VIDEO..Is All Interest Usary?
Xabier Garay is the author of "Debt Freedom Reign" which is an anti-Federal Reserve monetary reform book. His book correctly identifies interest/usury as the true problem with the worlds economic/monetary policies. Even 1% interest on gold, silver, copper, or diamonds will fleece the People. YouTube
Dominant Social Theme: It's a mathematical certainty. You can't pay back the interest. Someone has to lose.
Free-Market Analysis: This is a great little video along with a nicely written intro, as well, that focuses mostly on interest rates but also mentions tally sticks. We comment on both of them, below.
Tally sticks first. We've been struggling with the issue of tally sticks ever since we read about them in Ellen Brown's famous book, Web of Debt. Ms. Brown, who believes that government ought to handle money (along with virtually everything else, it sometimes seems) made the point that tally sticks were in use continuously for some 700 years after King Henry I initiated the system. Wikipedia describes it thusly:
The most prominent and best recorded use of the split tally stick being used as a form of currency was when King Henry I initiated the tally stick system in or around 1100 in medieval England. He would only accept the tally stick for taxes, and it was a tool of the Exchequer for the collection of taxes by local sheriffs (tax farmers "farming the shire") for roughly 726 years. The split tally of the Exchequer was in continuous use until 1826.
Ms. Brown's point was that this money served very well. But recently we began to realize it was "artificial money" in the sense that it was constrained. Maybe we're missing something but it seems to us that such a system (if it did exist as it has been described) would have limited the money supply.
The more we think about it the more it seems to us that tally sticks were a great way for the elites of the day to maintain almost total control over the money supply. It also occurs to us that if tally sticks were mandated as monopoly money then there must have been a big black market in money as well.
Finally, we wonder if the ending of the tally stick system and the expansion of the Industrial Revolution was any coincidence. Once people had access to more money, various capital-intensive facilities perhaps became more practical. The tally stick system may have been great for the elites controlling the government but maybe it reinforced the Middle Ages' caste system and generally retarded innovation and freedom.
Enough about tally sticks. Let's take a look at the main point of this video, which is that any kind of interest charge is "usury" and ought to be made a crime. We're aware that the charging of interest recognizes the time-value of money but the fellows who made this video disagree with that.
We also believe that monetary functions ought not to be criminalized generally but again, the video has a different perspective. What is striking about the video is that it is just one of a virtual BARRAGE of anti-Austrian and anti-free-market websites and videos that are going up (all at once, it seems) attacking free-market economics.
This video even attacks anarchism generally, though to its credit, anarchists are properly identified not as rabble rousers but as those who believe that people would still survive and even thrive in the absence of government. Here's some more from the introduction to the video (notice how it immediately targets Ron Paul):
Ron Paul correctly wishes to End the Fed, but replace it with what? Don't be tricked by another phony solution by the elite. Paul is just another lying politicians just like the rest. As INTEREST/USURY is the original sin of the world's monetary/economic problems; competing commodity currencies is a false solution.
As the People do not have these commodities, they would have to borrow them from the elite. Private banks would compete at the interest rate on various commodities. But even at 1% on gold, silver, platinum, diamonds, oil, or whatever, the People will be fleeced.
Ithaca, NY has had a COMPETING, VOLUNTARY, PAPER currency for 20 years. As it is offered WITHOUT interest/usury is is the true solution. The People can issue/spend the currency into circulation just as Ben Franklin's colonial scrip; or Lincoln's Greenbacks. Debt/interest/usury free money is the solution. It created BOOMS with the Bank of Venice, and Tally Sticks in England.
OK. So banning interest inevitably creates prosperous societies. Again, we're not so sure. We haven't noticed that Islamic countries are so much more prosperous than non-Islamic countries. But beyond this, the whole "science"-of-money-idea leaves us cold.
We tend to agree with the Austrians that economics is NOT econometrics and that simple models of complex environments tend to break down in real life. We noticed that the model being used in the video depends on banks issuing out money. But in real life, people can gain capital from places other than banks.
To simply maintain that money is always being circulated with interest (and that this makes it inevitable that some people are "losers" and some are "winners") strikes us as using a "musical chairs" analogy to describe economies that are seven billion people strong.
Coincidentally, one of our favorite feedbackers, "Hoss," posted a feedback entry that dealt extensively with this point. You can see it posted on the thread at DB below the article by Lew Rockwell, "The Personal Is the Economic." Here it is, as well:
The argument that debt-based, interest-bearing currency is destined to implode due to compound interest is both a truism and a red herring. Fiat currency issued as debt, made legal tender at the point of a gun, with compound interest due on it will clearly implode, either through hyperinflation or the rude seizure of all assets by the money-printer. I assume this concept is not at issue.
But it is a red herring based on false premises to assume the same fate awaits a free market in asset-based currencies. First, an asset-based currency of any kind is not debt, because it is an asset. It cannot be created out of debt, it has to be created out of work and real material.
Second, any borrowing in any economy presumes that the loan will be paid back out of future production of real goods or other consideration. (So the lender accepts a promisory note, which is a kind of currency of itself. So, any economy will include some debt-based, interest bearing currency of some sort.) On a macro scale, any interest actually paid can only come out of an increase in production of real wealth.
The assertion that the concept of interest requires exponential growth and consumption of resources is based on a the fallacious presumption that a free market in currencies would be restricted to a single currency (and that debt can be monetized into that currency). It would not, and this is why Ron Paul and others do NOT advocate a government-mandated gold standard (and I have argued in the past that it is possible the elite are cooking up a pseudo-gold standard to replace paper, 'only you can't have the gold and you still must use their paper').
A free market would go around any exponential growth pratfall like water around a rock in a river. Borrowers would not borrow at rates they could not repay, and if they did, they would default. Ultimately, interest charged on loans would be limited to a rate in accordance with increasing productivity. Perhaps a new, risky, wildly profitable venture could promise a rate of return that would support compound interest, and if so, then good for both parties. I would predict that most run-of-the mill loans would likely be simple interest. I would further predict that with prices falling in accordance with increases in productivity, the amount of borrowing would decrease dramatically (it being already profitable to simply save). People would buy things from savings, property could be transferred to offsping, etc. And people would be free to make their deals in any commodity — chickens, wheat, silver, gold, hours of work.
The perverse effects of the current fiat/debt economy seems to implant through lifelong experience some basic assumptions that might be radically different if we had economic freedom. Perhaps it is difficult to imagine a world where nothing can be loaned without first being earned or produced. One effect is that it would make more sense to save than to borrow. Most people would own their homes, rather than having the money-printing class holding title to most of the real estate. (In fact, though it might be possible to try it, I think it would prove impossible for a bank or other entity to create debt notes out of thin air and end up with title to all the property, as it is now.)
On this basis then, I contend that the assertion that a free market in currencies would require exponential growth to be false. Initially, perhaps people accustomed to living in an inflationary debt-based economy might not realize the folly of their ways, but this mistake would be self-limiting. Without the ability to create currency out of nothing, any actions taken based on the faulty exponential growth expectation would quickly fail, because there would be no ability to put off the effects of the folly into the future or onto unwilling third parties, as it is now. What cannot happen, will not happen.
Furthermore, the suggestion to forego interest yet still allow an elite group to print money from nothing and spend it does not offer an inherent solution to the exponential growth problem. In fact, growth in the money supply under such a situation has been shown many times to be limited only by the avarice of the money-printers and their ability to enforce through use of arms the exclusive use of their counterfeit issue. Growth in currency quantity in excess of growth in assets equals impoverishment of the people forced to use the currency.
