For or Against Usury

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  • Sat, Feb 06, 2010 - 01:41pm

    #81
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    Re: For or Against Usury

If  Joe the baker  came to me and asked to  lend him  money so he could take advantage of an opportunity,   should I get compensated for it?

Why should you get compensated for creating and lending a promise to pay?

And  who should determine the price,   or interest rate (my compensation)   Joe and me or someone else?    I’m assuming  here that Joe will agree on a price only after he has  weighted his borrowing cost against his potential gain.   Are we doing something immoral here?

How can Joe ever have a gain if the only source of money he can obtain is money that is borrowed from the banking system at interest making it impossible for him to get out of debt unless he captures enough borrowed money from someone to pay back his loan plus the interest, leaving the next borrower in tougher shape until eventually someone has to give up their collateral to the bank who only loans a promise to pay?  Are you being serious in the immoral question?

Don’t get me wrong,   I despise the way banks operate but I see nothing wrong with a loan per se.    They  (banks) should be reduced to safekeeping peoples savings, and loans should be limited to contract  time deposits under severe penalties for breaking that contract.   They can serve as a conduit for channeling savings (time deposits) to job creating production.

If banks are reduced to safekeepting peoples savings, why would they still be allowed to make loans?  If banks where reduced to only holding savings who will perform check clearing and money transfer transactions?

If I put all the money I have into savings how is that going to help create jobs?  Where would I get the money to save in the first place if the only way I can get any money in the first place is to borrow it from the bank at interest?  I would really like to know how we can borrow ourselves into prosperiety.

Joe the baker will have use of the money now for his purpose and he will pay down the loan over time as per our agreement.   The same applies if the amount happened to be in the Trillions.   He  will pay me according to our agreed upon payment schedule —-over time.

When the principle is repaid that money is extuiguished.  How can we pay a 59 trillion dollar debt with a 7.7 trillion dollar money supply?  As soon as we pay back close to 10% of the debt there will be absolutely no money in circulation.

This I think is at the core of the problem where inflation and economic dislocations originate.

Wouldn’t the core problem be the fact that there is an unpayable interest bearing debt that has to contantly grow or the system will collapse?

The only thing that stopped Americans from using gold coins and gold backed dollars is the US government itself.

If the people really wanted to use the gold coins why did they demand to carry the paper receipts when they could have just as easily used the gold coins?  Could the fact that there never has been enough gold to make a good general meduim of exchange also have something to do with it?

Americans will again resort to using gold or gold backed money simply because we’ve used them before.   Doesn’t seem farfetched.

Where is all this gold going to come from?

If politicians were able to create money themselves,   they will add to these:   Social Security,  Medicare, Medicaid, Tarp 1 and 2, TALF,FEMA, Fannie and Freddie, AIG,  Detroit,  Iraq and Afghanistan (hell might as well fund IRAN just in case) Welfare, Foreign Aid,  Pork Barrel projects for everyone.   Money decisions would be guided by politics of course.    What  else could we expect :    liberty, sound money and free markets?   

        What is going to stop them,  the US constitution?

Would if we put so much pressure on the government to only create money and spend it into circulation for things the benifit the entire population such as permanant infrastructure?  I do understand there needs to be limits on what money can be spent on, especially war.  Would you support having the government actually create money debt free, and have it spent into circulation with no debt and no taxation?

  • Sat, Feb 06, 2010 - 02:45pm

    #82
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    Re: For or Against Usury

 

The people cannot get out of debt due to our tax code, which basically forces people to go into more debt (credit card and so on), Plus I don’t understand how putting some extra principal would help get ride of P+I when it’s only P in existence, true it may put a dent in the P+I, but it will not end it on a collective scale.  Maybe I’m getting things mixed up.

Ron Paul never said specifically debt-free currencies, he just mentioned competing currencies.  Sorry about that misunderstanding. 

