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0.0000001% Interest is Usury

September 11, 2012

What’s wrong with charging a “reasonable” amount of interest? The reason is that our debt-based money system is a conspiracy to defraud people of their wealth. Money is brought into existence when someone signs an indenture, agreeing to pay back a loan and interest on that loan. For private individuals these indentures are mostly mortgages on property (that’s why the rate of mortgage creation is crucial to our economy); or indentures can be signed by officers on behalf of a company, usually secured. When both individuals and corporations feel it is not prudent to apply for loans, rather than expose the Ponzi scheme that is debt-based money, the government will coerce us into it by borrowing large sums on our behalf, claiming it is madness for an entire nation to economise. Debt-based money imposes the necessity of exponential growth on an economy – and exponential growth is a transient phenomenon, pace Brown (“No more Tory boom and bust”). It was never a Tory or Labour or Whig boom and bust; it is always a debt-based money boom and bust.

As Vix Pervenit explains, you must only return what you have received, but when you borrow debt-based money, you borrow money created out of thin air, yet you are obliged to pay back the real fruits of your labour, not thin air. The bank will pay depositors interest on money they deposit because banks use that money as the means to lend additional money against it (that’s why it’s called “fractional reserve banking”). About 10 times historically, although the economy is crumbling round our ears because banks arrived at leverage of x60-80 and much more if one takes account of the gross value of derivatives outstanding.

This debt-based money fraud/Ponzi/conspiracy distorts the real economy by destroying the price signal that entrepreneurs and labourers experience as they try to maximise their own wealth by applying their talents and capital where it obtains the highest return (wages or interest). But if money is produced ad lib then the price signal becomes meaningless or worse it sends a false signal to workers and entrepreneurs. Why does Britain have such a massive financial sector? Because banks create the debt-based money, banks get the most use from it. And consequently, bankers are highly rewarded, creating the impression that the economy needs a lot more bankers. All this money flows into financial assets and creating a much larger savings and investment industry that the country needs. But because the money printing never stopped the returns to financial services stayed high (in money terms. In real terms the UK’s financial services sector’s productivity is negative). This false signal has been in operation in the UK for a long time, but went exponential after Keynes provided intellectual cover for uninhibited Bank of England intervention, i.e. money creation using government debt, which is a tax on the population.

Well, it seems as if the Western economies are debt saturated because creating new government debt now has a negative effect on economic growth. Tragically, the powers-that-be are all invested in the “government must do something” fallacy. There is nothing government can do to get us out of this mess. Our only hope is that scientists invent nuclear fusion or some form of costless energy to allow the debts to be paid. It’s almost comical that our rulers are heading in the opposite direction with energy sources that produce less energy over their operating lives that it takes to construct and maintain them (wind turbines, solar panels and tidal barriers).

Until we are free of the egregious distortions created by debt-based money, any talk of a fair distribution of value between land, labour and capital is at best futile, but probably corrupted beyond any rational debate.


From → Chapter 1

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