VIDEO: Is All Interest Usury?

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.

The bottom line is that when one person has to produce real wealth in order to obtain currency, and someone else can create the currency at zero cost and obtain real wealth for it, an injustice is being committed. The assertion that freedom causes victims is questionable at best, but the use of this canard to justify purposely victimizing people outright as an answer to it is simply absurd. And paper money created from nothing is evil, much more evil than whatever ‘disadvantages’ freedom might bring. It is PURPOSELY evil.

Projecting the faults of the current system upon a proposed free market in order to promote an even more authoritarian alternative is either a badly mistaken line of reasoning or purposely disingenuous … If I strike it big and make gazillions, I will spend money to support Ron Paul and others like him, too. And some would try to taint them for it, using class warfare arguments. So be it. If I were a neocon and struck it big, and paid money to think-tanks to support my views, and then if some of the people I were paying started to point out the absurdity of my statist views, I suppose I would cut them off. Seems pretty straightforward to me.

My freedom goes to my ability to own myself and keep the fruits of my labor. Paper money is the largest-scale device yet concocted to steal the fruits of people’s labor, and allow some people to own others. Quibbling about the cosmetic differences of one paper money scheme or another does not negate this fact. None of the arguments I’ve read here alter the fact that the better Austrian economists come out squarely in favor of my freedom, and none of those arguments have yet convinced me to willingly ask to have my freedom denied. Not even rush hour traffic. (Which is almost always made worse by statist attempts to ‘solve’ it through restrictions. Another red herring.)

(Video from Truthbomb1’s YouTube user channel.)

Posted by dave jr on 02/17/12 09:12 AM

Posted by memehunter on 02/17/12 03:33 AM
“By the same token, if two people decide to borrow / lend with interest, no one should have the power to force them not to do so.”

if two people agree on a transaction involving a loan with interest, it is the business of other users using the same currency that these two people are using, since this transaction has introduced a systemic scarcity and competition for all users of that currency.

It may not be ethical to have the power to *force* these two people not to use interest, but one may question the ethics of a system which gives these two people the power to *force* other users of that currency to accept the negative consequences that this transaction may entail for them.

Advocates of the free market and of the freedom of voluntary choices should realize that this type of argument cuts both ways, as I have already explained several times on the DB.

The only way that such a transaction would be no one else’s business is if the two people are using a currency that no one else is using.

“But then it wouldn’t be a free market, would it?”

In a market of competing interest-free and interest-based currencies, most people will frely choose to borrow in the interest-free currencies. Since there will not be many debtors using interest-based currencies, those wanting to make money by simply saving money in these currencies and living off interest will soon find out that it doesn’t work. This will all happen freely and voluntarily.

And yes, there are several examples of interest-free currencies that are not supported by governmental coercion, Anthony Migchels’ Gelre being one of them (insofar as I understand the mechanics of the Gelre), the LETS, the Chiemgauer (in which case a negative-interest or demurrage applies), and even the JAX bank system (in spite of the valid points you made regarding this sytem) being others.

“if two people agree on a transaction involving a loan with interest, it is the business of other users using the same currency that these two people are using, since this transaction has introduced a systemic scarcity and competition for all users of that currency.”

Your socialist ideology is showing.

First, “all users”, by virtue of merely existing have no claim to currency.

Secondly, you begin with the false premise of scarcity. As if currency is a natural resource, which when consumed, leaves less for others. This also falls in line with the redistributionists. This is a perversion of ethics.

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Posted by Joe on 02/17/12 09:10 AM

“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.”

I would have thought that people at The Daily Bell would have a good awareness by now that no so called Islamic country today is interest free, they all (including Iran) have fiat currencies and central banks. If they were interest free they would be prosporous and this is what scares the power elite about genuine Islam (not the Muslim Brotherhood brand of Islam).

