Why is Usury immoral and people still support Capitalism?

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tayl44
tayl44's picture

Paying interest on everything is in conflict of getting someting for nothing.Is this conflict the reason for so many problems? If so,can usury/capitalism be made moral? 

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polycarp2
Interest is o.k. if its spent

Interest is o.k. if its spent back into the economy. It isn't. It disappears into financial paper.

Government could be financed with interest  rather than taxes if government owned the banks. The only government-owned bank in the U.S. is the Bank of N. Dakota. North Dakota has its highest budget surplus in history while the rest of the states are plunging into insolvency.

The Fed is no more a government bank than is the Bank of England. Both have shareholders and serve private banking interests..

If the Fed was a true central bank based on the N. Dakota model, the federal, government could simply spend money into existence when it was required rather than borrowing it into existence.

Interest, rather than taxes could finance government...and be spent back into the economy..Interest  can be a good thing. Right now, it isn't. It's an extraction from the economy.

Retired Monk - "Ideology is a disease"

 

FreeMarketeer
FreeMarketeer's picture
polycarp2 wrote: Government

polycarp2 wrote:

Government could be financed with interest  rather than taxes if government owned the banks.

Absolutely. Except the government should just own the central bank only. Every other bank can - and should - be private.

Curious though...how, without taxes, would  you keep the rich in check? You know, keep them from getting too rich?

Cheesebone
Cheesebone's picture
Usury itself isn't immoral at

Usury itself isn't immoral at all. If anything, it's logical.

Instead of trying to picture mass quantities of money bu thousands of banks goign out to thousands of borrowers - simplify it.

Say you have $10,000 set aside for emergencies, "rainy days", perhaps some high-dollar retail goods, so on.. this is money that you have available to you at any given moment in case something happens. You don't NEED it right now, but it could be very helpful in the future depending on your needs.

Your neighbor comes over and is having some issues of his own, and asks kindly if he can borrow $5,000 from you, but he promises that he can make whole on the loan within the next 2 years. Obviously you have the funds available to lend. What is your incentive to lend it out though? This would cut your rainy day fund in HALF, making any discretionary spending from the account almost completely gone and increasing the odds of you not having enough in the account to cover any emergencies that may arise. This is a risk to you. Something has to happen to make this loan worthwhile, Otherwise, it's just a risk with nothing to gain. Even if you knew beyond a shadow of a doubt that you'd be repaid in 2 years - this is 2 years that you had to spend WITHOUT the availability of that $5,000 that you might have wanted to spend on something that arose during the period it was lent out.

Usury does make sense,  it rewards the lender for his temporary sacrifice of money with a larger return in the future. It goves the borrower instant spending money at the cost of future underconsumption to repay the loan. The borrower sees the benefits first, and then evens out the costs later. The lender sees the costs first, and then reaps benefits later.

stwo
stwo's picture
Usury and interest are not

Usury and interest are not synonymous.

tayl44
tayl44's picture
Poly and all,when a system

Poly and all,when a system have so many problems,something tells me,the foundation is "wrong".We have a democratic political system and a capitalist economic system,the problems are economic.(bigger) Capitalism is base off profit/interest,usury is immoral when profit/interest is excessive.The problem is where does "excessive starts"? Everybody know in nature,you get something for something.When people first traded a apple for apple,that was a normal deal.When people start expecting more,that where the problem starts.There is nothing in nature where you put 100% in and expect more back.A electrical transformer is the most efficient machine man makes(97%)  Usury is saying,humans cannot out-perform nature. Cheese,if a price can be put on "risk",then everything in life has a price.(even going to the bathroom) That`s the basic problem of capitalism,putting a price on the unpriceable,land is the same problem,you cannot price it.How can you price "God"? When we put a price on God,we`re playing God.We better get back to "basics",if we want to get out of the "Twilight Zone". 

Cheesebone
Cheesebone's picture
Yes, everything does have a

Yes, everything does have a price. Going to the bathroom has a "price" of interrupting what you're doing to make a trip to the can and take care of business. You pay that price because you value the pants you're wearing, the couch you're sitting on, and your own self-dignity more than the effort expended in a bathroom trip.

polycarp2
Considering banks make loans

Considering banks make loans by creating the money out of thin air through fractional reserve banking, I see no reason why interest rates should approach 30%.. All that does is accelerate the withdrawl of money from the money supply.

Banks inject the principle of the loan into the economy's money supply. They dont inject the interest into the money suppy. There is a shortfall.

When loans decline, the withdrawls from the money supply exeed the injections into it. The money supply shrinks. Economic activity slows..

The Main Street money supply shrunk 6% last year and 9% in the first quarter of this year.

It's the same failure of our monetary system that we always undergo over and over. Read economic history.

"Faced by the failure of credit, they have proposed only the lending of more money" - FDR

Under our system that's the only solution other than government injections to make up the shortfall. When borrowers are broke, the banker solution,  loaning more money, simply can't take place.

Government owned banks could use interest to finance government, and re-spend the interest back into the money supply rather than disappearing it into financial paper. Taxes not required. The figures to do that jive.

The century-old state owned Bank of N. Dakota is a successful working model for that. The state has its highest surplus in history while the rest are plunging into insolvency.