  • Sat, Feb 06, 2010 - 03:09pm

    #84
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    Re: For or Against Usury

[quote=goes211]

[quote=DrKrbyLuv]

Here are some suggestions that I think would work very well in an alternative system (fire the Fed):

  1. All new money created by the Federal Government through the Treasury
  2. Almost all new money to be issued by private concerns and state government; the Federal Government should issue (spent into the economy debt free) very little money as a percentage
  3. Private banks would continue under a new model that would require that they borrow or buy (issuance fee) all new money from the Treasury (revenue stream to eliminate income and employment taxes)
    • The Treasury could charge banks an issuance fee, and they could profitably lend money based services provided (credit application, collections, etc.)
    • Interest could be charged by the Treasury and passed on to borrowers by private banks – this might be needed to make the transition easier as it is closer to the current model (in the long run I prefer issuance fees shown above)
  4. States would be free to charter banks to provide interest and debt free money for approved infrastructure projects that benefit the people and their commerce (for example, transportation systems or hydro electric power)
  5. State chartered banks could provide interest free money for approved initiatives (for example, decreasing home and building energy use by 50% or providing funding to get people off the electrical grid)

Sorry for such a rough overview, there would of course be more details. 

Larry

[/quote]

Some questions

  1. If states could create and spend money on their own “approved” infrastructure projects, what constraints would there be on this power? 
  2. Wouldn’t contruction workers and teachers unions just advocate near infinite spending on infrastructure and school construction?
  3. Would all the money be fungible across all states?  For example, would Wisconsin residents be forced to sell their goods and services for money that was excessively created for the benefit of another nearby state?
  4. Wouldn’t this sort of money creation quickly run into a commons problem?  Each state would be better off building excessive amount of infrastructure but to the detriment of the union.
  5. Without a proper pricing mechanism on construction capital, how can proper cost / benefit analysis be done on projects?

What will keep this from QUICKLY devolving into a Zimbabwe like spiral.  Is there some competition, market forces, legal constraints that I am missing?

[/quote]

I was hoping to have Larry (or someone on the other side) chime in on this.  I know Thomas has made an attempt but as often seems to be the case with him and myself, there seems to be something lost in translation.

  • Sat, Feb 06, 2010 - 03:57pm

    #83
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    Re: For or Against Usury

[quote=strabes]

[quote]If  Joe the baker  came to me and asked to  lend him  money so he could take advantage of an opportunity,   should I get compensated for it?[/quote]

– Only if you actually loan him money, not a fake contract that does nothing except obligate Joe to pay YOU money + interest or you take his assets.  If you tried that, you’d be put in jail.  But bankers become rich because that’s what they do, while the folks they loan to like small farmers and businesses who do all the value creation in our society go broke.

[/quote]

Quit being thick!  Carl is pointing out (and is being ignored), just like several others on this thread have, that it makes sense to recieve interest on loaned capital.  He said nothing about being a banker or the monetary system.  It is clear to anyone with an even moderately open mind that he is refering to a private individual that has extra capital being approached by someone with an idea in need of capital. 

What outcomes are possible.

  1. The baker sells his idea outright because he does not have the capital exploit his idea.  In this case if the idea is great, he does not gain the fruits of it because he most likely sold it for less than its worth because someone else is now assuming the risks.
  2. The baker sells part of his idea as equity in the new busines to gain the needed capitial.  Once again if the idea is truly great, he gets only a partial gain because he had to sell business equity to gain the capital.
  3. The baker could get capital via a loan.  In this case he can keep the full fruits of his labor minus a time based interest charge that was agreed upon before starting the business.  The interest compensates the person that put up the capital that made the business possible.

[quote=strabes]

– Take a commission like any other middleman fee.  Quite different than the compounding usury system.

[/quote]

What commision is fair?   If the loan is going to be paid back in 1 year and the fee in 5% of the loan, how would that fee be different than a 5% simple interest rate?

[quote=strabes]

– It’s not a valid analogy to the banking/usury system we’re debating.  You’re assuming real money exists and you’re just adding a tiny increment to buy a car.  The problem is the current system is nothing but debt, principal + interest, that is impossible to pay back on a macro basis.

[/quote]

It is not supposed to be an analogy to the current banking/usury system.  It is merely pointing out that interest changes, by themselves, are not the problem.  The problem is that our means of exchange is created with interest out of thin air by a party that does not have any skin in the game.

[quote=strabes]

[quote]If politicians were able to create money themselves,   they will add to these:[/quote]

Banking propaganda is amazing.  They already virtually destroyed the country with $100 trillion in public debt including all the unfunded liabilities you list, but they have us thinking our elected leaders might add a little more if they actually take their constitutional power back!

