[orwin]

I borrow you 10 money i use to buy my chair-making tools. I make the chair, sell it 20 money, then pay you 12 money back for the service rendered. Basically money is supposed to be a tool that help us creating capital by exchanging goods.

[DrScientist]

But aren't you confusing the means of exchange with the creation of value.

The creation of value is me taking energy from the sun and converting that into a chair.

You lending me money is you extracting value from artificially being a middleman.

It would have been more efficient to write an IOU to the tool maker, make the chair and pay back the tool maker directly.

Now sure that IOU isn't that fungible - however that highlights one of the absurdities ( if I understand it correctly ) of the current banking system where private banks are able to in effect issue IOU's on their own basis but put mine and your name on it as a guarantor - resulting in the public having to bail out banks when they over extend.

[JohnFen]

> The creation of value is me taking energy from the sun and converting that into a chair.

Which requires money to do. If you borrow that money to enable using solar to make furniture, then you can repay that money with interest and keep a profit for yourself. Both the borrower and lender come out with more money than they had when they started.

That's not a zero-sum game.

Now, it's 100% true that borrowing and lending can (and often is) done in a way to make it a zero-sum game, but that's just because the world (including the big-time corporate world, and especially including major IT companies) is full of scammers.

[DrScientist]

>> The creation of value is me taking energy from the sun and converting that into a chair.

> Which requires money to do.

No it doesn't require money. It requires energy. Money is often involved as a means of exchange, but it's not required.

If what you said is true it would be impossible to live off grid and make a chair.

By focusing on the money you are focusing on the means of exchange rather than the fundamentals - which is energy, knowledge and collaboration.

Let's take a concrete example - the development of Linux - did that require some large VC backed funding models or was it simply people sharing spare cycles for shared benefit? Here the underlying resources required was people's time [1] - not money per se.

[1] Sure some value was exchanged using the medium of money ( Red Hat existed, large companies shared larger cycles by explicitly paying employees etc ) - but that's not lending and interest with money somehow being the time limiting resource. Again don't confuse the means of exchange with the thing being exchanged.

[orwin]

Originally, money is a IOU and basically a tool to trade between communities. The individualization of capital (capitalism basically) made place for private loan and artificial middlemen like i wrote in the previous comment. And yes, you can work without it, but this is the way things works in the west since the 18th century, 17th century in GB.

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To be clear about how banks work: they don't loan money, they create it via accounting. You go to a bank and ask for 20 money at 10% interest, they will write in their asset column "20 money" and in their liability "20 money", give you the newly created 20 money and create a "coupon" of 2 money (sorry that's the french word, i don't know how englo people call that). If needed (like a liquidity crunch), they can sell the coupon worth 2 money at 1 money, or even your loan worth 20 money 18 to another bank, but they will keep the liability in their own books. If the liability become higher than the assets, bankruptcy. Notice that the money you put in the bank isn't touched.

The money you put in bank, they invest in low risk assets like government bonds, through their investment funds. Since those are locked assets, if too many people want their money back at the same time, the bank enter a liquidity crunch, have to sell the locked assets at a discount, and put the losses on their own funds, in the "liability" column.

Wether it's caused by a credit crunch or because loans aren't being repaid, if a bank "liability" column has a higher value than its "assets" column, they enter bankruptcy. The state auctions customer-linked investment off (i think that's more complex and depends on the local laws, in my country you have a transfer provision where the customer and the bonds linked to some of his bank accounts are transfered to a new bank) where those are slowly sold at a higher value than the failing bank would have gotten, slowly reimbursing the customers. It is _very_ rare that bank customers loose any money in the long run (they do suffer opportunity cost though, their assets are locked and don't earn any interests, so in a way, they loose a little). in the 2007-2008 crisis, the issue is that banks split loans weirdly and did a lot of accounting shenaningans tying each international bank to each others.