For or Against Usury

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For or Against Usury

 

I was wondering who on this site thinks Usury (interest) is a good thing?  Now I'm not talking about interest you get on your savings or CD's but on loans people take out.

When a bank gives you a loan for a house, car or small business, it technically does not have the money to back up the note/loan.  So why should a person be obligated to repay P+I when they (the bank) technically never had P to begin with through the practices of Fractional Reserve Banking?

I think we should end usury on Loans for Houses, Cars, Businesses and College.  

Now the argument is that "that is how banks make their money", but that also makes no sense to me when they have the power to make the currency available on demand with a few key strokes and book entries.  

The issue of Debt free monetary systems has never been discussed in the media at all.  I was also wondering if this done for the very specific reason to purposely not inform the public?

 

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Re: For or Against Usury

I think we should end usury on Loans for Houses, Cars, Businesses and College. 

So what you are saying, is you shouldn't have house, car, business or college loans?  After all, if you don't have interest why would anyone lend money?  Would you put your money at risk with no upside?

Now I'm not talking about interest you get on your savings or CD's but on loans people take out.

They are the same thing.  Why do you think you make money on your CD's and savings?  It's because the bank is lending money to others and some of it goes to paying on savings, other for operating the bank. 

Fractional Reserve Banking?

Now that is the real question, not interest.   Should FRB be allowed, that is should a bank be able to lend out more than they have in deposits.  If you choose no, then I think savings takes on a different feel.  You deposit money and specify how much can be lent.   Lending would be just like you making a loan to a friend.  The money that is lent is no longer available for your use until it is paid back.  Now with a central holder like a bank making the loans they may be able to aggregate loans to reduce individual risk.  That is you allocate a specified amount to be lent and the bank can aggregate it with others to make loans so that any one bad loan doesn't result in a total loss like you would have if you personally lent money to an individual.

No matter what interest rates will be much much higher, and should be for making loans.  Right now money is cheap so it is used to do stupid things like buy houses, CRE, speculation, etc.  Also because savings interest is so low no one wants to save, rather you have to speculate to keep up with inflation.

My personal opinion is that we should allow competing currencies and banking systems.  That way you get to make a choice based on your risk tolerance.  You can choose a commodity backed currency or a fiat currency. You could choose a FRB or non-FRB bank.  There is no reason we can't have choice and let the market and people choose what works best.  Right now we are forced to use the USD (at least in the US) and forced into a FRB system so that the government can spend without having to directly raise taxes.

 

 

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Re: For or Against Usury

If I am collecting the interest I am all for it. If I am paying it I am dead set against it.

If we have a system of 100% reserves then the banks can make their money off of fees. Of course unsecured loans with no collateral such as revolving credit accounts are another matter. That is how Louie down at the pool hall makes his money.

V

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Re: For or Against Usury

 

Rhare,  You ask "if you don't have interest why would anyone lend money?"   Simple, If I had the power to loan money I don't have like the banks do then I would not care.  Since the banks do have this power, why enslave the working people of an economy?  

A predominant debt-free monetary system has so many more perk as opposed to a Debt based monetary virus.  

 

Im sure if the FED need to pay for some kind of costs it does not come out of their own pockets. 

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Re: For or Against Usury

So what you are saying, is you shouldn't have house, car, business or college loans?  After all, if you don't have interest why would anyone lend money?  Would you put your money at risk with no upside?

And this IMO is the crux of the argument. If a bank didn't charge interest it would go out of business.

Usury IS debt. No usury, no banks. No banks, no debt. The usury is there so that the bankers can make money period. Remember they aren't putting up any risk. They make the money appear out of thin air plus they have the down payment, collateral, and any equity. Pretty sweet deal huh?

How about this. The governmet issues a note that has a law attached to it and that law says it is illegal to attach any usury (interest) to this note. So why would the government do this if it wasn't making interest? Because it would be great for the economy and business. Banks could charge a fee for storing your money, safe gaurding it, transfering it, etc.

The interesting part would be: could the government tax that note? Would that be considered usury?

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Re: For or Against Usury

If a bank didn't charge interest it would go out of business.

 

How can a bank go out of business, when any expenses can be covered and created just like the loan was, out of thin air?  Banks should be a public utility to benefit the people not the bankers since they charge interest on $$$ they never had to begin with.  

This Debt based system is beyond paralyzing and naturally inflationary.

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Re: For or Against Usury

JK121

Thats my point. They couldn't and shouldn't stay in business if they survive by usury.

Printing money out of thin air is usury because its done when a loan is created and interest is attached to the loan. They wouldn't do it if there was no interest in it for them.

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Re: For or Against Usury
JK121 wrote:

Rhare,  You ask "if you don't have interest why would anyone lend money?"   Simple, If I had the power to loan money I don't have like the banks do then I would not care.  Since the banks do have this power, why enslave the working people of an economy?  

Sometimes I wonder if this sites advocates of debt free money even bother to think about what the otherside is saying. 

We don't want banks (or anyone else for that matter) to be able to create money out of thin air.  Once you understand this point we ask, why should those with capital put it at risk by loaning it to someone else if they are not allowed to charge interest to compensate for that risk?

