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What Gary North is not telling you about Interest

by on December 23, 2011

So at long last, Gary North has felt the need to say something about interest. Beside, of course, whatever he had to say in his massive 20 volume economic commentary on the Bible.

I’m glad he did.
The fact that Austrian Economists felt they could ignore it, was bad news for the cause.

Next, we’ll look at what he has to say, but first let’s see what he did not deem necessary to discuss.

What he didn’t say

There is the fact that interest is being payed by the poor, to the rich.
Adds up, doesn’t it? The rich have money, the poor don’t. So the rich lend it to the poor and receive interest in return.

In Germany Margrit Kennedy quantified the wealth transfer. It transpires, that the poorest 80% pay more interest than they receive. Only the richest 10% receive more interest than they pay. The next 10% lose nor win through interest.

Predictably, within the top 10% bracket the same process is going on: the poorest 8% pay more than they receive to the richest 1%. Even in the top 1% bracket, the same thing is happening.
A decent explanation for the Rothschilds, wouldn’t you say?

On the other side of the spectrum, we see the same inverted. The poorest 10% lose to all the higher 10% brackets.

The 70% bracket almost receives as much interest from the poorer classes, than he loses to richer 10% brackets.

This shows that the poorer you are, the more you stand to lose with the current system.

So how much money are we talking about?
In Germany it has been established that the poorest 80% lose 1 billion euro’s per day to the richest 10%. That’s about 365 billion euro’s per year.

Extrapolated to the USA, we may expect the poorest 80% pay about a trillion or 1.5 trillion per year to the richest 10%.

That may not even sound that much with a 14 trillion GDP, but remember what percentage the richest 10% take of that GDP and what the poorest 10% earns.

So the system intrinsically greatly favors the rich.

Another major item that Gary North ignores is this:
Even if you have no outstanding debt, you lose 45% of your disposable income to interest, assuming you spend all of your income, which is true for no less than the poorest half of the US.

How come? Producers incur capital costs while producing the stuff we want. This is a no brainer, but nobody ever cared to calculate what these costs really amounted to.

H. Creutz and Margrit Kennedy did and they came up with this astounding number.

The numbers differ per sector. Food  prices apparently consist of about 25% interest. Capital intensive industries like construction can see percentages up to an incredible 75%. Imagine that: the figures show that about 75% of the costs of building a home are costs for capital.

All these numbers are from Margrit Kennedy’s (below)classic ‘Why we need Monetary Innovation‘, a shorter version is here.

Finally, let’s consider the old tale of the mortgage.

You pay 300k interest over thirty years for 200k home. Nowadays this money is just created when you borrow it. This we consider unfair. So now we are led to believe we must have Gold instead?

We should take it a step further. If we can create the money for nothing, we should pay almost nothing for it.

That is the basic case for interest free currency and this is what Gary North ignores, and as we shall see, has done nothing to refute in any other way.

What he did say

Let’s begin with the latter part of his essay. North pens a lengthy litany on how, with a stable money supply, interest rates would automatically go down to almost zero through price deflation.

He’s well known for his predilection for deflation. Declining prices. Wonderful, right?

But he never mentions deflation is pleasant for creditors. Both the value of the outstanding debts and the interest payed over them increase.

As we have seen, there are many more debtors than creditors, so deflation is a nightmare for the vast majority of the people.

Also, because in deflation money is gaining value, there is strong incentive to hoard it instead of spending it. This diminishes the urge to invest. And this harms economic growth.

Next, he ignores the question where the bankers are going to get their Gold from. Or better: he simply states banks attract Gold by taking in deposits in exchange for interest. He claims the free market will eventually force these depositors to accept close to zero interest rates. Because it is so handy for them to store the Gold there.

Ahum?

North assumes that the whole world will immediately run to a newly opened full reserve Gold bank to dump all their gold there as quickly as possible?

Well. Maybe. But theoretically, we must take into account the notion that some parties might be playing the Gold market. The boys at Gata certainly seem to think so.

Gold has been a strategic commodity for a long time. I think it might be a little risky to not consider someone may have cornered the Gold market.

The possibility is, that some powerful parties have amassed a lot of the Gold. They would be able to dominate a Gold market and set interest rates as a Monopoly would.

All this is mere speculation, maybe. But I’m certainly worried about it.

Furthermore, the past does not give much hope for the idea of zero interest rates for Gold. And that was in an era that through fractional reserve lending more liquidity was in circulation than there was Gold.

North concludes his deflation narrative in this way:
“In a capitalist world in which there is no increase in the money supply, there would be low rates of interest in an expanding economy. Banks might offer – probably would offer – loans at zero percent or slightly above to borrowers, and also offer negative rates of interest – charges for depositing gold – to depositors. They would sell gold storage and check-writing services.

Inconceivable? Really? Have you looked at what your bank is paying you to get you to deposit your money? Look at what the U.S. Treasury is paying: one one-hundredth of one percent per annum on 90-day T-bills. If this can happen in this economy, it can surely happen in a full gold coin standard economy with falling prices.”

But this is complete rubbish of course: North (right) should know we live in a banker induced boom/bust cycle. They bring down rates only to bring the whole crowd into debt, then they raise rates again. Expect rising rates at some point this time also.

In the Gold Standard of yesterday, there was never zero percent credit and North knows this well.

