Dont be too quick to judge the 1%

[TimG]

Sure there is. Theres a whole bunch of different ways actually. When you qualify for a loan the credit authority could simply add the money you need to the monetary base, assign it to you, and charge you a small fee based on the real cost to administer your loan and evaluate your credit.

Loans are basically an investment and the lender is entitled to a return. Are you seriously arguing that people should not get interest on their savings accounts too? There is no difference between a savings account and a loan.

[blueblood]

Sure there is. Theres a whole bunch of different ways actually. When you qualify for a loan the credit authority could simply add the money you need to the monetary base, assign it to you, and charge you a small fee based on the real cost to administer your loan and evaluate your credit.

Usury free money has existed in various different forms and various different times throughout history. Theres absolutely nothing impossible about it at all.

In fact... we came very very close to this being what our economic system was based on. Abraham lincoln implemented usury free money in order to win the civil war because internataional bankers tried to charge him 23% interest on the money required to win. He told them to go ____ themselves and Colonel Dick Taylor was put in charge of solving the problem.

The solution was to create the green back.

So they printed out 450 million dollars worth of usury free money, using green ink on the back to make sure they looked different than bank notes.

The system worked so well, that Lincoln wanted to adopt this as permanent national policy but he caved to pressure from internation bankers.

So let me get this straight, you want interest free banking? If that's the case, why in the blue hell would I risk my corporate account to be lent out with the risk of not being paid back, when I could get a track hoe and make an underground safe or snap up gold bullion? If the bank is not getting interest from the people they loan out to, how are they going to pay depositors and bondholders for the use of their money?

Usury free banking would lead us to 1920s Germany and Zimbabwe pretty quick. The only way a person can get away with printing money is in wartime, and even then it's a liability that has to be paid back in one way or another,

Edited November 20, 2011 by blueblood

[dre]

Loans are basically an investment and the lender is entitled to a return. Are you seriously arguing that people should not get interest on their savings accounts too? There is no difference between a savings account and a loan.

No most loans are NEW MONEY. They are not drawn on anyones deposits. The federal reserve system pays about 2 cents for each note, whether those notes represent 2 dollars or 100 dollars, the banking system pays 2 cents.

If the federal reserve creates new money and loans it into the system, there IS no investor in the sense youre talking about. The value of that money is derived by taking a little bit of purchasing power away from all other dollars in existance.

[dre]

So let me get this straight, you want interest free banking? If that's the case, why in the blue hell would I risk my corporate account to be lent out with the risk of not being paid back, when I could get a track hoe and make an underground safe or snap up gold bullion? If the bank is not getting interest from the people they loan out to, how are they going to pay depositors and bondholders for the use of their money?

Usury free banking would lead us to 1920s Germany and Zimbabwe pretty quick. The only way a person can get away with printing money is in wartime, and even then it's a liability that has to be paid back in one way or another,

If that's the case, why in the blue hell would I risk my corporate account to be lent out with the risk of not being paid back, when I could get a track hoe and make an underground safe or snap up gold bullion?

No its totally fine for you to lend your money at interest, or for you to put your money in a bank and have them lend it at interest.

[TimG]

No most loans are NEW MONEY. They are not drawn on anyones deposits.

As my examples above illustrated any new money created for loans by banks always ends up in a savings account. This means interest on loans is used to pay interests on savings. You cannot eliminate interest on one without eliminating interest on the other.

Since ALL loans are someone's savings (whether this link is created after the loan is created irrelevant) we need a system which maximizes the return on investment since everyone wants a good return on their savings. The current system does this. Your system creates a massive pool of 'dead money' that does nothing useful.

The federal reserve system pays about 2 cents for each note, whether those notes represent 2 dollars or 100 dollars, the banking system pays 2 cents.

Bank notes are a symbolic but largely irrelevant part of the system now. What it costs to produce does not matter. Edited November 20, 2011 by TimG

[dre]

As my examples above illustrated any new money created for loans by banks always ends up in a savings account. This means interest on loans is used to pay interests on savings. You cannot eliminate interst on one without eliminating interest on the other.

Yes you can if you separate the system into its logical functions.

The first function is traditional banking. Banks accept deposits and lend that money out at interest, and they split the take with the depositor. Thats totally fine. Investment banking is fine too.

The second function is monetary expansion (or contraction). This is when a national government with the constitutional responsiblity to manage the creation of money needs to get that brand new money into the economy. Theres a whole bunch of different ways that governments can do this, and theres no reason for anyone to pay interest on this money.