Interest is fine...depending on who collects it and what is done with it.

We're in a systemic meltdown, created in-part by our monetary/banking system. The last time this happened was in the 30's. In the 1800's, they were rather frequent. The systemic meltdown isn't being addressed.

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease"

 

 

Cheesebone
Cheesebone's picture
With declining supply in

With declining supply in availble currency should also come a decrease in prices, as the value of the money should change inversely with the amount in circulation.

The problem is that the FED thinks that deflation is running rampant, when in reality prices for things that people ACTUALLY NEED (foor, energy, etc..) keep rising. The figures the dimwits in Washington are using (Core CPI) don't accurately reflect real consumer prices. The fact that the media talks about Core CPI just exposes the fact that the government has succeeded in tricking the public into thinking that prices are actually falling.

Salt in the wound.

polycarp2
Things based entirely on the

Things based entirely on the domestic economy are falling in price...like housing.

Things requiring foreign input are rising. That includes food.  Industrial agriculture requires heavy inputs of oil....an import.

Domestically the dollar is deflating from a shrinking supply. . Internatonally, it's inflating from a glut of them in global markets. This is new in the U.S. economic experience.

Retired Monk - "Ideology is a disease".

tmoney13
tmoney13's picture
tayl44, I agree with you that

tayl44, I agree with you that there is a fundamental problem with our structure, but I don't see it as economic (capitalism or free market enterprise) I see it as government intervention in maintaining the status quo, or supporting specific businesses or industries. 

Cheese I agree that everything does have an opportunity cost, you are spot on there.  Whether we like it or not everything has a price to it.

Poly, with regards to public banking, I agree with you but how would it work in practice.  The Bank of North Dakota is not a good example as it is not a Central Bank.  I don't have a problem with the BND but it does not set interest rates or print money.  So lets assume the US Treasury takes over the function of money creation (which I suppport) would they set interest rates like the Fed, or in your mind would interest rates be left up to the market (which is what I support)?  

tayl44
tayl44's picture
Cheese,everything has a price

Cheese,everything has a price is the reason we are on the road to judgemen day.Imagine selling stock on Wall St  for the "risk" on going to the bathroom? What happen to the people with no money,they have to hold it? Where does this risk/price on everything end? Risk is a human concept like the world is flat,our beliefs can be "Very Wrong".(no matter how strong we want to believe they`re right) Poly,you say interests is ok,depending? I see no ok with any interests base off capitalism and its money system.I say again,usury is base off you cannot get something for nothing and interests is base on getting more than you put in.Poly,can people out-produce nature/God? Tmoney,you think government is the problem? If government wasn`t there,capitalism should`ve/would`ve die along time ago! The reason capitalism has so many problems,it`s not intune with nature/God,you cannot get something for nothing.Democraty is intune with nature/God,freedom of choice with responsibility have "no problems".   

tmoney13
tmoney13's picture
tayl44, you are right you

tayl44, you are right you can't get something for nothing.  You are required to work.  Sometimes the amount of work you can do is limited by the amount of physical resources that you might have at the time.  Borrowing money to get the resources you need is a way that allows you to maximize your ability to produce.  If borrowing comes with a price (interest) then it is the nature of the borrower to determine whether or not he wants to take that risk in borrowing so that he can thereby maiximize his abilities.

polycarp2
Interest is the preferred way

Interest is the preferred way to remove excess money from the economy. if it inflates. However, the money pulled from the economy  with high interest rates should be removed from the economy and dbe estroyed rather than winding its way into bank vaulas and financial markets. Maintaining an appropriate money supply is a function of government....not private banks.

.Interest is also the most sensible way to finance government. Interest from government-owned banks could replace taxes. The figures are  workable. All interest would be re-spent back into the economy rather than disappearing into financial paper.

Do you prefer a 6% interest rate on a part of your income used to pay back loans, , or a 30-40% tax rate on most of your income as now?

A function of government is to regulate the money supply. The money supply has to be sufficient to purchase all of the goods and services capable of being produced, and the money supply can't exceed the productive capacity of the nation.

Historically, going back several thousand years, when the money supply wasn't sufficient, economies collapsed or experienced severe downturns.. Downturn sometimes lasted for centuries....as in the Dark Ages. When money was too abundant, economies collapsed. (Weimar Germany).  It has to be balanced.

Maintaining the balance is a function of government...NOT THE PRIVATE BANKING SYSTEM..The private banking system can't do it. Only a government banking system can.

Currently the Fed has near zero interest rates to increase the money supply..... to encourage lending and the creation of money for the loans.. Money creation is done through fractional reserve lending. Without borrowers, that doesn't work.

A true central bank could simply spend money into existence rather than borrowing it into existence when an economy needed stimulation to use its productive capabity and distribute goods.. That would work. National debts would be a quaint historical amusement..

Do you prefer a 6% interest rate on a part of your income used to pay back loans  and never have  government debt, or do you prefer a 30-40% tax rate on most of your income and high government debt as now?

