Reply To: Economic calculation and Bitcoin


Lending at a negative interest rate would be like selling a product at a negative price. No one would do so there would be no supply of credit at all and therefore no loans and no rate of interest at all. It could be the case, as you suggest, that the most urgent borrowers might be willing to pay an interest rate that more than compensates for the price deflation, say 10%. In this case, the inefficiency of an excessively deflationary money is partial instead of total. There are many willing lenders and willing borrowers at the pure rate of interest who would supply and demand credit and thereby, satisfy their time preferences. But many lenders will not do so given the extent of price deflation.

What Rothbard means is that people can make all the trades they want to make with any amount of money (above a technical minimum). If they have twice as much money, prices will be twice as high and if they have half as much money prices will be half as high. But, they can make all their trades regardless.