This too is an interesting video…

Why Are We All in Debt Part 1/4
Click to view link

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Posted by Abu Aardvark on 02/17/12 07:10 AM

Posted by JRX on 02/17/12 03:22 AM
I’m sorry, but these guys build their case on a premise I can’t understand, i.e. that people simply have to borrow money from the bank. Of course, if you believe you really have to borrow money, you are in the claws of the people that lend. Still, if they didn’t lend you the money, or were forbidden to do so, in what way are you better off when you think you need it?

But more importantly, the mantra of these guys, ‘It wasn’t put into the economy’, is simply misdirected. But I can’t blame them, since I know only one economist ever that has been able to explain the sources of interest in a simple way, and that is Prof. George Reisman.

He has the best modern critique of the time preference theory of interest and the productivity theory of interest I know of, and a positive alternative explanation on the sources of interest even without inflation (his net investment /net consumption theory). Here’s his introduction in audio pdf, Click to view link (NB! 28MB). Also, check out is book Capitalism, Click to view link (NB! Also many MBs), Chapter 16.

I don’t buy everything in this book, and you don’t have to either, but as a source of original ideas there’s nothing like it. And I’ve studied every major economist of the last 300 years (including Gesell), so I believe I’m able to compare. I still hope someone shows me something better than, since I’m eager to learn.

“And I’ve studied every major economist of the last 300 years (including Gesell), so I believe I’m able to compare. I still hope someone shows me something better than, since I’m eager to learn.”

—————————–

“Human Action” by Ludwig von Mises

Click to view link

“Man, Economy, and State, with Power and Market” by Murray N. Rothbard

Click to view link

“Democracy, The God That Failed” by Hans-Hermann Hoppe

Click to view link

You may want to take a look at some of these 2578 books – all for free – here:

Click to view link

You’re welcome.

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Posted by Abu Aardvark on 02/17/12 05:57 AM

Posted by memehunter on 02/17/12 03:33 AM
“By the same token, if two people decide to borrow / lend with interest, no one should have the power to force them not to do so.”

if two people agree on a transaction involving a loan with interest, it is the business of other users using the same currency that these two people are using, since this transaction has introduced a systemic scarcity and competition for all users of that currency.

It may not be ethical to have the power to *force* these two people not to use interest, but one may question the ethics of a system which gives these two people the power to *force* other users of that currency to accept the negative consequences that this transaction may entail for them.

Advocates of the free market and of the freedom of voluntary choices should realize that this type of argument cuts both ways, as I have already explained several times on the DB.

The only way that such a transaction would be no one else’s business is if the two people are using a currency that no one else is using.

“But then it wouldn’t be a free market, would it?”

In a market of competing interest-free and interest-based currencies, most people will frely choose to borrow in the interest-free currencies. Since there will not be many debtors using interest-based currencies, those wanting to make money by simply saving money in these currencies and living off interest will soon find out that it doesn’t work. This will all happen freely and voluntarily.

And yes, there are several examples of interest-free currencies that are not supported by governmental coercion, Anthony Migchels’ Gelre being one of them (insofar as I understand the mechanics of the Gelre), the LETS, the Chiemgauer (in which case a negative-interest or demurrage applies), and even the JAX bank system (in spite of the valid points you made regarding this sytem) being others.

From the foreword of “The Pure Time-Preference Theory of Interest”:

“Consumers and entrepreneurs often speak of ‘the cost of money’ when referring to interest rates. Modern lenders also refer to the interest they charge as ‘loan pricing.’ Viewed this way, interest is viewed as if it were any other good. The cheaper a good the more affordable it is. And so the lower the interest rate, the more affordable. By dictating key interest rates, modern central bankers are believed to be alchemists, lowering interest rates to magically transform scarcity into prosperity.

As the world struggles to deleverage, with the market constantly forced to clear malinvestments of a continuous string of asset bubbles and crashes, central bankers continue their faith in the ancient tradition. All the economy needs is more monetary elixir. If the patient hasn’t yet responded, it must mean larger doses are needed: Interest rates must be too high.

