Our Interest in Interest The debate against the gold-standard Austrians is over. The populists won. The battle of today among the thinkers for the people is whether or not interest should be abolished. I say that borrowing money when you need it to put out a product you want to make should be possible without having to apply for a government interest free loan grant or looking for friends who will lend the moneyh at zero interest. Moslems disagree. The anti-usury compeating currencies crowd -- Anthony Migchels, Daniel Kyrincki as well as Martin Luther and various saints through history all agree that usury is sinful and bad and that no good can come from it. They are wrong. The truth is that a loanable funds market and bank intermediaries between lots of little savers who are potential lenders and the entrepreneurs with big time-sensitive ideas for serving manking are served with a market where the price of hired money is interest. Interest rates in a well-designed for-the-people economy does important things. The itnerest rate regulates how much investment versus consumption will be undertaken, it regulates saving versus consumption, and it regulates leisure time for household versus more work time -- with the coordination that a market system does in taking everyones preferences and means into account. Outlaw interest -- a price for ready money -- and all of this co-ordination is rendered impossible. I say interest can be made to serve if we junk almost everything else concerning the financial sector and money creation -- and re-design them. So I have written the following -- just so, after I am dead, the decide to say that I never tried to let them know that I disagree with them. Our Interest in Interest Dick Eastman Dec 28, 2014 Is lending the temporary use of money in exchange for later receiving back a somewhat larger amount of money a bad thing? Should it be outlawed? Or can interest made harmless and helpful in a world where debt is always temporary and never piles up, where money in the economy for repaying both principal and interest is always plentiful and close to everyone, and where the risk of default is shared equally between lender and borrower and where the nations money is permanent and supplied in ample amount to the economy as a public utility without cost? I say in such an economy interest is a very good thing. It peforms very important functions that the critics of lending for a return fail to see. Today interest is part of a system rigged by organized crime to rob the human race -- but interest can be part of a populist economy where everyone rises to an every improving utopia. I know you have heard otherwise -- but the truth is: INTEREST IS NOT BY ITSELF THE VILLIAN. The villian is debt-based money and private (bank) money creation and an economy rigged to prosper the financail sector at everyone elses expense I am not anti-interest. It is OK for people to pool their money to give it to an entrepreneur who wants to do make something really good for people -- and its OK for those people to get an agreed upon return for each dollar lent from the man who hired the money. Banks have a function as institutions that make this happen easier -- without a lot of transactions costs involved in the entrepreneur finding a lot of people with small amounts to lend. The bank is just an intermediary. And they should each compete with a lot of other banks doing the same thing. Anyone should be able to start a bank with an easy to get state charter. That kind of bank is good. That kind of interest does not hurt anyone. Another anti-usury illustration -- which I will not discuss here. We live under a system of interest slavery -- but that is because the whole system is designed to exploit the many to prosper the few. It is a wicked and crooked rigged game. Ive lost a lot of allies by supporting a system (populist social credit) that allows the charging of interest on loans. I dont like that -- but I am not about to compromise -- because the question is an important one and a society can either benifit or be badly hurt depending on the way it answers this question when reforming money and finance. I think usury -- a sin -- can be avoided with a system that converts interest into a partnership arrangement far different from the terms of loan making today. You can just outlaw charging interest and have the govenment take over the making of all loans -- as very misguided reformers who quote the Bible and the Koran say. I say that the sins of usuerers are much more sophisticated and can only be rooted out by a complete redesign of money creation and banking in the economy. Take away the power banks have and make them simply interfediaries between money savers and entrepreneurs -- as they should be -- and let them do this in a competitive environment -- where they are in real competiton with many other banks for the interest they pay savers and the iterest they charge borrowers. My way makes sense -- but it is not so easy to take in. Eliminating usury is so simple a slogan. It is as simple and as stupid as the slogan Only gold is real money. So this is letter is for those who want to bother learning more complicated truth about the role of interest in bad economic systems and its role in good econmic systems (good for the general public that is). Note - The views of money today are 1) Rothschild token system for managed behavior in a global plantation 2) gold system where gold is money and gold reserves control money in circulation 3) and anti-usury systems in which money can be borrowed interest free from the non-profit government if your application is accepted. I say they are all wrong. I agree with this cartoon. Under the present system only loan money is provided but what must be paid back is all the loan money plus compound interest. That is why populists want permanent money that is not loaned into existence. I represent a system where money is created and provided by government, but a government that can neither