Quote from: GCInc. on April 22, 2013, 08:48:18 PM

Consumption implies wastefulness, which we need to minimize. ... Ideally, in a demurrage system "spending" from the spender's viewpoint would mean investment into more stable assets, like nybble41 said. Not consumption.

I would like to take the opportunity to distance myself from this line of reasoning. Investment is not inherently better than consumption, or vice-versa. The sole point of investment, however, is to enable future consumption. Consumption is not waste; it is the whole point of economic activity. There is nothing noble about a currency designed to force its users to abandon it in favor of something more stable; that is just one of the reasons why such a currency will not become widely adopted (at least not voluntarily).

Quote from: GCInc. on April 22, 2013, 08:06:46 PM

Quote from: myrkul on April 22, 2013, 07:52:32 PM

So, saving to buy a car is less productive than going into debt for that car?

It certainly is. Spending as soon as possible opens up the need and opportunity for more production than would saving for years before spending.

Saving to buy a car is neither more nor less productive than going into debt for that car. In order for you to go into debt, someone else had to save so that they would have the excess resources necessary to make that loan. This is true even if the only two entities involved are you and the maker of the car. Either your savings (loaned to the maker) or the maker's savings are what allow the maker to survive while working on the car rather than gathering necessities. Regardless of whether you saved up for the car, someone had to, so in the broader economic perspective there is no difference.

BTW, introducing a third party (a bank) who makes a "loan" without any actual saving doesn't change that fundamental equation; without the saved surplus, the bank can issue as much money as it wants, but there won't be anything to buy with it. Money has no value without savings.

Quote from: Impaler on April 22, 2013, 09:46:53 PM

... the Return on Investment of capital goods can and dose become negative when their is an excess of capitol, something that frequently occurs when entrepreneurs pile on to a profitable sector of the economy and saturate it.

Yes, and interest can and does become negative in real terms when there is an excess of capital. You see this when the economy is undergoing inflation--people accept below-inflation levels of interest because there is nothing better available to invest in.

Quote from: Impaler on April 22, 2013, 09:46:53 PM

With sufficient competition the return on all capital goods should fall to zero and stay their, to what ever degree that ROI is above zero must derive from something that prevents it from dropping. And that is clearly money interest, once the capitol ROI is driven down too or below that of money then lending for additional business expansion in that sector stops. Thus the rate of money interest acts as a 'floor' to ROI of capitol goods. Your explanation is thus backwards, money interest creates capitol ROI not the other way around.

If capital goods were superabundant then their marginal ROI would indeed be zero. I assume that was what you meant by "sufficient competition", but it's not a realistic scenario. Capital is scarce, not superabundant. The interest rate reflects the ROI on capital throughout the economy; if the ROI in a given sector falls below the interest rate, that is a signal that there is enough investment in that sector, so in that sense it does act as a "floor" for a particular sector. If the ROI were to fall across all sectors, however, then so would the interest rate "floor". If there was no expectation of return on investment then the interest rate would be zero (or even negative, given inflation), because no one would be interested in taking out loans.