Why do we pay interest?

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DrKrbyLuv's picture
DrKrbyLuv
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Why do we pay interest?

Interest charges are an unnecessary parasitic load that zaps the life and vitality from our economy and damages our future prosperity. Chris Martenson explains that interest debt is not sustainable - I agree and I would add that it is neither warranted nor fair.

Why do private citizens and businesses pay interest charges on secured loans?

A big misconception is that banks lend their own and/or depositor's money. They don't. Until recently, over 97% of all borrowed money was created on the spot through account entries by banks and lending companies.

The Emergency Economic Stabilization Act/TARP of September 2008, changed the reserve requirement to 0% - absolutely no reserves are required - 100% of all borrowed may be created on the spot. And, this act immediately made the potential money supply infinite.

If the banks are not lending their own or depositors money; then whose money are they lending? Money that is issued by the lone authority and backing of the people, their assets, and the United States - "We the People." A home mortgage is backed by the collateral of the purchased real estate and as we have seen the banks and lending institutions have provided no additional security.

Why should anyone pay continuous interest charges to private banks for money they are neither lending nor backing? Banks charge interest only because they have a monopoly to do so. Private banks add nothing that could not be profitably and fairly compensated through service and transaction fees (application processing, credit checks, collections, checking accounts, etc.).

Many say that the solution is to eliminate fractional and zero reserve lending. If banks were required to actually lend their and depositors money, they would be earning the interest charges and caution would become part of the process.

But look at it another way - why should we fund the future with money solely from the past? If a promise to pay is secured by sufficient collateral; then it endows the newly issued money with value. If we require full reserve lending - then we are by design, limiting real, productive economic growth by making money too scarce.

The elimination of interest fees (usury) would be a powerful elixir to cure our economic depression and to nurture a financial future that is prosperous and sustainable.

Interest charges are usually expressed in terms that are misleading. For example, a 7.5%, 30 year mortgage has an effective interest rate of just over 150% ($100,000 amortized mortgage has an interest fee of around $151,000 for a total debt of $251,000).

Here are several examples of what might be done to begin building a reliable and sustainable economy:

1) Make interest free money available for all qualified mortgages (and borrowers). This would on average, cut mortgages payments by half and would allow people to keep more of their money.


2) Make interest free money available to "prepay" all existing mortgages that qualify. At the end of 2007, US private mortgage debt outstanding was around $14.5 trillion. This amount represents only the principal; the interest could be another $21 trillion (estimated 7.5% interest factor at 1.5 - see above) for a total cost to retire the loans of around $35 trillion. These are significant numbers - the entire US GDP was around $14 trillion dollars last year.

Again, this would at reduce mortgage payments by over 50% which would go a long ways towards stemming the rising tide of home foreclosures.


3) Make interest free money available for home equity loans. This would enable people with home equity to eliminate expensive credit card debt (25%+).


4) Make interest free money available for qualified home improvement loans. Energy saving upgrades should not be charged with interest (improved insulation, better vapor barriers, insulating windows and doors, geothermal heat pumps, solar collectors, rain water collection equipment, etc.). Qualifying loans would not count against existing home equity. The upgrades would stand on their own as collateral and a savings investment.

Our present policy is flawed in that it assumes that banks add wealth to the system - they don't; people create wealth and prosperity through productivity. This flawed logic has led our policy makers to take some bizarre and suspiscious actions. We the people are borrowing money against our private and public wealth - with interest charges added, to provide free money to banks so that they may lend us money with interest charges added.

Larry

 

gyrogearloose's picture
gyrogearloose
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Re: Why do we pay interest?

Thought scenario

Why should I, a saver lend you money at no interest to buy a house. You might not insure it and if it burns down, how do you repay me ( the risk) I may as well buy the house and rent it to you for an ongoing income.

The money to buy the house has to come from somewhere, and if it does not come from a saver, and say the fed creates it to lend it to you, we get inflation.

Any way, under the current system, the banks don't get to keep all the interest, they give most of it to me ( the saver), and only keep a small margin for providing the service. If a bank did not offer me interest, I would not bother giving them my money.

 

Cheers Hamish

RubberRims's picture
RubberRims
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Re: Why do we pay interest?

I had a job trying  to explaining this to my parents. Be it they are both retired, not senile. It was not easy. Anyhow not that they fully understood, try teaching and old dig new tricks. The common response from the older generation would be, "I have seen this all before" I am sure you have, it been going on since the 17th century.  