spend nor lend the new money it creates. Under this system all new money is distributed evenly to the people, all of it arriving in the household sector as a dividend to each persons bank account. The money arrives with no strings attached. People may spend it, save it, or lend it. This system also does away with the the power of the banking system to create new money deposits by lending them into existence simply because they have reserves in their vaults and the fractional reserve lending rule. Under this system banks can only lend the money that people who have saved money lend to the bank. People bring their small amounts of savings to a bank and sign an agreement not to withdraw their funds in exchange for the promise of the bank to pay them interest for the use of the funds. The banker then lends (transfers) to borrowing entrepreneurs or home buyers who pay interest for the use of the money. The bank must live on the spread between the rate they charge savers who lend the bank the money and the rate they charge entrepreneurs for the money they seek to borrow. Notice that there are no reserve requirements at all in this system. The bank must manage its own operations. The only regulation is that it not create new money, but actually lend the deposits that savers have agreed to let the bank take and lend. It is up to the banks how much reserves to keep on hand and how much to loan out. It is up to the banks -- when sizing up the risk of the entreprneurs venture or expansion plan or extra hiring etc -- to pick the interest rate they want to charge an entrepreneur. There will be no national interest rate for money. Every bank will set its own interest rate based on its position and its estimate of the risks of the entrepreneurs undertaking. Under this system there is no central bank. There is no national interest rate. Just as their is no set price for an old toaster at a garage sale. Banking will be very little regulated -- because at present, bank regulation is no more than price fixing in favor of the lending class. And of course any regulation will be done by the states. The Federal Govemrent will be separated from all banking. The federal goverment will never borrow. It will only tax its citizens for paying for the public goods the citizens representatives decide the public should provide. The Federal Goverment will operate on an anll-tax financed pay as you go basis. This system gives more liberty than the libertarians. More security and stability than any of them. And it is never deflationary. It will mean a lot less debt in the world. More businesses will expand using their own profits rather than bank loans. People will have leaisure to be consumers more of the time and workers less of the time -- since they will not be working to support a parasitic banking racket and international speculators. At present there is a net drain of money from circualtion in the domestic economy -- mostly due our almost exclusive use of loan-crated deposits for money -- loans which must be paid back principal (equal to the entire loan) plus compound interest (an amount often greater than the principal itself) -- which means that defaults, forceclosures are inevitable. The banking elites (Bank-of-England/Rothschild system of debt-money and bank controlled money creation) operate as a parasite (the upper loop sucking up interest moneyh and taking assets seized in bankruptcy -- the upper loop in the picture above) while the lower loop (the real economy -- the people) are drained of all they have. Money leaking from the domestic economy of housholds and domestic businesses to buy foreign goods or pay interest or taxes will equal money injected by bank lending, government spending and export earnings plus the new money dividend to households. 1. repudiate debt incurred under a fraudulent system where adequate money supply to repay debt deliberately has been ruled out 2. institute permanent national money created by fiat (ex nihilo, from thin air) 3. originate all new money exclusively in each citizen’s primary bank account – through a regular, free and clear, household-sector dividend which they can then 1) spend or 2) save or 3) lend to a bank to lend (see below) at their own discretion 4. separate banking from money creation, thus ending the fractional reserve banking system; require that money creation and distribution to households be a federal function, and that chartering and regulating banks be a responsibility of the States; eliminate all national banks -- eliminate the central bank and all open market operations by any bank. 5. require that banks (State-regulated savings and loan associations) lend only funds entrusted to them by money owners for that purpose (see 3, above) 6. require that the risk of all bank-financed transactions be shared between borrower and lender, so that banks can only recoup half of the principal in the event of business loss resulting in default -- if their loans are not 100% backed by claims to collateral and priority as a creditor in the case of default banks will become wonderfully more interested in whether their borrower succeeds or fails -- in whether all borrowers succeed or fail. They will be sharing the risk at last. They will have a stake in preserving the health of the overall economy at last. 7. end all deficit finance by government; require that all government goods and services be funded by direct taxation and fees. The system I believe in - call it Populist Social Credit - does not eliminate interest and it does not socialize lending. But it does eliminate debt slavery and net interest drain and it does completely eliminate all macroeconomic power of financial-sector big shots by bringing down to the banking power of that of any business in a market with stiff competition from many small providers all the same product at low prices. That would be banking in a truly populist country.
Posted on: Mon, 29 Dec 2014 01:07:00 +0000
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