In theory the government uses the private banking system in this way to achieve price stability... the idea being that the supply of borrowers and the demand for loans would ebb and flow with the size of the economy. But in practice that doesnt work very well, because as soon as you allow private institutions to profit from monetary expansion they will do absolutely everything possible to increase the ammount of borrowing, and the ammount of monetary expansion. They will offer teaser rates, they will peg interest rates as close to zero, reduce their lending standards, and mail out millions of letters BEGGING people to accept credit.

[dre]

And back to the suggestion that usury-free money is impossible... history proves this statement false.

The American colonies used usury free money with great success and acheived strong growth. The only reason they stopped using it was because the king of england BANNED it. Both Lincoln and JFK also implemented usury free money with great success. In both cases they were mysteriously assasinated.

After Lincoln created usury free dollars the following editorial was printed in the London times...

If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and the wealth of all coun­tries will go to North America. That govern­ment must be destroyed, or it will destroy every monarchy on the globe.

England and France moved to support the South, and mobilized the Royal Navy to smash the Union blockade. Lincoln had allies though in his fight against the Monarch and the bankers. The Russian Tczar was also trying to prevent them from setting up a central bank in Russia, and expanding their influence, and he sent the Russian Navy, and ordered rear admiral S.S. Lesovskii and rear admiral A.A. Popov to set sail for the Americas and report to Lincoln.

[TimG]

The second function is monetary expansion (or contraction). This is when a national government with the constitutional responsibility to manage the creation of money needs to get that brand new money into the economy. Theres a whole bunch of different ways that governments can do this, and theres no reason for anyone to pay interest on this money.

There has to be a rational mechanism for ensuring the new money is put to the most productive use. Having competing banks vet loan buyers, take responsibility for collecting unpaid debts and making a profit off the interest is the most effective market based mechanism to arbitrate between different buyers of credit. Edited November 21, 2011 by TimG

[TimG]

Both Lincoln and JFK also implemented usury free money with great success. In both cases they were mysteriously assasinated.

So you are going to put on your tinfoil hat now? What is next? Are you going to claim that Bush blew up the WTC to appease the Builderburger group?

I don't know the real story behind your Lincoln anecdotes but I would bet there are good reasons for what happened that are not reported by conspiracy sites.

[dre]

There has to be a rational mechanism for ensuring the new money is put to the most productive use. Having competing banks vet loan buyers, take responsibility for collecting unpaid debts and making a profit off the interest is the most effective market based mechanism to arbitrate between different buyers of credit.

take responsibility for collecting unpaid debts

The government does that not banks. The COURTS enforce those contracts, and the public pays for it. And screening borrowers is a low cost service. In a usury free system private sector solutions would emerge and they would gladly do this for a small fee as opposed to a percentage of the entire transaction. The cost of screening the borrower and administering the electronic collection of payments plus a little bit extra for profit. The real cost of this activity is about .25%.

So the government could contract this service out to the private sector on a FEE basis. Or it could use usury free money to pay its soldiers and civil servants and put money into the economy that way, which the market would then efficiently allocate. Or it could hire a private company to build a road... and that money would enter the economy in the form of purchases and wages.

[dre]

So you are going to put on your tinfoil hat now? What is next? Are you going to claim that Bush blew up the WTC to appease the Builderburger group?

I don't know the real story behind your Lincoln anecdotes but I would bet there are good reasons for what happened that are not reported by conspiracy sites.

I never alledged any conspiracy. Im just saying that those practices ended because those two sitting presidents were assasinated, and that they were seen as a major threat to the monarchy and the banking system. They wouldnt worried it would fail... they were worried it would succeed. Infer what you want from that.

In any case its you that claimed interest free money was impossible. Im just pointing out that it absolutely is not, and its worked very well whenever its been tried on any scale.

And this DOES NOT mean that banks and investment banks cant charge interest. Once this money has been EARNED by somebody, usury is justified if they choose to lend it out. Its their money after all, and we now have a living and breathing "investor" that deserves a return.

Edited November 21, 2011 by dre

[TimG]

The government does that not banks. The COURTS enforce those contracts, and the public pays for it. And screening borrowers is a low cost service.

You do realize that the mortgage fiasco in the states was caused by 'screeners' (a.k.a mortgage brokers) who had no stake in whether the loans were ever paid off? You are creating what I would call a huge 'moral hazard' that would end in tears. For the system to function properly the entity that makes the decision to loan the money must be the entity that loses financially if the loan does not get paid back. This is the way the banking system worked in Canada and why there were no bailouts. Edited November 21, 2011 by TimG

[TimG]

In any case its you that claimed interest free money was impossible. Im just pointing out that it absolutely is not, and its worked very well whenever its been tried on any scale.

As far as I can tell is is has never been implemented. Lincoln talked about changing the system but ended up with a compromise. I don't know what JFK said he wanted to do but a president saying something is hardly something to fear. The president of the US is a pretty weak head of state.

