Interest rates.

Discussion in 'Economics' started by slider123456, Jul 23, 2008.

  1. Usury (the real definition is ANY lending with interest). is the cause of unemployment/overproduction and inflation/underprodution. In a system with no interest everything is balanced people have the exact amout of money they need to buy all the products they produce hence no overproduction leading to unemployment and no underproduction leading to inflation.

    When Interest is introduced their is a shortage of money hence overproduction. In other words the goods are worth more than the money available to buy them which necessitates exporting or unemployment. On the other hand if there is an underproduction from increased efficiencies this leads to inflation as their is more money than goods to buy leading to a raised interest rate hence more investment from foreign countries. This will balance out between 2 or more countries as long as one is overproducing and one is underproducing. When there is not a balance and both countries are over-producing then unemployment will result. The other problem is there is interest being taken out of all countries leading to not enough money being available to balance it all out leading to someone failing and unemployment in one country or the other whereas with no interest this does not happen and also the necessary dance of import/export which is needed when interest is introduced is not needed.

    The other problem is the authority of banks to take interest. The value of money does not come from our belief in it but more correctly from our belief in it buying the goods we produce. The banks do not produce these goods, we do, so why are they getting a percentage of everything we the society makes. Are we paying them tremendous amounts of money to confound a system that should work if interest was taken out and to be our overseers and if so why? Why do we not take our destiny into our own hands with a interest free system that is simpler because it does not involve the intricate dance of import/export between 2 or more countries or the inevitable spending deficiency introduced by interest.

    The amount of money we pay banks to confound a system that is very simple is staggering and is the cause of someone failing even if they make no mistakes because their is not enough money to buy all the products we make. On a $200,000 loan the total that would be paid is $500,000 over 30 years so $300,000 for them to do nothing. The interest on this loan is necessarily incorporated in the next wave of loans where interest is paid again and again and again until after many generations it is paid off. This interest causes huge imbalances in the world and is the likely the main cause for many many 3rd world countries. We pay them all this to make a fairly simple system overly complex.

    If we kept the money we paid the banks we would likely have massive surpluses and a continually better quality of life from more and more efficient manufacturing techniques which would lead to deflation and a better quality of life where we could work less and have the same quality of life or work the same amount and have a continually better quality of life instead of having to work more and more to have the same quality of life.

    Does anyone understand why the system is run like this with an overly complex and efficient system instead of a simple and efficient one?
  2. I am really puzzled why this post is getting no replies I have also posted it at a few different sites and no one has responded to any of them either I am really interested to hear someones take on this.

    If there really is no justifiable reason why the banks should be taking a percentage of each dollar lent out since they are no longer backing it with gold but the products our society produces they should be working under some sort of contract not 3% of all money lent that is insane and seems totally illegal.

    If there is no reason for this the easiest way out of this current and mounting economic crisis is to just pay them what they would have got under contract and return all of the fraudulently attained interest to the people it belongs to then start over with interest free loans provided by the government which is exactly how it worked with the greenbacks.
  3. There are so many flaws in your argument that I don't even know what to respond to.

    Interest is a function of the value of time and opportunity cost. Because time has value due to opportunity cost, nobody in their right mind will loan money without expecting additional return. This is where it seems that you are basing your argument; hinting that we should not be able to borrow/lend.

    Inability to borrow/lend results in extremely slow growth. Companies must pay out of pocket for every machine they buy or facility they build. This would result in mass amounts of hoarding as in your argument there would be a constant money supply. People and companies would be forced to hoard money in order to make larger purchases.

    One might argue that a company could still borrow from investors rather than the bank so there is no interest paid. That is a faulty argument though, because investors are still expecting a return on their investment, which is essentially an unknown and variable interest. Because it is not known or guaranteed, it inherently carries a risk premium. This in turn leaves a hole in the market for someone to offer investment choices which are more known and certain; offing a fixed rate of return that is lower than the expected return on a stock investment. What we have then is a bank. IOW, banks didn't create the idea of interest, nor are they forcing it on us. Interest is a natural product of people not willing to lend money for free, but a culture still wanting rapid expansion and innovation.
  4. My argument to that is if everyone in the country stopped producing goods so there was nothing to buy how much interest would you have given for that piece of paper then. Your thinking is upside down the only value in a dollar comes from the knowledge you can buy something with it otherwise it is a piece of paper without even gold to back it up.

    The ability to borrow would increase if a bank was paid a set contract price and loans were given out to qualified applicants at %0. More people would qualify for the loan with a lower interest rate. Essentially all these banks do is charge interest on goods we produce. That is fraud!!!
    With the necessary repercussion of slowing the economy because less people qualify for loans.

    Your argument about no one giving a loan for free is faulty because that is what would happen if the government was the lending institution. At it's fundamental level money is a way to simplify barter. If you were just trading goods you would not trade them for less than it was worth and in reality you couldn't because both parties could not give it to each other for a discount it would just even out.
  5. It doesn't matter whether we are talking paper dollars or silver dollars, your argument doesn't hold.

