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This was what I don't get about the "we just keep using debt" argument.

Let's say you live in Podunk, Missouri, and the town is split by a river with a ferry. The people of the town get fed up with the ferry and decide they want a bridge, but it'll cost 50 Bitcoin. No one person has that much and nobody outside the town wants the bridge, so a group of them decide to ground a Bridge Building Society and they pool their money (40 Bitcoin) and get some discounts on building materials from the local carpenter and stonemason (3 Bitcoin worth) and some volunteers to help with the construction (7 Bitcoin worth). In return, they grant themselves and their immediate families and supporters/volunteers the right to use the bridge free of tolls for 20 years and those who contributed money are to receive whatever toll-money is netted at the end of the year, for 20 years. To speed up receipt of tolls, they quickly build a wooden bridge and start collecting, while the steel/stone bridge is being built slowly over 5 years.

My argument was that the tolls probably wouldn't return the full 40 Bitcoin, within any reasonable amount of time, and that the Bitcoin payers would be fine with that because they get to use the bridge.

But I was told that they would just borrow the 40 Bitcoin and pay 10% interest for them and then pay the 40 Bitcoin back with interest after 5 years, which would be 60 Bitcoin. And those Bitcoin each contain more potential purchasing power than the originally invested ones because 6 years have passed.

And I think most people would just rather keep riding the ferry. 🤷‍♀️ The tolls already didn't cover the 40 Bitcoin investment because it's a bridge out in the swamp and not over Chesapeake Bay, and now you've added 20 Bitcoin on top.

I can't get an explanation for where the 20+ Bitcoin come from.

Most large loans have no explanation for where the interest comes from, under fiat, and that seems even less plausibel under Bitcoin.

People who want a bridge will just pay for a bridge.

f0xr 1y ago

Under the current system, the interest for loans comes from new loans. That's why M2 only goes up to the right, and any pause collapses the entire financial system.

That's a consequence of the debt/fiat system based on the fraud of usury, where banks charge interest to loan out money they don't have.

Imagining a Bitcoin standard is tough right now, because we're in a brief blip with Bitcoin rapidly appreciating in value as in gets monetized. Eventually that process slows down and stops. At that point Bitcoin deflates at the rate of economic growth. That's a lot slower than the current value appreciation. At that point loans become possible, as long as it's for a genuinely productive use that beats the overall rate of economic growth. Loans don't go away, but massive misallocation of capital does.

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Discussion

Laeserin 1y ago

The only thing I could imagine that meets that limitation in Podunk is to take out a loan to build only a very cheap wooden bridge, and then try to squeeze the drivers for high tolls, to pay back the loan before it collapses.

f0xr 1y ago

Yeah I think a bridge in some little town that only gets local traffic is exactly the kind of unproductive investment a sound money standard will kill. Imagine how that project gets built today. Massive debt issuance by the state, or taxes on people who will never use the bridge.

I see the fact that these projects under a Bitcoin standard either don't happen, or get fronted by a wealthy local benefactor, as a really good thing. I don't want my taxes and the inflation of my savings building bridges in Podunk Missouri. Let's use that to build SMR's or desalination plants or something really worthwhile.

Laeserin 1y ago

Well, my original example assumed that there was no state and no taxes. Only private enterprise and only Bitcoin.

I was trying to prove that people might still build bridges and roads in smaller towns, even if there was no "third party" to pay for them and even if there wasn't enough traffic over the bridge to pay for the bridge. Bridges to small towns are hugely beneficial to those towns, so the people in those towns will just have to pony up the dough and pay for it, themselves, or deal with having no bridge.

But it was like, just take out a loan. Why would I take out a loan for something like that? I'd pay double for it, in the end, and be tied to the debt.

But the counterargument is that, otherwise, people willing to be benefactors of a bridge would own the bridge, through the building society. So, rich people would pay for many/most of the public infrastructure and businesses, and everyone else would depend upon their largess. Whereas, if one person could just go get a loan from a bank, he would be the person owning the bridge in the end, after all, it was his idea. And then everyone in the town would bleed tolls out of the nose or take the ferry or build a second "town bridge".

But the bridge probably still remains unprofitable, so the benefactor is now the rich financier lending for mysterious reasons, rather than the rich building society people who just wanted a bridge to drive over themselves, and there is a builder trying to pay back 100 BTC for a bridge (no more discounts and volunteers, after all). How is that better?