JK121 wrote:

A predominant debt-free monetary system has so many more perk as opposed to a Debt based monetary virus.  

I would sure love to hear how these debt-free monetary systems will solve all of our problems. Then we can end the FED and eliminate our evil debt based monetary system.  Bernanke could then move over to the treasury department and print (I heard he is good at it) lots of credit based money for us until Americans are the richest people on earth as we should be.  When he has made us Americans all rich he can then show the people of Zimbabwe what they did wrong.

Personally I think that any top down monetary system will eventually fail for the same reasons that top down economic systems fail.  Those at the top will use their power for their own personal benefit or suffer from the fatal conceit of thinking they know what is best for everyone else and therefore are justified to use force on others for their own good.

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Re: For or Against Usury

Personally I think that any top down monetary system will eventually fail for the same reasons that top down economic systems fail.  Those at the top will use their power for their own personal benefit or suffer from the fatal conceit of thinking they know what is best for everyone else and therefore are justified to use force on others for their own good.

What would you suggest?

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Re: For or Against Usury
Johnny Oxygen wrote:

Personally I think that any top down monetary system will eventually fail for the same reasons that top down economic systems fail.  Those at the top will use their power for their own personal benefit or suffer from the fatal conceit of thinking they know what is best for everyone else and therefore are justified to use force on others for their own good.

What would you suggest?

How about freedom?  If it was up to me I would treat money like every other commodity and let the market sort it out.  One outcome I could see happen is something like the "Digital Coin" proposal but without being forced by government.  It could start with something like WalMart bucks or Detroit Dollars where each end user is free to transact in whichever currency he wishes and market forces will force discipline on the issuing parties.

Honestly I have no idea how it would work but it would have many benefits like:

1) No monopoly control over our money and therefore no single way to capture and corrupt the process.

2) It would be very hard to finance a welfare/warfare state

3) Compatible with the constitution.

4) States/Municipalities could still charge taxes in their own local currency and therefore make a market for it.

5) Hard money types would be free to transact in gold/silver but people that prefer fiat currencies would could use them.

The key would be that there would be no forced fungability between the currencies and therefore markets would spring up to find the proper conversion rates.

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Re: For or Against Usury

Usury is the most powerful human force ever invented, having built the most powerful empire in history.  All major religions warn against it.  But the secular case to be made is even more powerful.  It is the basis of exponential growth, which everyone on CM understands.  It's also the cause of ever-increasing centralization, ever-increasing scale, and ever-increasing velocity of the system.  These 3 issues are why both parents must work now, lower class parents need multiple jobs in order to feed their kids, small farmers and main street businesses have been destroyed, many lament their lack of free time for rest and joy, many despise their endless commutes to jobs they hate working for mega institutions, many parents don't have time for their kids, the lower classes have no wealth only debt, people numb their minds with TV or see a therapist because the system is so massive they have no freedom or autonomy to do anything about it, etc etc etc.

 

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Re: For or Against Usury

I was wondering who on this site thinks Usury (interest) is a good thing?  Now I'm not talking about interest you get on your savings or CD's but on loans people take out.

The practice of usury should be completely outlawed.

When a bank gives you a loan for a house, car or small business, it technically does not have the money to back up the note/loan.  

And even if you take them to court, you cannot force the bank to pay because their promise to pay is not court enforceable.  What backs the note is the collateral pledged (your property).  Our property is what backs the money.

So why should a person be obligated to repay P+I when they (the bank) technically never had P to begin with through the practices of Fractional Reserve Banking?

Why should we have to pay them back when they didn't loan you anything in the first place.  Numbers (that's all they loan us is simple numbers in a checking account) do not consist of any tangible object.  A better way of saying it is that numbers do not consist of any known chemical substance.  So if a person doesn't loan you anything, why would you be obligated to give him anything back other than what he loaned you?

I think we should end usury on Loans for Houses, Cars, Businesses and College.  

You're off to a great start!  But now we need to figure out how to plug the gap here because 100% of the money supply comes into exsistance through and extention of credit by the banking system, and when that princple is repaid it is extinguished.  We need to figure out a way to replace all the interest bearing usury debt money with debt free, wealth money.

Now the argument is that "that is how banks make their money", but that also makes no sense to me when they have the power to make the currency available on demand with a few key strokes and book entries.  

Banks "make" money every time they issue a new loan.  Banks do not create any currency, they only create book entry money.  100% of the currency is produced and sold direcly to the banking system by the U.S. Government.  This brings up a really good point though.  Banks can create as much credit as they wish.  There is no limit the the amount of book entries they can make.  Now the question is how do we force the banking system to create those numbers and final payment and move them into circulation without debt and all based on wealth with no taxation.

The issue of Debt free monetary systems has never been discussed in the media at all.  I was also wondering if this done for the very specific reason to purposely not inform the public?

Great question.  This gets right down to the heart of how the bankers control everything.  Because nearly everyone is in debt to the bankers they have an obligation to perform for the bankers.  If a certain media outlet began to run stories against the banking system all the banker would have to do is call in his loan, or raise his interest rates and put the squeeze on them.  The only power the bankers have is over the creattion of the medium of exchange as interest bearing loans and the power that comes with having everyone owe you.

