For or Against Usury

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  • Sun, Feb 07, 2010 - 06:28pm

    #111
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    Re: For or Against Usury

That London Times quote is a good find Larry.  I’ll have to use that one in my writings.

  • Sun, Feb 07, 2010 - 08:25pm

    #112
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    Re: For or Against Usury

[quote=DrKrbyLuv]

goes211 wrote:

Sometimes I am left wondering if there is a solution to the money system problem. Could it just be too complex of a problem, with at goals that are at times contradictory ( means of exchange vs. store of value )? I wonder if expecting money to be a true store of value may be asking too much for anything but short periods of time. After all money is just another commodity and commodity prices fluctuate due to supply and demand all the time.

Hello goes, I know what you mean, we can see the problems with our current system but replacing it is more difficult.  Government created money is a better route as it eliminates the national debt, income taxes and it is the only way to hold our financial sovereignty.  But, a possibility (likelihood?) exists that too much money may be created if no restraints exist.

One axiom that I hold is that all new money created by the government should be backed by tangible assets.  The discipline to endow the money with the value of collateral seems to be a good way to prevent abuses.  Not everyone will agree, for example Steve Zarlinga would simply spend the money into existence on social programs and such.  Yes, this could help but it seems to me that it may open Pandora’s box.

I may be too conservative but I would eliminate any unsecured loans and on private loans, a down-payment should be required to help offset asset value fluctuations.  In my perfect world, collateral assets would deprecate no faster than the amount of open debt.  From my perspective, it doesn’t matter if gold or some other tangible asset endows our money with value.

[/quote]

One of the problems I have with your poposal is what you mean by “backed by tangible assests”?  What I think you mean is that the money should have been spent to create some common infrastucture.  However, under this scenario I don’t see how this money is any more backed by anything than is monopoly money?  If one cannot turn in money to someone/something and recieve the backing asset, in what way is the money really backed by a “tangible asset”?

It is not that I particularly like a commodity money like gold, but it may be the best of a bad lot and does force some market discipline.  I worry that a system that runs like the one you propose would be analogous to a commody futures market where there was no physical settlement options.  Without the ability to demand physical possession, the market would be wide open to manipulation and would quickly devolve into some sort of alternate reality.

I realize that you only think that physical infrastructure should be built by the state in this way but how and where could that line be drawn?  Certainly if you feel that investing in schools it a worthy project, how can you deny spending on teachers?  After all is there a more important component to our national infrastructure than our next generation?

You even have the problems when you can constrain this spending to proper infrastucture.  After all we at least in theory, right now building infrastucture requires spending tax dollars, and yet we still have wasteful project like “the bridge to nowhere”.  Can you imagine what would happen if the states did not have to even considered the costs to these projects?  Every town in america would have their own equivalent to Boston’s “big dig” going on at all times.  I wonder what would happen to construction costs?

Another problem I see is that this new wealth based money is never destroyed.  At least the current debt based money we have is eliminated once the underlying loan is repaid.  This new wealth based money would increase yearly, unconstrained by any external controls.  Each year government spending would far exceed the economy’s increased industrial capacity, therefore causing inflation.  This would not initially be a big problem for the government because it could just spend more each year to meet its demands.  I don’t think it would take long for this spending to look very much like our current exponential money system.

Please don’t take these criticisms personally.  In some ways I believe the system you propose could actually work but it would require a non-corruptible benevolent dictator to make it work.  If you ever find one of these, maybe I will change my mind.

  • Mon, Feb 08, 2010 - 04:22am

    #113
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    Re: For or Against Usury

Another problem I see is that this new wealth based money is never destroyed.

When the wealth based principle is put into circulation it will be destroyed when it is used to pay off a principle part of a loan, also extuiguishing the interest load of that loan without shifting it onto the next generation.  Currently we would have to Spend over 50 trillion just to get to a 0 balance within the system.

Each year government spending would far exceed the economy’s increased industrial capacity, therefore causing inflation.

How is this possible when 100% of the new money would be matched with production?

I don’t think it would take long for this spending to look very much like our current exponential money system.

Except this money wouldn’t be interest bearing debt, it would be final payment that could be used to stop the exponential growth of the debt.  In other words, bring the debt down and create a sustainable monetary system.

In some ways I believe the system you propose could actually work but it would require a non-corruptible benevolent dictator to make it work.  If you ever find one of these, maybe I will change my mind.

The how about letting the people on the local level make the decisions on whether or not new money/infrastructure would be added to their local economy.  I’m most big cities could use all new electrical grids, sewer systems, roads, bridges, 21st century transportation systems, ect.  I also understand people who grew up in the country like myself, really enjoy the peice and quite of a dirt road with little traffic, and should be able to keep it that way.

