I agree, and I should have said this, “Money as Debt” takes a conspiracy turn at about halfway. I'm a reminded of Adam Savage's "Do you mean Tesla the inventor of AC power, the genius or Tesla the nut-job?".
I very much liked your explanation in the third paragraph, but under this model what does interest represent? If I step through your logic here.....
1. I believe there is copper in that hill which has a value ( say of 60K ).
2. I ask the bank for 10K to get started
3. Thus 10K has been added to the economy, recognizing that raw materials will be brought to the economy and growing the pie of wealth
4. I go into them thar hills, mine out the copper for 60K.
5. I pay back the bank, who now has 10K actual cash in their reserves, against which they may lend. I have also put 50K of my sale of this copper in their bank, giving them 60K against which to lend.
6. At this point, I think we're balanced in terms of what's been added to the value pie.
7. OK, so what does interest represent? The opportunity cost on the hope that I would find the copper? And, alternatively, say I found nothing in those hills, what happens to that 10K that was created? Shouldn't that be destroyed?
I'm not disagreeing, but I'm trying to understand your model better.
I'm not much of an economist, but I think interest basically represents risk. So it's insurance against being wrong. If we average it out over all the loans made by everybody, I don't think this is necessarily inflationary.
Even if the miner doesn't find copper, he's still obligated to pay back his loans. Maybe the bank seizes his property or he pays it off slowly from some regular job where he generates some other value. Either way it will work out in the end, although perhaps the effect is slightly inflationary until he pays off his loan.
And you have to take into consideration all the other loans made. If there is some other miner whose enterprise works out, then, if risk estimation techniques are good, it balances the one that failed.
When the techniques that everyone is using to estimate risk are totally wrong, you get the USA in 2009.
I very much liked your explanation in the third paragraph, but under this model what does interest represent? If I step through your logic here.....
1. I believe there is copper in that hill which has a value ( say of 60K ).
2. I ask the bank for 10K to get started
3. Thus 10K has been added to the economy, recognizing that raw materials will be brought to the economy and growing the pie of wealth
4. I go into them thar hills, mine out the copper for 60K.
5. I pay back the bank, who now has 10K actual cash in their reserves, against which they may lend. I have also put 50K of my sale of this copper in their bank, giving them 60K against which to lend.
6. At this point, I think we're balanced in terms of what's been added to the value pie.
7. OK, so what does interest represent? The opportunity cost on the hope that I would find the copper? And, alternatively, say I found nothing in those hills, what happens to that 10K that was created? Shouldn't that be destroyed?
I'm not disagreeing, but I'm trying to understand your model better.