Originally posted by mnemeth1
reply to post by Elzon
Any inflation of the money supply leads to a distortion of interest rates, which is the direct cause of business cycles.
So, even if inflation is being counteracted by deflation it would have negative effects. Remember, this monetary system has got nothing to do with
loans. The market as a whole may have loan contracts, but that has nothing to do with the monetary system described.
Today's monetary system is based on debt and the one being described is not. The monetary system being described is based on trade itself.
Perhaps you did not see the inevitable interactions that would have to occur in order for a monetary system to operate as describe, perhaps a recap
Credit is not transfered from consumer's account to a producer's account.
Credit is instead copied from the consumer's account and is set to the producer's account upon confirmation from both consumer and creditor, this
creates inflation based on trade.
The only way someone loses credit is by the creditor's deflation rate.
The deflation rate of credit accounts is set by the creditors to remain competitive with one another.
If an individual creditor does not have good standards it runs the risk of having too much inflation therefore ruining its individual currency.
So yes, each individual creditor has it's own defacto currency, there is no central currency or central standards (other than what the market decides
If you didn't see that would be inevitable when you originally read my post then maybe go back and think about it?
This is a VERY simple system, nothing complicated enough to warrant an hour long video or anything.
If you don't see how inflation is created through individual transactions I might be able to understand why you didn't understand it the first time
Think about it this way:
Today when I purchase something I give someone money and they give me a product in return. In the system described when I purchase something credit
from my account will copy itself into the account of the individual selling the product.
In today's system inflation is created through debt (loans). In the system described inflation is created through individual transactions.
Today deflation happens through completion of loans. In the system described deflation happens due to individual creditors setting and maintaining a
deflation rate of all user accounts they maintain.
This requires more than an understanding of macro and micro economic theory. This requires an underlying understanding of all previous basic forms of
monetary systems. I'm talking about a monetary system not an economic system.
I hope that clears some things up. The monetary system being described has nothing to do with loan interest rates as it does not rely on loans and
aims to do away with such systems as they would be inferior as a type of monetary system. Sure, there will still be loan contracts in the market
overall, but the standard monetary system has nothing to do with loans.
Hope that helps?