Quote from: jtimon on September 28, 2011, 07:27:20 AM

I see. And I realise I must correct myself. Hoarding doesn't cause deflation, an increase in the hoarded money pool does. A decrease causes inflation.
The more constant that pool is, the more stable V and P.

Yes, the technical term for it is demand for money. A rather unfortunate one, since simple souls (and most of the economists) take it rather literally. As demand for nominal money, little peaces of paper with portraits of dead leaders or their electronic equivalents. It's a related topic, that's why I mention it here, but.. just mention. FTM.

Quote from: jtimon on September 28, 2011, 07:27:20 AM

There should be no difference between investors that rely on loans and investors that doesn't. The self-financing entrepeneurs should think that they're lending to themselves. All borrowers and money holders investors are competing in the same market, the money holder must account the costs of capital-money even if he doesn't have to borrow it.
Yes deflation can lower interest rates (negative inflation premium) but it cannot lower the interest to zero.

Well, the world just doesn't work this way, and there's a difference between investors which rely on loans and those who do not. The loan market is an attribute of a rather developed and sophisticated economy and you can have (and there are) investments even without loans markets. Robinson Crusoe Examples to Rescue!

And when looking at the relation between investments and loans, I insist in treating the investment as the more fundamental.. eh... whatever. If you have an investment project and you think it will be profitable then there is also an opportunity for a loan. Rate negotiable, but greater than zero and lower than the expected rate of profit.

So, in order to prove (credible claim) that price deflation (in the conditions of stable money supply and increasing technological productivity) will kill the loan market you have to prove that such conditions will turn all investments projects into unprofitable one. Now.. are you accepting the challenge?

Quote from: jtimon on September 28, 2011, 07:27:20 AM

My point that an increase in the hoarding pool doesn't lead necessarily to more investments. You assume that someone will buy the bricks, but they can stay in the stock of the producer. Or the deflation can force him to sell them at a lost, which will cause is bankrupt. Wasn't his business profitable? It was without deflation, but not with it.

Business plans going bad? Happens all the time. People learn and try to be wiser next time. But, I have to say that you are saying here is slightly different from your original position (as I understood it). Namely that saving can lead to losses for the society as a whole, not that saving is inherently harmful.

Quote from: jtimon on September 28, 2011, 07:27:20 AM

This may be the central point of our disagreements. You say that money can't yield on its own, it needs profitable investments.
But money performs services on its own and "it can charge" for those services.

Well, I guess that exactly for that "services of its own" that markets choose a commodity to serve as money, medium of exchange. Also it is "it can charge" or "it can't charge" If the second that's part of the appeal for holding money.

Quote from: jtimon on September 28, 2011, 07:27:20 AM

Money is by definition the more liquid asset. That represents an insurance against uncertainty that the money holder gets for free. The rest of the money users are paying indirectly for that insurance.

OK, someone gets something for free. Relatively speaking. So much I get. How is this a big deal? Where's and who's the victim?

Quote from: jtimon on September 28, 2011, 07:27:20 AM

Also, money is needed for trade, even when there's no profitable potential investments nor growth. And "the wares pay" for that reallocating service. The basic interest is included in the final selling price of every product. The merchant not only collects his wage from the final selling price, but also the interest on the liquidity he needs in his operations. Again, if the merchant have the money, it should consider that he's lending to himself, because he's competing with other merchants that operate with borrowed money.
In this sense, capital-money is the only authentic capital (here I define capital as something that has sustained yields rather than means of production) and the interest rate is what protect the means of production (that need financing to come into existence, not simple nets) yields. Capital that won't yield as much as money does is simply not financed, and that prevents further competition within a certain type of capital.

Market prices, market prices, market prices.. For goods and interest rates. Also there is no such thing as basic interest and hold money does not yield (monetary) interest.

Your theory of value seem to be a variant of cost theory of value where as a fixed cost into the price of every good enter the (a fixed?) interest rate on the price of loaned (own) capital. But that's backwards! First it is from the prices of goods that prices of inputs are inferred, and second interest is also a market price set by supply and demand.

Well that's about it. Also about that "free insurance" that you seem to hate so much. Like it or not, but there is a demand for safe, long term storage of value. And if money cannot server as such a storage people will start looking for substitutes.

Do you really think that it is better for people to save in paintings, old violins, even gold? Shotguns and canned beans?

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