chapter  4
34 Pages

The property theory of interest and money

ByGunnar Heinsohn, Otto Steiger

Our property theory of interest and money intends to answer what we regard as economic theory’s core question: what is the loss which has to be compensated by interest? We completely differ from the answers given so far. We accept neither a temporary loss of goods nor a temporary loss of money as the cause of interest. When money-as an anonymized title to property-is created in a credit contract, the interest causing loss is the loss of an immaterial yield which we have called the property premium (Heinsohn and Steiger 1996). In the money-creating and the money-forwarding credit contract, property has to be encumbered. Through this collateralization, the freedom of property is temporarily blocked, that is, the property premium is given up.