[/quote]

This is what drives my crazy dealing with you and your ilk.  Anyone that has looked at the problem and come to a different conclusion as you, in your mind is clearly just some dupe.  Is it too much to ask that you listen to what others are saying before blindly claiming that we are for the current system?

update:  I appologize if this statement is over the top.  It is very frustrating because it seems like most people are not willing to even consider what the otherside is saying.

  • Sat, Feb 06, 2010 - 06:54pm

    #85
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    Re: For or Against Usury

goes211 wrote:

Some questions

  1. If states could create and spend money on their own “approved” infrastructure projects, what constraints would there be on this power? 
  2. Wouldn’t contruction workers and teachers unions just advocate near infinite spending on infrastructure and school construction?
  3. Would all the money be fungible across all states?  For example, would Wisconsin residents be forced to sell their goods and services for money that was excessively created for the benefit of another nearby state?
  4. Wouldn’t this sort of money creation quickly run into a commons problem?  Each state would be better off building excessive amount of infrastructure but to the detriment of the union.
  5. Without a proper pricing mechanism on construction capital, how can proper cost / benefit analysis be done on projects?

What will keep this from QUICKLY devolving into a Zimbabwe like spiral.  Is there some competition, market forces, legal constraints that I am missing?

Hi goes, thanks for the great questions.  I’ll try to answer with some opinions.

1.  If states could create and spend money on their own “approved” infrastructure projects, what constraints would there be on this power?

This is a tough but important question because from my perspective, I think it is important to move as much financial control as possible from Washington to states and local government.  So, by having federal restraints in place, we are giving some power to the federal government that I would hope to avoid.  Clear rules are preferred over mandates or interpretations.

First, I think states should only be able to create debt free money if a tangible asset that benefits the people and commerce is created.  This endows the new money with value.  Ideally, the states would be limited only by their productive capabilities.  The amount of projects would be artificially reigned in, to a degree, by the fact that it takes time and energy to get through the approval process (state government must approve each project with feasibility studies).

We could also use some mathematical formulas to determine the minimum and maximum amount of newly created debt free and interest free money to be created.  Others have mentioned the P + I = D (Principal, Interest and Debt) formula that plagues our current system.  Debt will always be higher than the Principal, which represents our money supply.  Usually, the national debt is close to the total money supply ($12.7 trillion national debt and money supply, M3, around $14.5 trillion).  Add to this the private debt, which is around $47 trillion, and our total “P” principal owed is around $60 trillion.

So, we know a couple of important details.  First, we have around $14.5 in total money supply (M3).  Second, our private and public debt totals around $60 trillion, we are “short” around $45.5 trillion, not including interest payments.  In our current system there is only one way to create money – through new debt.  This creates a perpetual debt loop as we borrow more to pay past debt, the gap between the money supply and total debt can only increase – exponentially.

From this we can calculate:

  1. Total private + public debt = $60 trillion (D)
  2. Average duration of the loans = 8 years (Ad); I am guessing at this number
  3. Average interest rate = 6% (Ai); I am guessing at this number
  4. Solve: Annual principal required (Pa), D/Ad = $7.5 trillion
  5. Solve: Annual interest required (Ia%), Pa x Ia% = $450 billion

So we have calculated that at a minimum, the states must inject $450 billion (debt and interest free) into circulation during the first year.  And a possible maximum of $7.5 trillion.  A preferred amount might be calculated by adding another variable – the amount of new money entering the system.  For example, if we know that $7.5 trillion is coming out of circulation, we could subtract the amount of new money.  For example, let’s say that $4.5 trillion is borrowed through the year:

  • Solve: Ideal amount of annual debt and interest free money to be created by states, Pa – $4.5 trillion = $3 trillion

In this example, the target amount to be created is $3 trillion for the first year.  The equation could be run each year/month.

2.  Wouldn’t construction workers and teachers unions just advocate near infinite spending on infrastructure and school construction?

Construction workers would surely benefit along with everyone else.  No doubt school spending would be increased which is fine with me.  The gotcha is that money cannot be created to pay the teachers, janitors, etc.  Money could be spent on new buildings and rehabilitating old buildings to be more energy efficient, healthy and productive. 

3.  Would all the money be fungible across all states? For example, would Wisconsin residents be forced to sell their goods and services for money that was excessively created for the benefit of another nearby state?