  • Mon, Feb 08, 2010 - 12:25pm

    #114
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    Re: For or Against Usury

Thomas,

I think what you are talking about is a little different than what I was thinking we were talking about.  I understand that you are proposing state chartered banks that work within a system very much like what we have now.  The loans that the state/local government currently is financing through bond sales could be repaid with little or no interest to the state bank, thus saving taxpayers the interest costs of the infrastructure that they are building. This makes some sense to me as long as that bank’s loans are repaid.  I wonder what happens if a states bank becomes insolvent?  How will the state finance its infrastructure if its bank is gone?  I guess this is a fairly small problem that could be overcome.   I have definately come a long way to thinking that this process may work as long as it was not abused.

However this seems a little different than what some others were proposing and what I really have a problem with.  Somewhere along the line I believe it was said there would be no taxes in this system and the state (and/or federal government) would just create money to pay for its needs.   I was not undert the impression that this money be created as a loan?  If it was a loan, where would the money come to repay if not through taxes?  If it was not a loan, then think of my criticisms from that point of view.

  • Tue, Feb 09, 2010 - 04:58am

    #115
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    Re: For or Against Usury

Goes211,

I hope I can answer your questions clearly and effectively.

I understand that you are proposing state chartered banks that work within a system very much like what we have now.

We already have a system that clearly works.  Payments can be made securely, you can purchase anything in the world with this money, and its the preffered method of payment by the people.  I cannot think of any logical reason to get rid of the current payment infrastructure.  The people like using electronic payments, in conjuction with a small amount of currency and coins.  It clearly works.

The loans that the state/local government currently is financing through bond sales could be repaid with little or no interest to the state bank, thus saving taxpayers the interest costs of the infrastructure that they are building.

There is two questions that come to mind.  Why does the bank need the money back when all they do is destroy it?  Currently its impossible to pay off the government debt without creating a massive increase in the private sector debt, which currently holds around 80% of the debt.  I highly doubt the private sector can possiblely handle any more debt.

What I am proposing is money without debt, no loans, no debt, no bonds, no liabilities, no exponential growth of debt.  A way out of catastrophic debt where new money is created as an assest only, instead of an impossible to pay interest bearing debt.

thus saving taxpayers the interest costs of the infrastructure that they are building.

A more accurate way of saying this is to actually PAY the people for production with money instead of loaning the people their paychecks and then eventually taking back more from the people than what was created. 

This makes some sense to me as long as that bank’s loans are repaid.

What I’m talking about would give a mathematical solution to allowing loans to perform since there would be a way for people to pay the interest without forcing someone else deeping into debt.  My question is, why does the bank need the loan repaid if when all they do is destroy the money when they get it back?

I wonder what happens if a states bank becomes insolvent?

They go out of business, but if the bankers in minnesota had any sense to them they would be scrambling to get some debt free money into circulation because then they would be able to have far fewer loans go bad, reduced forecloser costs, and increase profitibility to everyone in the system.

How will the state finance its infrastructure if its bank is gone?

There is around 400 state chartered banks in Minnesota.  If somehow all them banks went under, and we had our bill passed I would personally open a state chartered bank.  A bank of issue, that would not issue credit (debt) but only issue money (final payment).

I guess this is a fairly small problem that could be overcome.

True, but if the bill gets passed, it’s a highly unlikely circumstance because our bill would basically create the banks profits and allow their loans to be serviced without having near the foreclosers.  The banks would still get the bulk of the benifit of the new money through the interest on their loans.

I have definately come a long way to thinking that this process may work as long as it was not abused.

If the abuse can get any worse than what we have now, someone please speak up.

Somewhere along the line I believe it was said there would be no taxes in this system and the state (and/or federal government) would just create money to pay for its needs.

The reality is there will always be taxes, but the choice is do you want crushing taxes to service interest profit payments to a banker who didn’t loan anybody anything and demands that they pay him interest as his profit or would you rather live in a society that has low taxes, and a high standard of living?

I was not undert the impression that this money be created as a loan?  If it was a loan, where would the money come to repay if not through taxes?  If it was not a loan, then think of my criticisms from that point of view.

You’re correct.  This money would not be created as an unpayable interest bearing debt.  It would be created as final payment without any liability to anyone.  Because it wouldn’t be a loan, it would stop the ever increasing tax burden and immediatly offer a tax cut and reduced costs on the people.  It’s more about being free from unwanted obligations.  Freedom vs being enslaved to an ever growing unpayable debt.

  • Tue, Feb 09, 2010 - 05:27am

    #116
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    Re: For or Against Usury

goes211 wrote:

One of the problems I have with your poposal is what you mean by “backed by tangible assests”?  What I think you mean is that the money should have been spent to create some common infrastucture.  However, under this scenario I don’t see how this money is any more backed by anything than is monopoly money?  If one cannot turn in money to someone/something and recieve the backing asset, in what way is the money really backed by a “tangible asset”?

