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How economic slavery works

"We have stricken the shackles from 4,000,000 human beings and brought all labourers to a common level, but not so much by the elevation of former slaves as by reducing the whole working population, white and black, to a condition of serfdom. While boasting of our noble deeds, we are careful to conceal the ugly fact that by our iniquitous money system we have manipulated a system of oppression which, though more refined, is no less cruel than the old system of chattel slavery."
Horace Greeley - (1811-1872) editor of the New York Tribune

If you were to find that we were in fact in a kind of economic slavery, you could say its because of some greedy powerful men that are evil. But they could not have this power, if it were not given to them by those who were subordinate and acquiesced... whether through intimidation, ignorance or coercion to this servitude. In today's society it is because of a combination of these reasons. We are enslaved in this way, and the method has existed since the time of Babylon and perhaps even before. What this short paper is, is a quick primer about how money works.

THe introduction: You go to the bank, and get a loan at 6% interest 25 years, for 200k . You end up paying 400k after 25 years. Now, you may think this interest of 200k was justified because you are using someone elses money... but that is the great brainwashing/misconception that has taken place. When a loan is given, new money is created. That is why our economy is a debt driven currency. That is why all money constitues a debt. Our money supply couldn't expand if it wasn't created through loans.

When a loan is given, the principal is created, and the principal + the interest are due back. As the loan is paid back, the interest is taken by the bank for their service, and the principal is destroyed.

But wait... depositors do get interest don't they? If it is not their money being lent out, then why do they get interest? Well... depositors do get interest. A depositor typically gets about half the rate as what banks typically charge for their loans. If they are loaning out money at 6%, depositors will get 3%. So does this mean that 50% of interest goes to pay those depositors ? Well not entirely... you see not all money is earning interest. There is checking account money, and raw cash for instance which earn little to no interest. So in reality, only about half of the money supply is actually earning that interest from deposits. With those rough estimates, we can say that about 25% of interest goes to the depositors, and 75% to the bank. So of your 400k that you spent, 50k went to depositors and 150k went to the bank.

Now is this 50-75% in interest they earn justified? Lets take a quick look at the banks expenses. The creation of a loan and money is mostly an electronic transaction. By typing in a few keys, you can create 1 thousand, or 1 million dollars just as easily. Such electronic transactions we can liken for instance... to say something like paypal which charge a few cents to dollars commision on that transaction. So is that what justifies the 150k? Well... not really.

But wait... don't banks bear the risk in the event of foreclosures? Well yes they do! . In this way they act as insurance. But does this justify the 75% or 150? Well... Lets say that foreclosure is 5% of loans given. Lets say the bank makes 20 100,000 dollar loans @ 5% interest for 15 years. This creates 2000000 in money. Lets say they charge 5% interest rate for this loan. That would net them 850k . Now they take their cut of 850k 75% which is 635k. Now since 5% of loans result in foreclosure, one of these 100,000 loans will result in a loss that they will absorb. But will they lose 100k ? No.. if you look at the amortization table of a loan, you will see that as you pay a loan, part is principal part is interest. Obviously the foreclosure would not happen right away, but sometime through the life of the loan. Since the largest part of the payments start in the beginning as interest that means they will earn some of this(which offsets any loss). Secondly in the event of a foreclosure they will seize whatever collateral and assets they can and sell them to make it up. So lets say they loose half of the loan or 50k. 635k - 50k is about 585k, from 2000k in loans.

Is this 50k they risk justified by the 585k they would make from a simple electronic transaction? Well that is arguable. I will say no though... especially since Interest itself INCREASES if not causes the risk of foreclosure.

So what is the solution?

Simple: interest free loans.

The government finances themselves by creating the money interest free, and then taxing the money back out of circulation. If they do not tax all that they spend then that would simply be inflation. This is much better than the current system.... where we are in debt to the federal reserve. The government literally borrows money from the Fed at interest, and the public debt continually grows. Our income tax goes to pay the interest on this debt... when in reality our government could just as easily create this money themselves, but instead unconstitutionally delegates this power to the federal reserve which is not federal and it is not a reserve. our country and gold itself is now being held as collateral.

For the private sector, including individuals and corporations, the government would give interest free loans. Note however, that these loans would not be automatic... they would be just as hard to get as say interest bearing loans. But we would pay them off alot sooner, and we would not be slaves to the bank. for example, a 25 year loan of 200k at 5% interest could be paid in an interest free loan with the same monthly payment... in 13 years. So when you go to get approved for a loan, the loan officer or whoever is in charge decides based on your financial status.. just like they do now... what you are capable of paying... and for the person that would have qualified for that 5% interest loan for 25 years.... you would qualify for the 200k loan at no interest , but must be paid in 13 years or less. The foreclosure would be subsidized. But since interest would be 0% foreclosure would be much less than it is now at %.

Interest... we all know it increases foreclosure, increases unemployment... and decreases production. But the one thing it is touted for is for controlling inflation. Is it actually true?

1. in either loan the same amount of money is created. In the interest free loan, since the principal is being paid in full the money is leaving the economy faster. Therefore it is less inflationary in this respect.

2. Since a loan is an addition to the money supply, does reducing the interest rate which could mean more loans given may increase money? the interest does not actually control the money supply. what controls the money supply is the federal discount rate. But as I have shown... even if it did control the money supply , as in less people would want to take loans out if the interest was higher... you could make it just as hard through non interest bearing loans.

3. demand pull. does increasing interest, reduce demand.... which reduces dollars competing for the same goods. Well essentialy yesnot, if interest increases more people save their money instead of spend it. So it looks like there is less money ... even though there is the same. But that is only half the truth. When this spending decreases due to less demand(and more people wanting to earn interest through savings)... so does production. And unemployment increases. The fact that production decrease means that capital is no longer being fully utilized. So while you are sort of decreasing the money supply (temporarily by having people put their money in savings) , you are also decreasing the production. If the money was spent production would increase and capital would increase as well (unemployed would become employed, unsold goods could become sold goods etc) . Also assuming inflation was less....

what causes inflation then? The debt of a loan itself is what keeps it from being inflationary because it is paid back. The debt free issuance of money through open market operations means that money is created without any additional debt and it is never paid off and is completely inflationary. In this way the government taxes the people invisibly through inflation as well as through all their other means.