The individuals who create innovation and mobilize capital may or may not be debtors. Debtors are simply those who pull consumption forward from the future to the present. One of the more interesting ideas from The Rise of Knowledge is the concept that future innovators will be increasingly dependent on knowledge production and that knowledge production is increasingly non financeable. If this premise is correct the relevance of debt to innovators and growth generators will likewise decline.  

I have nothing against debtors per say, I am one, I took out debt for my student loans as well as for my house. However, the simple reality is that under our current system debt is intrinsically tied to theft. When I took out my loans I devalued everyone else's money in the economy by some small fraction. The biggest beneficiary of those loans is the bank who now get a very reliable payment directly from my salary. Whether I am a beneficiary remains to be seen. Those who lost out in the transaction include everyone holding cash or bank deposits as they experienced a real if imperceptible decline in the purchasing power of their savings. This simple act of theft is the only way to do business or create new money in our economy and as such it is accepted as normal and justified. We are told it is necessary for "liquidity" or to "keep the economy going" and told that reverting to sound money would cause "economic collapse."

If we could travel back in time and talk with the educated Roman elite we would probably find them fielding very similar arguments in favor of their system of latifundium.  
  
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The ancient Roman elite would probably argue that slave labor was required to keep food production going. They would report it as uneconomical to produce food any other way. They would justify any evils of their system as necessary to keep Rome strong and feed its large population. They would belittle reform and warn that abolishing latifundia would lead to famine, starvation and perhaps the collapse of the empire itself.

The sad thing is that those ancient Romans may have been correct. Their system was by that point perhaps dependent on slave labor and sudden reform may have led to catastrophe. However, the dependence of Rome on slavery rather then a defense of slavery is simply a sign of the systemic corruption of Rome. At its heart slavery is a system of theft and is thus fundamentally inefficient. As such it is a system doomed to eventual replacement either externally or internally. Humans have always sought guaranteed income and the theft of another's labor is lucrative especially if it is legalized and enforced. Because of this profit it was not until very recent times that the practice was abolished. The last country to abolish slavery was Mauritania which "officially" abolished slavery in 1981 but did not actually make it a crime to own slaves until 2007. As a human race that is where we stand. We finally made slavery illegal everywhere 8 years ago.

Our economic system like that of the Romans is hopelessly dependent on theft. The entire economy is wrapped and warped by the ebb and flow of debt and fiat currency leaving us in a constant battle to be the fastest to debase everyone else's savings and be the fastest to deploy debt and grab the "income producing assets". Transitioning to any form of sound money seems impossible for it would result in widespread economic collapse with its accompanying high probability of famine, and war. However, like the Romans our dependence on theft is no defense of our status quo. Rather it is simply a indication of systemic rot.

Your description of those who use deflationary currency as hoarders is an oversimplification. It is true that a deflationary currency in an era of growth is redistributive. It allows for the owners of such a currency to claim a portion growth of the economy and its labor without actually contributing to that growth. However, transitioning to an inflationary currency does not necessarily transform hoarders into investors. Instead it simply transforms them from the beneficiary of redistribution to its victims and creates a new class of elite that consists of those who control that newly created currency.

The only economically optimal solution is one in which there is no redistribution. This only occurs in a currency that approximates the ideal of no inflation and no deflation. Such a currency or multiple currencies would maximize the incentive to invest without resulting in a redistributive decline in purchasing power if one chooses not to consume or invest.        

Well, whoa, ho!  Here is someone who is likely to have a Happy New Year!  Nice purchase, perhaps a collector's item if Bitcoin grows as most of us hope.

Gold and Bitcoin, a great combination.  Especially in ONE place.

I agree with most of your text, as I strongly believe there is no such thing as morality in macroeconomics, morality comes in politics which is why I put politics above economic growth. Sound money for a household is good and proper but doesnot generalize on the macroscale, also we are not talking about major inflation only a slight percentage that is normally targeted the 2% which is a bit arbitary true but doesnot have major redistributive effects , and the ones that exist I deem them more as equalizing effects.

We have made the conversation again about knowledge age, but as you know, taking up student debt, knowledge doesnot come cheap, so fundless knowledge is not going to be, knowledge is power and there will always be gate keepers. Even if it was completely free so,eone should support you while you study, cause study and work do not mix.

So funding will always be needed to equalize the playing field, be it for knowledge, getting the tools to create house,car, or starting a new bussiness. So a slight inflation guaranties that availability of funding.

