Sunday, November 28, 2010

unhealthy interest addenda: it's not about the gold standard; it's first about interest

Yesterday i wrote up a wee post about what i'd learned about the creation of money as always being the creation of debt  in our monetary system. This fact isn't something promoted when we visit the Bank of England and go heft the gold bar (made in germany) that's on display. That fact is that money in our current international monetary system is always already debt. That the creation of a dollar is at first the creation of a debt. As such, the goal of ever paying off debt with money that is always debt first, is impossible.

In the wee bit of notes i've seen about this post, several folks have argued our problems all come from being off the gold standard. If we could only create as much money as we have some resource to back it, then money would be limited to actual SOMETHING, right? and so we couldn't spiral into unending debt, right?

Let's look at that.

it's not about the Gold Standard - it's about interest (of debt)
A few things seem to be missing in this argument - about the race that will always be on to keep plundering the earth of more gold; that value can be in other things that have real worth (unlike gold that's just shiny) - such as infrastructure from education to roads; that a fractional reserve system is questionable and that pulling the plug on interest that can just be used to create more interest rather than spent (or just killing interest) could pretty much solve this mess.

actual goods growth (green) cannot keep up with the exponential curve of debt (red)
To review a couple of these points, in a fractional reserve system even with gold, something can still been made out of nothing. Fractional reserve: i am allowed to make something of nothing; as long as i have One Bit in reserve, i can ACT as if i have Ten Bits, let's say (see money marketing mechanics pdf, in resources, below).

Likewise, i'm making loans at interest on this fictional money, too. The debt of interest accrues against that fictional gold, too, and so debt, like cancer, grows much much faster than the healthy organism and will inevitably consume it. See the graph above. The curve of debt is taking an exponential hike against the more linear (and limited) growth of people and goods.

It hasn't always been this way; it doesn't have to be this way. Check out tally sticks in Henry I's England and Greenbacks in Lincoln's America. See The Secret of Oz (or its 14 year precursor, the masters of money) as putting the boots to the so called value of the myth of the Gold Standard; it will make you ill. The benefit of the Gold Standard, when the gold is held by the private banks, is no benefit or change. It's all still debt and fractional reserve banking and private banks deciding to contract the money supply. So please, time to recheck the illusion that it's all because we went off gold that we have these problems. Gold backing historically has been the root control of central banks in the world's economy, and especially in the US.

[W]e shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.
William Jennings Bryan on July 9, 1896, at the Democratic National Convention in Chicago

Exponentially Impossible - that's just the inescapable math.
Fundamentally it seems to me that it really really doesn't matter whether a standard is backed by gold or not, if the most fundamental concept, regardless of standard, is that to create a dollar, that dollar is toujour deja, always already, attached to interest,  that dollar + something - that is, it's always attached to debt, and that the interest of that debt does not have to be 100% recycled.

On a system-wide level, it becomes impossible - as we see all around us - to pay off the debt because, in this system, the payment of one debt OF NECESSITY creates MORE DEBT.  Because loans are always attached to interest with a goal of creating never ending growth of interest which means more debt, and all the interest (that is 100% of it) does not circulate back into the money supply. It's not recyled; it's ponzi'd. Which gets back to money in our monetary system as debt.

In the monetary system as a whole, of which we are a part, it's impossible with the current laws around interest and its use for 100% of the debt ever to be paid. Look at what's happening with Europe right now for instance, exemplified in this video's question "and where does the money come to pay off that debt?" "exactly; next question..." "but what's the answer?" "you're wasting valuable time"

Alas, the bailout - the creation of more debt as some perverse kind of rescue - of COURSE sees banks becoming wealthy again, at the cost of everyone else because it's just more of the same, except accelerated. Loans when they can only ever be repaid as loans are perhaps the definition of insanity: doing the same thing and expecting a different result. And the economic divides get wider and the process accelerates.

As said, this process can start to get a little intrigued - but it doesn't need to be. We just have to start with the monetary system creates money as money + interest. Where's the money coming from to pay off that interest? It's a deliberately exponentially viscous spiral. If you want to go down the more intrigued path, here's a route via a very interesting discussion by Paul Grignon that still comes out to the same conclusion.  Here's a lovely 7min animation if you prefer that to text. Really really worth reading/watching.

Once we know that fundamentally money = debt, there's no surprise - there's no question. What we see now of nations always responding to debt, and using debt as an excuse for everything, what is happening now is EXACTLY, PREDICTABLY what's going to happen. That we're surprised is the horrible sign of our own well fostered ignorance, and resistance to the desire that anyone could be doing this.

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." ~Henry Ford

No Spoon. The crime is that we have been educated to think money has to be this way. But it has not always been this way. It does not have to be this way. There is no frickin' spoon, dam it.

Kill interest; kill off any of the problems we see right now. Well ok, either get rid of interest or have very different rules governing how interest can be used (eg, it must be spent in its entirety), and problems iron out. No wonder all major religions of the world said usury was a sin.

The idea of monetary reform is not crazy nut nut conspiracy based. Take a look at the section about monetary reform that talks about "govn't issued debt free money"(just scroll down the page). Quite sensible people talk about it. And if we were more sensible more of us would be demanding politicians to stop dicking around with debt and telling us to tighten our belts, and would be worrying about fundamental causes. Sheesh, since they're sadly around anyway, here's something a Monarch or Pope who doesn't have to worry about being elected could actually do something about meaningfully.  Never mind the dam architecture Charles. Get one with Money as Debt.

Legal Tender. The most amazing heist that the private banks of the world have pulled off is to have govn'ts sign up to allowing banks to say "we'll handle the money supply" and that when a govn't needs money, they get it as  A LOAN with INTEREST from a BANK, a private corporation.

One might argue (and others have) that US independence was to get away from just such monetary policy rooted in England/Europe. Or for that matter, in the forced return in the UK to - Guess what? - the Gold Standard (see the currency act of 1763). So the US went to WAR to get away from this control. That break lasted only till 1913. Who's doomed to repeat history?

(money as debt II: the discussion of the gold standard - about 4mins in)

Cui Bono? 
We like to make things more complicated than they are or actually better than they are (as this argument against the claims of Money as Debt II shows) because we have a hard time accepting that a) something could be this simple and b) this corrupt and yet c) this legal. That we have empowered govn'ts to indenture us to banks in an impossible cycle doomed to collapse and suffering. This isn't a conspiracy; it's just the law.

When, please, are the aliens coming?

Thanks to the amazing work featured here by Paul Grignon off the coast of Vancouver Island, Canada.

Addenda to the addenda
There are historical precedents for alternatives. I'd encourage you to watch the Secret of Oz, especially the last 45 mins if you're interested in previous and even recent precedents. It's not more debt (duh?). It's community banks, savings banks, state banks with debt-free money being created and spent into circulation for the "common wealth."

The story of Iceland's pre-privatised banking prosperity and catastrophe of what happened when it privatised away from savings banks is amazing. Go Iceland in recovering your banking.  The US has done it six times historically. Do it again.

Some monetary reform related resources

No comments:


Related Posts with Thumbnails