There are ideological and practical reasons for backing money with tangible asset collateral.  No one explains the ideological better than Byron Dale in Modern Money Secrets, where he links money value to wealth:

All material wealth stems from our two basic industries; agriculture and mining.  If it cannot be grown, it has to be mined either from the ground or from the sea.  Everything we have and use (except what we use as money) originates from natural resources and consists of known, identifiable chemical substances, including the air we breathe.

By applying our God-given physical and mental energies and abilities to the processes of agriculture and mining; mankind develops nature’s natural resources into all of the food, fiber, fuel and materials used to feed, clothe and house all of us.  There is simply no debt in this process!  We don’t borrow our abilities we use them to harvest the natural raw resources and enhance them to make better products.

Assets endow money with value (collateral) as it is created as a by-product of the new generation of real wealth, as described by Mr. Dale.  In many respects, this is how money is created in our private debt based system.  For example, when mortgage money is created, the house is pledged as collateral and the homeowner signs a promissory note.  Try to take out an “un-secured” loan in our current system and you won’t get very far unless you pledge other existing assets. 

Mr. Dale goes on to explain the key difference in money systems, that is how it is introduced into circulation:

…Money is a creation of man.  It must be manufactured by someone!  Most people do not understand that after money is manufactured it must be moved into circulation and there is only three ways to move money into circulation.  Those three ways are:

  1. Gift it
  2. Spend it
  3. Lend it

It is unlikely that another country will want to give us money as a gift, so we are more less stuck with spending or lending money into circulation.  Both spending and lending endows the money with value as long as tangible assets are pledged.  We are taught that money must be borrowed into existence and that interest charges are required as an incentive.  Neither is true, we can borrow without interest charges and money may be spent (free from debt) into existence.

The practical reason for requiring assets is that it restrains the amount of money to be created.  The new money is created in direct proportion to the added wealth/productivity.

Larry 

  • Tue, Feb 09, 2010 - 06:19am

    #117
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    Re: For or Against Usury

 

Dale said  money is a creation of man. It must be manufactured by someone?

I was just reading history of money from wikipedia and it seemed people have used many things as money  that was not created by man.

People must have simply agreed to use cowry shells or barley as a medium of exchange then.    

  • Tue, Feb 09, 2010 - 07:28am

    #118
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    Re: For or Against Usury

Carl Veritas,

Money is a creation of man.  It’s a concept of the mind invented by man and yes it must be manufactured by someone.  Because all ‘money’ is created by man and manufactured in one way or another.

It is true that shells and grains have been used as money and there is in fact a manufacturing process in them.  Shells and barely by themselves are not money.  They only became money when people agreed that they were money.  Clearly they are not money in and of themselves, or they could never have been de-monetized.

The manufacturing process is a bit different for each but the same principles apply to both of them.  Man had to apply his labor with the earths raw resources(agriculture or mining), and his knowledge(how to turn them into money) before any of those shells or grains could move into circulation.  The least talked about principle of that type of money creation is that money moved into circulation as a wealth instead of an interest bearing debt.  Clearly they did not have to pay the earth back plus interest for that money to exsist.

It’s true that all people really have to do is agree that something is money and it can be used as money.  There is no better example than what we use for money today.  Demand deposits or check book entry is the true money is our system, yet there is no law declaring it to be money.  It is simply money by common mental acceptance.

  • Tue, Feb 09, 2010 - 07:41am

    #119
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    Re: For or Against Usury

Carl Veritas,

Also, if you’re interested.  Byron is going to be a featured speaker on Republic Magazines Webinar Today (Tuesday feb 9th) at 3pm EST 2pm Central Standard Time.

http://www.republicmagazine.com/webinar

It looks like they have a function to ask questions live if that is something you’re interested in.

  • Sat, Feb 13, 2010 - 02:52am

    #120
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    Re: For or Against Usury

Father Charles Coughlin, a famous Catholic priest of the Diocese of Detroit, wrote a book entitled “Money! Questions and Answers” in 1936.  In it he explains the definition of usury: “Usury is a breach against the commandment “Thou shalt not steal”, and is related to three specific immoral actions listed under the following: (a) Charging an unreasonable and abnormal rate of interest. (b) Charging interest on any recognized non-productive or destructive loan. (c) Charging interest on a loan of fictitious money which the lender created, thereby demanding from the borrower an unjust return, in the latter case, the lender reaps where he did not sow.”
Jct: Ezekiel condemned both excessive interest and usury. So unreasonable interest is NOT usury. Charging interest on something that does not have babies does cause the mort-gage death-gamble among participants; so b) is usury. Whether you charge interest on old credits or new credits, it creates the death-gamble so b) and c) are usury.

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