 

How can a bank go out of business, when any expenses can be covered and created just like the loan was, out of thin air?

Because there is a rule within the banking system that when a loan goes bad that bank has to take money (numbers) from their income account and apply (destroy) it to the remaining prinicple part of the loan that has quite performing (paying).  When the amount of bad loans exceeds the bank's income they are insolvent and out of business.  This rule does not apply to all banks, just the bulk majority of them.

Banks should be a public utility to benefit the people not the bankers since they charge interest on $$$ they never had to begin with.

Well I believe banks should be regulated into honest and moral prinicples, and not be allowed to perform their theft by decpetion practices as they do now.  I think they could and should remain private but should have to generate their profits from services provided (check clearing, account service fees) not from creating the medium of exchange as interest bearing loans.

It's refreshing to see someone open to the idea of having money in circulation that doesn't have to be borrowed in order to exsist.  If we can get more of this type of thinking we might just have a monetary system that works for the benifit of the people instead of a money system that only works towards the benifits of the few, as it is now.

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Re: For or Against Usury

Strabes is correct.

Usury is the most powerful human force ever invented, having built the most powerful empire in history.

The single best tool to manipulate and control and entire nation for the complete benifit of the few is to allow the creation of the medium of exchange as interest bearing loans.

Nearly 100% of the ills we face in our society are a direct consequence of our monetary system.    Like Strabes said, this money system is why people have to work harder and longer and get less and less, because by the very nature of this fraudulate debt based monetary system is that is it designed to transfer all the real wealth from the many to the few.  It's much like a ladder where the bottom rung gets knocked out.  Pretty soon more and more people get knocked off the ladder until the bulk of the society is completely poor and economicly destroyed and the few at the top are enriched beyond their wildest dreams.

 

Great posting Strabes.

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Re: For or Against Usury

goes 211

Sheesh. If you're going to criticize the idea of a non usury note you should at least have a better idea. Your list of things is so broad and utopian it isn't really an idea at all its really more of a day dream.

1) No monopoly control over our money and therefore no single way to capture and corrupt the process.

What does that even mean and how would create an iron clad system that couldn't be corrupted.

2) It would be very hard to finance a welfare/warfare state

How would it be 'very hard' through law? And who would make the decision about the definition of 'welfare'.

3) Compatible with the constitution.

Kinda like the Patriot Act? The politician/bankers aren't going for that on I can guarantee that.

4) States/Municipalities could still charge taxes in their own local currency and therefore make a market for it.

Like the Articles of Confederation we had before the Constitution? Yep that worked out great.

5) Hard money types would be free to transact in gold/silver but people that prefer fiat currencies would could use them.

So the two would always be equal? Somehow, by magic? One would never be valued higher than the other driving people to choose one over the other? I mean we already have that don't we? Seems like most people use fiat. I wonder why?

The key would be that there would be no forced fungability between the currencies and therefore markets would spring up to find the proper conversion rates.

Again this was tried during the Articles of Confederation and was proved a disaster.

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Re: For or Against Usury

5) Hard money types would be free to transact in gold/silver but people that prefer fiat currencies would could use them.

So the two would always be equal? Somehow, by magic? One would never be valued higher than the other driving people to choose one over the other? I mean we already have that don't we? Seems like most people use fiat. I wonder why?

No we don't already have this.   Legal Tender laws and sales taxes/capital gains taxes prevent this.

2) It would be very hard to finance a welfare/warfare state

How would it be 'very hard' through law? And who would make the decision about the definition of 'welfare'.

If you have a hard currency, then it's hard to finance welfare/warfare because you have to actually collect taxes to pay for it.  You can't secretly debase the money supply to secretly pay for it.

There seems to be confusion, there are 3 different things being mashed together that are related but completly different:

  • Usury (interest) - Generaly usury is used to refer to excessive interest.  At any rate, interest is a return paid on borrowed capital.  It could be any type of capital, hard currency, fiat currency, labor (ie. I'll work 10 hours for you later if you work 9 hours for me now).
  • Fiat Currency - The USD, not backed by anything other than faith, as opposed to a hard currency that is backed by some form of commodity or asset.  Gold and Silver are a hard currency that can be used directly instead of via a paper representation, but you could have a hard currency based on any asset, just maybe not directly usable in a form like a coin.  The reason gold/silver or other metal is desireable because of it's direct use and inability to counterfit.
  •  Fractional Reserve Banking - A method (fraud in my opinion) where a lender can lend out more than they have on deposit.  Note, this could be done with a hard or fiat currency.  The risk is that if too many people demand their money at one time, then a hard currency will become a fiat currency.

I think it's important to keep these thing distinguished, as any system that doesn't involve interest is fantasy and will fail.  Unless you say absolutely no loans for anything, then you can't have a system without interest, since without interest, you won't have any market influence controlling the use of capital to insure it is used wisely.   This is pretty much the system we have now since interest is set very low and the reason we have had the housing bubble.   The only way you get interest rates so low is because of a fiat currency in which those that are printing the currency can arbitrarily set the interest rate as opposed to  a hard currency where you have to intice the holder to lend the currency via a promise of reward that out weighs the risk.

