Quote from: jtimon on August 30, 2011, 05:00:31 PM

Quote from: kjj on August 30, 2011, 04:20:41 PM

There is only one kind of inflation. If you want to call it monetary inflation, feel free.

Although they're related, I like to distinguish between monetary inflation (money printing) and price inflation (rising prices) to avoid misunderstandings. Monetary inflation is taken into account in my later explanation. Price inflation was already in the first analysis.

The concept of price inflation as a thing only exists for people that think prices are supposed to be fixed. For everyone else, it is just a consequence of something else, usually (monetary) inflation.

Quote from: jtimon on August 30, 2011, 05:00:31 PM

Quote from: kjj on August 30, 2011, 04:20:41 PM

A moment's thought should convince you that an insurance premium is exactly the same as a higher interest rate.

But there's a basic interest that doesn't disappear with perfect secure lending. I guess you attribute it to the time preference.

I said higher interest rate, as in the difference between the interest rate with the insurance and the interest rate without it.

Quote from: jtimon on August 30, 2011, 05:00:31 PM

Quote from: kjj on August 30, 2011, 04:20:41 PM

Time preference is indeed applicable to all things. The only way it couldn't is if you assume it only goes in one direction at all times and for all things.

No. Why should I prefer everything now instead of later? Things rot and capital depreciates with its deterioration.
The utility of a liter of milk today doesn't include the utility of a liter of milk in a year, because you won't be able to safely drink it in a year.
With demurrage you could prefer 100 coins next year rather than 100 coins today. Money, an artificial good, a symbol of value can have the qualities that its users decide it to have. Their users will chose a currency with demurrage if it has advantages, for example, cheaper trades and loans.

I keep saying time-preference. Why do you keep acting as if I had said "now-preference"? Also, the utility of a liter of milk in a year doesn't include your ability to trade it now.

Quote from: jtimon on August 30, 2011, 05:00:31 PM

Quote from: kjj on August 30, 2011, 04:20:41 PM

The island story doesn't remove prejudices, it just tries to replace them. Also, it doesn't apply here, because you were talking about money.

I don't understand how are you still convinced that is always better to have a loaf of bread today than tomorrow. It is so clear to me that it depends on the concrete circumstances of the owner of the bread...
Why bakers sell on credit (without interest) then? Wouldn't they be better keeping the bread although they can't sell it tomorrow?

I said no such thing (see above). I also said explicitly that rot doesn't apply here because you were talking about money.. Oh, and yes, bakers might very well be better off letting their bread rot, because you might be willing to pay more for (different) bread tomorrow when you are hungrier than you are today.

Quote from: jtimon on August 30, 2011, 05:00:31 PM

Quote from: kjj on August 30, 2011, 04:20:41 PM

I suppose I should also point out that inflation is indistinguishable from currency demurrage, in practice.

I don't think so, but it is a common claim.

Quote from: jtimon on July 02, 2011, 12:19:57 PM

Isn't demurrage equivalent to inflation?

No. Their impact on the gross interest is the opposite. Demurrage removes the privilege that lenders have over borrowers and the demurrage is substracted from the basic interest.
With inflation, the money holder could just buy things and sell them later at a higher price. That has to be taken into account when negotiating the interest.
This is added to the gross interest in the form of inflation premium (Hausse-premium in the text).
The reason why we have low interest with inflation today is the way the inflation is created.
Central banks monetize debt by buying bonds and giving cheap loans to banks. This way, when the real savers (not the central bank) go to the financial market they find that some borrowers (the banks and the governments) have already obtained its funds with cheap loans and they have to lower their prices (their interest) to meet the demand that the central bank has decreased.
Real savings have to be balanced with investments and that's in my opinion the most important lesson from the austrian school. But that's not incompatible with demurrage.
They found out that increasing the money supply doesn't solve the problems of deflation, just postpone and aggravate them.
But with demurrage you incentive money circulation without increasing the money supply.

So, lenders won't include demurrage in their calculations when deciding what interest rate to charge? How do you expect to make this happen?

Also, read your post from July again. In it, you are very close to the Eureka! moment. You understand that we use peculiar mechanisms for economic policy, but then you direct your criticisms towards neutral concepts rather than the implementation.