The Carpenter

Once upon a time there was a skilled carpenter who had a reputation for reliability and magnificent furniture for homes and businesses. Over the years he built up a well-equipped workshop, with an adequate warehouse full of selected materials alongside.

One morning he was working on an order to fit out a new store, when he realized he was out of inches (cm’s). He had the tools, materials, and skills to do what the customer required, but was short of inches. No-one in the village had any to spare, so he had to go over to the city to the Inches Bank (IB).

IB required him to sign over his land for collateral. IB lent him inches as debt (a claim on his property) at 10% interest (that means he had to pay 10% of the outstanding inches to the bank each year).

The carpenter received more orders, and needed to expand by employing an apprentice who turned out to be an exceptionally skilled craftsman. They had a good name and plenty of business, so the partner and his wife soon had happy children in a cozy cottage.

Of course with expansion came the need for more inches, which IB lent on the strength of his workshop and warehouse as collateral. Again the inches were issued as debt at interest.

The carpenter diligently paid the interest each year. He could not pay the debt off completely since his business needed the inches to operate. Business was steady so he did not notice that paying interest actually reduced the amount of inches he had available for working capital, since he simply borrowed any shortfall required.

On day he had time to take stock and noticed that the interest payments had grown to be his single largest expense. He also calculated that he had repaid the amounts borrowed many times over through interest, and somehow still owed the original amounts.

The interest payments kept growing ’till one year he was unable to meet the payments, and the bank foreclosed on his warehouse, selling it to a subsidiary at a fraction of what it was worth, simply to pay their amount, contemptuously disregarding the needs of their loyal carpenter client.

The following year the carpenter had to take on extra work, sell off spare inventory, mortgage his workshop, and eventually cut wages (leaving his partner and their new family destitute), just to make the interest payments.

Eventually, of course, the bank sent in the sheriff and the carpenter was on the street with nothing…

Through the miracle of compound interest, a prosperous, growing business, staffed by skilled craftsmen, feeding two families, was destroyed, the owner dispossessed and left destitute.

Even more staggering when we realise that the inches lent to the carpenter in the form of loans, did not even exist before the carpenter walked into the bank. There was no vault full of inches, or inches deposited by other clients. No, it was created out of nothing the minute the carpenter signed over his property as collateral.

This is same situation for business and governments, where the single largest expense at all levels of governments is interest payments, which explains the exponential growth of government debt worldwide.

Currencies deposited into accounts (of individuals, corporations, and governments) by banks as loans, are not legal tender but private money created out-of-nothing by private corporations (only physical coins and notes are legal tender).

The currency to pay interest is however not created (only the principal amount is). So as interest is paid, the amount of currency available to the borrower declines, forcing the borrower to keep borrowing, expanding, and competing in a perpetual struggle for enough currency for working capital, and to pay interest (stave off foreclosure), while grinding up natural- and human resources.

All Levantine religions have banned interest (usury – Christian, riba – Sharia, neshekh – Halakhah)

Please see comments below, and Financing of the Watermill


 

Why riba is haram

Dear reader,
Here is an easy explanation why religions ban usury

  1. To satisfy demand for loans and market operations (purchasing financial assets), banks create money out-of-nothing. They do not need our savings.
  2. The money is lent as debt (claims on your assets and labour) at interest (which is not created along with the principal).
  3. Payment of interest exhausts the money supply* requiring ever more loans for money to transact in the economy.

Corporations are forced to keep growing (chewing up the planet) to pay interest. The single largest government expense (all governments) is interest payments.

Compound interest and exponential borrowing inevitably leads to bankruptcies, ie., transfer of wealth to the hands of the very few.

Business cycles (intentional credit contraction by banks) accelerates bankruptcies and dispossession of individuals, corporations, and governments.

The end of a currency cycle (Kondratieff) means that the system is bankrupt, and wealth transfer negotiations take place on a grand scale (comparable to grand theft from wars) before a new cycle of dispossession is started all over again.

The credit for this insight goes to Michael Rivero, Sarah Emery, Imran Hosein, and Richard Werner, (please view the links)

Here is a telling verse from the Torah (Deuteronomy 23:20)

Margrit Kennedy and Bernard Lietaer have demonstrated that almost half of retail prices are the accumulation of interest.

