Interest- The Demon that Drives

Ed has challenged me to explain what he calls my dislike of Capitalism.
So I shall.
Actually it's not a dislike at all, it serves me well. I live in a rich country. I live very comfortably.
I make hay while the sun shines.

But I look ahead in alarm.
As does anyone in a position of power who is staring with alarm at the inevitable.
Trust me, this is what the Bilderburg Group REALLY discuss.
They discuss what to do, when they just can't control the demon anymore.
And they arm themselves against the riots. That's why they want a Police State now.

It's us they fear.

If the debt was all called in, the world would be in the red.
That day is doomsday.
Because then, the whole global economy sits on a house of cards.
But that day must come.

Lets just explain for a second, how the economy works.
In a pre-monetary culture, the value of everything is relative.

When cows are plenty, you get less turnips for a cow than when cows are scarce.

Silver being easier to carry around then cows, working out the value of everything relative to little lumps of silver is a good idea for people who seek to take the exhange of goods thing to a new level.

By watching when things are scarce or plenty and taking advantage of those cycles, they end up with more possessions.

So silver coinage becomes a facet of organised cultures.

In such culture, usury can be useful to an individual, but overall it is a social nuisance, unless kept to absolute necessity.
If I borrow ten silver coins and promise to repay you eleven, it stands to reason, I am looking to find some way of making twelve.
Whatever way I choose, means someone else being down two silver coins.

In a finite community, this sort of thing can spiral out of hand, because there really are only a finite amount of silver coins. In those days, money didn't just grow on trees. It's value was fixed.

So in this sort of culture usury aids those with lots of silver coins to profit from someone's misery, even if it isn't the borrower, but someone further down the line.

Monarchs and Rulers could benefit from it, and thus it survived.

But the advent of world trade changed that. Now usury had a purpose.

Usury was reinvented as a positive. Now it could provide funds for speculative ventures which would of their very nature, bring dividends. It was used to create the money tree which financed the plantations, the tea schooners and the slave ships.

And then people saw what the money tree could do.
And it did some pretty amazing things.
It powered the industrial revolution, it taught the common people to read and write, it built railways, steamships and telegraph lines.

Because there were always new markets. You borrowed ten thousand, promised to repay eleven thousand, and made twenty thousand through trade.

This was the miracle of free trade.



There is of course a problem.
Silver is finite. There is a limit to what is in the world. The world is finite.

Everyone can't borrow AND repay for ever. What are they going to repay with?

Now in a silver currency, you can have deflation as well as inflation. If someone finds a silver mine, the value of silver drops. Inflation.

If a fleet of Spanish ships sinks, deflation, The silver is worth more, there's less of it.

But a system used to perpetual growth gains a new dynamic. A continuous pressure on prices. The only brake on this is the fact that the coinage really is finite. There is only a finite amount of silver. In fact, by this time, most countries had adopted the gold standard, linking coinage to value in gold ingots.

The pressure is simple. With so many people in debt, if there is a hiccup and trade goes bad, they owe money they can't repay. Not only that, with goods being scarce, traders are tempted to put their prices up.
Both these problems mean that those not in debt want wage rises, just to put things back on a level.
These times were hard times, but eventually trade would pick up again.

Inflation on a modern scale was only seen in countries with 'fiat' money. This is money which is worth what people say it is. It isn't tied to anything. You CAN make as much as you like. So it keeps inflating.

But when the growth really did slow down for good, when it really did stop, there was a problem.

The banks were the mainstay of the world. They lived on interest. The world was driven by the motor of profit.
But it was a demon that needed feeding, and there was no more for it to eat.
Infinity is an imaginary number.



And since the war, it has continued.
Eating money that isn't there.
The imaginary debt figures rise, but who would repay it, if it was called in?

The Credit side goes down, the Debt side goes up.

And no one knows how to stop it.
In a sense it doesn't really mean too much. The world won't end when the crash comes, but the economy as we know it will.

Ed, I don't hate it, I can just see that it's an illusion, a growth spurt phase in the history of humanity.
And the last few decades the growth has been an illusion- fuelled mainly by the illusion that people were 'buying' their own homes, rather than taking out loans for life.
The Economy doesn't really grow any more, it's just the Interest is still fed.

When it can't eat any more, the system is f**ked.