So this whole narrative of price deflation automatically making credit cheap is far fetched at best. To be honest: the whole story stinks.

To get to the point

Earlier in the article North comes up with the classic explanation for interest. Time. The creditor cannot use the cash while someone else borrows it.

Personally, I believe this is the basic reason why the bankers want to go back to Gold. Because if you have paper, it all sounds a little strange: the money is based on credit, created the moment the loan is put out. So there is no ‘time’ aspect. The money didn’t exist before it was borrowed. It will cease to exist when it is repaid.

But if you lend out Gold, you have a better story. More people will fall for it. And it is an argument to be reckoned with. It can be defeated, but not merely with economic arguments. That is, if Gold obtains a currency monopoly when we do away with the current ‘system’.

To be honest, considering the horrible implications of interest as discussed above and ignored by North, I think we should be far more diligent in our quest for interest free money. It is far too easy to say ‘people want something back for the time they don’t have their gold’.
The cost is just too high.

An interesting approach is Social Credit, which quite a few populists promote.Dick Eastman (above) is probably it’s most powerful advocate. It is debt free currency printed by the Government, and handed out to the population to spend into circulation. It’s much better to have the people spend it than Government, like the Greenback. It’s their money to begin with, and they know better what they and the country need. Also, the Government has little incentive to inflate: it would gain nothing from it.

The main problem with Social Credit is that it does not allow interest free credit. It would still needs banks for that, including interest.

It is for this reason that Public Banking, introduced by Ellen Brown (above) is so important. It is much better than the Greenback, and probably about as good as Social Credit. By the way, Public Banking and the Greenback are two very different propositions. The way North equates them as one is sloppy at best, reeking of a lack of understanding at worst.

The two real problems with Public Banking are the ones the Austrians detest most: it’s basically a statist approach and it is far from certain that Government is the right place for money creation. However, Public Banking includes the option for individuals to open banks and use them for interest free credit. Privately owned banks with such a goal would face the problem of capitalization. This is a result of the necessity for reserves, even in a fractional reserve banking system.

And of course there is inflation: Public Banks would typically print more money than is necessary, thereby allowing price rises. The fact that the credit would presumably be used for infrastructural projects and the like is not a sufficient safeguard against this.

These are real problems, but considering the horrific costs of interest to the majority of the population, perhaps we should not be overestimating the problem of inflation. Or look for other ways in combating it. Educating the public for instance. Although that has shown to be a daunting task with most matters.

However, The Gold people have realized some time back, that a State sanctioned Gold Standard is probably no better than any other State sanctioned monopoly. It is, at any rate, not consistent with their anti statist approach to life and the economy. An approach I hold very dear as well, by the way.

Also, a currency monopoly, even if it is Gold, is not really consistent with a Free Market ideology.

So nowadays Austrian Economists argue for a free market for currencies, as do the interest free currency people.
They assume Gold (or a bimetal standard) will prevail in such a market.

And this is the crux, making the debate about ‘time’ and it’s price, interest, superfluous.
Here’s why.

What units will win in a free market for currencies?

What will happen if Ron Paul gets his way and legal tender laws are revoked?
Absolutely nothing.
People will continue to hoard Gold and pay with Federal Reserve Notes.

It’s called Gresham’s law.
Bad money drives out good money. Either the overvalued or depreciating units will circulate, while the better store of value will be hoarded. Gresham’s Law, although needing repair, will always prevail.

However, I don’t reject Paul’s proposals.
It is right that legal tender laws, creating the currency monopoly, should be revoked.

Gold will be irrelevant in any mature currency market. It loses even against the federal reserve notes.
As a means of exchange, that is. Clearly it is a much better store of value than the dollar.

That’s the problem with Gold. Everybody loves to have it, therefore they hate to pay with it. People will only pay with Gold if they don’t have anything else to pay with. Therefore Gold will lose as a means of exchange against almost any opposition. Even as lousy as the Federal Reserve crap.

But in a free currency market, we will see a third way, besides banking currencies and Gold: Interest free credit, provided by Mutual Credit Facilities.

From fractional reserve, to full reserve, to………no reserve ‘banking’.
Although I suggest we do away with that word altogether. Banks stink, always have, since the days they still called themselves ‘Goldsmiths’.

All the units are created as credit, from day one. Zero capitalization is required. No deposits, no savers are required.
It’s the way most barters operate. These barters are already quite successful (in terms of turnover and profitability). There are thousands of them worldwide.

But they are severely handicapped by the fact that none of them are convertible to other units. Most notably dollars or euros. Up to a few years ago, the technology was not available. It is now, but it is not well known. Yet.
Bitcoin is showing the way, but very primitively. It is not created as credit, so there is no interest free credit. However, it does show how free market currencies can be made convertible to other units.

Soon, these currencies will be available. Some of them are being launched as we speak.

What will happen if, besides Gold and Federal Reserve Notes, Mutual Credit Facilities will be offering their units? Convertible to Dollar and also Gold?

They will destroy the dollar and every other ‘national’ currency.
Because nobody is going to a bank for a 5% per year mortgage, either in Gold or in paper, if you can borrow the money at 0% percent at your local regional interest free currency dealer.

But will businesses not demand Gold, you might wonder? Well, businesses who will only accept Gold will face a problem in the face of competitors accepting paper also, won’t they?