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease"

 

tayl44
tayl44's picture
Poly and Tmoney,what give a

Poly and Tmoney,what give a person the right to get more then their investment? When "nothing" in nature give no more then what is invested.

tmoney13
tmoney13's picture
tayl44, the fact that another

tayl44, the fact that another party agreed to the arrangement and time.

tmoney13
tmoney13's picture
Poly, what are your thoughts

Poly, what are your thoughts on peer to peer lending such as the site www.prosper.com

It doesn't solve the money creation problem that we have with the Fed, but as a separate topic I would be interested in your thoughts.

tayl44
tayl44's picture
Tmoney,you give the reason

Tmoney,you give the reason why we have so many problems,"we think we can do anything". Reality say no!

Cheesebone
Cheesebone's picture
But people have freeedom of

But people have freeedom of choice. If I want to lend money out to a crackhead, there's a pretty high probability that I won't get paid back. Should the government intervene and tell me I can't loan him my money? Because at the end of the day, I mean, not loaning that money to this crackhead IS ABSOLUTELY in my best interest..

 

polycarp2
tmoney13 wrote: Poly, what

tmoney13 wrote:

Poly, what are your thoughts on peer to peer lending such as the site www.prosper.com

It doesn't solve the money creation problem that we have with the Fed, but as a separate topic I would be interested in your thoughts.

I find it interesting that you can earn 10%+ by charging 7% interest. The scam is?

As long as interest money is re-spent back into the economy, I have no problem with personal lending. Otherwise,, its simply another extraction from the money supply.

It's the same sort of thing that brought down Argentina, same thing that brought down Greece, same thing that brought down Iceland, same thing that brought down Latvia, same thing that's bringing down Ireland, same thing that will bring down Spain, Portugal, Italy and the Euro.The money supply is being sucked into finance where it disappears into fnancial paper.

It's the same thing, in part,  that's bringing down the U.S. Interest not re-spent back into the production/distributionl economic activity diminishes the money supply.

Economic activity slows. when the spendable money supply isn't equal to the productive capacity of goods/services. There is no way to make all the possible exchanges of goods/services. That's been so going back to the fall of Rome. The Dark Ages is probably the best example of a greatly diminished money supply.

Retired Monk - "Ideology is a disease"

 

tmoney13
tmoney13's picture
Poly: I find it interesting

Poly: I find it interesting that you can earn 10%+ by charging 7% interest. The scam is? - I am not sure what you are saying here, and where did these numbers come from?  I guess I was asking on what your thoughts on moving from traditional banking to more peer to peer banking.

Poly: Economic activity slows. when the spendable money supply isn't equal to the productive capacity of goods/services. There is no way to make all the possible exchanges of goods/services. - wouldn't allowing people to contract in whatever money they saw fit by eliminating legal tender laws cover most of the money supply problem?  If you have only one payment method which is required by law to use, and that money supply is controlled by a cartel, it seems obvious to me that issues will occur,

tayl44
tayl44's picture
Cheese,if you believe in the

Cheese,if you believe in the freedom to make interest,it would be in your best interest to sell crack to the crack-head and government will say it`s legal.Usury had made us lose touch with reality.We`re so far gone,we believe in freedom without responsiblity.  

Cheesebone
Cheesebone's picture
Well I actually do believe

Well I actually do believe that I should be able to sell crack to a crackhead legally, lol.

The point I was making was that government has no place in enforcing laws that infringe on personal choices people make simply because they believe the choice isn't in the best interest of the person making it.

As far as Polycarp's statement.. just because money isn't immediately re-spent into an economy, isn't a bad thing. That money can become savings in a bank, and as everyone's savings accumulates with time, this provides banks with REAL money that can be lent out for spending, for capital investment, for construction.. if all earnings were immediately re-spent into the economy, credit would be virtually impossible to create.

polycarp2
If interest   gets sucked up

If interest   gets sucked up into a bank, it's a diminishment of the money supply. It isn't loaned out. Most of it goes into financial paper.

 Credit isn't impossible to create if interest is re-spent back into the economy. We issue loans based on fractional reserve banking.. The money is created out of thin air for lending purposes..

If banksters need money to loan, they can get it from the Fed at near zero interest and sock it to the credit card holder at 30%. That becomes an extraction from the money supply. The principle is injected into the money supply, the interest isn't. There is a shortfall.

Government can be financed by government-owned banks. You can finance it by paying 6% interest on the portion of your income used to pay back loans/mortgages, or finance  government with 30-40% taxes on all of your income and paying interest anyway.. Figures to  finance government with interest are workable. That would mean dumping private banks..

The state-owned Bank of N. Dakota is a successful century-old working model for government banking.

People seem to prefer taxing themselves rather than dumping taxes, dumping private banking and dumping periodic meltdowns.. If they prefer taxes, they should really stop complaining about them. Taxes aren't necessary.

Tmoney, the "earn 10% while loaning at 7% interest" was on your link. The scam is what? Something similar was run in the early 60's based on 2nd mortgages.. It went belly up. The "lenders" lost their shirts.

Retired Monk - "Ideology is a disease"

tayl44
tayl44's picture
Poly,what should money be

Poly,what should money be base on? What is North Dakota State Bank operating cost? What do interests mean to you? Do political economy have a way to do a experimenal test of a public bank? Poly,i would appreciate any answers to these questions.I respect your economic knowledge/good common sense. 

polycarp2
Well, the operating cost is

Well, the operating cost is low enough that the state-owned bank puts money into N. Dakota's State Treasury every year. Loans can be had as low as 2% interest. The state is self-financing. It loans money to itself with fractional reserve banking, and pays itself the interest.

