the state to take a long this depends anyway on the constitution or executive rights but in general, they can always borrow from the markets, which they do anyway.

Chavez is a prime example of an autocrat who uses "public interest" as a pseudonym for his own personal interest.

p.s. Those who can't send War Chariots, will have to make to with Chariots. Those who do not have horses, should get them.

1. Any progressive tax system is based on subjective measure. Actually, almost everything is based on subjective measure. Some people even think the value of a life could be based on subjective measure... Of course the numbers should be based on a consensus through society as far as possible. It´s a normative thing to judge how much a person can possible EARN. But someone that would say "a person can justfully EARN an infinite amount of money, theoretically" will be hard to find. Fortunately.

2. What i meant is the state taking loans from "its" national bank. As someone said, they were under national control anyways (which they are not). So then they wouldnt charge themselves interest anyways - so that only takes putting existing theory into action (make things the way people think they are and should be anyways).

3. If i had to name just one person, that obviously is manipulating public opinion and using public interest (or its fear induced on them), in order to propel personel interest (and that of his lobby), that name would certainly not be Chavez, but Bush. The first tackles the bear, the later is tackled by it. The former subdues the oil industry to the nation, while the later subdues "his" nation (and others on top of that) to his oil industry.

BTW - after talking about interest and all that stuff, i just happened to think about the uncle of Donald Duck (i forgot his english name - i know its not "Dagobert" like in german) and how funny it is, that the wealthiest man (or rather duck) sits on a mountian of coins. If he did that, he´d not be the wealthist for long, i guess, uh ?! LOL

[Wittlich]

Originally posted by Unimatrix11
BTW - after talking about interest and all that stuff, i just happened to think about the uncle of Donald Duck (i forgot his english name - i know its not "Dagobert" like in german) and how funny it is, that the wealthiest man (or rather duck) sits on a mountian of coins. If he did that, he´d not be the wealthist for long, i guess, uh ?! LOL

That would be Uncle $crooge McDuck

(you've got to love google!)

[Unimatrix11]

Hmm - thats funny - cause in Germany his "safe-houses" have a big double D (DD - for Dagobert Duck) on them... i figure they redraw them for the translation... So he is a "McDuck" and Donald is only a "Duck" ? Whats with that ?