Quote from: cartman on July 15, 2011, 12:00:18 PM

Quote from: jtimon on July 15, 2011, 09:01:21 AM

-There's no money in our example and that's why "interest" can go to zero. In fact, one could say that there's no such interest but a sharing of profits.
The basic interest of money doesn't ever goes to zero, no matter how little the growth is. Interest stays there even within a recession.

We could easily introduce money in the story, there is just no need because there is only two goods at a time.

To do it, we could imagine that there's many colors and flavors for the fish and that each fish needs a different net and a different amount of time to be captured.
My point is that with money interest will never go to zero.

Quote from: cartman on July 15, 2011, 12:00:18 PM

Quote from: jtimon on July 15, 2011, 09:01:21 AM

-Within capitalism, the nets would need to yield at least as much as "money does", taking it first from profits and then from wages. The production of nets would have stop when that yield is compromised (until some nets break or the tribe gets bigger) instead of when the demand is met. In your example, there's free market but there's no capitalism.

Exactly! In a developed economy where nets are invented, the return of producing nets must be higher than the return of money. This however means it has to be sufficently profitable compared to producing OTHER goods. So you can always break down the whole time preference thing to production and goods. Money is just the medium of exchange. Prices reflect barter rates, interest reflects growth.

Without money the nets must be profitable compared with producing other goods, but with money that is not enough. Let me try with an example.
Without money:
If Robinson can capture 10 fish a day without a net, 20 with net, it takes 4 days to make the net and it breaks after two days of use.
The net just need to save a little time or produce just one more fish to be profitable.
With money:
The network has to pay the interest to be profitable. The money owner will never lend it at zero interest because money lasts forever. Also, the fishermen must sell their fish for money before the fish rots. The money owner can exploit that situation and profit from it.
Everybody needs money to trade and invest and the money owner rents the tool for commerce just like the constructor rents the highway to drivers.
But the constructor needs to maintain the highway while money lasts forever. Every investment needs to pay interest. And you pay interest with every good you purchase, because every business have to pay its financing costs. Even if the entrepreneur uses its own money, he should get the interest from his money, besides the business profit.

Quote from: cartman on July 15, 2011, 12:00:18 PM

Quote from: jtimon on July 15, 2011, 09:01:21 AM

But in general, yes, it seems that the liquidity premium gets higher when there's very profitable investments to make.
On the other hand, after the initial profits move to wages, people can save more, decreasing the basic interest.

Yes, thats the point. In my fishexample interest in fact goes to zero, because there are no other goods than fish and massages and no more options to grow.
If you imagine the - highly hypothetical - situation when there is no economic growth (on average) in the whole world, what is going to happen?
Let there be a few companies that still make profits while the rest of the economy stagnates. All companies which are not growing will pay back (or already have paid back) there debts because paying back means say 4% profit (avoidance of loss) compared to 0%. So there is almost noone borrowing money so interest will be very low.
The last few companies growing can now very quickly and cheaply get money at the market and max out their growth potential. De facto, the stock prices will go up almost infinitely to take the low interest into account, and the companies can easily issue stocks for high prices. After this short phase, the whole economy would on average stagnate. Of course there are wages, depriciation etc BUT there is no need for a money market. You still need money for trading and stuff but you dont need loans and savings at bank so there would be no interest.
In this admittedly hypothetical situation, I can't see how "at least little interest" can remain. In reality we would, if at all, come close to zero, because there alway is some fluctuation (population growth and demographic changes, changes in education, nature and of course bernanke and the chinese.

Then why there's interest within depressions?
Why would the money owner ignore his power and rent it for free?
If you can ruin someone else by doing nothing, that person has an incentive to convince you to do something.
It doesn't matter how much cost you to obtain the money, all that matters is how much the other person needs it.
Basic interest is the profits derived from the scarce and everlasting money we have.
It's not about morality, it's about profiting for the privilege you have as money owner. That's why religions have failed when trying to just prohibit interest.
If you want to avoid interest you either need free money (money that rots) or non scarce money (mutual credit money like LETS or Ripple).

Quote from: cartman on July 15, 2011, 12:00:18 PM

On the other hand, if one accepts the hypothetical situation, he could also accept a few meaningful statements like:

- A certain amount of economic unequality is temporary (this somehow is a constant situation, but the inequality of industralisation was the reduction of poverty today and the inequality of the internet age is tomorrows reduction of poverty)
- This part of inequality is somehow "fair" and does not harm anyone (except the coachman who can easily switch to driving a car within some weeks)
- Every attempt to intervene at that part of inequality (regulations, intellectual property rights, minimum wages) prolongs the process that the current inequality wave(s) benefit to fight tomorrows poverty

I even want to try a really provocative statement:
Besides this cause of inequality, most inequality is caused by the state (or other mafia-like institutions like the mafia or warlords)

I agree. The profits of the entrepreneur are a legitimate source of inequality, just like the bigger wage of a more skilled worker.
The state is a great source of inequality and comes from the monopoly of violence.
Basic interest (which I claim won't disappear with zero or negative growth) is another source of inequality.
Money is kind of agreement or contract within the whole society and its terms can be changed.