The mainstream view has devolved to the belief that zero is too high. In the spring of 2009, Harvard economist, and former adviser to President George W. Bush, N. Gregory Mankiw seriously wrote in the New York Times, ‘It May Be Time for the Fed to Go Negative.’ But who would lend money to only receive less in return?

Mankiw approvingly cites German economist Silvio Gesell’s argument for a tax on holding money, an idea John Maynard Keynes himself approved of. Crazier still is Mankiw’s idea that one of his graduate students floated, of turning interest-rate policy into an absurd game of chance.”

Chapters:

1. Time Preference – By Murray N. Rothbard
2. Human Action: The Rate of Interest – By Ludwig von Mises
3. In Defense of the Misesian Theory of Interest – By Roger W. Garrison
4. The Pure Time-Preference Theory of Interest: An Attempt at Clari?cation – By Israel M. Kirzner
5. Interest Theories, Old and New – By Frank A. Fetter
6. Professor Rothbard and the Theory of Interest – By Roger W. Garrison

Click to view link

(PDF)

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Posted by memehunter on 02/17/12 03:33 AM

Posted by bionic mosquito on 02/16/12 08:14 PM
“Any market, free or otherwise, has rules that the participants must adhere to.”

The rules of a free market:

1) let’s make a deal
2) do what you say
3) low price wins

“I have trouble understanding why, if in a free-market… people acknowledge negative wealth transfer via interest and therefore decide not to use it, or that it is a negative device… that this must be philosophically/theoretically opposed?”

It is philosophically/theoretically opposed because it is faulty economics.

It is not practically opposed – in other words, if two people decide to borrow / lend without interest, no one should have the power to force them to apply interest. By the same token, if two people decide to borrow / lend with interest, no one should have the power to force them not to do so.

But if you want to advocate force, then stop trying to hide behind the mask of free market. Don’t be shy about your desire to lord over your fellow man. Just know, as history has proven too often, this sword cuts two ways, and we are usually on the wrong end.

“We need a consensus against it and solutions without it.”

But then it wouldn’t be a free market, would it? Not for the ones who disagree with the consensus. But if concern about protecting minority rights is not important to you, please say so openly.

“By the same token, if two people decide to borrow / lend with interest, no one should have the power to force them not to do so.”

if two people agree on a transaction involving a loan with interest, it is the business of other users using the same currency that these two people are using, since this transaction has introduced a systemic scarcity and competition for all users of that currency.

It may not be ethical to have the power to *force* these two people not to use interest, but one may question the ethics of a system which gives these two people the power to *force* other users of that currency to accept the negative consequences that this transaction may entail for them.

Advocates of the free market and of the freedom of voluntary choices should realize that this type of argument cuts both ways, as I have already explained several times on the DB.

The only way that such a transaction would be no one else’s business is if the two people are using a currency that no one else is using.

“But then it wouldn’t be a free market, would it?”

In a market of competing interest-free and interest-based currencies, most people will frely choose to borrow in the interest-free currencies. Since there will not be many debtors using interest-based currencies, those wanting to make money by simply saving money in these currencies and living off interest will soon find out that it doesn’t work. This will all happen freely and voluntarily.

And yes, there are several examples of interest-free currencies that are not supported by governmental coercion, Anthony Migchels’ Gelre being one of them (insofar as I understand the mechanics of the Gelre), the LETS, the Chiemgauer (in which case a negative-interest or demurrage applies), and even the JAX bank system (in spite of the valid points you made regarding this sytem) being others.

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Posted by JRX on 02/17/12 03:22 AM

I’m sorry, but these guys build their case on a premise I can’t understand, i.e. that people simply have to borrow money from the bank. Of course, if you believe you really have to borrow money, you are in the claws of the people that lend. Still, if they didn’t lend you the money, or were forbidden to do so, in what way are you better off when you think you need it?

But more importantly, the mantra of these guys, ‘It wasn’t put into the economy’, is simply misdirected. But I can’t blame them, since I know only one economist ever that has been able to explain the sources of interest in a simple way, and that is Prof. George Reisman.