 

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Re: For or Against Usury
Johnny Oxygen wrote:

goes 211

Sheesh. If you're going to criticize the idea of a non usury note you should at least have a better idea. Your list of things is so broad and utopian it isn't really an idea at all its really more of a day dream.

So is the new standard that one should not criticize something unless we personally have a better idea?  I guess we should just shut down this site because I have not found anyone around here with all the answers to the Economy, Peak Oil, the Evironment....?  Seriously I thought this was a place to discuss these topics amoungst concerned citizens with different perspectives.

As I said earlier, I don't have all the answers and I never claimed to have the one and only solution?  I also think this problem is bigger than one person or even a group of people.  I just stated my preference for a market driven solution as opposed to a top down solution.

I then go on to list a few of my reasons for thinking this way.  If they are not good enough for you, I am sorry.

Johnny Oxygen wrote:

1) No monopoly control over our money and therefore no single way to capture and corrupt the process.

What does that even mean and how would create an iron clad system that couldn't be corrupted.

When did I say that it would be iron clad and incapable of corruption?  It is my opionion that competition keeps the competitors honest and without competition, we generally have suboptimal solutions.  Why should there not be monetary competition?

Johnny Oxygen wrote:

2) It would be very hard to finance a welfare/warfare state

How would it be 'very hard' through law? And who would make the decision about the definition of 'welfare'.

I assume our elected officials would make the decision but without the ability to indirectly steal from us by debasing the currency it would be impossible to run the fiscal insanity we currently have.

Johnny Oxygen wrote:

3) Compatible with the constitution.

Kinda like the Patriot Act? The politician/bankers aren't going for that on I can guarantee that.

Are we looking for the Banker's permission?  As for the politicians, they will either come to that conclusion or it will eventually be forced upon them by the market or a societal collapse.

Johnny Oxygen wrote:

4) States/Municipalities could still charge taxes in their own local currency and therefore make a market for it.

Like the Articles of Confederation we had before the Constitution? Yep that worked out great.

Like I said a warfare state would be pretty hard to maintain.  Would they have failed if not for war with England?  The US defense spending is now greater than the rest of the world combined.  Personally I would like for the US to stop being an empire and go back to a humble republic.  You must disagree.

Johnny Oxygen wrote:

5) Hard money types would be free to transact in gold/silver but people that prefer fiat currencies would could use them.

So the two would always be equal? Somehow, by magic? One would never be valued higher than the other driving people to choose one over the other? I mean we already have that don't we? Seems like most people use fiat. I wonder why?

Why?  When someone sticks a gun to my head and says use fiat, it kind of has that effect.  Are you not aware of how PM conversion gets taxed as capital gains?  Uncle Sam taking a bit cut out of the conversion kind of makes it impractical don't you think? 

If fiat is so great why do they need to use force against the alternatives?

Johnny Oxygen wrote:

The key would be that there would be no forced fungability between the currencies and therefore markets would spring up to find the proper conversion rates.

Again this was tried during the Articles of Confederation and was proved a disaster.

Look if your going to crap on someones ideas at least know what your talking about.

Who is crapping on who?  Like I said earlier in this thread.  It would be nice if debt free money advocates would bother to think about what the otherside is saying.

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Re: For or Against Usury

No we don't already have this.   Legal Tender laws and sales taxes/capital gains taxes prevent this.

You can transact in gold and you can transact in fiat its just a matter of conversion. My point is that one currency will 'win out' over the other eventually.

If you have a hard currency, then it's hard to finance welfare/warfare because you have to actually collect taxes to pay for it.  You can't secretly debase the money supply to secretly pay for it.

This is lawyer speak. Define your version of 'hard currency'. Is that FRN? Gold coin?

Tax collection? You have a hard time collecting taxes from 'hard currency'? What about property tax, sales tax, income tax, etc? Are you saying that if you used hard currency it would somehow become harder to collect these taxes from you? You write later on:The risk is that if too many people demand their money at one time, then a hard currency will become a fiat currency. This removes your argument about hard currency being taxed.

Usury (interest) - Generaly usury is used to refer to excessive interest.  At any rate, interest is a return paid on borrowed capital.  It could be any type of capital, hard currency, fiat currency, labor (ie. I'll work 10 hours for you later if you work 9 hours for me now).

Nope. Excessive interest? What the heck is that? Interest is a return on borrowed capital? Where is the capital when the bank creates the money out of thin air? There never was any 'capital'.

I think it's important to keep these thing distinguished, as any system that doesn't involve interest is fantasy and will fail.

It worked for thousands of years until the bankers began the process of usury. Lincoln's greenback work well to and it was considered to make all American currency non-usury until the bankers shut it down.

as opposed to  a hard currency where you have to intice the holder to lend the currency via a promise of reward that out weighs the risk.

More lawyer speak. How is this different from our fiat system? Explain what you mean.

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Re: For or Against Usury
Johnny Oxygen wrote:

Usury (interest) - Generaly usury is used to refer to excessive interest.  At any rate, interest is a return paid on borrowed capital.  It could be any type of capital, hard currency, fiat currency, labor (ie. I'll work 10 hours for you later if you work 9 hours for me now).