But the businesses will not want the money if they can’t save it, will they?
Corporations are not interested in the question what the money will be worth in a year. They want to know where they can spend it usefully tomorrow.

But they lose value, these units, you say?

So what? If I have some of them and I want to save them, I just go buy some Gold and bury it in the back yard.

That’s the difference between a store of value and a means of exchange.

So as long as the credit facility has sufficient takers for it’s units and/or as long as it is convertible to other currencies businesses will always accept them.

The main example is WIR, in Switzerland. These guys turn over 2 billion WIR (1 WIR = 1 CHF) per year. They have existed for 80 years. They have 1 billion outstanding credit. Eighty thousand small and midsized business accept the WIR and it is widely recognized as a major contributor to Switzerland’s diverse and prosperous economy. Many of these businesses say they would not have survived at least one of previous recessions. Because WIR is especially important during downturns.
It’s main limitation is that it is not convertible.
But even this is not the reason it has not destroyed the Swiss Franc. The story is, that the Big Banks have told WIR to stay put to avoid problems. The Banking Maffia is very powerful and that’s just one reason we need a free currency market.
WIR’s great strength is it’s superior management and it’s focus on the common good. Most barters are not quite as successful as they could be, because they are exploited by their owners for their own purposes.

In this day and age, however, when more and more people are waking up to the all importance of money, more players with the right focus will enter the market.

Concluding

No, Gary North did nothing to dispel the nonsense of interest.

So he was unable to discredit Public Banking and Social Credit.

But yes, we agree that a free market for currencies is the best way.

And again no, Gold will not prevail in such a market.
Gresham’s Law makes it useless as a means of exchange and interest free currencies are much cheaper.

Also read:

Discussing Interest and Gold with the Daily Bell
Daily Bell: Wrapping Up
In Defense of Ellen Brown

Updated 12/23/2011 2:48
Some minor textual matters and a few details.

Updated 12/23/2011 10:27
Idem, I also improved the title.

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63 Comments
  1. You said “The main problem with Social Credit is that it does not allow interest free credit. It would still need banks for that, including interest.”

    You are quite incorrect in that assertion. Go to http://www.economiccures.com/WealthPump and see a fully integrated social credit solution that actually REQUIRES that loans be interest-free.

    People really fail to comprehend what is fundamentally afoot here. The ROOT CAUSE of our economic distress is the GAP – not interest. As C. H. Douglas correctly observed, you can issue sufficient social credit by way of compensated price and dividend to cover the costs of interest and the economy will be in balance.

    This would cause one to wonder why the banksters have been so opposed to social credit. One needs to recognize that by their keeping money in short supply, they can manipulate and control us. If social credit makes money not plentiful but rather sufficient, they lose all leverage. This is the real reason they play their smoke-and-mirrors games and try to hide what is really going on.

    This leads me to a personal conviction that there is really no benefit to charging interest on loans. If a man fails to repay an interest-free loan, his credit-worthiness will not be any better or worse than if he fails to repay the loan with interest. None of the dynamics for issuing a loan need change. There is definitely a downside to charging interest though – especially under the present order of things where we have a shortage of money and then you heap interest charges on top to make a bad situation worse. For this reason, I believe bankers should lose the privilege of issuing loans on a fractional reserve basis and their sole source of profits should be to charge fees for their accounting services in a competitive landscape. Let this be the consequence for their violating our trust. Let banks operate like every other business by charging fees for their services. All loans should be granted by a central credit authority to producers who present viable business plans and to consumers for big-ticket items. With a 25% sales credit on every good and service sold, there will be no shortage of buyers. With a national dividend to all, there will be no more welfare state and even more liquidity will further spur economic growth.

    When the GAP has finally been filled, the “musical chairs” scenario caused by artificial money shortage will finally end and with it, most bankrupcies. The only businesses that will fail will be those that produce things consumers don’t want and this is as it should be.

    Before I get flamed for offering up such radical ideas, I only ask that you wathc the youtube videos at the above link first and carefully consider the proposals first. There is also a questions and answers section that anticipates many questions. The fix is technically much easier than most people think. It is our flawed beliefs and the rabbit holes those beliefs lead us to false conclusions about that are the real problem.

    • hi Dean,

      thanks for this. I think the key sentence is this: “This leads me to a personal conviction that there is really no benefit to charging interest on loans.”

      That is what it is about: we need to stop the wealth transfer to the Plutocracy.
      I do not accept the idea that it is sufficient to compensate people for their loss: the Money Power has no claim to the wealth.

      Although I didn’t realize there are formal solutions for interest free credit within Social Credit, it is fully clear that it could be easily built in to the system. I had something like ‘fusion’ of Public Banking and Social Credit in mind, but that has already been devised, if I understand you correctly.

      I do believe that a combination of both, interest free credit and Social Credit might well be the best way to go for Govt.

