Interest BY Depreciation

An important subject within traditional economics is the so-called Term Structure of Interest Rates. Go to Altavista and type "term structure of interest rates" (with the quotes) in the search box. And you will get an idea what is meant by it.
The subject is important, because it can yield Lots of Money for the one who can predict future term structures. Nobody has hitherto succeeded in achieving that goal, though. We will see in the end why this shall be so.
The so-called Term Structure of Interest Rates can be explained a great deal by a theory which takes into account the psychology of (positive) interest-bearing Money. This theory reveals that the primary Interest (: mind the word !) of our GOD, the Great Omnipotent Dollar, is in the Destruction of goods (and men).

According to the theory of money by Silvio Gesell, interest is a phenomenon which is attached to a form of money which we will call gold money. That is: money which is historically based upon precious metals / the gold standard. 

> I presume that when you say gold money, you are aware that the Gold standard
> was dropped in 1971 [ ... ]
Yes, I'm very well aware of that. But contemporary money still behaves as if it is money which is backed by gold. And therefore it still asks interest for it's "services". I use the term "gold money" to indicate this behaviour.
The key reasoning is that gold remains constant in its "value" (Gesell will curse me for this) while the goods against which it is exchanged depreciate. Because the money which is exchanged against a good is equivalent with the good, the money should get rusty, just as the good gets rusty. However the money can defend itself against this threat of depreciation by charging an additional amount of money, in order to keep its enduring value up to date. This is precisely what is called interest, but explained from a mixed Marx / Gesell point of view. The point to be made here is that the money actually needs depreciation of goods, in order to be able to charge interest. Think about it in another way. It is advantageous for the money that goods are Destroyed, because consumers are then forced to buy same goods again. And with every transaction, new interest can be claimed. 
> The present system is simply put a LETSytem that centralizes issuance
> (mostly through private banking) and of course charges interest.
That's correct, of course. US Dollars are not really "backed" by something productive. On the contrary, USD's are backed by counter-productive assets: weaponry. That's one reason why the United Stated are bound to be sucked into warfare every time again. Go to Altavista and type "interest and depreciation" in the search box. OK. Now do the same thing with "interest BY depreciation" and you will find not a single item ! Yet I am convinced more and more that just the BY provides a new clue to understanding the truly Destructive nature of our money system.
There does exist a thourough mathematical theory about the depreciation of goods, like the machines which are used in a factory. It is well known that the chance of failure of these things can be described statistically by a so-called exponential distribution, or probability density:

f(t) = exp(-t/tau) / tau

The accompanying Cumulative Distribution is more important to us:

F(t) = 1 - exp(-t/tau)

Here tau = the mean time between failures (MTBF), or the time that it takes before something will "die" for the first time.
There are many references on the Web, even if you are searching with a rather detailed keyword list, such as: exponential probability distribution failure . In some of these articles, you will find an elementary explanation.
The gist of my theory is that the Term Structure of Interest Rates actually mimics the Depreciation of Goods. With other words: the term structure must be similar to a weighted sum, of Exponential Decays. Speaking in mathematical terms:

F(t) = Integral v_L + (v_H - v_L) w(T) [ 1 - exp(-t/T) ] dT

Where the integral is carried out over some area of interest (mind the word!)
I have squeezed this theory about the Term Structure of Interest Rates into a computer program. There are two versions of the software: an English and a Dutch one. The Dutch version is found at the SP site.
The English version is found here. It's time now to run that USA program, by downloading first the following bits and pieces:

The Term Structure Data are definitely needed in order to be able to run the English version of the program. They were downloaded from a USA website called 'EconStats'.
The executable as well as the source code are free from CopyRights. Though Anything Free comes without Guarantee, you may take a look inside the code, in order to convince yourself that I am not cheating anybody.
The first RadioButton is for calibrating between the upper and lower levels v_L and v_H of interest. I don't know yet what the physical Meaning is of these levels ! That is to say: how they eventually are related to decay of goods (or even the death of humans ?) in the real world.
The second RadioButton is an attempt to relate the term structure to a single article, with a single time of failure. It turns out that a lifetime of 20 years gives an approximation which, alas, is not a "bad" guess at all.
With articles where interest and depreciation in aerospace industry are tabulated, you will find further support for my finding that quality standards in our society do not reach much longer in the future than an order of magnitude of say 10 years. (Japan is a noteworthy exception)
The other RadioButtons provide several kinds of weighted summations over goods with a lifetime somewhat shorter than the one selected (with the "SpinEdit").
You can walk through the Term Structure Data by either Edit-ing the date (year-month-day) and press the Read Data button, or simply by pushing the Next / Previous buttons.

It is seen that the agreement between theory and experiment sometimes becomes excellent indeed. And different choices, determining the precise shape of the lifetimes distribution, do not make so much difference after all. It is also observed that the term structure is mainly determined by the Short LifeTimes, which represent the highest "risks" to the owner of the loan. It is clear now that nothing can be gained by betting on one good or another, for the purpose of gaining more profit: since the decay times of all goods are so well known to our Money. In fact, the reverse is true: supply and demand cause the Risk to spread in such a way that nothing can be gained. That is: according to an integral over short lifetimes of Depreciation curves of the goods, the Decay of which actually generates the interest, the red (blood-colored) Curves of Death will be formed. I am proud of my little Best Fit Button, which performs a great deal of the task: fitting Death Curves to the Federal Reserve's economic data.

So far so good. You are invited now to take a look at the positive side. The point I am to make here is that ANY money reform, in order to succeed, MUST be accompanied by a vast improvement of the lifetime, that is Quality of our goods. Rent can be killed only if we deprive money of its principal greed: to depreciate things in comparison to itself. If our goods are made of Long-Lasting Quality, alike the enduring persistence of gold, then gold-money will no longer have any reason to act as it is a superior substance.
Long-Lasting Quality is an Interest Killer. Which is all clearly demonstrated these days by the interest-rates in Japan: dropping to the level of zero, and even below zero ! Such happens because the quality of Japanese goods tends to be excellent, when compared to US of America products for example. But I have a tip / hint for Western Civilization.
Any Producer would like to produce a cheap car that depreciates fast, because that would give him the "best" return. But the forces of competition are such that he cannot do so, because the Consumer wants to have a car that does Not depreciate fast. It's always a compromise between cheap profit of the producer and the quality desired by the consumer. Steering in society should be simply in such a way that the consumers always win. Let our commercials be made up by Organizations of Consumers and you will soon see the difference !

Yet the worst scenario at this moment is being devised by George Bush Jr. and his warlord companions. I am observing this pattern for the 4'th time in my life. A war against Iraq inevitably will be needed, in order to increase Interest BY Depreciation, of goods (and people), to levels which are still "better" for the Almighty US Dollar than they are nowadays. And the interest rates certainly will be rising with the advent of that war, as an additional "benefit" of the overall Devastation. According to America's credo of Enduring Freedom, which obviously includes the same for its Death machine: No McDonalds without McDonell Douglas !

Back to my Delphi page