The system is flawed by human nature yet there is another word that jumps to mind, Slavery! And still people are blinded by how the system assimilates our minds to believe this is the way it should work?

Perhaps one day, people will acquire a desire to resolve this pitiful excuse for a monetary policy and remove economic Armageddon. They might start using money in ways that will actually give back some value to the monopoly money we work so hard for. But I dont think it will happen.

RR

 

 

 

DrKrbyLuv's picture
DrKrbyLuv
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Re: Why do we pay interest?
gyrogearloose wrote:

Why should I, a saver lend you money at no interest to buy a house. You
might not insure it and if it burns down, how do you repay me ( the
risk) I may as well buy the house and rent it to you for an ongoing
income.

Yes, I agree - and that is why I said that fully secured loans should come with newly issued money - no one should have to lend or borrow from others.

 

bearing01's picture
bearing01
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Re: Why do we pay interest?
DrKrbyLuv wrote:

Yes, I agree - and that is why I said that fully secured loans should come with newly issued money - no one should have to lend or borrow from others.

You mean the Federal Reserve should just print every new dollar of debt out of thin air with no interest rate charged to the debtor? Or charged to the US Treasury?  Little inflationary don't you think?

The idea of running an economy on a zero interest rate is a crazy Keynesian idology which is not possible.  It's the same as saying that existing capital has zero value with regard to its ability to generate wealth.  Spend every dollar.  Don't save a penny.  Print Print Print money. Keynesians hate savings.  However, the economics of such a concept are impossible. It relies on ever increasing debt loads and inflation to create future profit opportunities and to compete in the price wars for existing commodities.

Interest rates come about by an individual's time preference for money (how much wealth/capital you're willing to sacrifice in the future to secure wealth/capital present in the economy today) and also the value of capital employed in different factors of production (how much wealth that capital is capable of producing/generating).  You cannot increase productivity without first saving. Just printing money and using it to secure goods to produce doesn't economically work.  Printing money does not create wealth that one can use for production.  The money just enables you to secure some of the already existing goods in the economy, bidding it away from other producers. Forget about money and think of a barter style economy.  When you save you forego immediate consumption to make these saved commodities available for new additional production of future goods.  You save wealth (food, steel, etc) to sustain yourself during the production phase until your product is ready for market.  If you have no commodities (savings) then you have to borrow someone else's unconsumed (saved) commodities to sustain yourself and your production until you're ready to offer it to market.  It is your or someone else's savings that make an increase in production and future prosperity possible. To borrow newly created money for consumption means that you're attempting to consume existing commodities while other wealth generators are not simultaneously foregoing their right to consume those same commodities.  These creates a price war and the destruction of monetary wealth (dollar purchasing power) for savers.

Interest rates are also what provides the signals to business whether or not a venture will be profitable.  When the Federal Reserve make interest rates artifically low (below the natural level supported by savings) this is what creates the unsustainable credit bubble and resulting boom which must inevitably end in a bust.  Ventures suddenly appear profitable (with artifically low interest rates-not supported by savings) in lines of production that would not otherwise not be profitable at higher interest rates. Businesses take on such ventures to find out later that the economy doesn't have enough wealth to support the new products brought to market.  The Federal Reserve has to eventually raise interest rates to cool the inflation (to prevent loss of confidence in money & hyper-inflation) and these false investments become obvious and bust.  We have boom/bust cycles because the Federal Reserve make interest rates artifically low. This is why we are in the situation we're in.

Maybe an example to help illustrate:

I see a business opportunity where my community needs a gardner to mow lawns.  I do the analysis and find that I can get $20/lawn but I will have to pay the gardner $15/lawn plus $4/lawn for gas and other expenses.  A new lawn mower will have to be replaced in one year, but I can buy one for $100.  I figure that by the end of the year the gardner can mow 105 lawns. Therefore, if I buy one lawnmower using $100 of my savings I will get back $105 in one year.  I earned $5 on my money in one year, or 5%.  The average rate of return for economic investment will be around 5% in such condition.  If the bank interest rate is higher (say 6%) then I will instead put my money in the bank for higher return.  There will be no gardner.  If the demand for the garder is sufficient then the venture will likely occur with 6% return.  If the bank only has 4% interest rate then an investor will more likely venture into the gardening business than putting the money in the bank. The bank's demand for deposits will likely rise/fall until the offered interest rate makes the rate of savings balance other investment returns.  Now, I decided to use $100 of my savings and yield 5%.  If I didn't have savings but instead borrowed $100 from the bank to buy the lawnmower at 5% return I would gain no profit at the end of the year.  The bank is the one who profits.  If the banks loan the $100 interest free then no one's savings are used for investment.  No one can determine if the venture is profitable or not.  Multiple investors buy lawnmowers but the excessive competition makes the venture not profitable. 