Nope. Excessive interest? What the heck is that? Interest is a return on borrowed capital? Where is the capital when the bank creates the money out of thin air? There never was any 'capital'.

How many times do we have to say something for you to listen?   We don't want banks (or anyone else for that mater) making money out of thin air!  We agree that when they do, they are charging interest on money that they created for free which is the ridiculous system we have now.

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Re: For or Against Usury

We don't want banks (or anyone else for that mater) making money out of thin air

Then how do you suggest we have money created?

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Re: For or Against Usury

If you have a hard currency, then it's hard to finance welfare/warfare because you have to actually collect taxes to pay for it.  You can't secretly debase the money supply to secretly pay for it.

This is lawyer speak. Define your version of 'hard currency'. Is that FRN? Gold coin?

Johnny,

I believe goes211 means Commodity Money when he says hard currency. 

Is this what you mean Goes211?

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Re: For or Against Usury
rhare wrote:

There seems to be confusion, there are 3 different things being mashed together that are related but completly different:

  • Usury (interest) - Generaly usury is used to refer to excessive interest.  At any rate, interest is a return paid on borrowed capital.  It could be any type of capital, hard currency, fiat currency, labor (ie. I'll work 10 hours for you later if you work 9 hours for me now).
  • Fiat Currency - The USD, not backed by anything other than faith, as opposed to a hard currency that is backed by some form of commodity or asset.  Gold and Silver are a hard currency that can be used directly instead of via a paper representation, but you could have a hard currency based on any asset, just maybe not directly usable in a form like a coin.  The reason gold/silver or other metal is desireable because of it's direct use and inability to counterfit.
  •  Fractional Reserve Banking - A method (fraud in my opinion) where a lender can lend out more than they have on deposit.  Note, this could be done with a hard or fiat currency.  The risk is that if too many people demand their money at one time, then a hard currency will become a fiat currency.

I think it's important to keep these thing distinguished, as any system that doesn't involve interest is fantasy and will fail.  Unless you say absolutely no loans for anything, then you can't have a system without interest, since without interest, you won't have any market influence controlling the use of capital to insure it is used wisely.   This is pretty much the system we have now since interest is set very low and the reason we have had the housing bubble.   The only way you get interest rates so low is because of a fiat currency in which those that are printing the currency can arbitrarily set the interest rate as opposed to  a hard currency where you have to intice the holder to lend the currency via a promise of reward that out weighs the risk.

Rhare,

Thank you very much for these distinctions! They make complete sense to me, and help to distinguish between problems related to all three.

Also, a question:

rhare wrote:

Should FRB be allowed, that is should a bank be able to lend out more than they have in deposits.  If you choose no, then I think savings takes on a different feel.  You deposit money and specify how much can be lent.   Lending would be just like you making a loan to a friend.  The money that is lent is no longer available for your use until it is paid back.  Now with a central holder like a bank making the loans they may be able to aggregate loans to reduce individual risk.  That is you allocate a specified amount to be lent and the bank can aggregate it with others to make loans so that any one bad loan doesn't result in a total loss like you would have if you personally lent money to an individual.

If one combined some comments you made in your first response to this thread (see above, about defining to a bank how much risk you were willing to assume if the bank were to loan out some portion of your deposits in the bank), would this make fractional reserve banking more palatable, or would it make no difference?

 

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Re: For or Against Usury

ccpetersmd said:

If one combined some comments you made in your first response to this thread (see above, about defining to a bank how much risk you were willing to assume if the bank were to loan out some portion of your deposits in the bank), would this make fractional reserve banking more palatable, or would it make no difference?

I don't know.  Personally, I think non-FRB banking is the way to go.  That is when you choose to lend out capital, you can't use it until it is repaid, or in the aggregate until someone else puts enough capital in to allow you to withdrawl your money.  However, I also can see how a FRB system can work if you maintain high enough reserves to outstanding loans.  After all, if interest rates are set by the market and appropriate, then the capital should be aimed at productive resources which means the actual "net worth" in the economy grows, that is the new currency created by the loan is actually back by whatever assets were purchased with it.   However, on the flip side, you end up in the situation we are in now, which seems to indicate the risk is too great to use FRB.

I keep coming back that I think we need to let the market sort it out.  That is allow multiple systems to work simultaneously and see what provides the most benefit.  I like to think that a non-FRB system is probably best, but I can't be sure.

I also want to add one more comment, for those that say the only beneficiary of FRB is the bankers, I don't believe this is correct.  Savers who wish to lend money to get interest but want reduced risk, this may be an appropriate solution.  The bankers don't get all interest in profit, a large portion goes to the operation of the bank (salaries, etc just like all businesses), and a large portion goes to those with deposits in the banks in the form of interest on savings.  That is I don't think the system we have is all bad, I can see some benefit.  To me the main problems are:

  1. The Fed setting the federal funds rate instead of the market setting rates.
  2. The legal tender laws and tax laws that force everyone to use the cartel of banks. 
  3. Government guarantess for banks.

If we got rid of these issues I could see that a responsible run FRB system might work as long as it was in competition against other entities, non government controlled or manipulated,  and could fail thus allocating risk to the depositors and equity holders in the institution, which in turn helps to set interest rates.