The state currently has its highest budget surplus in history.

If all banks in the state were state-owned, N. Dakota's residents wouldn't pay taxes. The banks could finance government.

If we had government supported by interest rather than taxes on a national level, a 6% rate would finance N. Dakota's share of the federal government as well.

Do you prefer paying 6% interest on your loan payments to finance government, or  30-40% tax payments on all income to finance government plus interest payments to banksters as now? Which is preferable?

Taxes on income above $3 million or so would just be to prevent huge wealth disparities from unbalancing the economy and feeding speculation. Meltdowns aren't pretty.  Income spent to expand a business, create a new business, etc., would be tax exempt even at the upper levels.. We've done that before.

Other than that, taxes wouldn't even be required. They'd be used only for economic reasons. Close to 99% of the population would have no taxes at all.

Neither party, with all their talk about cutting taxes  proposes eliminating nearly all of them. They can do that. Banksters and financiers, of course, would raise a ruckus. They'd be irrelevant.

Answering your other question: ULtimately money is based on what a nation produces. The tangible wealth that their money represents.

Retired Monk - "Ideology is a disease"

 

Natural Lefty
Natural Lefty's picture
Tay, rather than talking

Tay, rather than talking about the fine points of usery and interest, I will answer your original question as follows:
As far as I am concerned, usery is immoral, at least when used by those with more to take advantage of those with less and create and/or perpetuate a society of haves and have-nots, and capitalism of the monetary form currently practiced around the world is also immoral. It is a fundamentally flawed system as you have deduced, and needs to be changed, which I have been writing about that in my Capital Idea series of blog posts for quite some time.

The people who practice usery, however, either: A. Don't believe that usery is immoral and/or B. Do it even though they think it is immoral because for them, the monetary payout justifies the immorality. Clearly, and unfortunately, there are a great many people in this world (perhaps most) who fit one or both of these categories.

Cheesebone
Cheesebone's picture
(This is copied & pasted from

(This is copied & pasted from another thread I posted in, but it applies here)

Polycarp, this still sits funny with me. North Dakota isn't really a good state to use as an example, as it really doesn't resemble much of what the majority of America actually is. N. Dakota is sparsely populated, (48th out of 50 states, actually - only about 650,000 people in the whole state. That's like the population of the 10 closest cities to me combined. Here's kind of a funny image when you think about it: http://upload.wikimedia.org/wikipedia/commons/4/46/North_Dakota_populati... ), The population has been generally DECREASING for the last 80 years because there's really nothing to do there, especially for skilled workers.. It's a very resource-rich state though, primarily a massive agricultrual state, lots and lots and lots and LOTS of farmland, plus a lot of oil there as well.

North Dakota's GDP is ranked **19th** in the country, at $39B. With only 650,000 people in the state, it's hard to imagine that figure is very consumption driven (whereas the USA's GDP is roughly 70% consumption). The fact is that North Dakota is a very PRODUCTIVE state, in relation to their population. They create much more wealth than they actually use up themselves. The bank has very little to do with it, I'd say. It's not a "haven" for the rich either - N. Dakota has the FEWEST amount of tax returns posting incomes over $1M than any other state in the union. (Whereas Connecticut, the #1 GDP state in the country, is much more millionaire/rich people oriented and has a much different reason for their GDP figures VS population)

I mean.. North Dakota, with 650,000 people, and all that production and revenue. California on the other hand is pushing close to 40 MILLION people. And their State GDP was $42B. Only 3 billion more than the virtually empty-by-comparison N. Dakota.

If you want to look at a GDP-per-person comparison here - get a load of this:

California = $1050 per person

N. Dakota = $60,000 per person

On a different note.. a bank simply creating CREDIT out of thin air to make loans, even interest-free, also has it's own problems too. If the loan fails - the losses are still real. If we could simply create loans with no real penalties for defaulting - why would people pay them back anyway? What's more, that means that ALL LOANS could be guaranteed, right? There would be absolutely no need to do any kind of background check on the borrower because if they fail to make whole on the agreement, you can simply "refund" the balance to yourself and everything would be ok? It's almost like writing a check to yourself.

tayl44
tayl44's picture
Poly,Lefty,Cheese,Thanks for

Poly,Lefty,Cheese,Thanks for the responses.Poly,the case is close on the need to go to public banking,i ask the question about numbers to show the comparison between commercial banks(for the lay-man) I agree,money should be base off human/land production,but how do we get back to that basic position? An answer to the question about experimental economical models(scientific) can help us solve the problem of a "Where the Beef" solution.A test can be the "proof". Lefty,thank you.you make clear on why capitalism/usury is supported, to "stay alive"! But that the problem,we`re alive,but how long and what kind of life? We know that what`s immoral should be illegal.Thank God we learn from our mistakes,it`s time to redefine "interests".Cheese,a public bank will work anywhere not base on a corrupt economic system  GDP.(a system base on demand/wants is for "children" which we`re) Time to grow-up to economic democracy.

polycarp2
A state bank functions as a

A state bank functions as a state bank, regardless of the size of the state's population. N. Dakota has a smaller population than Calif. It also has a smaller tax base than Calif.