Thus, the cost of borrowing must have a non-zero price in order to compete for savings against different investments. Otherwise there will be no savings of wealth to increase productivity/investment growth and there will be no signals to investors to determine the profitability of different lines of production.

DrKrbyLuv's picture
DrKrbyLuv
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Re: Why do we pay interest?

bearing01 - thanks for taking the time to comment on my post.  You offered some valid concerns. 

bearing01 wrote:
You mean the Federal Reserve should just print every new dollar of debt out of thin air with no interest rate charged to the debtor? Or charged to the US Treasury?  Little inflationary don't you think?

No, I mean eliminate the banking monopoly to issue new money, abolish the private federal reserve. 

I agree with your concern that we should not "create money out of thin air."  I should have been more clear that interest free loans should be fully collateralized.  Money is issued proportional to the wealth created which avoids inflation - the money is not issued out "of thin air."

bearing01 wrote:
The idea of running an economy on a zero interest rate is a crazy Keynesian idology which is not possible.  It's the same as saying that existing capital has zero value with regard to its ability to generate wealth.  Spend every dollar.  Don't save a penny.  Print Print Print money. Keynesians hate savings.  However, the economics of such a concept are impossible. It relies on ever increasing debt loads and inflation to create future profit opportunities and to compete in the price wars for existing commodities.

We agree that the Kenysians, and I would add the Austrians too, subscribe to a monetary system that cannot be sustained.  Chris Martenson' Crash Course #8 describes the growth of debt interest better than I can. 

When we issue less money than the actual costs of the loan, the amount of money in circulation is always less than the debt.  In my mortgage example, $100,000 principal must be repaid with $251,000 when interest is added.  The non-funded portion of the loan must be repaid out of future circulation - which means the circulation must increase in velocity in order to satisfy additional transactions (velocity in simple terms - the number of times a dollar is spent in a year).  The velocity of circulation has limits and there are a number of forces that may cause it to decrease or increase.  

People are discouraged to save with our current system because if savings were to increase, the velocity of money would decrease.  Or, if inflation increases and people lose buying ability, the velocity of money will decrease.  On the other side of the coin, if the amount of lending is reduced, the velocity decreases.

If interest free loans are issued, then the amount of new money will equal the amount of debt - the existing circulation is not affected which eliminates inflationary/deflationary influences.

bearing01 wrote:
Thus, the cost of borrowing must have a non-zero price in order to compete for savings against different investments. Otherwise there will be no savings of wealth to increase productivity/investment growth and there will be no signals to investors to determine the profitability of different lines of production.

Look at it another way - why should qualified borrowers, seeking fully secured loans, have to compete for money with every investment available?  I contend that a secured loan is not an investment.  If someone were starting a company and needed some unsecured cash; then yes, venture capital should be rewarded in some way (stock ownership for example).  But on the other hand, if someone wanted to start a business and had adequate collateral to secure the loan (home equity for example) then an interest free loan should be available.

Larry

 

mred's picture
mred
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Re: Why do we pay interest?

Nice job bearing01.

DrKrbyLuv,

I have much affinity with your
sentiments regarding the evils of the current monetary system. I
accept the use of the term “usury” for interest charges collected
on money created on demand out of thin air. I also think that the central banking
scheme is a fraud and an instrument of control that is totally unable
to accomplish the goals it is supposed to have. We are in agreement
that one necessary condition to restore some sanity in the system,
and most importantly, economic freedom is the abolition of the Fed.

I guess that you make this proposal along the lines of the “Mathematically
Perfected Economy TM” (gotta love that TM) that you have indicated elsewhere you favor. Here is where we part ways.

We have just gone through a land boom
of phenomenal proportions. We have seen only the first part actually:
residential real estate. The second part is coming: commercial real
estate. That is the one that will inflict the largest amount of pain.
A bubble like this can be produced under one condition: virtually
unlimited expansion of credit; that is, by money created on demand.
And that was even with the disincentive of interest rates.
Furthermore, the residential bubble occurred with non-recourse loans,
which is a synonym with having the promise to repay “backed” by
the property. You see where I'm going? A proposal for a system with
money created on demand, interest-free, backed by the property is a
recipe for an even greater bubble, an even larger distortion of the
markets and an even larger destruction of productive capital. That is
what I understand your proposal to be.