Yes.  The states would not create the money, they would simply have authority to issue it.  All money would be created by the U.S. Treasury and made available for states.  The treasury would charge issuance fees to the states.  All newly created money would be United States Notes.

4.  Wouldn’t this sort of money creation quickly run into a commons problem? Each state would be better off building excessive amount of infrastructure but to the detriment of the union.

When states benefit, the union benefits.  No doubt, there would be a push for states to spend the money but I trust that they are more responsible than the federal government.  There may also be a need to develop some guidelines as I mention above.

5.  Without a proper pricing mechanism on construction capital, how can proper cost / benefit analysis be done on projects?

I think we already have the skills to calculate an ROI (return on investment).  No doubt there would be some competition but I think that would be healthy. 

What will keep this from QUICKLY devolving into a Zimbabwe like spiral. Is there some competition, market forces, legal constraints that I am missing?

I see your point and request that you look at it from another perspective.  The spiral of creating more and more money is not the result of irresponsible spending; it is the result of the exponential growth of debt.  Sure there is irresponsible spending now, but it is is necessary to keep our system from imploding.  For example, imagine if the U.S. actually cut spending by 50-75%.  Our money supply would quickly begin drying up and the contraction would cause massive default in loans.

Our system is rigged up front, it is inherently and mathematically flawed.  But, it can be fixed – there are solutions.

Larry

  • Sat, Feb 06, 2010 - 07:22pm

    #86
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    Re: For or Against Usury

goes, please no apologies.  I love your post!  heated debate is what made this country, not corporate/political conversation…that’s how corruption takes over. 

I guess it’s all in the eye of the reader…hermeneutics…what’s in my mind as a writer gets interpreted differently than intended and it’s my job to listen to reader feedback and try again.  and I obviously did the same in response to Carl…interpreting differently than he intended.

so to answer his first question without being thick:  yes. 

on the last issue, I made a statement about the system, about the propaganda machine we’re all caught in, in an attempt to rally everyone against the system and “take the constitutional power back.”  this was on a day when the government announced it can assassinate citizens and I was particularly infuriated that Americans have let America die.  so it was an attempt to rally.  that works on other sites and in other walks of life, but not on CM.  any rallying call on here, unless it comes from a few inner club members, is considered a distraction from day trading or out of bounds or a personal attack or non-scientific or whatever.  so I’ll stop…I’m definitely outside the club.  

 

  • Sat, Feb 06, 2010 - 07:45pm

    #87
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    Re: For or Against Usury

 

In the early days the colony of Massachussetts did in fact print their own money to pay  for things. I think they even flirted with the idea to do away with taxation and just print what they needed.  Others followed suit and  we had a mess.

With fthe federal government in charge of money   how will the economy work?    

 

 

 

 

  • Sat, Feb 06, 2010 - 07:58pm

    #88
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    Re: For or Against Usury

 

T. Hidin’  and Larry:

The old Soviet Union had their nations resources at their disposal yet the communist party could not produce adequate supplies of the most basic staples for the people.       Why?

  • Sat, Feb 06, 2010 - 09:09pm

    #89
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    Re: For or Against Usury

I would support abolishing the central bank and legal tender laws.   

  Let’s see what people would use as a new medium of exchange absent government edict.  

There is no need for a G man money czar to spend on politically guided projects.  

We already have Congress and they are constantly under heavy pressure to spend and they always oblige.   

 

 

 

 

 

 

  • Sat, Feb 06, 2010 - 09:18pm

    #90
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    Re: For or Against Usury

T. Hidin’  and Larry:

The old Soviet Union had their nations resources at their disposal yet the communist party could not produce adequate supplies of the most basic staples for the people.       Why?

What a great question.

First, we have to understand that the monetary system of the old soviet union was setup almost identically to the monetary system of the USA.

Goerge Whitehurst Berry just did a great show on this.  The one thing that George sort of skipped over was how they are exactly doing that here today, with all this talk of revolution.  The only time people have a revolution is to come up with a new form of government.

Maybe George’s show can help to answer this question.

http://podcast.gcnlive.com/podcast/crash/020410.mp3

Unless we quit falling for the bogus gargbage they want us to fall for, and we finally sit back and study how they gain all this power by through control of the monetary system, we will watch the fall of our country, freedoms, and everything else we think we enjoy.

 

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