Reading this text, there are some somewhat blatant flaws there. If I was a financier in such a free-money economy, what's to stop me from asking that when you pay back the loan, you add a few extra stamps or bills to the money you return, i.e. charge you interest on the loan?
The fact that if you don't find no one that wants to accept that trade, you will actually lose money by demurrage. If you want to save, you better lend your free-money or do something else with it.
There seems to be some lack of knowledge/understanding about things on his part, too. For example,
And what price was paid for a piece of land yielding a rent of $1000 ? The calculation was based on the fact that $100 bore $5 interest, and the price of the land was as many times 100 as 5 is contained in 1000. But how did this rate of 5% originate ? That is the crux of the matter.
The answer is, a bank that loans money to many houses calculates the probability that each new loan will default. The interest is calculated based on the overall chance of default per year, plus required operating costs (paying for employees and stuff). If the bank is operating in a perfectly competitive economy (no profit) is enough to ensure that if someone during the year defaults on their loan, that 5% interest fee should be just enough to cover the paychecks of employees, operating cost of the bank, and maybe still allow them to make an extra loan or two. So, again, time and/or risk.
No, apart from the operating costs of the bank, the inflation/deflation premium and the risk premium, you pay
basic interest I should probably stop linking you chapters because you can get confused by jumping around through the book.
If the answer is "there is already a lot of money going around, so the quantity of money will drive interest through competition to zero," that ignores the part where a lot of money means each bill costs less, meaning you just need more of them to buy the same thing, which, again, means that you will likely have to go to someone specific and scarce who has a lot of this money, who can still charge you interest. If the situation becomes too inflationary, likely people will abandon this money for something else.
I just really don't see a difference between money being inflated by a central government that prints more bills, and money being inflated by design, with the central government printing more stamps (bills)
No, interest rates are not driven down by monetizing debt and printing but simply by demurrage.
However, there's a part that you won't like in the book (I don't like it neither). He says the central issuing authority could control prices levels.
A free-money central bank (yes, sounds weird) would have it easier to because the velocity of free-money would be more predictable.
He doesn't talks about stimulus packages or nothing similar, his central issuer would just provide stable prices and if there's price instability, is the fault of the central issuer, because the absence of liquidity in the market cannot be blamed due to built in incentive in free-money to circulate.
Luckily we now have the block chain and we can just have a stable monetary base for freicoin, letting prices adjust themselves while solving the potential problems of deflation and the problems of interest.