 N. Dakota also has its highest budget surplus in history. Calif. with its larger tax base is insolvent.

 .N. Dakota has access to "in effect" interest free borrowing, Calif. doesn't.

 N. Dakota has a state bank contributing to its treasury annually, Calif. doesn't.

N. Dakota capitalizes its own bank with tax revenues and benefits from loans against it.. Calif. capitalizes private banksters with its tax revenues. and banksters benefit from the loans against it.

Like any bank, whose primary concern is the lending of money, and providing a despository for surpluses of it, the bank verifies the credit worthiness of its borrowers. Of course, private banks whose primary interest is in gambling don't do that. They bundle the loans and peddle them to someone else as "securities". Then the derivative betting begins. Bets they are valuable vs. bets that they aren't. The FDIC ,the Federal Reserve and the taxpayers will bail the banksters out if need be to keep the nation's economy from collapsing from the nonsense..

If the nation's banks were government operated, interest could finance government rather than taxes. 6% of a person's income that is spent on loans vs. 30-40% of a person's entire income as taxes...plus paying interest anyway.

Interest would re-spent back into the economy as the government budget rather than extracting interest from the economy and throwing it at Wall Street and international financial markets.

If you prefer taxation and period meltdowns, keep the present structures. Let governments borrow money into existence rather than simply spending it into existence as they did before the Bank of England came into being...founded by shareholders..

Banksters laugh at you all the way to the bank every morning..I'm sure they delight that you'd rather pay taxes than put them into the unemployment line. Billion dollar bonuses would be sorely missed. .

Retired Monk - "Ideology is a disease"

.

Cheesebone
Cheesebone's picture
I completely understand WHY

I completely understand WHY you're saying what you say about the state bank, but you seem to want to attribute N. Dakota's statewide prosperity on the fact that it has a State Run Bank - when in reality, when you look at that states fundamentals, the bank likely has virtually no effect on the real bottom lines and WHY they're in such good shape.

It doesn't NEED a high tax revenue because the state is producing far more than it needs, which results in less need for state-run programs and ultimately leads to a budget surplus when government aid isn't in demand.

California is an extremely debted state right now, many of the citizens there are incredibly upside-down on mortgages and buried under other debt as well. How would a state-run bank swallow the losses from diminished property values? THE LOSSES ARE STILL REAL. Just because the credit can be created out of nothing doesn't mean that losses can simply vanish as well. It's still an inflation machine at the end of the day.

polycarp2
It's an inflation machine if

It's an inflation machine if government spending exceeds the productive output. When the prouctive output is under utilized, it isn't. Then it stimulates production of goods/services.

Banks, operated as public utilites could finance government. 6% interest on the portion of income used to pay back loans, or 30-40% taxes on all income to finance government and pay interest anyway as we do now.

Taxes aren't necessary. The figures to finance government with interest revenues jive.

We have inflation under the current banking/monetary system. The 1910 dollar is worth about four cents.

How the private banking system functions...creating money out of thin air.ttp://www.youtube.com/watch?v=sanOXoWl0kc

Retired Monk - "Ideology is a disease"..

 

Cheesebone
Cheesebone's picture
polycarp2 wrote: It's an

polycarp2 wrote:

It's an inflation machine if government spending exceeds the productive output. When the prouctive output is under utilized, it isn't. Then it stimulates production of goods/services.

Ok, so what is the productive output of California? What is the productive output of N. Dakota?

I'd bet that N. Dakota, with is 650k population is a more PRODUCTIVE state than California is even with over 60 times the population.

Even if you wanted to use GDP figures as an assumed LEGITIMATE estimate of productive output, a State Bank in California would only be able to provide credit worth $1050 per California Citizen, once a year. Not really going to help much. North Dakota on the other hand, their bank would have a massive amount of $60,000 worth of credit for every man, woman, and child in the state. Which of course is a huge potential help. But in general, they don't need it BECAUSE of their true productive output.

And it's not just an inflation machine only if spending exceeds productive output - what if bank spending results in capital flow to nonproductive areas, businesses that start and just don't ever take off, malinvestment due to misreading the market... huge amounts of money could be spent on creating assets that do absolutely nothing for the benefit of anyone. Obviously this is an unrealistic example, but let's say I took out a huge loan to build a factory that created "entertainment goods", and then went ahead with it, hired all these people, bought up all the raw materials, and now I have this huge functioning factory producing ...VHS cassettes. I have spent all this money invested in a company that manufactures products that nobody wants. No profits made. No ability to pay back the loan. Then what - the bank just says "oh well."? They just created money out of nowhere to finance a business that did nothing but drain resources from parts of the economy that could have been ACTUALLY productive. The money supply basically just expanded.

