5.Sats.a.Pack on Nostr: Under a #Bitcoin Standard, costs would deflate at the approximate rate of increasing ...
Under a #Bitcoin Standard, costs would deflate at the approximate rate of increasing productivity.
So if global productivity is increasing at 5%/yr, then purchasing power of a sat increases by 5%/yr.
(We're under 4% today, and you could argue that without taxes, fiat theft, and regulatory capture, we could easily be at 10%/yr)
This kind of flips the whole idea of borrowing on its head.
Like other comments,
I still think lending will be a thing.
I think it'll be greatly decreased, and almost always for investment. (Borrowing for consumption would be asinine, and no one would lend it to you).
But to answer the question, what happens to interest rates ?
I think they stay low, like <10%, but the bar for lending goes through the roof.
As a lender I'm taking massive risk.
I have to trust that the borrower;
1. Doesn't get liquididated or run.
2. Can at least beat global productivity rate, otherwise I'm better off hodling.
3. That the expected value (est. return × probability of success) is attractive enough to outweight points 1 & 2.
To do all of this, a borrower (ie entrepreneur) couldn't just grow at market pace, they'd have to outcompete and outright market capture.
Productivity is additive to humanity, but a fixed supply cap means lending is a zero sum game.
If I'm expecting 10% return yr 1 and global prod is 10%, then the net present value end of yr one on what they owe me is 20% higher then what they're borrowing.
That's a huge hurdle, and it doesn't even factor in profit, that's just paying the lender.
If it's not an airtight business plan, my stats are staying cold.
So if global productivity is increasing at 5%/yr, then purchasing power of a sat increases by 5%/yr.
(We're under 4% today, and you could argue that without taxes, fiat theft, and regulatory capture, we could easily be at 10%/yr)
This kind of flips the whole idea of borrowing on its head.
Like other comments,
I still think lending will be a thing.
I think it'll be greatly decreased, and almost always for investment. (Borrowing for consumption would be asinine, and no one would lend it to you).
But to answer the question, what happens to interest rates ?
I think they stay low, like <10%, but the bar for lending goes through the roof.
As a lender I'm taking massive risk.
I have to trust that the borrower;
1. Doesn't get liquididated or run.
2. Can at least beat global productivity rate, otherwise I'm better off hodling.
3. That the expected value (est. return × probability of success) is attractive enough to outweight points 1 & 2.
To do all of this, a borrower (ie entrepreneur) couldn't just grow at market pace, they'd have to outcompete and outright market capture.
Productivity is additive to humanity, but a fixed supply cap means lending is a zero sum game.
If I'm expecting 10% return yr 1 and global prod is 10%, then the net present value end of yr one on what they owe me is 20% higher then what they're borrowing.
That's a huge hurdle, and it doesn't even factor in profit, that's just paying the lender.
If it's not an airtight business plan, my stats are staying cold.