  2. nothing like saying something for taking the pressure off … eh … Paulimon?

    with the fed rants
    .. been seeing them ever since i entered circles of conspiracy, pockets of resistance, homesteads of landtrusts, and especially the households and homepages of maverick thinkers.
    ‘Think’ is, they all stare themselves blind on the rot concentrated at the top whereas building a fresh pyramid right alongside it and this time keep the ups and downs runnin and pumpin transparantly, would solve problems the quickest and turn a single horrified, crick in the neck, monotone shriek into a melodious tune and honest rhythm. This is the occupy message … the mistake made so far was to take that ‘right alongside’ too literally — understandable since the waste and recycleable detritus of depraved urbanity can sustain a lot of protest but feeding stuff into riot cop raid bins and container should get demoralizing soon enough. The occupy movement will just have to revitalize the community one .. and the secession one besides (unite left and right in other words .. it’s the only way to begin having time for the radial and perp to those 2 ones.

    • oops, meant to say:
      i am fed up with the fed rants

      the above triggered by:
      International Community Radio Network
      wayseermanifesto.com
      occupy stuff
      David Mike Montagne & Charlie McGrath (wideawakenews – Rense)
      May 2011

      as it is and stands, i remain loyal to the underdogs and invisibles i have been want to champion all along, only more and more, again and yet again right now:
      only thing wrong with fed levels is their power to decide anything, they need to be restricted to pure and passive though accurate and perfectly see-through, look-up, -over and -out (and yes, always down, only lenses allowed for those who can’t stop themselves from fucking with stars) registrations and aggregations of the waves lower levels make.

  3. Bit gold and I make brief appearances in Wired’s Bitcoin article.

    Nick Szabo after ‘substantial’ ‘length(s?)’ of time(s?) ‘worth’ (? inalienable really .. unless you merc the murk merchandise, mercenarize, mercantilize and otherwise market mothers and daughters) of absence … since july 5th to be ‘exaxed’.

    http://unenumerated.blogspot.com/

    http://unenumerated.blogspot.com/2006/06/menger-on-money-right-and-wrong.html

    on Menger and links Nick’s classic ‘shelling out’ (how i first found him way back).

    here’s a taste:
    “Gold and commodities prices have a good long-term correlation across business cycles. Industrial mineral prices do tend to vary more than gold within a business cycle due to changes in consumption expectation. (Of course these are not really predictable “cycles”, but unpredictable effects of things like credit conditions, but “business cycle” is the unfortunate standard term in economics for this variation in overall credit and consumption).”

    + 25 comments

    http://unqualified-reservations.blogspot.com

    fella he used to spar with on these issues … his memory is kept alive there by commenter josh last may:

    “One thing that has affecte my thinking has been the concept of political property rights that I first read about from Nick Szabo. Whenever I think about property now, it is in reference to this paradigm. So, I am not 100% with you on property rights as a check to hierarchy. I see property rights as the outcome of a stable hierarchy.”

    etcetera, yada yada, literacy aint getting us nowhere folks … matter of the fact gold and writing have a whole lot in common … the impression, the mark made is the socalled extractable and carryoffable worth but really it aint the shape of the groove you carve … but the dust that one lets fall and often pollutes in the process rather than seeing it as the universal pollinizer prerequisite to all subsequent success of more specific pollinizations.

    have i lost you?

    we began here with bread from stones right?

    google that phrase … hard

    done?

    now, it’s entirely superfluous to jammer on about volcanos and glaciers right?

  4. Paul Paskey asked “What if that piece of paper is a warehouse receipt for coinage available for redemption at the Treasury or a bank, e.g. Silver Certificate?”.

    If the piece of paper entitles the holder or bearer, of the piece of paper, to “coinage available for redemption at the Treasury or a bank”, then there is a debt associated with the piece of paper. The Treasury or a bank has a debt obligation to the holder or bearer of the piece of paper.

    • Gentlemen, the value of the paper is not so much established by debt. There is also such a thing as debt free paper.

      Money is that which has been agreed upon as the means of exchange.

      It’s the agreement that creates the value.of the money. Initially, anyway.

      After that, the market decides how much goods money buys and that’s it’s real value.

  5. Paul Paskey permalink

    “Paper money does not have any value unless some type of debt is associated with it.”

    What if that piece of paper is a warehouse receipt for coinage available for redemption at the Treasury or a bank, e.g. Silver Certificate? Even the value of this paper may be discounted by the marketplace if it perceived there are fewer coins available than warehouse receipts.

    BTW, North is a Protestant; Rothbard was born a Jew.

  6. Re: “… debt free currency printed by the Government …

    Paper money does not have any value unless some type of debt is associated with it.

    Money without debt can exist in the form of coins valued by instrinsic metal content.

    If the intrinsic metal value, of 1946-2011 U.S. Mint cupronickel nickels, remains close enough to face value, a cupronickel alloy monetary standard is possible.

    The closing December 23rd metal value of these nickels is “$0.0515308” or 103.06% of face value, according to the “United States Circulating Coinage Intrinsic Value Table” at Coinflation.com.

  7. Paul Paskey permalink

    “Doesn’t anybody remember what this moron did back during the Y2K scare?”

    Doesn’t anyone remember what Sir Alan Greenspan did?

    He created a whole lot of money.

    And look what happened.

    • Keep in mind that Alan Greenspan created all this money is interest bearing debt. Just try for a second to estimate what amount of interest was paid by the American People on all that newly created credit.
      And to who.

  8. take off your shoes permalink

    Gary North is a jew.
    Nuff said.

  9. benmarston permalink

    Gary North writes in the Reformed Tradition and it was the reversal by the Calvinists of the long Tradition within the Orthodox Church in opposition to usury, that opened the flood-gates to hyperusurious fractional reserve and fiat banking. They have sown the wind and reaped the whirlwind. Mr. North is remaining true, unfortunately, to his revisionist Tradition. Lord have mercy on all of us.