Johnny Oxygen said:

This is lawyer speak. Define your version of 'hard currency'. Is that FRN? Gold coin?

I think it was actually my comment to which he was referring, and no, it's not lawyer speak as I'm certainly not a lawyer - hell in another thread I got accused of being a fourth grader. :-) 

I think "hard currency" is something that is backed by a tangible asset.  It could be land, energy, gold, silver, copper, etc.  In some cases the currency is the "hard asset" like gold/silver/copper coins, or it can be redeemed for a hard asset on demand.

Johnny Oxygen said:

You can transact in gold and you can transact in fiat its just a matter of conversion. My point is that one currency will 'win out' over the other eventually.

No you can't!  if you buy gold, it goes up, you sell it you have to pay capital gains (at least if you don't want to go to jail).  This means it is not just a matter of conversion.  Why do you think one currency would win out?  We have many competing currencies in the world, in many countries multiple currencies are in use.

Johnny Oxygen said:

It worked for thousands of years until the bankers began the process of usury.

Where? Interest has been around for ever.  If you don't think you have to have interest, then will you please lend me all your money for nothing?  I'll send you the address to send me the check.  If you say no then you prove my point. :-)

Johnny Oxygen said:

Lincoln's greenback work well

Really?  They were sucessful in only having an 80% inflation rate as opposed to the souths much higher rate.  Just because one currency wasn't as devalued as the other doesn't mean it was a success.

My comment:

as opposed to  a hard currency where you have to intice the holder to lend the currency via a promise of reward that out weighs the risk.

Johnny Oxygen said:

More lawyer speak. How is this different from our fiat system? Explain what you mean.

How is this lawyer speak? Perhaps you have been deprived of oxygen? :-)  To make my point, give me your money I promise I'll pay it back in full and I promise to do something useful with it.  Again, if you don't think this is a good deal, then you need to rethink your comments! In order to lend money to someone, you will want something in return on top of your principal for the risk.  That extra part is interest.  The more risk you perceive in lending the money, the higher the reward you expect, which means the higher the interest you expect.  If there is no reward, then why would you lend  money?

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Re: For or Against Usury
Thomas Hedin wrote:

We don't want banks (or anyone else for that mater) making money out of thin air

Then how do you suggest we have money created?

Like I said earlier.  I don't think that anyone or any group is smart enough solve this problem alone.  The billions of people that make up the market for goods and services would find a solution.  It might start off with hard money like gold and silver but I would not be surprised if that was only a partial or just a transitional solution.

If you believe that money is a commodity why must it be created by some entity.  Why can't it be created and have its value be set by market forces like every other commodity?

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Re: For or Against Usury
Thomas Hedin wrote:

If you have a hard currency, then it's hard to finance welfare/warfare because you have to actually collect taxes to pay for it.  You can't secretly debase the money supply to secretly pay for it.

This is lawyer speak. Define your version of 'hard currency'. Is that FRN? Gold coin?

Johnny,

I believe goes211 means Commodity Money when he says hard currency. 

Is this what you mean Goes211?

That is a solution but not necessarily the only one.  I like commodity money because it does not require force to enforce its usage but I can imagine other non-commodity solutions.  My speculation is that non-commodity solutions would have to be very well managed to remain in existence.   In general, competition is good for consumers of that good.

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Re: For or Against Usury

I thnk we are getting off track so I will try and be a little clearer.

I think that we agree that banks currently make money through interest on money they created for free through loans.  They can also make money by repossessing collateral in deflationary situations which they caused by not loaning enough new money to cover the outstanding debt obligations.  With that being said, still I don't find interest to be offensive.  It is only offensive right now because someone without any skin in the game is making a return on capital that they don't deserve. 

  • I still feel that those with capital do require some return on capitial (interest/usury), to compensate for the risk of default.  If you don't believe this to be the case, please explain why.
  • I also believe that if this interest rate was set by market forces and that money creation was also handled by market forces, we would not have the problems that we have now. 

Because money creation would be handled by market forces, loans would only be made to parties that were going to make productive uses of that capital.  We would not have the problem that more money would always need to be created to cover the outstanding loan obligations or the system would collapse.  The loaned money would either create enough capital to cover its interest debt or would default and therefore add money to the system to pay off other outstanding loans.

Does this make any sense to anyone other than me?

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Re: For or Against Usury
rhare wrote:

ccpetersmd said:

If one combined some comments you made in your first response to this thread (see above, about defining to a bank how much risk you were willing to assume if the bank were to loan out some portion of your deposits in the bank), would this make fractional reserve banking more palatable, or would it make no difference?

I don't know.  Personally, I think non-FRB banking is the way to go.  That is when you choose to lend out capital, you can't use it until it is repaid, or in the aggregate until someone else puts enough capital in to allow you to withdrawl your money.  However, I also can see how a FRB system can work if you maintain high enough reserves to outstanding loans.  After all, if interest rates are set by the market and appropriate, then the capital should be aimed at productive resources which means the actual "net worth" in the economy grows, that is the new currency created by the loan is actually back by whatever assets were purchased with it.   However, on the flip side, you end up in the situation we are in now, which seems to indicate the risk is too great to use FRB.