He has the best modern critique of the time preference theory of interest and the productivity theory of interest I know of, and a positive alternative explanation on the sources of interest even without inflation (his net investment /net consumption theory). Here’s his introduction in audio pdf, Click to view link (NB! 28MB). Also, check out is book Capitalism, Click to view link (NB! Also many MBs), Chapter 16.

I don’t buy everything in this book, and you don’t have to either, but as a source of original ideas there’s nothing like it. And I’ve studied every major economist of the last 300 years (including Gesell), so I believe I’m able to compare. I still hope someone shows me something better than, since I’m eager to learn.

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Posted by memehunter on 02/17/12 03:22 AM

DB: We haven’t noticed that Islamic countries are so much more prosperous than non-Islamic countries.

DB elves should realize that this is not a valid comparison, given that there are also cultural, geographical, and historical differences between Islamic countries and non-Islamic countries.

A more valid comparison would be to compare the prosperity of Wörgl during the ‘Freigeld’ experiment with that of neighboring Austrian towns and villages during the same period, which share very similar cultural, geographical, and historical characteristics.

DB: 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.

I don’t presume to speak for the authors of the video or to refer to the content of the video, but I believe that the analogy is valid in the case of an interest-bearing debt-based currency: in that situation, there will indeed always be ‘losers’ and ‘winners’.

As for Hoss’s comment, I agree that it is well-written but don’t agree with how the views of those who oppose interest for philosophical, ethical, and economical reasons were represented in certain instances. I rebutted a few specific points on the original thread. Interested readers may want to look it up.

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Reply from The Daily Bell
We haven’t noticed that Islamic countries are so much more prosperous than non-Islamic countries. DB elves should realize that this is not a valid comparison, given that there are also cultural, geographical, and historical differences between Islamic countries and non-Islamic countries.

DB: We made a very simple point. Countries where interest is (formally) banned don’t seem significantly more prosperous than countries where interest is used. It’s not hard to understand. It’s a fairly simple statement.

——

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. I don’t presume to speak for the authors of the video or to refer to the content of the video, but I believe that the analogy is valid in the case of an interest-bearing debt-based currency: in that situation, there will indeed always be ‘losers’ and ‘winners’.

DB: Yes, for you, economic activity must always include winners and losers. The idea of commerce as mutually beneficial escapes you. Why are we not surprised?

——-

As for Hoss’s comment, I agree that it is well-written but don’t agree with how the views of those who oppose interest for philosophical, ethical, and economical reasons were represented in certain instances. I rebutted a few specific points on the original thread. Interested readers may want to look it up.

DB: You didn’t rebut anything. We have noticed in fact (and pointed out) that you don’t make arguments so much as develop fantasies that suit your mood momentarily and which you then repeat as if the mere act of recitation gives them some sort of validity. It does not.

Posted by memehunter on 02/17/12 03:09 AM

DB: 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.

The following was already posted on the now famous ‘Gold Standard is Good’ thread (with its 372 comments):

Click to view link

“There were a number of advantages for using the tally sticks.

(1) They could be used like money, but they were interest free.

(2) They were virtually impossible to counterfeit. Each tally had different grains in the wood and different records and notches engraved that appeared on both halves. To be legal you had to match your half with the King’s half.

(3) They did not need any gold or silver to back them but were backed by commodities that did not even exist at the time of issue. These commodities could be future produce, something manufactured or even gold or silver that the person hoped to acquire.

(4) They were basically inflation proof. Unlike money in our current system they could not be produced in unlimited amounts. The number of tallies made would be limited by the estimated production or wealth of the people. Then when the tallies were turned in for taxes or payment during Michaelmas (the harvest time) they no longer existed within the system and new ones had to be created. There could only be an increase in tally sticks if there was a corresponding increase of anticipated production and since each person was responsible for the value of his tally stick there was little desire to inflate its value.