  10. Gary North permalink

    Gary North is an absolute fool and idiot. Doesn’t anybody remember what this moron did back during the Y2K scare? Or how he tried to profit from all of his fear-mongering foolery? Nothing North say’s can be trusted, and I mean NOTHING.

    Since then, North had tried to be the oracle of truth, but has been dead wrong again and again and again. North is basically an idiot oracle pretending to be an expert.

  11. Complete fiction. Natural money has inherit properties that can never be efficiently recreated my man. Our entire global economy of security is nothing more than an expensive enforcement of a fictional fiat hegemony. When one injects fiction into reality failure is expected even desired.

    /s However if one were to choose to us a fictional money and enforce its will upon humanity through force one could create a tierd economy based on oppression, inequality and pillage.. A little relative poverty here and little relative poverty there mixed in with some x pods, a touch of ignorance for reality and everyone will be complacent right? /s

  12. CogitoMan permalink

    What makes better money “free” money or gold? As I see it, it is no contest issue…Free money by definition have no value, same as pile of sand on the beach. The beauty of gold in comparison to any “free” or government instituted fiat money lies in the fact that gold HAS NO LIABILITIES in contrary to any kind of “free” or fiat money. What it simply means is the fact that gold has EXPLICIT intrinsic value totally independent from any outside influence.Again, it means that NO ONE (mean private or governmental institutes) CAN ROB holder of gold of their purchasing power! This is because no one can create gold out of “thin air” aka “print” more of it at no cost therefore diluting gold’s purchasing power. “Free” money or fiat currencies by definition do not have those qualities. The crux of the problem for those make-believe type of currencies is based on belief that counter party issuing them will keep their promises. Monetary history proves that all promises are eventually broken.This is why PURCHASING POWER OF ALL PROMISE-BASED MONEY ALWAYS GOES TO ZERO, ALWAYS!!!! On the other hand as again monetary history shows, monetary system based on pure unadulterated gold standard survived for many centuries, as it was in the case of Bizantynian Empire. It lasted for twelve centuries and during that time prices for goods and services WERE STABLE for all that time. This puts a definite end to a shameful lie that gold cannot function as a currency as this author suggests. C’mon, why do you treat readers like idiots?! But again, let’s make it simple, let the FREE market decide!
    Chew on that Mr “Free Money” scam pusher!

  13. lol usury permalink

    The wealthy humans on this planet aren’t wealthy because of material accumulation so much as the fact that there exist a class of people we call the “working poor” who do the actual work.

    If you were to take away the working poor from this Earth wealthy humans are no longer wealthy.

    The rich need the poor to be rich and the poor don’t really need the rich.

  14. lol usury permalink

    What is the value of gold?

    Imagine if ALL of the gold on earth disappeared tomorrow. What would happen?

    Nothing.

  15. Ih8zion permalink

    Thats y Islam forbids Interest n we have a war against Islam…

    • Absolutely.

  16. I found this but I have not read it yet.
    Just skimmed it so far.

    A Biblical View of Economics and
    Industrial Relations

    http://hermeneutics.kulikovskyonline.net/hermeneutics/BiblicalEconomics.pdf

    Bernie

  17. Cosmin permalink

    When you talk about interest-free credit, the question that pops into my head is: how much?
    How much credit would you extend to someone? Let’s say he wants to buy a house. The more credit you extend and the more people you extend it to, the more they will bid up the price of that house. So, instead of buying 200 000 $ house and paying 300 000 $ in interests, they will buy the same house for 500 000$. And if they stop making payments, whoever extended that credit has to mark down its value or extend even more credit. So a third party has to always be careful about how much credit that facility extends, as it is heading towards hyperinflation. So, this third party will decide to fore-go the headache of attempting to ascertain the feasibility of the institution extending credit by turning to a medium of exchange that has no counter-party risk. Gold. And Silver. And anything else he wants, really, except those have the stable rarity and durability that allows them to store wealth more reliably than other commodities.

  18. Kenzer permalink

    As a practicing economist myself, I must admit the worlds best economist by far is Lyndon LaRouche. If you want to learn real physical economics, study his work. Fortunately I remain a better scientist, so I do not lose all face.
    As for you gold bugs, gold can (and currently is) being manufactured in electro-fusion reactors for under $50 dollars a Troy ounce, silver even cheaper! Looks like you are going need to find another god to worship. True wealth ls found in the productive capacities of skilled labor.

    • CogitoMan permalink

      Ha, ha…another alchemist here. You are talking pure nonsense, worse, there are some who might actually believe you. Another medieval hack who promises turning lead into gold. Bud, before you open your mouth at least try to be knowledgeable to the extent that you might sound reasonable. At this point you have made an idiot out of yourself.
      When it comes to LaRouche he is preying on simpletons who do not understands what he is talking about. I bet, he does not understand himself but that’s another story. Yes, I agree that all debt should be nullified by edict but that’s all I agree with him. All his other ideas are nothing but another expansion of utopian Keynesian ideas. It is really not much different than the promotion of “Free Money” by this Keynesian apprentice as presented above.As long as people do not understand that all types of any fiat currencies is nothing but just another scam to rip them off of their labor, nothing will change. They will be slaves to the system constantly robbed by the issuer of that “currency”. This is why gold and silver as counterfeit proof money are the best to keep what you earn. Nothing else stands even close to it.