If you are picking things from this
MPE-thing, then I have to say that this suffers from an even larger
vice: the MPE author has no idea about how inflation (by whatever
definition you use: monetary or price) arises. Look at the following
quote that I suspect you will be familiar with:

Quote:

"If all the money is loaned into
circulation as debt, and the debts are subject to interest, and if we
cannot borrow more than the value of whatever we are borrowing the
money for, it is unclear first of all how it is even possible
to suffer what you define to be "inflation."

"In other words, if we can't borrow $50,000 to buy a $35,000
home or $50 to buy a $20 tire, how can we possibly *ever* suffer
'inflation'?"

"But I don't understand then, even if it were possible to
suffer inflation, that an increase in circulation per goods and
services would engender increasing prices."

"In other words, I understand that *if* we somehow *could* be
subjected to a circulation greater than the value of all the things
for which we had borrowed the money into circulation, *seemingly*
that greater circulation which we do not even know can exist might
only at first provide a capacity to *pay* higher prices; but
as to why or how it would cause them, there is no connection
whatsoever, for how does a factory say for instance first detect
that one day the circulation we do not know can even increase in such
a way has somehow increased... are you saying that in these
potentially non-existent circumstances that nonetheless the factory
simply raises prices one day, to take greater profit from
'inflation'?"

...

And then he goes on to demonstrate further his utter confusion.
Please tell me that you see how absurd the tenet in the above quote
is.

Tampering with the interest rates has brought upon us the
derivatives casino and ultimately this economic mess. There is
super-important information entailed in the cost of money. In a sound
system it would inversely correlate with the savings level.

Money on demand is a tragedy imposed on us for the benefit of a
particular group at the expense of everyone else. It destroys one of the main purposes of money: to be a store of value. We certainly don't need any more of that.

bearing01's picture
bearing01
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Re: Why do we pay interest?

I'm still trying to get my head around what you're suggesting..

Quote:

A big misconception is that banks lend their own and/or depositor's
money. They don't. Until recently, over 97% of all borrowed money was
created on the spot through account entries by banks and lending
companies.

[...]

Why should anyone pay continuous interest charges to private banks for
money they are neither lending nor backing? Banks charge interest only
because they have a monopoly to do so. Private banks add nothing that
could not be profitably and fairly compensated through service and
transaction fees (application processing, credit checks, collections,
checking accounts, etc.).

[...]

The elimination of interest fees (usury) would be a powerful elixir to
cure our economic depression and to nurture a financial future that is
prosperous and sustainable.

Are you suggesting that if I have a tractor in my field worth $100k that I can use to secure a loan for $100k and if the credit money is created out of thin air (not a banker's liability) then as long as I secure the loan/promise to pay by putting up my tractor as collaterial then I shouldn't have to pay interest?  The thing is that even though I fully pay back every dollar (and there's no money left in the economy after I pay it back) this scheme is extremely inflationary.  The current Fed policy to create new money to back  97% of new loans is a crazy mistake and is very inflationary.  The creation of such money to use to secure commodities or other consumer goods does not require anyone else in the ecomony to forego their consumption (by saving) in order for me to consume that $100k worth of goods.  What's to stop anyone with capital (currently tied up in some investment or house) to go into the bank and request fiduciary money to double their spending power in an instant.  Overnight the price of goods can sky-rocket.  To create money out of thin air like that means you're giving someone the power to go into the market and secure goods, to bid them away from other producers, without having to first produce or contribute the equivalent to the economy.  And there's no penalty of taking out such loans either.  It's like assuming that consumption drives production.  It's not demand/consumption that drives an economy.  It is wealth itself and wealth created by production that drives an economy. You must first have wealth (food, steel, energy), not money, in order to produce.  Borrowing someone elses savings means you're borrowing their wealth.  Borrowing interest free money created out of thin air is not borrowing someone elses wealth.  It's stealing it.