BTW - If the system is so great why didn't China, Venezuela, Cuba or the USSR adopt it?

Seems like a natural thing for a communist state.

Here is a good summary of banking in the USSR: http://faculty.vassar.edu/kennett/Lieberman.htm

Note that it appears to operate as you want. The government creates money to meet its social objectives.

The USSR was not the economic paradise that you seem to think comes with this system.

It is also interesting that the USSR moved to a western style system in 1987 which kind of debunks your theory that our current system is imposed by a cabal of bankers out to protect their self interest.

Edited November 21, 2011 by TimG

[blueblood]

I never alledged any conspiracy. Im just saying that those practices ended because those two sitting presidents were assasinated, and that they were seen as a major threat to the monarchy and the banking system. They wouldnt worried it would fail... they were worried it would succeed. Infer what you want from that.

In any case its you that claimed interest free money was impossible. Im just pointing out that it absolutely is not, and its worked very well whenever its been tried on any scale.

And this DOES NOT mean that banks and investment banks cant charge interest. Once this money has been EARNED by somebody, usury is justified if they choose to lend it out. Its their money after all, and we now have a living and breathing "investor" that deserves a return.

Let's look at occam.'s razor here. If interest free money were to help out govts like you said it would, why wouldn't politicians be implementing it to buy voters with all sorts of gov't spending and loose economic policy? The "1%" would be useless because they don't have the votes, heck the 1% would even benefit because of all this new liquidity.

And besides it isn't free, Lincoln realized that the money would end up worthless and paid the piper and as a result the USA had the highest growth in it's history. There's no free lunch. Having interest free money means a return to the aristocracy and people running on the banks.

[maple_leafs182]

As far as I can tell is is has never been implemented. Lincoln talked about changing the system but ended up with a compromise. I don't know what JFK said he wanted to do but a president saying something is hardly something to fear. The president of the US is a pretty weak head of state.

JFK signed executive order 11110

'(j) The authority vested in the President by paragraph ( of section 43 of the Act of May 12, 1933, as amended (31 U.S.C. 821(), to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of an outstanding silver certificates, to prescribe the denominations of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption,' and ( By revoking subparagraphs ( and © of paragraph 2 thereof.

I am not saying there was a conspiracy to kill JFK but I am also not ruling the possibility out. But to say that it is preposterous to even entertain the idea that someone or a group of people would kill a national leader to control that nations monetary system for their own benefit makes no sense to me, of course that is a possibility.

We live in what some would claim to be capitalist society, I would argue otherwise but lets just say it is capitalist. The entire economy is based on the movement of capital for investments. We gave Central Banks the ability to create capital out of nothing, they then loan that capital to commercial banks and in some cases directly to other types of corporations. They then use that capital to invest in the economy abroad. The problem with this system is it makes it easier for the big banks and big corporations to obtain capital the needed to make all the major investments. This is why we have monopolies or oligopolies in almost every sector of the economy, this is also how so much of the worlds wealth has been accumulated by a small amount of people. The current monetary/banking system favours the few, that is why we need some sort of honest money system. In a free and just society, everyone should have equal opportunity, right now the banks and big corporations have an edge over us.

[TimG]

The current monetary/banking system favours the few, that is why we need some sort of honest money system. In a free and just society, everyone should have equal opportunity, right now the banks and big corporations have an edge over us.

Not one shread of truth in this statement. First, only well established corporations can even hope to qualify for loans. Smaller businesses need risk taking investors - not loans. Second, when corporations borrow money they pay for it like anyone else. The central bank is the only entity that can create money without paying for it and central banks are not in the business of making profit.

[GostHacked]

Not one shread of truth in this statement. First, only well established corporations can even hope to qualify for loans. Smaller businesses need risk taking investors - not loans. Second, when corporations borrow money they pay for it like anyone else. The central bank is the only entity that can create money without paying for it and central banks are not in the business of making profit.

Ahahaah what world are you living in. The central banks ARE making a profit, because they can create money out of nothing, and charge interest. The fact they charge interest means they are making money. No bank is out there to lose money or to break even. Then you can look at entities like the World Bank and the IMF (both global central banks, and both charge interest), and who controls those two entities? Then you ask, how can the Fed print money? Mainly because another nation bought the debt allowing the Fed to increase the money supply while devaluing the dollar.

You really seem out of touch with what is going on.

[TimG]

The central banks ARE making a profit, because they can create money out of nothing, and charge interest.

Any interest they collect is vapourized using the same tools they use to create the money in the first place. Central banks are non-profit entities that are tasked with managing the value of the currency. If they make money on some of their operations they use that profit to cover their operating costs and any excess revenue is lent to the government. From the BOC website:

The revenues generated by the Bank each year greatly exceed its operating expenses.