  19. jag permalink

    Interest is compensation for the use of someones surplus labor.
    I don’t see the problem with interest per se.

  20. Indeed. There are costs. People need to live, even if they manage currency.

    If a few thousand businesses work with the currency in a town, they’d typically pay about 200 dollars per year to participate.
    In exchange for this, they get about 10 to 20% of their turnover in such a currency.

    The Credit facility would be viable, but small business.

    A currency big in for instance New York, with maybe a few hundred thousand businesses, let a lone a massive wordlwide currency operating through the internet, would be even much cheaper, and allowing far more income for the credit facility.

    I also believe, that many of these currencies will be run by a new class of entrepreneurs:
    They will not work for profit, but for the common good.

    they will be well paid, because they would be very capable people.
    But profit maximazation will not be the goal of these organizations.

    • You don’t have much in the way of brain power, do you ?? Poor soul :(

      • I’m sorry to disturb any illusions you may have had about Gary North, Austrianism, Interest or Gold in the free market.

        But I appreciate your sympathy!

  21. “Where would you go for a mortgage: to your local currencydealer offering it at zero percent in a Mutual Credit scheme, or at a Goldbank demanding 5%?”

    The Mutual Credit scheme would have to have a fee of some sort to cover costs. Revenue minus expenses equals profit. If there were no revenue then the cost of running the business would come from some other place like like dilution of the value of the unit they were using, or poor quality service, or people working eight hours a day for free.

    But is people want to voluntarily start their own club based on barter or unbacked paper currency issued interest free, then they should be able to do so.

  22. “The fact is that the poor are raped by the rich through big business also, like in your example.”

    Big Business is able to exist only because they are owned or controlled by The Powers That Be/International Bankers/”Illuminati”
    who are able to buy up everything over a one or two hundred year period time frame because the have an immoral money cartel.

    In a real free market there would not be a concentration of Big Business, there would be distributism:

    http://sites.google.com/site/themoneymeisters/distributism

    “Because in a free market for currencies, the cheapest currencies will prevail… ”

    Because in a free market for CLOTHES, the cheapest CLOTHES will prevail ???

    • We agree, I only mentioned it because you saw it as an argument for interest.

      I like the distributism model you linked to, and can certainly support it. Decentralization, commonwealth. Low tax, no usury, property with the people that work.

      I did some work on the same theme here: http://realcurrencies.wordpress.com/2011/12/22/why-transnationionals-thrive/

      Certainly, the units must provide solid services normally associated with money.

      But consider the basic question:
      Where would you go for a mortgage: to your local currencydealer offering it at zero percent in a Mutual Credit scheme, or at a Goldbank demanding 5%?

  23. Well, equating interest with profit certainly is one of the banker’s more favorite memes, but Ancient Wisdom states that delivering a good or service is something else than lending one.
    That’s the fundamental difference between profit and usury.

    And there are plenty of reasons to reconsider the idea that profit maximization is a valid, or even effective motivation.

    Renting would be a marginal business if it weren’t for interest. It is because most can’t afford the cost for capital in acquiring some, that they need to rent, instead of buy.

    The fact is that the poor are raped by the rich through big business also, like in your example.

    The question is, does the fact that the rich rape the poor through big business provide a good argument for allowing them to do the same through our money?

    Big Business would not exist in an interest free economy (http://realcurrencies.wordpress.com/2011/12/22/why-transnationionals-thrive/). Or at any rate it would be far less dominant.

    However, from an economic point of view this is not a necessary conversation.
    Because in a free market for currencies, the cheapest currencies will prevail, as I worked out above.

  24. “How anyone can still defend interest on money?”
    ————————————–

    How anyone can still defend fees on rental equipment?

    https://www.hertzequip.com/

    Then people should work for free?
    With no fees then the equipment rental market would disappear.

    The cost of interest charges on money in a private
    and competitive currency market, is much less than
    the cost of the tremendous currency inflation (resulting in
    higher prices for goods and services) that would take place
    in a “market” that issued government monopoly, interest free currency. The temptation to direct extra currency to the politician’s friends and controllers would be too great, because all men and women are sinners, all have fallen souls, all have the propensity to do evil and that includes government workers, government politicians and their friends, and the controllers of government agencies and politicians.

    Another problem with any type of Government-run system is that
    over time too much money would be directed into government favoured industries such as military, roads, welfare and away from free market industries (what 100 million people each want) such as food, clothing and shelter.

    Profit (interest) serves a vital function in a free market.

    Bernie

  25. EdGe permalink

    How anyone can still defend interest on money ?
    Only by ignoring facts eh…

    A while back i read “The Babylonian Woe” by David Astle ( money, private money creation, interest, in the old days ).
    The evil of private money creation and interest (poverty, war, debt slavery etc.) has been with us since Babylonian times.

    As it’s allmost Christmas, I’d like to give a quote here that made me think…

    Astle writes :

    ” Nevertheless, out of Babylonian money power itself, oblivious it seems to its own real self interest, carrying Christianity as far as those limits unto which its total hegemony prevailed, Christianity itself rose as an island of love and goodness in an ocean of hatred, confusion, greed, and depravity that had come to exist as the ultimate result of at least three thousand years of the depredations of such private money creative power.

