The major religions of Hinduism, Buddhism, Judaism, Christianity and Islam have all criticised the practice of Usury. So too have many of the worlds greatest thinkers like Plato, 1Aristotle, 2 Seneca,3 and Plutarch.
Many pages, books in fact, have been written explaining why Usury is bad. The main contention is however that it allows the rich to get richer at the expense of the poor getting poorer. You might not begrudge a person making money for providing a product or service to the community. But Usury allows a person to get richer simply because they are rich. As a result whole countries are now in debt to the banking system.
To give an example of just how destructive Usury can be, imagine a situation where a choice exists between two investment projects. One is for the placing of money into a bank at a 5% return, which the bank then unethically invests in a polluting business, the other choice is for a direct investment into a project beneficial to both people and the environment, say a hydroelectric plant, but with returns of only 3%. Financially the more viable project is the one which is most destructive to us and our environment and whilst profit incentives are vital in encouraging progress, the unregulated practice of Usury is highly damaging and can actual hinder progress, if such a direction is deemed to be less profitable to pursue.
"Only after the last tree has been cut down,
only after the last river has been poisoned,
only after the last fish has been caught,
only then will you find that money cannot be eaten." Cree Indian Prophecy
The practice of Usury allows only the rich to benefit by choosing whether or not to invest and what to invest in, simply on the grounds of how much money it will make for them.
To add insult to injury, there exists a potentially even more harmful aspect of Usury, and that is that projects being invested in needn't even be successful in order for the investors to make money on them!
Because financial institutions more often than not demand collateral to be held against loans, as a guarantee should a venture fail, there is no incentive for them to invest in workable projects above pointless ones. People now are borrowing vast amounts against their homes and lenders encourage this, standing to gain either money from repayment or property from repossessing.
The rewards made possible by Usury can encourage all sorts of irresponsible investments, because from the financiers point of view, it appears sensible, being guaranteed to make them a profit, no matter what the result.
When it doesn't make any difference they don't have to care.
If we are talking about a fair way to share the resources in our world, then this is not it.
The rot starts the moment the currency is produced.
1. Plato, Laws, v. 742
2. Aristotle, Politics, I, x,xi
3. Seneca, De beneficiis, VII, x
FRACTIONAL RESERVE BANKING
Usury however is not the only way in which banks can produce money from nothing. Most of new money creation comes from high street banks giving out private loans for anything from a designer suit to a new car; as well as the interest earned on these loans, they also benefit through the practice known as fractional reserve banking. Depending on risk, a bank needs to keep just 8% to 20% of its capital in reserve, the rest, it is allowed by current regulations to lend.
How does this create money out of thin air?
Imagine an individual goes into a bank and deposits 100 (we'll call them person A); from this 100 deposit only 8% needs to be kept by the bank, the remaining 92% can now be lent out to someone else (we'll call this other someone person B).
Person A still has 100 in their account, but person B now has 92 as well. From out of thin air 92 has been created. But the process doesn't have to stop there. If person B wishes to put their 92 into a bank account also, then the money creation cycle will be repeated even further. (This scenario we give is actually generous to the bankers as it doesn't take into account the fact that they can use their own capital, buildings and so on, as reserves, so allowing for an even bigger chunk of deposited cash to be used in their money creating project. The richer the bank gets, the more money they can loan out).
Restricting this practice is paramount if we wish to have more control over the amount of money in circulation. Fractional reserve banking is one of the main reasons for our mounting private debt and this in turn is adding considerably to the economic uncertainties that businesses and individuals are finding themselves at the mercy of.
Remove Usury and fractional reserve banking from the equation and a wide range of alternative economic strategies open up to us, including ones which will free us from the cyclical effects of boom and bust and from the need to collect taxes. From here a more caring economic alternative can be allowed to grow taking in the needs of both people and the environment.
BELIEVE IT OR NOT?
Think of world finance and most people picture some huge establishment over which they have no control. This image is what those running our finances prefer us to see and they go to great lengths to maintain their grandiose illusion.
Impressively they engrave their currency notes with faces of authority and issue them from triumphant buildings supported by glorious pillars often decorated with gold leaf. The marble halls that dwarf the individual and inspire awe are designed to intimidate and remove all doubt about who holds the power.
Yet this intricate frame so cunningly designed has only one purpose: to distract attention away from the one element that is vital to a currencies survival.
That element is actually our collective faith in money's value.
It has been said that faith is the substance of things hoped for and the evidence of things unseen, but in the case of currency, it is even more than that. It is the vital ingredient that transforms paper into gold.
Alternatively if we all stopped believing that our current currency has value, then it would become worthless overnight.
A staggering thought!
We do not accept currency because it features fine works of art or intricately engraved designs or even because it is produced by an official mint. We accept currency because we believe others will accept it from us later, in return for things we might want, and for no other reason.
In simpler terms, if people in general did not believe in the value of money, money would have no real value of itself.
Power to the people is not a futuristic chant, it's a fact, today.
We collectively, almost unconsciously, have the vital ingredient which supports the whole financial system. If enough of us wanted to, we together could shift this support to something more fairer such as the currency XAT is providing.
We have the ability to give this alternative real value, simply by believing in it.
IT'S BEEN DONE BEFORE
The idea of producing money independent of the powerful Usurers, and Fractional Reserve Bankers, is nothing new.