Even if we are ushered into a new paradigm, I hold as necessity that at least one equalizing and redistributive force will exist, You may see ideas as minimum guarantee income poping up in euroland as a response to deflationary pressures.
Redistribution in form of diffusion of wealth is a stability requirement, no way around it.

That said current system is ill and ridden with corruption none can argue that, Even in segregating payments system from investment will not ensure that faults will not propagate from one to the other.

Thaaanos we have profound differences in opinion. I have broken your post down into its core arguments below.

1) Sound money does not generalize on the macroscale.

This is a claim unsupported by the historical record. Societies including our own have lived under a gold standard in the past. Rome's currency was sound for more or less the entire history of the Roman republic. It was not until the Roman republic failed and Rome became empire that the currency was debased in earnest 



2) Slight inflation targeted at 2% does not have major redistributive effects.

An inflation rate of 2% will result in a loss of almost 50% percent of purchasing power over a period of a single generation 30 years. I would call that a major redistributive effect.

3) The redistributive effects from inflation are "equalizing effects".

I completely disagree inflation primarily benefits first movers those granted the authority to debase the currency. Banks and those with political connections are the prime beneficiaries. Inflation redistributes from bottom and especially the middle class to the financial elite. Rather then an equalizing effect it worsens inequality.

4) Knowledge does not come cheap... So funding will always be needed to equalize the playing field...a slight inflation guaranties the availability of funding.

There is nothing wrong with working to finance an education. Indeed this used to be how it was normally done until we decided to sell out our children's future with government guaranteed non dischargeable student loans. The "guaranteed" of funding you speak up results in ballooning out of control costs malinvestments in non productive fields and lifetimes of debt servitude.

5) It is necessity that at least one equalizing and redistributive force will exist. Redistribution in form of diffusion of wealth is a stability requirement.

To the degree this is true this is what taxation is for. Taxation, however, is much more transparent and thus requires both public justification and also allows for opposition to develop.

6) There is no such thing as morality in macroeconomics, morality comes in politics.

Cooperative rather than predatory behavior develops naturally over time in transparent systems composed of repeatedly interacting agents able to choose between cooperation and defection. Immoral behavior in economic interactions is not sustainable over the long run as victims either go extinct or learn to protect themselves.

For the group cooperation is the superior economic choice. Subgroups with rule systems that facilitate cooperation aka morality will therefore outcompete and eventually replace those without such rules. The fact that Macroeconomics devotes little attention to long term sustainability of systems or the role of morality in maintaining this stability says more about the infancy and incompleteness of macroeconomics then it does about morality.

It was a militarized warmongering society,endless wars cannot be funded by taxes, so they need to debase their currency to fund them.

It was obvious that any militarized society will fall sooner or later. The same happened with some of the early chinese kingdoms.

Their wars were profitable until they conquered Europe, because they could not conquer the german tribes.

They almost went bankrupt after Carthage so they quickly conquered Spain , then Caesar conquered France and Egypt, the amount of grain and the minerals from France were enough for a few hundred years.

They started collapsing after the German tribes started attacking them, and their armies deteriorated and were harder and harder to fund. The amount of riots and revolts happening daily in every part of the empire was too hard to control and they collapsed.

Military overextension + Bankruptcy is not a good combo for an empire

Well they taxed the moneymakers as always, the merchants who traded goods between Rome and the other provinces, they taxed the merchants who  sold items in cities, they had property tax for all citizens and other minor tariffs , trade fees and smaller taxes.

Income tax didnt exist, and they were able to prosper very well even under hard taxes. The income tax is the worst of them all because it de-incentivizes people to earn.


Back then only flat tariffs existed, and property tax mostly, and it was enough to fund a militarized empire, imagine if they would be peaceful how big they would get?

Thanks for the link it was a very interesting read. I have selected a couple of highlights from it below which really showcase the decay of the late Roman Empire.

Yes many barbarians dreamed about conquering Rome and it's riches, remember in these days most of the gold was in their hands.

However Rome was tyrranical too vs the other tribes, they constantly subjugated them and kept them in their domination arena, and when they decided to conquer them all, then they sent armies into their lands, burned down villages, towns, raped women, and enslaved the men to fight in the arenas.

I think this kind of behaviour was very brutal, so no matter how brutal barbarians were, from a civilized society to do all of these was off limits.

A society based on murder, rape and slavery cannot last that much, that is why Christianity spread very fast in the empire, to restore some morality to the people.