Solutions include debt jubilees explained by Prof’s Michael Hudson and David Graeber, while Islam mentions charity on excess wealth (Zakat), and insists on intrinsic money like the Austrian school. But for us to be free of the parasitic monetary system we need to develop interest-free (crypto) credit.**

Thank you

*Please note we are typing about the demand side (main street) money supply, not reserves not borrowed (the reason QE does not lead to CPI inflation) typically used to purchase financial assets and ownership (hypothetically throttled by CB reserve requirements (borrowed anyway) and insolvency (bail-outs and bail-ins)). Unlike the loan principal which is canceled on repayment, interest does not disappear but is income used to pay expenses and taxes, distributed to shareholders, and retained earnings, like any other company.

**Interest differs from profit (which may be participated in under Sharia and Halakhah) in that profit does not compound and bears risk to the investor, unlike interest which leads to indebtedness and servitude. Furthermore profit is on products and services rendered, while interest is on money which should simply be the unit-of-account (UoM for bookkeeping (how does one charge interest on metres or hours?)) and means-of-exchange (to facilitate trade). Money is only a store-of-value only due to its tradability for products or services (proxy for stuff). 

Compounding interest leads to exponential wealth disparity.

https://upload.wikimedia.org/wikipedia/commons/5/5d/Wealth_distribution_by_percentile_in_the_United_States.png

Crypto wallet

Private banks have made enormous progress at improving technologies for our convenience such as online banking, easy payments, etc. What does it matter if our money is not in our pockets, but in a bank?

Does it even matter that it is not even money, but a credit (called currency) lent to the bank? What we want is convenience and ease-of-use.

The security of the monetary system is hardly our responsibility.

Continue reading “Crypto wallet”

Removing the constraint of currency for full employment

It is common knowledge that banks do not lend out savings, but rather create money out of nothing when a contract is signed.

For example, the currency (account balances) for a mortgage does not exist until the contract is signed. Then a bookkeeping entry gives the bank an asset and the borrower a liability.

This newly created currency can then be used to purchase a house, materials, contractors, etc.

But there’s a catch …
Continue reading “Removing the constraint of currency for full employment”

The magic of money

Once upon a time a little village had merchants such as the baker and brewer who provided bread and beer to the carpenter and farmer, knowing that in exchange the carpenter kept the furniture and fittings in order, while the farmer supplied grain at harvest time.

Friday afternoons in the pub they often pondered on how to trade with the village up the slope for grapes and wine, and the village downstream for beef and milk. The dilemma was coinciding the availability of products to barter, for eg., milk was available daily while wheat could be offered only at harvest time.

It would be difficult to establish the required trust to settle what is owed with strangers, or even neighbours who were not friends or family. So trade was stalled.
Continue reading “The magic of money”

The laughing lion and the doves

Perhaps the ashes of the labour guilds will be the phoenix that will form the nucleus of an alternative to bureaucracies, both corporate and government.

Phoenix

There is a thin layer of capable, productive people preyed upon by pyramids of parasites, whose livelihood depends on subjugation and exploitation of those few capable of wealth creation.

Parasites who live in a world where scraping and homage pays more than quality and production.

This is a world where human rights and freedoms do not exist. Indeed humans are considered resources and HR departments there to enforce corporate policy on those subjects.

However, the system won’t fix itself; it will have to be replaced.

Continue reading “The laughing lion and the doves”

Financing

Once upon a time an entrepreneur envisaged a watermill in a village with all the resources and skills to construct one.

https://www.flickr.com/photos/75894308@N03/7657361676The mill’s construction drew on forests and quarries for raw materials, and on carpenters and masons for skills, stimulating demand and thus economic activity.

Once the mill was completed, the village could reduce costs of flour and products such as bread and pastries which could be sold beyond the town limits. Cereals from neighbouring towns were also milled, making the enterprise a success, and the town prosperous.

Continue reading “Financing”

It is our duty to be free

It is our duty to be free

If a soldier is imprisoned by the enemy, don’t we consider it his duty to escape?. . .If we value the freedom of mind and soul, if we’re partisans of liberty, then it’s our plain duty to escape, and to take as many people with us as we can!”
― J.R.R. Tolkien

Do not use this money to pile up needless junk you don’t need. Use it to build your catapult. The one which will launch you over the walls of the corporate prison. Money gives you leverage. Build enough leverage, and you can pretty much do whatever you want all the time.

https://www.toddbrison.com/the-6-step-guide-to-selling-your-soul-for-money/