A zero-sum monetary system, interest rates, and implications
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Abstract (arXiv)
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 (100% and higher) are necessary within a zero-sum monetary system, and not just driven by greed. Extreme interest rates that appeared in various places and times reinforce the idea that hard money may have contributed to high rates of interest. Here a model is presented that examines the interest rate required to succeed as an investor in a zero-sum fixed quantity 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 because of the limited supply design. 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.
Key facts. Cited by 1 paper in the map (data through 14 Oct 2026). First posted on arXiv 26 Jun 2015.
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