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posted by dennisn on March 1st, 2015 at 7:53PM

So you're saying interest can't exist on that island, using that fixed currency. (Note: bitcoin is (will be) a fixed supply currency.)
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posted by jenni on March 1st, 2015 at 9:17PM

Can they divide the dollars or do they solely exist as literally three dollar bills? Either way, if there is only 3 dollars and one person owes another person two dollars they will have to make a deal with the owner of the other dollar to be able to use their dollar.

posted by dennisn on March 1st, 2015 at 9:18PM

Yes, the currency is divisble. Does that help?

posted by jenni on March 8th, 2015 at 9:25PM

I am not sure :)

posted by dennisn on March 9th, 2015 at 5:58AM

Actually in this example it wouldn't work (that is, this currency couldn't support it), since the guy is effectively asking for all the money on the island ... $2 on top of the $1 he already has. However, even here, there are solutions. They could create a new currency, and manage to pay off the debt -- a form of inflation. It might also be worthwhile to think of the lender/lendee as gambling, and thus have no guarantees of money. The fact that the lender didn't do "due diligence" regarding the feasibility of the loan is his fault.

However, the example I originally wanted to give was supposed to be more realistic. Say the guy only wanted a $0.1 loan with $0.1 interest. In this case he could earn the $0.2 he needs to repay the loan by exchanging goods and services with the other two islanders. The wealth would no longer be equally distributed, but that's okay.