Back in the 1700's the American Colonies were doing rather better than was expected for a backwoods land. No one paid income tax, yet prices remained stable with no inflation. There was not a single unemployed man, no poor and no vagabonds. When Benjamin Franklin was asked how he could account for all this new found prosperity he replied:
"That is simple. In the Colonies we issue our own money. It is called Colonial Script. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers.
In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one."
Breaking all the modern conventions of economics, the Colonies continued to prosper producing their own unbacked interest free money, until the production of Colonial Script was made illegal by the Currency Act of 1764. 1
This was an act pressed into law by the Bank of England fearing the production of Colonial Script would put them out of business.
This act forced the Colonies to pay taxes in the form of gold and silver to the British Central Bank and, as a result, the Colonies effectively handed back control of their economy to old world interests who, for the most part, would never see the new world as anything more than an entry on a balance sheet.
The effect of losing the Colonial Script on the Colonies was disastrous, bringing a rapid end to their prosperity as economic depression set in.
1. The Currency Act of 1764, British Parliament - 1764
KNOW OR OWE?
There is no risk of a new publicly owned currency not having value. If enough people agreed to support it by accepting it for trade, it would be as real as the current usury and fractional reserve constrained money we now have in existence. XAT has already created a digital currency which is growing in value every day and has the potential, with your participation, to expand into a currency that will make our future economic system fair for all. There are various reasons why such a new currency deserves your support.
1. It's Interest Free
Put simply, our current economic method carries with it a substantial service charge, whereas the Colonial Script was interest free.
The growing mountain of debt which is referred to as 'the national debt' would no longer be growing, which means the money now being siphoned off to pay this debt could be used to provide better public services which would benefit everyone.
Most countries are struggling under huge national debts. If you are living in one of them, your welfare is being maintained by what is essentially a bankrupted organisation which has only saved itself from folding by further borrowing.
This really does affect you and every social service you rely upon to live a normal healthy life.
2. It encourages Fair Trade
Publicly owned money would create with it a fairer means of trade for all, and a more responsible economic morality that could be built in as a condition of its use. (more on this in detail later)
At present it's the people who shuffle the money around that are earning the big wages, whilst the producers, especially those in the poor countries are earning a pittance.
Today there are thousands of institutions set up for the exchange and transfer of financial claims, and these are all designed to make money from money. The people and organisations concerned are not interested in efficiency or fairness, but primarily in making a profit for themselves at other peoples expense. The financial system that exists today is systematically corrupt.
In 1991, the amount of foreign exchange transactions were on average US$880 billion a day, this being a figure 60 times that of the total amount of trade in actual goods. In 1991, making money from money accounted for 98.36% of world trade; and the numbers of those involved in these production-less transactions have continued to rise ever since.1
3. It provides for No Taxes
Another benefit of this new money would be the ability to live tax free.
If legislation is the reins of power, taxation is the bit.
Taking back the power to produce money would, with proper controls, allow us to pay for public services without ever needing to collect taxes. Proper controls would have to insure that needed services are bought at the current price, i.e. the same price you would pay using borrowed or tax collected money.
While the money being produced to fund, for example, a much-needed hospital would not be backed by anything as it was being printed, we could instead consider it backed by the hospital it was produced to purchase.
Instead of having money circulating which is backed by gold or silver as in olden days, we could have our modern currency backed by essential resources instead. All it would take to make this possible and to give this money value would be an agreed willingness on the part of the public to accept this currency as legal tender when it was offered to them.
At present our governments produce a bond and borrow the bills we need against that bond at a considerable cost. Most economic students would confirm that there is no difference between producing a bond and producing a bill. Both are essentially the same.
Inventor Thomas Edison had a keen understanding of this:
"If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way.
It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency.
Both are promises to pay, but one promise fattens the usurers and the other helps the people." 2
Here we have a proclaimed genius telling everyone essentially that tax collection is unnecessary. And what do we do? We proceed to fill out our tax returns by the light of one of his bright inventions.
4. It's Environmentally Caring
Environmentally our current economic system is massively destructive.
As an example, the value of trees and plants is not based on their life giving properties (such as the clean air they give us, the fertile soils they maintain, the medicines that can be gained from them, and the countless other benefits they can provide). No, instead their value is based in terms of money.
The rewards set up by our current economic system encourage resources to be converted into money as soon as possible. Save money and you will get paid interest; save some trees and you get nothing. Take the money you get from selling your trees, invest it at 10%, and with compound interest your money will double in about 9 years. Leave the trees to be harvested in 10 years and you'll make much less. It's definitely more profitable to be less ecologically sound. It's better business to use up resources as quickly as you can so that you can get paid sooner.
The values held within our present system are not just unfair, they are ridiculous. A new economic system is not only desirable but desperately needed. An overall view of cause-and-effect needs to be considered to give value to actions which affect us all, considering real people and the Earth's real needs.
A new framework must be both enabling and conserving. Real value of action has to focus on the end result over any short term gain.
We must first consider how much water will be let in, before we decide to burn the hull of the ship to keep warm.
Conventional economics has no regard for sustaining resources or for its effect on people and the environment. Because at present we place value on how much money a person earns, we devalue all the other good things he or she might do for themselves and others.
We are also being deprived of things to which we have a natural right. No reasonable person would deny you the right to breathe, yet you have no control over those who have a stranglehold on the forests that produce your air.
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If you would like to discover, in greater detail, how this currency works and how it could allow for a true Direct Democracy,
Labels: Usury Explained