The value isn’t the promise itself, but the probability that the promise is sound and will be kept. There is always a risk that it won’t be paid back.
For me to not have capital, and then to gain access to capital that I didn’t save, is very valuable. It saves me time. In fact, I’m willing to pay a certain amount for the time it saved me (interest). If I don’t repay that loan, I suffer by having to pay much more for the same service in the future. People won’t lend as cheaply as the risk increases.
Just because Bitcoin has a hard cap does not mean Bitcoin cannot be exchanged over time between parties who make promises to each other. Of course there will be bankruptcy and jubilees, it’s a part of life, and it appears throughout the Bible.
Matthew 25:27 (NIV)
“You should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.”
The “extra” is made through the entrepreneurial genius of the borrower. He uses the capital and his skill to earn more than he borrowed. Even if the supply is capped, this can still occur.
Will more defaults occur? Of course. Will there be even a fraction as much debt in the world? No, much less, due to the nature of the money. But credit markets will still exist.
I still don’t see how credit distorts markets if the source of the money comes from saving, rather than the creation of new money through debt. If anything, it helps the market self-regulate and find the true market interest rate
For me to not have capital, and then to gain access to capital that I didn’t save, is very valuable. It saves me time. In fact, I’m willing to pay a certain amount for the time it saved me (interest). If I don’t repay that loan, I suffer by having to pay much more for the same service in the future. People won’t lend as cheaply as the risk increases.
Just because Bitcoin has a hard cap does not mean Bitcoin cannot be exchanged over time between parties who make promises to each other. Of course there will be bankruptcy and jubilees, it’s a part of life, and it appears throughout the Bible.
Matthew 25:27 (NIV)
“You should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.”
The “extra” is made through the entrepreneurial genius of the borrower. He uses the capital and his skill to earn more than he borrowed. Even if the supply is capped, this can still occur.
Will more defaults occur? Of course. Will there be even a fraction as much debt in the world? No, much less, due to the nature of the money. But credit markets will still exist.
I still don’t see how credit distorts markets if the source of the money comes from saving, rather than the creation of new money through debt. If anything, it helps the market self-regulate and find the true market interest rate