It's inflation at it's core.

polycarp2
Cheesebone wrote: what if

Cheesebone wrote: what if bank spending results in capital flow to nonproductive areas, businesses that start and just don't ever take off, malinvestment due to misreading the market... huge amounts of money could be spent on creating assets that do absolutely nothing for the benefit of anyone. Obviously this is an unrealistic example, but let's say I took out a huge loan to build a factory that created "entertainment goods", and then went ahead with it, hired all these people, bought up all the raw materials, and now I have this huge functioning factory producing ...VHS cassettes. I have spent all this money invested in a company that manufactures products that nobody wants.

poly replies: Sure banks can do stupid things. We're living some of the results of that, aren't we? They bought and sold $11 trillion worth of paper that nobody wants rather than financing anything tangible.. Taxpayers  guarantee $11 trillion worth of worthless paper as being worth $11 trillion. It keeps the private banking sector solvent..

A public bank would solve California's immediate crises, and unless they repeal Prop. 13 and shift the costs of local education back to local taxation, the state will continue going broke. However, if all banks in the state were state-owned, they could eliminate taxes. Interest earnings would finance government. Not a likely event.

N. Dakota was fortunate. They couldn't ship their farms and natural resources to China. The state remains productive. The state's economy wasn't shipped abroad.

If you're against using interest to finance government rather than paying high taxes, keep things as they are . You don't have to run in circles around it making up one absurd possible scenario after another. Banks don't spend the interest income in state-owned banking, they put it into the State Treasury. .

.Just simply state you prefer paying taxes and interest. rather than financing government with interest alone. Afterall, we've been doing it that way for a long time and have one systemic collapse after another as a result..

Get how it works. There is no way around periodic collapses with a private banking system..

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease"

 

Natural Lefty
Natural Lefty's picture
One of my great grandfathers

One of my great grandfathers was a politician in North Dakota around the time that the state bank was formed. I tried to search the internet to find out whether or not he had a role in it, but couldn't find anything. He was a Democrat, by the way. Ironically, I don't know much about North Dakota's state run bank. I didn't even know they had one until I heard that on Thom's show. However, I do know that most of North Dakota is farmland, so they produce lots of food there. They also probably get lots of farm subsidies. I have to question the statement that their economy is almost as big as that of California, though. Why is is that we hear that California has the world's sixth (or something like that) largest economy, but we never hear that about North Dakota. My great grandfather was also a farmer in N.D. so my greandfather grew up on a farm which was still in the family until my mom and her siblings sold it a few years ago. The farmers went through many struggles, as I recall, and didn't seem to have a very good income, or security, so I have to wonder where all this North Dakotan money is coming from, unless they are doing a really good job of managing what they have using their state bank.

Cheesebone
Cheesebone's picture
*sinks head* Ok so I was

*sinks head*

Ok so I was mistaken, a bit... ok, a lot.  Those figures I posted were misinterpereted by me, haha.. it was 39k and 42k **PER CAPITA** and not statewide 39B and 42B. So, umm... whoops.

HOWEVER.

I think this still doesn't de-rail the argument of productivity leading to the states success and the fact that their State Bank exists. It is their economic fundamentals that lead them to where they are. Poly agrees that "at least" their productivity hasn't been outsourced.. and yes, that's got a lot do to with it. But it still bolsters my argument.

It's not that I want to finance government through taxes VS interest, it's that I feel our government demands far too many resources from the private sector to begin with.

And back to the original topic, I feel that proper interest rates are what help discourage malinvestment in the first place. It is the fear of going into debt and not being able to pay it back, with REAL CONSEQUENCES, that prevents people from taking on loans in the first place. Therefore, people who do take on loans, generally do so when they can afford the payments and honestly believe that the loan investment will pay off.

 

 

polycarp2
And of course, our monetary

And of course, our monetary system based on private banking requires that banks continually expand credit or the whole thing collapses. Easy credit postponed a systemic meltdown. The last one was in the 30's.

Banks create money out of thin air with fractional reserve banking. They inject the pirincipal into the money supply, not the interest. There is a shortfall.

Without continual new loan injections, the money supply shrinks from the interest extractions. Economies grind to a halt. The U.S. Main St. money supply is shrinking.

"Faced by a failure of credit, they propose only the lending of more money" - FDR

State-owned banks, putting interest into state treasuries would see the interest re-spent back into the economy rather than flowing into financial paper. Systemic monetary collapses would no longer happen and taxes wouldn't be necessary.

With a re-strucuring of the banking system, national governments could once again spend money into existence rather than borrowing it into existence. Same amounts. One with debt...one without it.

The only uninterrupted prosperity England ever had was when the Crown rather than the Bank of England i(founded by shareholders) issued the money.Government issuance of money was changed in 1694. We've been following the "go into national debt to the banks"  policy ever since.

National governments have the authority to issue money. They shouldn't have handed it over to the private banking system. "Give me control of a nation's money, and I care not who writes her laws". - Rothschild, banker.