I keep coming back that I think we need to let the market sort it out.  That is allow multiple systems to work simultaneously and see what provides the most benefit.  I like to think that a non-FRB system is probably best, but I can't be sure.

I also want to add one more comment, for those that say the only beneficiary of FRB is the bankers, I don't believe this is correct.  Savers who wish to lend money to get interest but want reduced risk, this may be an appropriate solution.  The bankers don't get all interest in profit, a large portion goes to the operation of the bank (salaries, etc just like all businesses), and a large portion goes to those with deposits in the banks in the form of interest on savings.  That is I don't think the system we have is all bad, I can see some benefit.  To me the main problems are:

  1. The Fed setting the federal funds rate instead of the market setting rates.
  2. The legal tender laws and tax laws that force everyone to use the cartel of banks. 
  3. Government guarantess for banks.

If we got rid of these issues I could see that a responsible run FRB system might work as long as it was in competition against other entities, non government controlled or manipulated,  and could fail thus allocating risk to the depositors and equity holders in the institution, which in turn helps to set interest rates.

Johnny Oxygen said:

This is lawyer speak. Define your version of 'hard currency'. Is that FRN? Gold coin?

I think it was actually my comment to which he was referring, and no, it's not lawyer speak as I'm certainly not a lawyer - hell in another thread I got accused of being a fourth grader. :-) 

I think "hard currency" is something that is backed by a tangible asset.  It could be land, energy, gold, silver, copper, etc.  In some cases the currency is the "hard asset" like gold/silver/copper coins, or it can be redeemed for a hard asset on demand.

Johnny Oxygen said:

You can transact in gold and you can transact in fiat its just a matter of conversion. My point is that one currency will 'win out' over the other eventually.

No you can't!  if you buy gold, it goes up, you sell it you have to pay capital gains (at least if you don't want to go to jail).  This means it is not just a matter of conversion.  Why do you think one currency would win out?  We have many competing currencies in the world, in many countries multiple currencies are in use.

Johnny Oxygen said:

It worked for thousands of years until the bankers began the process of usury.

Where? Interest has been around for ever.  If you don't think you have to have interest, then will you please lend me all your money for nothing?  I'll send you the address to send me the check.  If you say no then you prove my point. :-)

Johnny Oxygen said:

Lincoln's greenback work well

Really?  They were sucessful in only having an 80% inflation rate as opposed to the souths much higher rate.  Just because one currency wasn't as devalued as the other doesn't mean it was a success.

My comment:

as opposed to  a hard currency where you have to intice the holder to lend the currency via a promise of reward that out weighs the risk.

Johnny Oxygen said:

More lawyer speak. How is this different from our fiat system? Explain what you mean.

How is this lawyer speak? Perhaps you have been deprived of oxygen? :-)  To make my point, give me your money I promise I'll pay it back in full and I promise to do something useful with it.  Again, if you don't think this is a good deal, then you need to rethink your comments! In order to lend money to someone, you will want something in return on top of your principal for the risk.  That extra part is interest.  The more risk you perceive in lending the money, the higher the reward you expect, which means the higher the interest you expect.  If there is no reward, then why would you lend  money?

I am in total agreement with rhare's response to Johnny.

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Re: For or Against Usury

goes211

OMG this conversation is getting hysterical! I think we actually agree with each other me and/or we are just missing each other.

I still feel that those with capital do require some return on capitial (interest/usury), to compensate for the risk of default.  If you don't believe this to be the case, please explain why. I also believe that if this interest rate was set by market forces and that money creation was also handled by market forces, we would not have the problems that we have now. 

Yes I agree.

I suppose my point (or way of thinking) was this proposal:

What if congress issued notes that could not have interest attached to them? I'm not proposing this cures all ills just a thinking exercise. Now the old FRN's were not removed but the new non usury notes were just added into the economy.

1.) How would people get their hands on these new notes if they needed a loan? Could government lend the money if it was gauranteed by law that they could never directly profit from it. So why would they do that? Because it would be a boon to the economy, increase velocity of money, allow businesses to grow, etc. But it also brings up the second point.

2.) If government taxed the end use of these new notes would that be considered usury?

3.) What would other countries reactions to this usury free note be? Would it instantly become the new carry trade? What would happen when other countries invested in this note and attached interest on it outside of the US?

I'm sure there are many more question to be added. I completely understand what you are saying its just that I don't have the faith you do in 'market forces' you said: Because money creation would be handled by market forces, loans would only be make to parties that were going to make productive uses of that capital. While I agree with this in theory we can also see how it can be horribly corrupted as it is now being and I suppose that is where my suspicion lies. So I guess what I am proposing is some sort of hedge against the few manipulating the whole.

I don't think making correction to the current system will do anything to stop it from being corrupted again. The bankers have this one figured out and all the players in place. Perhaps any system can be corrupted but I think the one we are using now is done in regards to ever being fair and legit.

 

 

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Re: For or Against Usury

I'm struck how well those of us living in a usury machine are trained to debate how to make it work rather than question the existence of it. We're trained to think it's necessary, sort of like hamsters in a cage must think their cage is necessary.  Debating how to improve the cage might seem productive to the hamsters, and little Bernanke-hamsters would become experts in how to run the wheels more efficiently (the humans would feed Bernanke more).  They would honor the hamsters who run the fastest and train baby hamsters to do the same.  But the humans keeping them stuck in the cage would laugh that the hamsters don't just walk out. 

