False Profits of Boom
Sam Aurelius Milam III
I've
long believed that interest payments ruin an economy. However, they've
been enshrined as "Next to Holy" by the "experts" who run things.
That makes it difficult to persuade people that interest payments are inherently
ruinous.
I
once attempted to persuade a friend and he opposed me with an analogy.
Paying interest on a loan, he said, is no different than renting land.
A loan is merely "renting" money and paying interest is analogous to paying
rent for the land. The analogy, of course, is flawed. When
money is borrowed ("rented", according to my friend), payment for the use
of the money is made in exactly the same thing as was "rented" — money.
For the analogy to be accurate, therefore, the payment for the rented land
must be made in the same thing that was rented — land.
Viewed
that way, it's easy to see that it won't work. It's difficult to
acquire land with which to pay the rent. The longer such rental continues,
the more difficult the payments will become. Eventually, all land
will be owned by the lenders. The same difficulty exists with interest
payments on loans of money. It isn't as obvious because we don't
have much experience with money. We mistakenly believe that currency
is the same as money. However, it isn't. When an economy uses
real money, then the supply of money is limited, just as the supply of
land is limited. As interest payments continue it becomes more difficult
to obtain money, just as it becomes more difficult to obtain land in the
analogy. Eventually, all money will be owned by the lenders.
The only way to avoid that is to increase the supply of money. Since
the supply of money is limited, it cannot be increased. However,
unlike land, money can be replaced by a substitute. The economy will
then function using the substitute, the supply of which is limitless.
That is the situation today. As the supply of currency (the substitute)
increases, its value drops. This means that we need more of it, increasing
the need to borrow. Increased borrowing will reinforce the trend.
Thus, interest payments will destroy any system of real money, force a
continuing increase in the amount of currency substituted for it, and force
an ongoing decrease in the value of that currency.
The
Federal Reserve System controls the supply of currency and the interest
rates. This gives it all of the power it needs to regulate how difficult
it is for us to survive. It can make things easy enough to keep us
docile but hard enough to make sure that we waste our energy struggling,
thereby insuring that we remain harmless. We've become so entangled
in the system of interest payments that it seems impossible to survive
without it. However, I believe that we can. We can get out
of debt, terminate our investments in the "financial" markets, and then
try to deal only in cash. Better yet, we can try to deal only in
real money.
| The Rules of Money — To be money, a thing must be durable, portable,
divisible without loss, available in limited quantity, generally accepted
as money, and must have intrinsic value as money. The better a thing
satisfies these rules, the better it will work as money.
— from Money,
by Sam Aurelius Milam III
|
| Economists, like all pseudoscientific charlatans, know that they can
hold onto their high-paying jobs only as long as they can keep the common
people convinced that money matters are so mysterious that only economists
can understand them.
— from The Way to Dawnworld, by Bill Starr
|
| Gresham's law .... The theory holding that if two kinds
of money in circulation have the same denominational value but different
intrinsic values, the money with higher intrinsic value will be hoarded
and eventually driven out of circulation by the money with lesser intrinsic
value. [After Sir Thomas GRESHAM.]
— The American Heritage Dictionary of the English Language,
Third Edition
|
| Frontiersman@ida.net | Frontiersman,
479 E. 700 N., Firth, Idaho 83236
Also see The Pharos Connection at http://www.ida.net/users/pharos/ |
January 1999
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