[willmadden]

I’ve been thinking about an “equity only” currency where charging interest and debt are outlawed.

If you need to raise money for a project, to buy a property, or to finance a business, you must sell a portion of your venture/asset to raise the necessary capital.

The idea is to outlaw debt and money creating more money via interest.

I don’t see why this system can’t be as efficient as a debt and interest based financial system.

It would require getting rid of agencies like the SEC and replacing these regulatory bodies with a very efficient stock system, like ICOs.

Lending money to a business is essentially the same as investing in it anyway. If the business defaults the result is the same.

This would eliminate the parasitic effect of excessive interest from the economy. It would need to be combined with a basic social safety net set low enough to encourage people to remain productive.

An interesting thought experiment, what if people ICO’d their future earnings, selling themselves into indentured servitude to repay the hard currency they borrowed?

That’s what people are doing when they borrow money today. It’s also what happens when nations go deeper into debt to central banks!

[nocoiner]

I guess I have a few questions.

1. Why are returns on equity inherently favored versus returns on debt?

2. How is new money created as productive capacity increases?

3. How are you going to have an efficient stock system when every transaction requires immediate settlement?

4. Why do the securities regulators need to go away in a hypercharged securitized society?

5. How are people borrowing hard currency in their road to serfdom? I thought there was no debt?

6. When you say debt is the same thing as equity, are you saying that in a stylized Modigliani-Miller sense or do you literally think debt and equity get similar treatment in the capital stack?

7. Do you realize that everyone debt is someone else’s asset?

[quickthrowman]

> Lending money to a business is essentially the same as investing in it anyway.

They’re very clearly not the same, debt and equity are separate things that serve different purposes. And yes, I am aware of convertible bonds and other forms of combined debt/equity instruments.

Debt is senior to equity in bankruptcy filings. A troubled company will pay its lenders and bondholders before paying dividends to its equity investors.

There has always been debt, society can’t function without it. “Lend me seeds now so that I may grow a crop and pay you back at harvest time” is a form of debt that has been around as long or nearly as long as agriculture has.

[nocoiner]

Give him a break, he’s in the middle of re-discovering Modigliani-Miller, except with a dash of crypto-optimism and pro-indentured servitude (??) thrown in.

[willmadden]

You're arguing from today's legal framework. I'm not interested in today's legal framework. My point is debt doesn't need to exist and we could operate more efficiently using a currency with a pre-defined supply with efficient equity markets.

[quickthrowman]

Please read the book ‘Debt: The First 5,000 Years’ and then re-examine your ideas about not needing debt. I think you’ll find that we do in fact need debt to function as a society.

A currency with a pre-defined supply is a non-starter, there are multiple academic papers you can find that will tell you exactly why.

[PopAlongKid]

>Lending money to a business is essentially the same as investing in it anyway. If the business defaults the result is the same.

It is far more common for a business when times are hard to stop (or never start) paying out to its equity investors (dividends) while still servicing its debt. It is not "essentially the same as investing".

[willmadden]

That’s only because of the way loan agreements are structured and because law and regulation are written around a debt based system.

If businesses couldn’t take on debt there would only be one class of stakeholders, the shareholders.

It would be an interesting thing to pilot in Muslim countries where charging interest is effectively forbidden. I think it could be a more efficient, transparent, and equitable financial system.

[naveen99]

So no credit cards for businesses or their employees ? What about unpaid invoices to other businesses , do they get converted to debt or equity ?

[willmadden]

There is no more debt or credit. Unpaid invoices are defaults where the violating party has their shares liquidated as a margin call to cover their bill. Businesses would be much more conservative about having currency to cover their bills, which would end the boom/bust/repossess economic cycles.

Digitizing ownership solves all of the “problems” with not having “credit”. Raising capital would be a simple as selling tokens on decentralized exchanges for the hard currency unit of account. Accounts payable are smart contracts due at a specific date/time.

You would have to completely reform the SEC for this to work. They would need to get out of the way for the most part (no more red tape and accredited investor nonsense) and only handle edge cases that can’t be automated.

Central banks would no longer exist to profit from issuing credit to nations. Taxation would have to be transparent and politicians accountable, because there is no more money printer.

[than3]

This was done in the past. Money lending (usury) was outlawed.

For 100+ years, interest above a certain percentage was outlawed until congress created a exclusion loophole for federal financial institutions.

If you haven't already read the book "Debt, The First 5,000 yaers" by David Graeber, I think you'd get a lot out of it.

Also, Market system's aren't a silver bullet.

[willmadden]

I’m not talking about outlawing usury by fiat, more the automation and extension of equity markets into the general economy using smart contracts for ar/ap using margin calls for unpaid bills and a pre-defined money supply currency as the unit of account. Credit at interest would not be supported and would be unnecessary.

[_siis]

I never said fiat, I said usury (interest), and that goes on any underlying asset.

I see where this is going though. Its not a new idea, it runs very close to similar lines of thought put forth by the authoritarian socialists.

It all sounds like a magical utopia until you get into the details. Promises are put forth, but once power is ceded, abuses happen. Those in power will claim "but those only happen because there is not enough of power and we face oblivion, anyone not with us is against us, they threaten our future", and the fools that are scared will believe it, and they are the ones that allow everyone else to become slaves. Its part of a common authoritarian playbook, and has happened many times throughout history.

https://www.mit.edu/people/fuller/peace/war_goering.html

When you look at the requirements for clearing at a national scale, it requires a centralized system with coercive control, and absolute information (future sight). For the most part those systems only operate efficiently because of corruption, and there is no future sight thankfully.

It doesn't address a number of issues with any centrally planned economy and without incentives it must be centrally planned to produce goods. Having assets without being able to use them means no property rights. The borgeioux/monopolists take over and the common man only needs bare subsistence. That's fine in a pre-limits of growth world but we'll be at 9B people soon and predefined currency pool without expansion doesn't take into account population growth. So given contention, who decides who lives and has children, or dies and doesn't. In that kind of system, the people at the top.

You end up with no investment, no companies, and no future within a generation or two (20 years = 1 generation).

Inevitably shortages occur, and when they do it causes death when its a strategic good (i.e. food). That death also won't be coming to those at the top while there's such a larger pool below. The people at the top need the good more since they are responsible for decisions that impact the whole. Sometimes its necessary to cut off a leg so the body can survive. Its important that the designated people can continue to make these important decisions in times of crisis... so they would say.

You can tweak those systems any number of ways and end up with the exact same outcome when you don't address the core problem of economic calculation which doesn't have a solution in centrally planned economies. Its not new, its old, there's quite a large body of material from the 1920s-1940s on it.