I go off topic. Skip this post if not interested in money supply/ government debt.
1. It is wrong to think that deflation is something that makes people delay purchases. Look at air travel as an example...
Strong point. You are right.
If basic needs are not satisfied people are willing to pay high real interest, e.g. if there is not enough housing. I believe that capitalism satisfies needs and once these are met I see no reason why interest rate after inflation shouldn't be slightly negative. On the other side cheap interest rate leads to stupid investments like another car factory when there already is excess manufacturing capacity in the world. So what to do?
I believe in markets. The interest rate should be decided by the market and not by some politician who wants to bail out his donor friends.
You may focus on the word "believe". I don't think this was tried. I have no evidence to support this believe. In other words: I believe it should be tried.
2. Government interest rates always need to be higher than inflation rate. There is a cost to borrowing that involves the calculation of what inflation is, the risk attached to loaning the money to any party, and a premium that should make it worth the time. That is simple economics on how banking works.
I was actually thinking a lot after I wrote it, because even I felt uneasy about it.
I stick to my yearly money increase of 5%. That should lead to inflation of 2-3%. To avoid stupid investments or excessive gambling I estimate a minimum interest rate of 4% ( = 1,5% real interest rate) is required. So yes, you are right.
If demand for credit is so low that interest rate falls below 4% the government has to absorb the excess savings.
Maybe deficit spending has a bad name because the political left likes deficit spending even during the biggest booms. My proposal means that if there is enough demand for credit from private players to keep interest above 4%, the government has to finance itself with the 5% new money plus whatever tax they charge.
Germany earlier had a rule in the constitution that new government debt mustn't exceed investments. That sounds reasonable to me. I would even say shouldn't exceed 66% of investments. In 2008 politics wanted to lower interest to close to 0%. Those who believe in strong money got upset. The compromise was that Germany added to the constitution that new debt must not exceed 0,35% of GDP/ year.
I believe that's double stupid. I don't like low interest rate and I believe excess savings have to be absorbed by governments.
Contradicting evidence: Low interest for Chinese and German and other savings uplifted billions of the real poor in the world out of worst poverty and also enabled renewable energies.
3. The expansion of gold has been an almost constant 2%. People that do not like honest economics, and those that would print colored paper to acquire things of far greater value are the only ones that have issue with it, the ones that make a lot of money in the absence of an asset based currency system.
I prefer Milton Friedman's 5%. Rulers under gold standard were tempted to dilute the gold content of coins. The only way to got rid of excess debt in the middle ages was to kill the Jews. I know in India there were cases where over-indebted villagers would threaten the moneylenders to give the debt documents or get killed. The Indian villagers were more civilized than middle age Europeans. As I wrote above, debt is inherent unstable. If there is no way to decrease the value of savings, savers may suddenly face a currency reform, a knife at their throat or other means to destroy all their savings.
Does money increase 5% and minimum interest 4% contradict that? I don't know. I believe it should be tried.
Do you write a lot?
Before I started posting on a.net I would write about topics of interest for myself. Writing slows down the thought process. Because of that slowdown one becomes aware of assumptions never reflected properly. Hardly any of my posts here in which I don't have to google something to make sure it's not just an assumption. One also becomes aware of contradicting evidence, like in the quote of myself above. I believe mature thought over a topic requires to write an essay about it. I also read a lot. But that's not enough.
You are quite a challenge for me. I'm looking forward for more discussions with you.