We did that. Get how the monetary system works under private banking. . It isn't that difficult to comprehend. What is difficult to comprehend is why we retain it.

http://www.youtube.com/watch?v=vVkFb26u9g8

Retired Monk - "Ideology is a disease"

Cheesebone
Cheesebone's picture
I guess the way I see it is

I guess the way I see it is that, if the banking system is on the verge of seeing multiple failures due to a decrease in the amount of credit in demand, then I would interpret that as a market signal saying that there are simply too many banks competing for the same person's savings. Some banks will NEED to fail.

tayl44
tayl44's picture
Poly,seeing you guys going

Poly,seeing you guys going back and forward on economic numbers of one economic system vs the other,makes a strong point to create a experimental test model of a North Dakota State/Public bank as a regular bank.Poly,do you also see the age old argument,"individual vs community" involve? I think Cheese is using the individual side(too many banks,sound like supplyside) If their`s a problem between the individual and community,the "Devil" has to be around.All humans basic needs, are the same.The community controlling money from private/individual control is basic common sense and natural evolution as people learn we all have the same basic needs.Cheese,I hope you don`t believe in "Capitalism"? Or it can be "Fix"?   

polycarp2
If the system follows its

If the system follows its usual course, the big banks will swallow up the smaller ones.

Economics is primarilly concerned about the accumulation of money.."Capital accumulation"..Real capital, however, isn't money. It's a factory, a forest, minerals and the like. Money is just a director of capital.

Money can direct existing capital to expand upon itself. It can direct a factory  (existing capital)  to produce another factory, etc., or direct a forest  (existing capital) to be harvested. It can direct existing capital to build a saw mill to turn raw lumber into boards.  Real capital builds upon existing capital. Real capital is tangible, it isn't abstract money.

Public banking can provide the means to do that.....to provide money as a director of capital.  Private banking and financiers are really irrelevant if that is done. Then economics would primarily be concerned with the production and distribution of required goods. rather than wealth accumulation.

However, since economics is primarily concerned with the private accumulation of vast sums of money, that will probably never be done.

Taxes rather than interest from public banks will continue to finance government, National governments will continue borrowing money into existence rather than simply spending it into existence, as they once did, and periodic meltdowns from the inherent flaw I've explained many times will be on-going events.

Retired Monk - "Ideology is a disease"

Natural Lefty
Natural Lefty's picture
I was thinking the same

I was thinking the same thing, Polycarp. It's not the "good" puts the "bad" out of business (as though economic success had anything to do with human virtues); it's the big swallows up the small.

Cheesebone
Cheesebone's picture
But Capitalism also drives a

But Capitalism also drives a profit motive for invention, advancement, so on.. I mean, if there was no real profit motive behind business in general, then it's pretty likely that I wouldn't have a cell phone with a touchscreen interface, storing hours of music, that shoots video in high-def, has an 8 megapixel camera, I can check my e-mail, maintain bank accounts, browse the internet.. and it cost me $200.

10 years ago a device like this would have been astronomically priced. It is because of Capitalism that we have been able to make things like this affordable and commonplace, it is because of Capitalism that we have a higher standard of living and more things to make life easier.

Polycarp's Monestery experience has obviously been very educational and eye-opening for him.. but in reality, there simply aren't that many people who WANT to live that kind of life. People don't want to have to garden for themselves just to eat, lol. The whole point is that Capitalism at it's basics lets people spend less time working and more time enjoying their life.

The kind of Capitalism that we CURRENTLY see is NOT what I'd consider a good example of what it was intended to be. It has been twisted, distorted, manipulated, bent, broken, and ultimately vilified as a result. The basic "laws" still apply but they have been grossly altered.

Capitalism has been given a terrible name at the hands of a tome of bad decisions made by people who should never have been given the power to make those decisions in the first place.

tayl44
tayl44's picture
Poly,change in life is a

Poly,change in life is a constant,and greed being a motivator of economics "probably" will be changing in the near future due to lessons learn and learn and learn through history.Lefty,you say,economic success has nothing to do with morality,you must have never seen "It`s Wonderful Life"? You say the big eat the small,how true. All the negatives build up over time,now the positives are taking this world out.Bad win battles,Good win "wars". Cheese,capitalism is more then bad people,it`s a bad idea. Democracy is a good idea,not even bad people can corrupt it,when they do,you know .With all the dead canaries in the mine,how much proof do you need? 

Cheesebone
Cheesebone's picture
tayl44 wrote: capitalism is

tayl44 wrote:

capitalism is more then bad people,it`s a bad idea. Democracy is a good idea,not even bad people can corrupt it,when they do,you know .With all the dead canaries in the mine,how much proof do you need? 

The only bad idea regarding the USA's application of Capitalism was giving the government so much potential to screw things up.

If you want to see the biggest pile of dead canaries in the mine - take a look at the nominal value of the Dow Jones VS things that actually have real value like gold & commodities.

Politicians have messed up Capitalism, giving it a bad name. it's not the fundamentals of Capitalism that are to blame. Aside from the events like Clinton apoligizing for lying about giving skin-flute lessons to his intern, when was the last time you actually ever heard a high-ranking politician say "Hey guys.. listen. I'm sorry, but I screwed up." It doesn't happen. They find other things to blame and do everything they can to try and make themselves look innocent. Capitalism has been the scapegoat for decades of TERRIBLE political choices and of course none of the politicians who actually created the hazards that led to failures will blame themselves. They'll blame the free market instead. They always have. These idiots think that the markets are "an art". 

LOL.