The revenues derive from the Bank of Canada's role as the issuer of bank notes to Canada's financial institutions. Institutions pay the Bank when they withdraw bank notes from it. The Bank then invests these funds in government bonds and treasury bills. The interest earned on these investments is the Bank's main source of revenue.

The difference between the interest the Bank earns and its operating expenses is its net profit, which is given to the federal government. In recent years this profit has averaged about $1.7 billion annually.

This process, whereby a central bank earns revenue in exchange for its role as the issuer of a country's currency, is called seigniorage.

Then you can look at entities like the World Bank and the IMF (both global central banks, and both charge interest)

You really have no idea what you are talking about. The World Bank and IMF are NOT central banks. Only banks which manage a currency can be a central bank. They are non-profit international institutions funded by countries. If they make a profit it is used to fund their operations. Edited November 21, 2011 by TimG

[maple_leafs182]

Not one shread of truth in this statement. First, only well established corporations can even hope to qualify for loans. Smaller businesses need risk taking investors - not loans. Second, when corporations borrow money they pay for it like anyone else. The central bank is the only entity that can create money without paying for it and central banks are not in the business of making profit.

I know not all corporations get loans from a central banks, I never said they did. When banks do get loans from a central banks, they get those loans at a lower rate then what they would have gotten in the open market, they then loan that money out at higher rates to us. Central banks favour the banking industry.

[GostHacked]

Any interest they collect is vapourized using the same tools they use to create the money in the first place.

How does it get vaporized? Care to explain that some? The money supply keeps increasing!!

Central banks are non-profit entities that are tasked with managing the value of the currency. If they make money on some of their operations they use that profit to cover their operating costs and any excess revenue is lent to the government. From the BOC website:{/quote]

If a bank charges interest, that's not a profit? And the excess money is simply given back to the government? Does that money get passed back to the taxpayer?

You really have no idea what you are talking about. The World Bank and IMF are NOT central banks. Only banks which manage a currency can be a central bank. They are non-profit international institutions funded by countries. If they make a profit it is used to fund their operations.

You may have a point there. But hey, the World Bank will be used to administer a global currency when the current system collapses.

[maple_leafs182]

You really have no idea what you are talking about. The World Bank and IMF are NOT central banks. Only banks which manage a currency can be a central bank. They are non-profit international institutions funded by countries. If they make a profit it is used to fund their operations.

What he said.

I would say the BIS is more of a central bank then those institutions although it isn't a central bank.

The mission of the Bank for International Settlements (BIS) is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.

In broad outline, the BIS pursues its mission by:

promoting discussion and facilitating collaboration among central banks;

supporting dialogue with other authorities that are responsible for promoting financial stability;

conducting research on policy issues confronting central banks and financial supervisory authorities;

acting as a prime counterparty for central banks in their financial transactions; and

serving as an agent or trustee in connection with international financial operations.

[blueblood]

How does it get vaporized? Care to explain that some? The money supply keeps increasing!!

point there. But hey, the World Bank will be used to administer a global currency when the current system collapses.

Instead of buying bonds like they typically do, it can work in reverse, they can sell those bonds. Which results in money supply shrinking.

[TimG]

I would say the BIS is more of a central bank then those institutions although it isn't a central bank.

The BIS has no control of a currency which means it is not a central bank. It is regulatory agency.

[TimG]

How does it get vaporized? Care to explain that some? The money supply keeps increasing!!

Not at all. The central banks can destroy money as easily as they create it. For example, if the central bank sells the bonds it holds it destroys money. The same happens to interest payments it receives but I guess the interest could be used to purchase more bonds if it wanted to expand the money supply.

The important point is there is no 'profit' for a central bank. Any 'profit' is either spent increasing the money supply or destroyed.

point there. But hey, the World Bank will be used to administer a global currency when the current system collapses.

I think the current Euro crisis is irrefutable evidence that a global currency will never happen. Edited November 21, 2011 by TimG

[TimG]

When banks do get loans from a central banks, they get those loans at a lower rate then what they would have gotten in the open market, they then loan that money out at higher rates to us. Central banks favour the banking industry.

Banks only borrow short term money from the central bank. These overnight loans are used to make sure the books balance every night and interbank transactions can clear. If banks want to get long term funding they got to go to bond market like all other corporations.

Here is a record of Apr 7, 2010 sale of bonds by the Royal Bank:

http://www.reuters.com/article/2010/04/07/royalbankofcanada-debt-notes-idUSN0746200120100407

Why would the Royal Bank be issuing bonds if it could get a special deal from the BOC?

Edited November 21, 2011 by TimG