(5) Tally sticks were widely accepted by the people for two reasons. First, tally sticks of some kind have been used for elementary record keeping since civilization began and people trusted them. Secondly, the king insured its equivalency to money by issuing a fiat that they can be used to pay taxes. In addition the various kings used tally sticks for money themselves.”

———————————————————————–

DB: 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.

This is inaccurate, as it ignores the role played by Money Power in the demise of the tally stick system. Money Power (‘the money changers’) was opposed to the tally stick system as it constrained their ability to take control of the money supply, and so they did everything in their power to eliminate this system.

More on the following link (this was also posted on the famous ‘Gold Standard is Good’ thread:

Click to view link

‘The tally stick system worked really well for 726 years. It was the most successful form of currency in recent history and the British Empire was actually built under the Tally Stick system, but how is it that most of us are not aware of its existence?

Perhaps the fact that in 1694 the Bank of England at its formation attacked the Tally Stick System gives us a clue as to why most of us have never heard of them. They realised it was money outside the power of the money changers, (the very thing King Henry had intended).

What better way to eliminate the vital faith people had in this rival currency than to pretend it simply never existed and not discuss it. That seems to be what happened when the first shareholder’s in the Bank of England bought their original shares with notched pieces of wood and retired the system. You heard correctly, they bought shares. The Bank of England was set up as a privately owned bank through investors buying shares. Even the Banks resent nationalisation is not what it at first may appear, as its independent resources unceasingly multiply and dividends continue to be produced for its shareholder’s.

These investors, who’s names were kept secret, were meant to invest one and a quarter million pounds, but only three quarters of a million was received when it was chartered in 1694.

It then began to lend out many times more than it had in reserve, collecting interest on the lot.

This is not something you could just impose on people without preparation. The money changers needed to created the climate to make the formation of this private concern seem acceptable.

Here’s how they did it.

With King Henry VIII relaxing the Usury Laws in the 1500’s, the money changers flooded the market with their gold and silver coins becoming richer by the minute.

The English Revolution of 1642 was financed by the money changers backing Oliver Cromwell’s successful attempt to purge the parliament and kill King Charles. What followed was 50 years of costly wars. Costly to those fighting them and profitable to those financing them.

So profitable that it allowed the money changers to take over a square mile of property still known as the City of London, which remains one of the three main financial centres in the world today.

The 50 years of war left England in financial ruin. The government officials went begging for loans from guess who, and the deal proposed resulted in a government sanctioned, privately owned bank which could produce money from nothing, essentially legally counterfeiting a national currency for private gain.

Now the politicians had a source from which to borrow all the money they wanted to borrow, and the debt created was secured against public taxes.

You would think someone would have seen through this, and realised they could produce their own money and owe no interest, but instead the Bank of England has been used as a model and now nearly every nation has a Central Bank with fractional reserve banking at its core.

These central banks have the power to take over a nations economy and become that nations real governing force. What we have here is a scam of mammoth proportions covering what is actually a hidden tax, being collected by private concerns.

The country sells bonds to the bank in return for money it cannot raise in taxes. The bonds are paid for by money produced from thin air. The government pays interest on the money it borrowed by borrowing more money in the same way. There is no way this debt can ever be paid, it has and will continue to increase.

If the government did find a way to pay off the debt, the result would be that there would be no bonds to back the currency, so to pay the debt would be to kill the currency.

With its formation the Bank of England soon flooded Britain with money. With no quality control and no insistence on value for money, prices doubled with money being thrown in every direction.’

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Reply from The Daily Bell
You have merely confirmed our hunch that the tally stick system probably supplied Britain with an inelastic monetary system likely not commensurate to entrepreneurial growth. Just because a system exists does not mean it perfect or even good. The modern monopoly money system of the West has now existed for a century. That’s not necessarily an endorsement.

Your affection for empire is baffling. You write that “It was the most successful form of currency in recent history and the British Empire was actually built under the Tally Stick system.” Again, we find this weird authoritarian streak.

Even if this is a true statement, and we are suspicious of it, what in God’s name is admirable about “building an empire” with all the ruin and murder that implies?