I can only hope that maybe someday the Progressive crowd will realize that they bought into a phony testimony from someone claiming to be innocent, because I really like all you guys as people :)

 

polycarp2
Government is always captured

Government is always captured under our application of capitalism. This isn't somethng new.. I'd suggest reading a wee bit of U.S. and world economic/political history. When wealth accumulation is large enough to buy government, government gets bought.

Miners mowed down by machine guns of Colorado's state militia for demanding payment in U.S. currency rather than company scrip wasn't because government was neutral. (Ludlow Massacre).

The cessation of government spending money into existence with silver coins was a direct result of banksters buying the U.S. government over a century ago..Their ultimate reward was the Fed and a monetary system based on debt..

Slavery functions under capitalism in a "democracy" just as well as it functions under a despot. We've had or own experience with that one.

Its inherent flaws have created one Panic - Depression - Recession after another. There is no need for them and the human suffering that accompanies them. Our application of what's an economic fundamental is flawed.

The structures themselves impede addressing global warming in a viable manner. The results of putting the human species at risk  won't be pleasant..

Retired Monk - "Ideology is a disease"

 

Cheesebone
Cheesebone's picture
But what incentinve would

But what incentinve would there be to "purchase" the government if doing so had no real benefit to your business anyway? The government was only sought to be bought out because it had the abillity to make regulations and changes that can benefit one person at the expense of another. Corporations and banks can use this power to their advantage, obviously. If that power was never available to government entities, then what motive would there be to try and buy out the system?

tayl44
tayl44's picture
Cheese,What do you believe

Cheese,What do you believe in?

polycarp2
Cheesebone wrote: But what

Cheesebone wrote:

But what incentinve would there be to "purchase" the government if doing so had no real benefit to your business anyway? The government was only sought to be bought out because it had the abillity to make regulations and changes that can benefit one person at the expense of another. Corporations and banks can use this power to their advantage, obviously. If that power was never available to government entities, then what motive would there be to try and buy out the system?

And government will always ultimately have the ability to do that...make regulations and changes to serve a few at the expense of the many.....when government can be bought.

The Constitution says corporations are really people. LOL.    The Constitution itself was bought.

The only time in history where government hasn't been captured to serve special interests was in egalitarian societies. Large disparities in income/wealth  ALWAYS lead to bought govrnment.

Our own state/federal governments that used to attempt regulating "special interest"  influence were bought to make attempts to  regulate  special interest money illegal. The Supreme Court has sanctified the corruption., Sanctified bought government.

The only time in history where government hasn't been captured to serve special interests was in egalitarian societies. Large disparities in income/wealth  ALWAYS lead to bought govrnment.

Welcome to a government that's incapable of addressing the nation's problems....because it can't step on the special interest toes that have bought it.

You have a strange take on the financial meltdown. It was brought about by bundling lousy loans and selling them as securities. Bank losses involved were from buying the junk that was falsely rated as "A" investments or by placing derivative bets on the wrong side.

Retired Monk - "Ideology is a disease"

Cheesebone
Cheesebone's picture
tayl44 wrote: Cheese,What do

tayl44 wrote:

Cheese,What do you believe in?

I believe in small, limited government. But not anarchy by any means. Even in complete anarchistic state, there will be small government-like organizations formed within. People will band together and create protection from others who want to steal from and hurt others and a list of "rules" that people need to follow if they want to be associated. I guess you could say that a gang in itself is a form of government to a degree.

I believe that the government described in our constitution laid a pretty good foundation - protect our lives, liberties, and property. Prosecute and punish those who directly violate these fundamentals.

I believe that things like national defense are absolutely best handled by an organized group of people that all citizens (who can legitimately afford it) do pay into for funding, and even as a very peace-loving person I believe there are a number of reasons why defense spending should be the #1 largest expenditure of a government.

 

polycarp2
We agree on a lot of the

We agree on a lot of the substance...and disagree on the definitions of the substance.

I'd define them by the Universal Declaration of Human Rights.  In economics, I'd define them by what works best for the majority rather than by what works best for the few, as now.

Economic collapses can really benefit a few. While they ultimately destroy  even the lower tiers of the elite, the upper tier increases its tangible assets many, many fold. Current economic theory supports that. It's called trickle down. The lower tiers of the rich themselves become dependent on what trickles down to them. They think they are exempt.  LOL.

Retired Monk - "Ideology is a disease".

tayl44
tayl44's picture
Cheese,the idea of government

Cheese,the idea of government is people working and sharing together in a civilize way.When government is use for any other reason,it`s not a government.Back on topic,the people who believe interests is moral and legal,remember when everybody use to hunt for food.Remember when everybody thought the world was flat,well the idea of 'interests" will go the way these old concepts went.Interests is a man-made idea,coming from every man is his own island.That concept don`t work in a world that getting "smaller".The human race is becoming one "big family",a family that`s a family work together to survive,they don`t charge interest.We the only animals on earth with this idea,there is no comparison in nature.We should get the idea something is wrong when an idea  it has so many problems. And the basic  problem, is getting something for nothing.(more then investment)  When somebody beliefs are stronger then their reality ,that`s insanity.The world is insane today,because they believe they can get more from this world then they invest.The world use to be flat,we will learn.The easy way or the hard way.We Will Learn to work smart, is to work together without interest.Usury is immoral for many good reasons,we just need to open our eyes/mind to them.