Money As Debt Page #4

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there are other borrowers in the same situation,

frantically trying to obtain the money they need

to pay back both Principal and Interest

from a total money pool

which contains only Principal.

. It is clearly impossible for everyone to pay back

the Principal plus the Interest

because the interest money does not exist.

This can even be expressed by a simple mathematical formula.

The big problem here is that

for long term loans such as mortgages and government debt,

the total Interest far exceeds the Principal.

So unless a lot of extra money

is created to pay the Interest,

it means a very high proportion of foreclosures,

and a non-functioning economy.

To maintain a functional society

the rate of foreclosure needs to be low.

And so, to accomplish this,

more and more new debt money

has to be created

to satisfy today's demands for money

to service the previous debt.

But, of course, this just makes the total debt

bigger.

And that means more interest

must ultimately be paid,

resulting in an ever-escalating and

inescapable spiral of mounting indebtedness.

It is only the time lag

between money's creation

as new loans and its repayment

that keeps the overall shortage of money from catching up

and bankrupting the entire system.

However, as the bankers' insatiable credit monster

gets bigger and bigger,

the need to create more and more debt money

to feed it becomes increasingly urgent.

Why are interest rates so low?

Why do we get unsolicited credit cards

in the mail?

Why is the US government spending

faster than ever?

Could it be to stave off collapse

of the entire monetary system?

The rational person has to ask:

Can this really go on forever?

Isn't a collapse inevitable?

"One thing to realize about our fractional reserve banking system

is that, like a child's game of musical chairs,

as long as the music is playing, there are no losers."

~Andrew Gause, Monetary Historian

Money facilitates production and trade.

As the money supply increases,

money just becomes increasingly worthless

unless the volume of production and trade

in the real world grows by the same amount

Add to this the realization that when we hear

that the economy is growing at 3% per year,

it sounds like a constant rate.

But is not.

This year's 3% represents more real goods and services

than last year's 3% because it is 3% of the new total.

Instead of a straight line as is naturally

visualized from the words,

it is really an exponential curve

getting steeper and steeper.

["The greatest shortcoming of the human race...]

The problem, of course, is that perpetual growth

[is our inability to understand the exponential function."]

of the real economy requires perpetually escalating use

[ -Albert A. Bartlett, physicist]

of real world resources and energy.

More and more stuff has to go from natural resource

to garbage every year

...forever,

just to keep this system from collapsing

"Anyone who believes exponential growth

can go on forever in a finite world

is either a madman or an economist."

-Kenneth Boulding, economist

What can we do

about this downright scary situation?

For one thing,

we need a different concept of money.

It's time more people ask themselves

and their governments four simple questions.

Around the world, governments borrow money

at interest from private banks.

Government debt is a major component of total debt

and servicing that debt takes a big chunk of our taxes.

Now, we know that banks

simply create the money they lend

and that governments

have given them permission to do this.

So the first question is

why do governments choose to borrow money

from private banks at interest

when government could create

all the interest free money it needs itself?

And the second big question is:

Why create money as debt at all?

Why not create money that circulates permanently

and doesn't have to be perpetually re-borrowed

at interest in order to exist?

The third question:

How can a money system that can only function

with perpetually accelerating growth

be used to build a sustainable economy?

Isn't it logical that perpetually accelerating growth

and sustainability are incompatible?

And finally:

What is it about our current system

that makes it totally dependent on perpetual growth?

What needs to be changed

to allow the creation of a sustainable economy?

[Usury]

At one time, charging any interest on a loan

was called usury

and was subject to severe penalties,

including death.

Every major religion forbade usury.

Most of the arguments made against the practice

were moral.

It was held that money's only legitimate purpose

was to facilitate the exchange of real goods and services.

Any form of making money from simply having money

was regarded as the act of a parasite

or of a thief.

However, as the credit needs of commerce increased,

the moral arguments eventually gave way to the argument

that lending involves risk

and loss of opportunity to the lender

and therefore attempting

to make a profit from lending is justified.

Today, these notions seem quaint.

Today, the idea of making money from money

is held as the ideal to strive for.

Why work when you can get your money

to work for you?

However, in trying

to envision a sustainable future,

it is very clear that the charging of interest

is both a moral and a practical problem.

Imagine a society and economy

that can endure for centuries because,

instead of plundering its capital stores of energy,

it restricts itself to present day income.

No more wood is harvested than

grows in the same period.

All energy is renewable: solar, gravitational or geothermal,

magnetic and whatever else we discover.

This society lives within the limits of its non-renewable resources

by reusing and recycling everything.

And the population just replaces itself.

Such a society could never function using a money system

utterly dependent on perpetually accelerating growth.

A stable economy would need a money supply

at least capable of remaining stable without collapsing.

Let's say the total volume of this stable money supply

is represented by this big circle.

Let us also imagine that moneylenders

must actually have existing money to lend.

If some people within this money supply

begin systematically lending money at interest,

their share of the money supply will grow.

If they continually re-loan at interest

all the money that gets paid back what is the inevitable result?

Whether it is gold, fiat

or debt money doesn't matter.

The moneylenders will end up with ALL of the money.

And after the foreclosures and bankruptcies are all filed,

they will get all the real property too.

Only if the proceeds of lending at interest

were evenly distributed among the population

would this central problem be solved.

Heavy taxation of bank profits

might accomplish this goal.

But then why would banks

want to be in business?

If we were ever able to free ourselves

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