Economic depressions won't be avoided by having low interest rates.  A healthy economy is one that has an interest rate in line with the rate of savings (supply/demand for borrowing those savings).  Depressions come about because the Fed discounts the interest rate artifically lower than the rate supported by consumer demand for immediate products (their rate of savings).  If consumers save (forego immediate consumption of consumer goods in favor for future consumption) then that frees up capital and commodities that businesses can borrow & use to increase their lines of production to produce goods for future consumers.  Ventures become profitable because of access to cheap credit (due to savers) and availability of stable/falling commodity prices (because people start to consume less).  Businesses take this capital and invest it in new production or increasing the number of stages in their production lines.  This new production takes time to come to fruition to realize a profit or loss.  If the level of consumer saving really did increase then these lines will create new future products that will turn a profit.  However, if the cheap credit was artifically created by the Fed's monetary policy then that means there was no increase in savings or witholding of consumption by consumers.  They continued to consume the same amount.  That means capital was falsely directed away from producing consumer goods and into higher levels of production (like producers goods or capital goods) and it takes time for these process to reveal that this diversion of capital into higher orders was a malinvestment.  This is why investment mistakes generally occur in simultaneously in several sectors of the economy, not just one.  As consumers and producers simultaneously bid up the prices of goods/commodities and prices rise the Fed's inflation alarm goes off and they raise interest rates.  This helps reveal non-profitability and bust of the malinvestments.  The recession/depression is the correction of the economy where capital & labor invested in higher orders of production shift back to producing more/less consumer goods at a level in line with the rate of savings of consumers.

And I agree that we should end the Fed and we should have free banking without fractional reserve lending. Banks can then return to be businesses that earn a little profit by taking on risk just like any other business.  There is no banking cartel (the Fed) to have a monopoly on the price of money and the ability to counterfit it at will.  With a free banking system (no cartel) it is my and your savings that banks lend.  You and I are the lenders to others and we earn interest.  The bank can take a processing fee for writing the loans and maybe a small cut of interest, but that should be it. Just like when we buy corporate bonds or US Treasuries, you and I are the lenders.  The banks aren't the only lenders in town.

DrKrbyLuv's picture
DrKrbyLuv
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Posts: 1995
Re: Why do we pay interest?

mred wrote:
I have much affinity with your sentiments regarding the evils of the current monetary system. I accept the use of the term “usury” for interest charges collected on money created on demand out of thin air. I also think that the central banking scheme is a fraud and an instrument of control that is totally unable to accomplish the goals it is supposed to have. We are in agreement that one necessary condition to restore some sanity in the system, and most importantly, economic freedom is the abolition of the Fed.

Well said!  

mred wrote:
I guess that you make this proposal along the lines of the “Mathematically Perfected Economy TM” (gotta love that TM) that you have indicated elsewhere you favor. Here is where we part ways.

There are many good ideas in the MPE, but if you don't care for it, I hope you will continue to look at others.    

 

 

DrKrbyLuv's picture
DrKrbyLuv
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Re: Why do we pay interest?
bearing01 wrote:

I'm still trying to get my head around what you're suggesting.

I appreciate that you are taking the time to try and understand what I am suggesting.

bearing01 wrote:

Are you suggesting that if I have a tractor in my field worth $100k that I can use to secure a loan for $100k and if the credit money is created out of thin air (not a banker's liability) then as long as I secure the loan/promise to pay by putting up my tractor as collaterial then I shouldn't have to pay interest?

Yes, if the appraised value of the tractor is $100,000, then I am suggesting that you should be able to get an interest free loan for that amount. Of course, transaction fees would be added in order to verify that the equity and borrower both qualify and a down payment may be required if the value of the asset depreciates faster than the loan repayment schedule.

The point being that the debt must always be fully secured - through-out the life of the loan. For example, if a tractor has a viable life expectancy of 10 years (I'm not familiar with tractors), then the duration of the loan may not exceed this limit. Now if you use that tractor that you own as equity to secure a loan and your tractor is eight years old, then the longest duration of a secured loan becomes 2 years.

bearing01 wrote:

The thing is that even though I fully pay back every dollar (and there's no money left in the economy after I pay it back)

You make an excellent point - I think you are saying that any debt based money system - with or without interest charges applied, will simply run out of money as debts are repaid. If the amount debt decreases - there will be less circulation, and if this occurs, how will we be able to sustain a prosperous commerce with a diminishing money supply.

I think you would agree that a debt based money system that charges interest will hit this problem much faster since the circulation must provide both principal and interest while the interest free system requires only principal.