Someday you will, as Ayn Rand suggested, “check your premises.” We’re not holding our breath.

Posted by picomanning on 02/17/12 12:58 AM

Competing currencies might compete over the soundness of various currencies. Milton Friedman pointed out that not one nation in history which used fiat money ever survived their temptation to not abuse that currency and they ALL failed. (Money Mischief -1996)

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Reply from The Daily Bell
Scottish private fractional reserve banking, just to cite one example, lasted hundreds of years.

Posted by picomanning on 02/17/12 12:51 AM

Money can be the medium of exchange and the object of exchange too. That is, my personal property can be rented id I can freely have the opportunity to make a rental contract.

You may rent my hoe for your garden but at the end of the season I want my hoe back and 7% of your crop. Too steep for you? Well if I can rent it of 7% then the demand for my farm implement can be considered that valuable. I might have to rent it for less. The profitability of the transaction can only find reality equilibrium within my marketplace.

Where interest gets screwed up can be discovered in the history of banking and the use of placebo money.

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Posted by bionic mosquito on 02/16/12 08:14 PM

Posted by Summer on 02/16/12 07:02 PM
I sincerely appreciate the open-mindedness, just and respectable views often seen at the DB (especially viz., issues of war, culture and religion) but I have trouble understanding why, if in a free-market (and importantly if a free-market and lack of government is what people want), people acknowledge negative wealth transfer via interest and therefore decide not to use it, or that it is a negative device (as many people are awakening to this now) that this must be philosophically/theoretically opposed?

Any market, free or otherwise, has rules that the participants must adhere to. These rules are formulated on the basis of fairness and probity. Interest is an inherently unjust device which transfers most of the wealth into the hands of a few – creating an economic elite. We need a consensus against it and solutions without it.

“Any market, free or otherwise, has rules that the participants must adhere to.”

The rules of a free market:

1) let’s make a deal
2) do what you say
3) low price wins

“I have trouble understanding why, if in a free-market… people acknowledge negative wealth transfer via interest and therefore decide not to use it, or that it is a negative device… that this must be philosophically/theoretically opposed?”

It is philosophically/theoretically opposed because it is faulty economics.

It is not practically opposed – in other words, if two people decide to borrow / lend without interest, no one should have the power to force them to apply interest. By the same token, if two people decide to borrow / lend with interest, no one should have the power to force them not to do so.

But if you want to advocate force, then stop trying to hide behind the mask of free market. Don’t be shy about your desire to lord over your fellow man. Just know, as history has proven too often, this sword cuts two ways, and we are usually on the wrong end.

“We need a consensus against it and solutions without it.”

But then it wouldn’t be a free market, would it? Not for the ones who disagree with the consensus. But if concern about protecting minority rights is not important to you, please say so openly.

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Posted by Summer on 02/16/12 07:02 PM

I sincerely appreciate the open-mindedness, just and respectable views often seen at the DB (especially viz., issues of war, culture and religion) but I have trouble understanding why, if in a free-market (and importantly if a free-market and lack of government is what people want), people acknowledge negative wealth transfer via interest and therefore decide not to use it, or that it is a negative device (as many people are awakening to this now) that this must be philosophically/theoretically opposed?

Any market, free or otherwise, has rules that the participants must adhere to. These rules are formulated on the basis of fairness and probity. Interest is an inherently unjust device which transfers most of the wealth into the hands of a few – creating an economic elite. We need a consensus against it and solutions without it.

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Posted by Summer on 02/16/12 06:39 PM

DB: 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.

Please be clear, ‘Islamic’ countries are unfortunately not holding to their anti-interest roots. That’s why they’re economically enslaved like everyone else.

However, as I have demonstrated, when the Rashidun Caliphate, the Islamic Empire, even in Europe – Islamic Spain; and in Worgl, societies prospered economically *without* interest.

Demurrage was not invented by Silvio Gesell; it is another word for Zakat that was introduced in the 7th century.