    With one convulsive shrug it threw off the snake like coils, reestablishing thereafter the natural order of life, of god, priest-king and priesthood and the people, all living as was ordained, with faith, piety, and sure belief. Thereafter, for a thousand years, International Money Power can only be faintly discerned, as a smouldering ember; a fire not entirely extinguished; evidence thereof being an occasional wisp of smoke as it waited for a day when a certain evil wind might blow, and flames come forth again to deal man total woe. ”

    There’s no footnote, so no reference…

    But he tells us that Christianity had a solution to the money problems of those days.

    Made me think about the Church…had it allways been some “halelujah society”, singing and praying to God. Mary, Jesus etc., or was there a different story ?

    Could it be that the network of Churches at the start of Christianity was an international money creative institution, providing Christians with interest free, and maybe also, debt free currency ? A “Holy” means of exchange that set people free ( from interest, endless debt and also slavery) ? After all, money IS a belief system.

    Just speculating on i could see it in the prayers : in the Aramaic language, in use in the days of Christ, the word for “debt” and “sin” is the same. “free us from our sins” means “free us from our debts”…

    And is the Holy Host, the piece of bread given to the Christians at Mass, a remnant, a placeholder…was what is called “the body of Christ” in reality the Christian coin, interest and debt free ?

    Could all be true eh…?

    Follow Jesus Christ (interest free, debt free currency ) and live in Heaven, leave Christ and go to Hell.

    And Hell is what we have these days. (btw.: if “global warming” was for real, i’ve just found the cause… :) )

    I’ve looked for more references on that subject but couldn’t find any.
    But i think it’s interesting stuff….please think it over this Christmas time.

    And piet poet, thanks for the KenFM link. Just listened the first hour and a half, i think it’s excellent !
    Good explanations and some humor inbetween…

    A merry Christmas to you, Anthony and all your readers.

    Ed.

    Ps.: could be that “Gods money” is really not gold then. :)

    • Thanks Ed.
      In case you missed it, here’s my take on the notion that Gold is God’s money:

      http://realcurrencies.wordpress.com/2010/11/08/is-gold-gods-currency/

      Interesting you say debt=sin. I though sin meant mistake, although that could be the same in Aramaic also.

      However, I feel interest free credit is even better than debt free currency. To my mind, the problem is interest, not debt. Neither the Q’uran, nor the Bible seem to have a problem with debt, although it apparently is only right to go into debt to invest. According to the Books, that is.

      You too enjoy Jesus’ birthday.

      God’s love is the only real thing.

      • CogitoMan permalink

        I don’t know how WIR swiss barter systems functions. I am guessing that this is more or less common pool of goods and services that are exchanged using WIR unit as a measure of value. But even in such system there is HIDDEN interest that is forfeited by participants for the simple reason that on balance all participants hold their WIR credits for about the same time.To better explain my view I assume that there is equal division among buyers and sellers and each buyer is at the same time seller of it’s own goods/services (after all just to get WIR credit you need to provide something to the system thus you must be seller). This will more or less nullify need for interest because on balance interest paid to each participant would equal zero. Still, what you do not see, this kind of transaction is VERY SHORT TERM like days or weeks at most. I am absolutely positive that you can’t get a
        standard WIR 30 year loan to buy a house and I am also sure that no one is making long term savings in WIR
        system as well. Similar system existed at the end of 19 century in England and US and it was based on short term 3 month credit based on goods/service exchange that had to be settled within that period of time. Prof Anatal Fekete was promoting it some time ago on the internet as a replacement
        for current dysfunctional monetary mess we have today. Still, to my understanding, it involved interest.

        • I don’t know what the longest credit is you can get in WIR, but you WILL get long term credit for max 1%.

          It’s called mutual credit. Read about it here:

          http://realcurrencies.wordpress.com/2012/01/03/mutual-credit-the-astonishingly-simple-truth-about-money-creation/

    • CogitoMan permalink

      Bud, simple question…..

      WOULD YOU LEND ME YOUR MONEY WITHOUT ASKING FOR INTEREST?!

      What most people do not understand about interest, it is in simplest explanation the COST of money over time. You must pay interest in free markets if only because purchasing power of fiat money DECREASES over time. No sane person would lend his new car to someone to get it back a year later without asking for some compensation. This is as true when it comes to money. Interest is the cost that market is asking for forfeiting the use of goods today for the use of goods at some time later plus risk of getting goods back.
      Hope this solves the misconceptions about interests and validity concept of “Free Money” as promoted here by some hacks.

      P.S. Because today’s markets are not free we have artificial interest rates. Real inflation rate in US is about 15% (as per shadowstatistics.com) therefore true interest rates should be above that to truly compensate lender. As an explanation I am not a banker and I truly believe that banking robber barons are exploiting dumbed down society to the max.

      • Like I said in the article CogitoMan:
        In modern practice, credit is created out of nothing.
        It didn’t exist before it was lent out, it will cease to exist when repaid.
        Even in fractional reserve banking this is the case.

        But barters do it much better, as there are no reserves. Therefore they don’t need capitalization. Therefore also, by the way, they can’t go bust. There is no structural insolvency like with fractional reserve banking.