Of course, hamsters aren't free to walk out, otherwise they would.  Humans are free to walk out, yet we don't.  Hmm...not sure about evolution.  Laughing

The banking establishment has also fooled everyone apparently that usury = return on capital.  I suppose if issuing stuff you don't have and putting people in bondage to pay it back plus interest = capital production, then you're correct that usury = return on capital.  But if that's capital production, then why don't we just have everyone become bankers?  We could all issue ourselves the money we don't have if that's real production. That of course reveals the lie of usury.

It is not capital production, but rather a casino.  As long as the house keeps throwing more chips on the table, the usury system works, people can get out of bondage.  But as soon as the house pulls their chips off the table or starts pulling yours off with higher interest rates, game over, people lose their houses.  It doesn't matter how that system is tweaked.  Eventually people lose their houses because rather than declaring jubilee at that time for the greater interest of the people as all religions call for, our government works for the casino. 

 

 

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Re: For or Against Usury

Solid copy Strabes.

But get ready for some blowback from the pro-usury crowd above. I think my questions merit response in regard to a non-usury note. We'll see how many people are even interested or if we will just continue talking about how usury SHOULD work.

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Re: For or Against Usury
Johnny Oxygen wrote:

goes211

OMG this conversation is getting hysterical! I think we actually agree with each other me and/or we are just missing each other.

I still feel that those with capital do require some return on capitial (interest/usury), to compensate for the risk of default.  If you don't believe this to be the case, please explain why. I also believe that if this interest rate was set by market forces and that money creation was also handled by market forces, we would not have the problems that we have now. 

Yes I agree.

Johnny,

I agree with you about this getting hysterical and would like to thank you for trying to get things back to a productive discussion.  We probably do agree more than you think.

Johnny Oxygen wrote:

I suppose my point (or way of thinking) was this proposal:

What if congress issued notes that could not have interest attached to them? I'm not proposing this cures all ills just a thinking exercise. Now the old FRN's were not removed but the new non usury notes were just added into the economy.

1.) How would people get their hands on these new notes if they needed a loan? Could government lend the money if it was gauranteed by law that they could never directly profit from it. So why would they do that? Because it would be a boon to the economy, increase velocity of money, allow businesses to grow, etc. But it also brings up the second point.

2.) If government taxed the end use of these new notes would that be considered usury?

3.) What would other countries reactions to this usury free note be? Would it instantly become the new carry trade? What would happen when other countries invested in this note and attached interest on it outside of the US?

As for your points, I don't completely disagree.  I can definately see some merit to the idea of government creating fiat currency without debt to pay for some of its obligations.   At least that money would be free of the parasitic banking middle men and the people themselves would gain the benefits of money creation.

I guess where I have a problem with this is that it feels to me like that solution is just trading one set of masters (bankers) for a different set (government bureaucrats).

Johnny Oxygen wrote:

I'm sure there are many more question to be added. I completely understand what you are saying its just that I don't have the faith you do in 'market forces' you said: Because money creation would be handled by market forces, loans would only be make to parties that were going to make productive uses of that capital. While I agree with this in theory we can also see how it can be horribly corrupted as it is now being and I suppose that is where my suspicion lies. So I guess what I am proposing is some sort of hedge against the few manipulating the whole.

I don't think making correction to the current system will do anything to stop it from being corrupted again. The bankers have this one figured out and all the players in place. Perhaps any system can be corrupted but I think the one we are using now is done in regards to ever being fair and legit.

 

Once again I understand where you are coming from.  You don't have faith thar market forces will not be corrupted.  I guess I feel is that government will be corrupted.  I will leave you with my favorite passage from Frédéric Bastiat's "The Law".

http://bastiat.org/en/the_law.html#SECTION_G714

Property and Plunder

Man can live and satisfy his wants only by ceaseless labor; by the ceaseless application of his faculties to natural resources. This process is the origin of property.

But it is also true that a man may live and satisfy his wants by seizing and consuming the products of the labor of others. This process is the origin of plunder.

Now since man is naturally inclined to avoid pain — and since labor is pain in itself — it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.

When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor.

It is evident, then, that the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.

But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws.

This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds.

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Johnny Oxygen
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Posts: 1443
Re: For or Against Usury

Property and Plunder

Man can live and satisfy his wants only by ceaseless labor; by the ceaseless application of his faculties to natural resources. This process is the origin of property.

But it is also true that a man may live and satisfy his wants by seizing and consuming the products of the labor of others. This process is the origin of plunder.

Now since man is naturally inclined to avoid pain — and since labor is pain in itself — it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it.

When, then, does plunder stop? It stops when it becomes more painful and more dangerous than labor.

It is evident, then, that the proper purpose of law is to use the power of its collective force to stop this fatal tendency to plunder instead of to work. All the measures of the law should protect property and punish plunder.

But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws.

This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds.

Now that is something we definately agree on!

What is your opinion of my 3 questions on non-usury notes?

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