During the Dark Ages the ‘Muslim World’ was flourishing economically. The ideal period of Islam and its economic principles was before and during the Rashidin Caliphate, however, positive economic principles continued… Such as, no usury and the Zakat system (a charge of 2.5 % on assets/monies held for a year if unused).

A period of huge economic and cultural advancement prevailed without usury between the 7th and 12th centuries; yet, trade&business advanced and loans were issued for hundreds of years…

Applications of interest free successful economic systems with zakat and demurrage:

From Wiki (Rashidun Caliphate):
During the Rashidun Caliphate there was an economical boom in the lives of the ordinary people due to the revolutionary economic policies developed by Caliph Umar and his successor Caliph Uthman. At first it was Umar who introduced these reforms on strong bases, his successor Uthman who himself was an intelligent businessman, had further reformed it. During Uthman’s reign the people of the empire enjoyed a prosperous life.

Bait-ul-Maal
Bait-ul-Maal, (literally The house of money) was the department that dealt with the revenues and all other economical matters of the state. In the time of Muhammad there was no permanent Bait-ul-Mal or public treasury. Whatever revenues or other amounts were received were distributed immediately. There were no salaries to be paid, and there was no state expenditure. Hence the need for the treasury at public level was not felt. In the time of Abu Bakr as well there was no treasury. Abu Bakr earmarked a house where all money was kept on receipt. As all money was distributed immediately the treasury generally remained locked up. At the time of the death of Abu Bakr there was only one dirham in the public treasury.

Establishment of Bait-ul-Maal
In the time of Umar things changed. With the extension in conquests money came in larger quantities, Umar also allowed salaries to men fighting in the army. Abu Huraira who was the Governor of Bahrain sent a revenue of five hundred thousand dirhams. Umar summoned a meeting of his Consultative Assembly and sought the opinion of the Companions about the disposal of the money. Uthman ibn Affan advised that the amount should be kept for future needs. Walid bin Hisham suggested that like the Byzantines separate departments of Treasury and Accounts should be set up.

After consulting the Companions Umar decided to establish the Central Treasury at Madinah. A separate building was constructed for the royal treasury by the name bait ul maal, which in large cities was guarded by as many as 400 guards. In most of the historical accounts it states that among the Rashidun Caliphs Uthman ibn Affan was first to struck the coins, some accounts however states that Umar was first to do so. When Persia was conquered three types of coins were current in the conquered territories, namely Baghli of 8 dang; Tabari of 4 dang; and Maghribi of 3 dang. Umar ( according to some accounts Uthman ) made an innovation and struck an Islamic dirham of 6 dang.

The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, since the time of the Rashidun caliph Umar in the 7th century. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government were used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058-1111), the government was also expected to stockpile food supplies in every region in case a disaster or famine occurred. The Caliphate was thus one of the earliest welfare states.[25][26]

The Worgl experiment was an incredible success evidencing the economic misery and evil monopoly that interest is. The Worgl experiment exactly used the twofold Islamic economic principles during the depression; with amazing results for the town’s economy, where the rest of the country was in dire straits. The central bank soon put an end to this successful experiment!

Silvio Gesell

Michael read and re-read ‘The Natural Order’ by Silvio Gesell. He talked with people in the town and convinced the members of the Worgl Welfare Committee to hold a session on July 5, 1932. In this session he gave a short summary and then proposed a ‘Distress Relief Program’. He stated that slow circulation of money is the principal cause of the faltering economy. Money as a medium of exchange increasingly vanished out of working people’s hands and accumulates into the hands of the few who collect interest and do not return it back to the market. He proposed that in Worgl the slow-circulating National Bank currency would be replaced by ‘Certified Compensation Bills’. The council would issue the Bills and the public would accept the Bills for their full nominal value. Bills would be issued in the denominations of 1, 5 and 10 shillings. A total issue of 32,000 Worgl ‘Money Bills’ was printed and put into circulation.

