All I know is that my house would require half the labor to pay off and that the cost of most goods would drop.
That is my point. In your system, I can't start a business until I've either saved up enough money for the building, machinery, and inventory, or I've got enough equity in something to collateralize a loan from a central bank. You've now made entreprenuership impossible for anyone in the middle or lower class. But let's say that I was finally able to save up the money. This bank will then make the loan to me at 0% interest without having borrowed it from someone else. It must then simply print the money which results in inflation because we now have more money chasing the same number of goods. But you say that inflation is caused by interest, and since this loan has no interest then we must be able to avoid inflation. So the money must now come from someone who doesn't expect a return on their investment. There is only one group who falls into this category. TAXPAYERS. Now every tax payer in the nation is forced into giving me a loan at 0% rather than investing their money according to their own prerogotive. Obviously, I'm not the only one who wants a loan, and according to your mentor Richard Cook, the right to credit must be extended to everyone. Wow!!! That sure is a lot of tax that will need to be paid to keep innovation going at the rate it has been for the last several decades. In fact, so much tax will be required that you'll have to eliminate personal income, and just make it the responsibility of the central bank to dispurse income according to what it feels the needs of each individual are. Sound familiar? It's called communism. Do you think there might be a reason why this has never worked?
It should be noted that communism is a very idealistic form of government in a theoretical sense. That's why many countries adopted it in the 20th century and tried it out. It sounds good on paper. The poor will be looked after. Everyone will have a job. Everyone will be supplied a home. One big problem though: it doesn't work in the real world. As they say the path to hell is paved in good intentions.
Goods are always correctly priced in an efficient economy. The seller will always charge what the buyer is willing to pay in order to realize max profit. Right now a 1/2 gallon of milk is deemed to be worth 0.002% of the average family's income. That will not change regardless of what the economic system is if people are free to make their purchases. In regards to your house, you are free to pay for a house with cash right now. But you don't want to wait until you've saved all the money. So the bank is going to give you a loan that charges you the cost to build the house, as well as the time it would've taken you to save up the money, plus a profit that compensates them for their effort as well as the risk that you'll default and stick them with a home that they must sell cheap.
No, you are paying $550,000 for a house that will be worth about $550,000 when you finish paying it off in 30-years. It's called time value of money. They are chargin you the future price of the house. Consider the alternative. Let's say that at current rates the payment on that loan would be about $1500 a month. Instead, you rent a place for $1000/month and save the $500 resulting in $6000 the first year and you increase that each year with a 3% cost of living raise. Let's even say that you invest the savings in a stock market and get 9% yearly return. You decide not to finance any of the house in order to avoid interest and instead save all the money in order to pay cash. Using average home appreciation numbers of 4% yearly, it will take you 25 years to save up the money for the equivalent house which is now selling for $650K. During that time you'll have paid $500K in rent, so now the house really cost you $1,150,000. I'd say the bank is doing you a favor by giving it to you for $550K.
No you are misunderstanding what I am saying. Their would be an institution that would basically print money. They could only print money if you were qualified like today. If you defaulted there would be asset seizures or charges laid They could only print money for those 2 reasons. There would be no inflation since interest drives inflation. Since everything is much cheaper people would pay taxes %5 would likely be enough. Banks would still give out loans to people who had a good credit who had worked their way up the credit rating just like now. This is not communism! This is capitilism without interest the state would not own your house. They would run public infrastructure as stewars for society like they are now.
Since they can take the house if I do not pay or put me in jail I do think that the risk vs reward for banks is reasonable. In order for the risk reward to be right they should make around %5 profit since their are huge sums of money being lent. In order for them to make %5 that would mean that around %40 of loans were defaulting and leaving absolutely no assets. Even if right now %20 were defaulting they would still be making an average of %100 profit on houses anyway.
I'm not misunderstanding what you are saying. You keep stating a falsehood, insisting that inflation is caused by insterest. It isn't caused by interest, it is caused by more money chasing a proportionately smaller quantity of goods. If your bank prints money to make loans, they have just caused inflation. It doesn't matter whether they charge interest or not. Price of goods is determined by supply and demand, not interest. If the bank prints money, there is now more money in circulation even though the quantity of goods has not increased. People are now willing to pay more for the same goods because current prices represent a smaller portion of their income. People don't value things in nominal dollars, they value them by what portion of their income they must spend to buy them. If you increase the quantity of dollars in the system without increasing the quantity of milk proportionately, then the price of milk goes up. Interest had nothing to do with it.
They aren't making 100% profit on your home. They are making 6% per year before inflation and expenses. There is a huge difference. IOW, they just invested $250K in you. It is taking them 25 years to make 100% return on that money, and all the while they were incurring operating expenses and watching the value of each dollar you're paying them back become lower and lower. Nobody would ever invest in a business that had a guaranteed return that low. The banks compensate for incredibly low returns by leveraging their money. If they couldn't leverage, you'd be paying closer to 20-25% interest for it to be worth their time to lend to you.
Hey pal, why don't you get your GED, take a few community college courses, and then we can have this conversation? I hope to God you're a live trader.