But that doesn't address your concern. So far in my exploration of interest free systems, I really haven't found a "diminishing circulation" solution that I would be comfortable suggesting. Let me paraphrase a few that have been suggested:

1) Circulation money could be offered as a public service, separate and in addition to money created through interest free, secured loans. This type of money has been referred to as "stamp scrip" and there would only be a "use fee" if you don't spend the money within a 30 day period (opposite of interest). If you accumulated some "stamp scrip" money that you did not want to spend, you would be free to place it in a savings account (no interest paid) or to store your wealth by investing it in stocks, precious metals, etc.

2) Government could spend a determined amount of debt free money into circulation by investing in public works and infrastructure.

3) A circulation service/transaction fee could be added to all new interest free debt. The service fee would go directly towards the public benefit by being added to the circulation.

4) I have an open thread with Mike Montagne (MPE) regarding this "problem." You may want to see what he suggests by checking http://www.perfecteconomy.com/f/viewtopic.php?f=102&t=365

There are some interest free proponents who suggest that "diminishing circulation" problems would never occur and that our logic is flawed because we assume that money is wealth and they would say it is simply a token for exchange.

bearing01 wrote:

What's to stop anyone with capital (currently tied up in some investment or house) to go into the bank and request fiduciary money to double their spending power in an instant. Overnight the price of goods can sky-rocket.

I think that people should always be free to borrow against their accumulated equity (provided the borrower meets the lending criteria). People are free to do that now and I think they should be free to do so under any system. If I want to give up some equity in my house to fund some other activity, then yes, I have picked up some cash but at the expense of my savings (equity is really a form of savings).

If everyone rushes out to cash in their equity (savings), and they begin spending that money, then yes, prices would probably go up under the natural order of supply and demand. An interest free money system is simply intended to allow people to keep more of their money - and hopefully savings will go up along with the newly found prosperity. However, I'm not sure that any system will make people more prudent - a fair and sustainable monetary system is all that we can provide.

One thing that could be done would be to require that people have more income relative to borrowing power. For example, traditional mortgages typically have a back ratio of around 0.36 (actually, we abandoned the traditional ratios some time ago in favor of option-ARM, reverse amortization, and a million other ways to creatively qualify a borrower but that's another story). The ratios could easily be tweaked lower to reduce the amount of borrowing relative to income.

bearing01 wrote:

To create money out of thin air like that means you're giving someone the power to go into the market and secure goods, to bid them away from other producers, without having to first produce or contribute the equivalent to the economy. And there's no penalty of taking out such loans either.

I am not suggesting that we create money out of thin air - I am suggesting that the loan must be fully backed by collateral, which endows the newly issued money with value. Wealth is added to our society in the amount of the loan.

bearing01 wrote:

It's like assuming that consumption drives production. It's not demand/consumption that drives an economy. It is wealth itself and wealth created by production that drives an economy. You must first have wealth (food, steel, energy), not money, in order to produce. Borrowing someone elses savings means you're borrowing their wealth. Borrowing interest free money created out of thin air is not borrowing someone elses wealth. It's stealing it.

I think consumption, demand, wealth and the ability to produce all drive our economy. And again; I would say philosophically, why should we fund the future with money solely from the past? If a promise to pay is secured by sufficient collateral; then it endows the newly issued money with value. If we require full reserve lending - then we are by design, limiting real, productive economic growth by making money too scarce.

When a person adds wealth to the society and they fully secure and pay for their debt, they are not stealing from anyone. They are prospering from their productivity. What banks do - lend the public's money back to them with interest fees; now that'stealing.

Finally, I agree wholeheartedly with you when you suggested we END the FED. Eliminate them, and you instantly eliminate over 80% of our economic problems; no, make that 99% (if I didn't mention it...I don't much care for the Fed)!

jneo's picture
jneo
Status: Platinum Member (Offline)
Joined: Jan 7 2009
Posts: 742
Re: Why do we pay interest?
 
Just have the Treasury issue the debt-free currency again with respect to the proper growth of the economy.  When the FED issues the money, it only creates the principal, so their is never enough to cover the principal + interest that is owed back.  
That is why I love reading about the Gold standard and past gold standards.  It always promotes small government and better economic growth with basically no inflation, but every time prosperity and growth happened there was always some war, or event that made the society go toward a inflationary fiat money/debt system.  Look like the cartel won in 1913.  
 
 
 
 
 
 
Also another thing the government can do its END OUR 18,000 PAGE TAX CODE.  And after you pay your house off, no more property taxes either.  
 
 
WE NEED A TAX REVOLT and WE NEED TO END THE FED.  

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