Worgl Success

Over the 13-month period the Worgl money was in circulation, the mayor carried out all the intended works projects. The council also built new houses, a reservoir, a ski jump, and a bridge. The people also used scrip to replant forests, in anticipation of the future cash flow they would receive from the trees.

Six neighboring villages copied the system successfully. The French Prime Minister, Eduoard Dalladier, made a special visit to see the ‘miracle of Wörgl’. In January 1933, the project was replicated in the neighboring city of Kirchbuhl, and in June 1933, Unterguggenburger addressed a meeting with representatives from 170 different towns and villages. Two hundred Austrian townships were interested in adopting the idea.

One eyewitness report was written by Claude Bourdet, master engineer from the Zürich Polytechnic. “I visited Wörgl in August 1933, exactly one year after the launch of the experiment. One has to acknowledge that the result borders on the miraculous. The roads, notorious for their dreadful state, match now the Italian Autostrade. The Mayor’s office complex has been beautifully restored as a charming chalet with blossoming gladioli. A new concrete bridge carries the proud plaque: “Built with Free Money in the year 1933.” Click to view link

From Wiki (Islamic economics in the world):
Click to view link
‘Though medieval Islamic economics appears to have somewhat resembled a form of capitalism, some arguing that it laid the foundations for the development of modern capitalism,[42][43] some Orientalists also believe that there exist a number of parallels between Islamic economics and communism, including the Islamic ideas of zakat and riba.[citation needed] Others see Islamic economics as neither completely capitalistic nor completely socialistic, but rather a balance between the two, emphasizing both “individual economic freedom and the need to serve the common good.’

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Posted by dave jr on 02/16/12 06:24 PM

These boys are on their way to getting it. They have more work to do. I would ask, what is the difference between being loaned the means to purchase a home, and being loaned the home?

It is not a question of usury, it goes deeper to the fraudulent nature of the product being used.

I would like to thank Hoss and his skill to speak with clarity.

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Posted by bionic mosquito on 02/16/12 06:07 PM

Hoss

This comment is fantastic. I am sorry I missed it in the original, but am glad I caught it here.

http://www.thedailybell.com/3621/VIDEO-Is-All-Interest-Usury

3 responses to “VIDEO: Is All Interest Usury?

  1. Centurean2 makes fun of Xabier Garay’s video despite all his own mistakes:
    – Tally 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.
    Jct: Yes, he’s missing something. Why would the king run out of tally chips?
    – tally sticks were a great way for the elites of the day to maintain almost total control over the money supply generally retarded innovation and freedom.
    Jct: I guess he’d likes the job private bankers have been doing.
    – We’re aware that the charging of interest recognizes the time-value of money but the fellows who made this video disagree with that.
    Jct: There would be no time-value of poker chips without money being kept in short supply.
    – 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.
    Jct: No, only banks issue new capital. Anyone else issues new money get jailed as a counterfeiter.
    – 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.
    Jct: He’d understand how P/(P+I) survive their mort-gage death-gamble musical chairs debt if there were so many billions playing. He doesn’t catch that it’s the same I/(P+I) who get knocked out of the game.
    – any economy will include some debt-based, interest bearing currency of some sort.
    Jct: Says our expert with no credentials.
    – The assertion that the concept of interest requires exponential growth and consumption of resources is based on a the fallacious presumption
    Jct: http://johnturmel.com/bankmath.htm shows that the debt does increase as exp(it) so he’s wrong here again.
    – Borrowers would not borrow at rates they could not repay,
    Jct: Every borrower who borrows 10 to owe 11 borrowed what they could not repay.
    – allow an elite group to print money from nothing and spend it paper money created from nothing is evil
    Jct: No one may create money and spend it. Banks create money and lend it.
    http://johnturmel.com/bankmath.htm for why he’s so wrong.

    • In my world there wouldn’t be banks in private hands!
      We are more than capable of issuing our own money, cutting out the middle man taking his hefty Usary, which keeps us all debt slaves!

      Germany should have been a lesson learned, look how it improved when it issued it’s own currency, but a War also kicked off, allowing us all to see just who rules the roost!

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