What is wrong with a little debt, cautiously applied and wisely managed? The response is absolutely nothing, as long as the debt is based on an honest exchange. There is plenty wrong to it as soon as it is based upon fraud.
What is the difference? A sincere exchange is one wherein a borrower pays off an approved amount in exchange for temporary use of a lender’s possession. That asset might be anything tangible value. When it were an automobile or an apartment then the borrower would pay “rent”. If it is money, then simply the rent is called “interest”.
In either case, the idea is just the same. When we get a loan of money, either from a bank or an individual, we’re ready to pay interest on the lending in recognition of the fact that the money we are now borrowing is an asset we would like to use.
It appears only reasonable to pay a rental fee for that asset to the individual who owns it. It is quite difficult to acquire money, REAL money to be precise. When the money we are borrowing was earned by someone’s labor and talents, they are entirely entitled to collect interest on it. But exactly what to think about money that is created by the click of a Computer key? Why must anyone collect a rental fee on that?
When banks place credits into your checking account, they are simply pretending to lend you money. In reality, they possess absolutely nothing to lend. Even the money that non-indebted depositors have placed with them was at first created out of nothing due to somebody else’s loan. What exactly entitles the banks to collect rent on nothing?
It is meaningless that men everywhere are compelled by law to accept these nothing certificates in return for real products or services. And we’re talking here in regards to what is moral not legal.
Each cent that exists nowadays, either in the form of currency, checkbook money as well as credit card money, exists only since it was lent by somebody. That means all the money in circulation is earning daily and compounded interest for the banks which created them. And what did the banks perform to gain this perpetually flowing stream of wealth? Did they lend out their very own capital obtained by means of the investments of stockholders? Did they lend out the hard-earned savings of their depositors?
No, neither of these were their major revenue stream. They simply waved the magic wand known as fiat money. The flow of such unearned wealth under the form of interest can only be seen as usury of the highest magnitude.
Now, where does the money originate from to pay the interest?
A puzzling question. Let’s consider if you borrow 10,000 from a bank at 9%, you are obligated to repay 10,900. But the bank system only fabricates 10,000 for the loan. It might appear, consequently, that there is no way that you can possibly repay your indebtedness. The amount of money put in circulation is just not sufficient to cover total debt, including the interest. The general belief is that, the more we borrow, the more we need to borrow and debt based on fiat money is a neverending spiral.
This is a half truth. It is correct that there is certainly an insufficient amount of money created to include the interest. But it is a fallacy that the only way to pay it back is to borrow yet a lot more. The assumption fails to take into account the exchange value of labor.
Eventually human effort pays all interest. And the impact of that fact is even more upsetting than the assumption that the total of this human effort in the end is for the benefit of those who create fiat money. It is indeed a type of modern serfdom wherein the great mass of society works as enslaved servants to a ruling monetary class and their bogus system.