Loan as payment
The idea that quickly came to mind was inspired by the fact that many, including myself, subscribe to certain channels on YouTube for a nominal fee of $0.99. This subscription allows us to comment with personalized tokens and share memes. A portion of this $0.99 goes to the channel host, while another portion is retained by YouTube for service maintenance and other purposes, what not.
If one continues subscribing to a channel for a year, the total payment amounts to $0.99 * 12 = $11.88. Let’s round it up to $12. After a year, $12 is transferred for consumption. However, this consumption is virtual, and it doesn’t result in any tangible or concrete benefits beyond symbolic value. Over time, I started questioning whether my payment was truly worth it, even though it’s a minuscule amount of money that doesn’t significantly impact my life in any way, shape, or form.
The question then arises: what does $12 a year mean in financial terms? Considering the current base interest rate of approximately 5.3%, the transfer of $12 from me to another person represents a labor-free and risk-free means of production temporarily borrowed from me. This allows the recipient to appropriate $12 from the central bank, relying on their creditworthiness. The principal amount that forms the basis of this risk-free loan is calculated as $12 / 0.053 = $226. Money essentially represents credit supported by the paying party. In this case, the individual seller I’m subscribing to has credit guaranteed by one of the largest tech companies in the world.
This leads to another question: since the interest income from $226 over the same one-year period equals the total monthly payment of $0.99, why do I choose to subscribe with monthly payments that potentially continue indefinitely if the content is worth the money? Instead, why not temporarily loan the merchant $226 for the limited period of one year?
There are two main advantages to this loaning business model. The second model is equally profitable for the merchant, just like the first. As long as the total income for the seller remains $12, the method of profit generation, whether through fixed income or as a recipient of payment transfer, is irrelevant. Based on my understanding of global tax laws, fixed income from interest is generally taxed less heavily compared to capital gains. The other advantage lies in the interest of the consumers. By temporarily loaning a fixed amount of money to the seller, with the promised repayment of the principal, the consumer can enjoy the content without losing any monetary value of their original principal unless the principal was alternatively invested elsewhere. For a significant portion of the population who are risk-averse, this payment is essentially zero. The key here is that the payer understands that the temporary loan is guaranteed with repayment after a specific time period, and this certainty requires the credit and trust of the payee, which is usually reinforced by banks and corporations.
People already engage in similar practices by loaning money or deferring income to the state because they believe the state has the ultimate creditworthiness for repayment, often incorrectly but still commonly prevalent. When the state issues bonds using its credit or levies taxes while deferring payment to its employees, we comply because credit-fiat money allows us to rely on the existing relational interconnection between the public and the state. Anyone with comparable creditworthiness will be able to extract interest payments through the same method as the state.
