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Let us now summarize the evils of our present monetary system. The evil is that interest is charged at the origin of money. This is caused by our federal government giving away the right to issue and put into circulation our total money supply. It has given this right to the private chartered banks. Under this system all money now comes into circulation as a debt to the private banks. The private banks charge interest on this money. This interest becomes an additional debt above the principal we borrow. This addition cannot be paid because no money is issued to pay it. If you borrow this addition you go deeper into debt. If you pay the interest out of the principal, this reduces the money you borrowed and the debt cannot be repaid. Furthermore, it reduces the money supply and causes a depression. In both cases we pile up mountains of debt that cannot be paid. The interest on these mountains of debt is now so large and ever-increasing because of compounding that it is causing ever-increasing inflation because the interest has to be passed on to the consumer. Those that have the power to pass this interest cost on to the consumer not only cause inflation but force the consumer to go into debt, because with the added interest costs there is not enough money left in circulation to buy all the goods and services available.
Let me give you a short but simple example. You borrow $1,000. at 15%. At the end of the year the banker wants back $1,000. plus $150. for interest. However, the $150. for interest doesn't exist. The banker only created a $1,000. but he wants back more than he loaned you. There is a flaw in our monetary system and this is why it will not work. So here is what happens. You pay your principal of $1,000. which leaves you the interest debt of $150. Because there is no money with which to pay it, you start your second year borrowing a new $1,000. Now you owe $1,150. and at 15%, by the end of the second year you owe $1,322.50. You again pay your principal. But you now owe $322.50. This is COMPOUNDING INTEREST. But your friendly banker will continue to loan you money as long as you have unmortgaged collateral, that is, a factory, a farm, a house, etc., etc. But this increased borrowing and paying interest has now become a part of your business. And in order for you to continue, you must pass this extra cost on to the consumer, your worker. So you raise the price of your merchandise, AND LOW AND BEHOLD! INFLATION IS BORN!!! But now, because you have increased the price of your merchandise, your workers need more money if they are to buy the goods they have helped produce. Of course, this is only the beginning of the problem. As your debt and interest increases year by year, you are forced to keep raising prices. By this time your worker is convinced that you are the one creating inflation. So he has to respond by demanding a yearly increase in wages. This has created enmity between business and labour, each blaming the other for the cause of inflation. However, the banker is the prime mover in creating inflation because he has put a cost on the use of money (namely interest). It was this interest which forced you to increase the price of your merchandise. Labour increase in wages was secondary. And the continuing increase in your debt and interest is continuing to create INFLATION. |
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