    If there weren't any products to buy, then currency itself wouldn't exist. Not even gold itself would be considered currency.

    Economic expansion and rapid innovation rely on specialization and trade. If we have specialization, then there must be a way for the specialist to dispense his specialty good. He won't give it away, because there is no incentive in that. He can trade it, which is fine, but a barter system requires that I as the buyer have something of equal value that he wants. This reduces the amount of product he is willing to produce because trade terms cannot be easily reached. Thus, progress slows dramatically.

    The natural result of this situation is some form of currecy. The existence of currency and the concept of opportunity cost give rise to interest. We aren't paying our bank to develop anything. They are filling a need in a market that expects rapid growth.
  6. But the currency has no intrinsic value by itself. Only the goods we as a society make has an intrinsic value therefore it is actually the fundamental driver of growth not the paper.

    There is absolutely no need for them to charge interest they are not giving you anything that has a value to pay interest on. You could cut out the private banks and pay the fed a set rate to responsibly lend out the money and the society would work better with more prosperity.

    To give an example if John and Jack each made a good a radio and a clock worth ten dollars each and the bank gave them each ten dollars. Then Jack went over and bought the other guys good he would have no money and $20 worth of goods. Then John realized he needed to buy Jacks good so he went over and bought it now they have switched goods. That is all that is necessary to simplify barter. Interest is just a deficiency that serves to do nothing but slow down lending and increase deficiencies.

    As I said before when America first started greenbacks were handed out without interest by the government and the economy flourished. There are numerous examples like this and usually the only reason they end is because private banks come in to stop the practice and intentionally muck everything up.
  7. sjfan


    Seriously... I think I'm being a bigger idiot than your "proposed economic system" by replying, but good god you are missing basic logic.

    By your premise, how about you lend me $100,000 and I'll pay you back in 100 years? Meanwhile, I can take that $100,000 and go start a business or invest in something. The fact that you can no longer use that $100,000 to do the same is your opportunity cost that you incure by giving me the money for 100 years.

    You'll want something for that, right? That something (doesn't matter if you collect it annually, all up front, or all backloaded) is interest (in fact, the frequency of payment and the amount is easily converted from one form to another).

    If this still doesn't sit well with you, I can instruct my lawyer to draft a note for you give me $100,000, which I will repay in the same amount. I'll even let you decide how long I get to hold it for.
  8. A bank loan with no interest is no different than a bank loan with interest you could try that with any bank they will take your assets and give you a horrible credit rating with possible charges of fraud and jail time. The loan would have a term like any loan it is not infinite.

    I completely understand your resistance I went through the same type of circular logic trying to figure out why their had to be interest because it is hard to accept being taken for a complete swindle. I have critically thought about this for a long time and come to the conclusion interest serves no purpose other than to rip us off and drive us into bankruptcy.
  9. sjfan


    When you say a loan with no interest, do you mean that the bank lend you $100 with a term of 5 years, and you just have to pay back the $100 at the end of the 5th year with no additional fees or costs? If that's the case, can you point to a single bank that will you point me to that bank?

    Again - if you believe what you say, then lend me $100k at those terms. I'll be happy to pay your legal and due dilligence costs and will happily pledge assets (my house, for example, which is worth FAR more than $100k) as collateral.
  10. Slider,

    I'm not tryin to be rude but you really should study finance and economics a bit and then rethink your "system".

    In your system, the government determines and sets the cost of borrowing. If they set it at zero and lend freely, it encourages people to be incredibly aggressive in their borrowing. This is precisely what happened when the FED dropped rates to 1%. People overleveraged and we are now paying the price.

    Anyway, government lending at 0% is entirely backed by the government's ability to tax. In order for the government to lend, it must have the money in the first place. If it prints money to lend then we realize inflation which you claimed was caused by the banks in your first post. It isn't caused by banks, it is caused by more money chasing fewer goods.

    If it doesn't print money to lend, then it must borrow money, take money, or both. Allow me to elaborate.

    It can borrow money from foreign nations. These nations aren't going to lend at 0% because they will expect something for their opportunity cost of not investing in their own nation. Since the g-ment is lending to me at 0% but still must pay a premium to the foreign nation, they must then tax the people to raise the extra cash. So the interest that I should've been paying is replaced by tax and everyone pays it.

    OTOH, it can borrow from the people in the form of muni bonds, but the people aren't going to lend money to the g-ment for free because they are giving up the opportunity to invest elsewhere. So again the g-ment must tax in order to repay the purchasers of the bonds.

    Or the g-ment can avoid borrowing all together and simply tax the people up front and then use that money to make loans at 0%. The is essentially callled communism. The government decides how much of my money I don't need, and how much of my money you do need, and then they force the transfer. Good for them because they don't go into debt and you still expand your business. Bad for me because I'm now lending money to you at 0% and lost all freedom to chose my own investment or grow my wealth. IOW, I'm forced into giving to (not investing in) your business because the g-ment thinks it is a good idea.
    #10     Jul 23, 2008