A zero-sum monetary system, interest rates, and implications
نویسنده
چکیده
To the knowledge of the author, this is the first time it has been shown that interest rates that are extremely high by modern standards are necessary within a zero-sum monetary system. Extreme interest rates persisted for long periods of time in many places. Prior to the invention of banking, most money was hard-money in the form of some type of coin. Here a model is presented that examines the interest rate required to succeed as an investor in a zero-sum hard-money system. Even when the playing field is significantly tilted toward the investor, interest rates need to be much higher than expected. In a completely fair zero-sum system, an investor cannot break even without charging 100% interest. Even with a 5% advantage, an investor won’t break even at 15% interest. From this it is concluded that what we consider usurious rates today are, within a hard-money system, driven by necessity. Cryptocurrency is a novel form of hard-currency. The inability to virtualize the money creates a system close to zero-sum. Therefore, within the bounds of a cryptocurrency system that limits money creation, interest rates must rise to levels that the modern world considers usury. It is impossible, therefore, that a cryptocurrency that is not expandable could take over a modern economy and replace modern fiat currency. JEL: E21, E22, E42, E51, G21, G29, G28
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ورودعنوان ژورنال:
- CoRR
دوره abs/1506.08231 شماره
صفحات -
تاریخ انتشار 2015