        So Yes, I’ll lend you interest free.

      • CogitoMan permalink

        My friend, you are missing basic ingredient when you talk about barter. Barter implies INSTANT exchange of goods without TIME involved, therefore there cannot be interest paid as again, interest is the COST of money over lending period i.e. TIME. Moreover, barter by definition does not involve money in any form or shape…it is just exchange of goods WITHOUT USING MEDIUM OF EXCHANGE i.e. MONEY. But barter is impossible to use in a large scale economy like today…imagine someone trying to exchange fish to get some bricks.This is why money was invented as a “middleman” medium facilitating exchange of goods. I fully agree with you that today’s fiat money system is totally corrupt but this is the case in any system that involves creating “money” out of nothing. Only currency based on commodity that has an intrinsic value in itself can/is honest currency as it CANNOT BE COUNTERFEITED! Your type of “money” does not fulfill that basic requirement as it is a PROMISE to pay and has no intrinsic value in itself. Unfortunately, any true, commodity based currency must involve interest as I have clearly explained in above car example.

        • This is a semantic question.
          Barter is, of course, the direct exchange of goods for each other, with all it’s well known limitations.

          However, The word Barter is also used for trading networks that use their own means of exchange. Because this means of exchange is not ‘money’ as most people understand it (i.e. Dollar/Euro, or even Gold), they say they barter.

          They don’t. They trade and use their own money. Like the WIR example that I quoted, who pay each other with WIR, where one WIR = 1 CHF.

          It’s a little confusing and the term barter is inadequate, but I hope it’s clear these barter do use their own units.

  26. Corrected copy, sorry.
    ————————————————————-

    Anthony Migchels said:
    “I get the impression from your site you:
    1. seem to believe all competing currencies would be metal based?
    2. Austrian Economists do not want to talk about a free currency market?”
    ———————————-

    They could and would probably be based on gold and silver.
    But the foundational principle is that money should be whatever two or more people voluntarily decide should be money. For instance if someone wanted to start a currency business that is backed by something other than metals then they have the lawful right to do that. It would be unlawful to FORCE a man or woman to use metals as a backing for currency and it would be unlawful to FORCE a man or woman to use something other than metals. Just start your own currency business tomorrow morning with whatever backing you want and the voluntary free market will sort it out.

    I think I used the phrase “infiltrated libertarian circles”. I meant that the currency industry is just another product or service like any of the other 9,999 products and services in the world. There’s nothing special about it so that it would need a Czar to run it or need to be a government-violence-enfored monopoly. It amazes me that many, many people that say they believe in free markets cannot grasp that this means a free market in the currency industry also. I believe Austrian Economists do talk about a free currency market except for that they come out with too much information or make the issue too complicated and as a result confuse people.

    Everybody has equal rights under the Laws of God and it is not just for the Rothchilds or Barry Soetoro (Obama) to start a hobby or business.

    God created man, and man created corporations. There is a hierarchy of laws based on the same. Did you know that Canada for instance is not a land mass? It’s a corporation, a file folder in some lawyers office in London, England owned by a private company called the Crown. They can’t make laws but they make rules called Statutes and Acts. But if these Statutes and Acts violate God’s Law and Common Law then these rules are unlawful.
    Monopoly currency rules are unlawful. All souls on Earth (not just Austria) have equal rights under the law. : ~ )

    Bernie Brauer

    • Yes, I’m indeed aware of these things. But I was curious to your point of view and now I know it.

      Except for the thought that metal would win in a free market (as you have read), I agree with all of them, although I believe the Daily Bell people are a positive exception: they are pretty clear cut about a free currency market.

      I’ll delete the previous version.

      Thanks for your reply and your work Bernie!
      Anthony

  27. “Give me control of a nation’s money supply, and I care not who makes its laws.” Mayer Amschel Rothschild

    “Give me control of a Government that issues monopoly, interest-free currency, and I care not who makes the nation’s laws.”
    Bernard “Amschel” Brauer

    “Give me no control because of a private, non-monopoly and competitive currency market, and I will care who makes the nation’s laws.” Bernard “Amschel” Brauer

    “Give me control of a nation’s FBI supply and I care not who tries currency competition.” Bernard “Amschel” Brauer, (FBI agents unlawfully and criminally raid Liberty Dollar).

    Cartel-Money DECEPTION!!

    http://sites.google.com/site/moneydeception

    • Nice and certainly very true!

      I get the impression from your site you:
      1. seem to believe all competing currencies would be metal based?
      2. Austrian Economists do not want to talk about a free currency market?

      I’d be interested in further comments!

  28. for anybody conversant in German there’s an on topic, technically as well as contentwise crystalclear 4 hour long thingy by Kenfm
    This young radio hero in Berlin is want to deliver at speed.
    The big star is Prof Hoermann who has/holds (forth at) a couple of U positions in Austria besides the special invites like this one.

    Kenfm is a real good young fella … thematizes the DU ammo and other thanatopics …

    DIE GELDSENDUNG

  29. Paul Paskey permalink

    Isn’t creating money out of nothing like turning stones into bread?

    I found this Khan Academy presentation on fractional reserve banking helpful:

    http://www.cobdencentre.org/2010/09/khan-academy-fractional-reserve-banking/

    • Well, people make cars out of stones (if it contains iron), so why not money?

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