As interest charges overlap and multiply (Credit cards, Loans, Instalments etc.) a gradual inflation of costs drives up the salaries people need to live – leading to an overall systemic inflation in the economy. Wherever there is interest, some inflation is unavoidable. Central Banks are also, aware that creating too much money, say to paper over Government debts, will also, boost inflation but often convince themselves to do so as they do recognize that a little inflation is a good thing.

It is true that seen through the eyes of Nature, a little inflation is actually a good thing. Money that loses value across the board is in tune with the Second Law of Thermodynamics (everything moves from a higher level/ order to a lower level/order i.e. entropy increases). The problem is that once all the interest payments are factored in, the devaluation of money may not be gradual and is anything but ‘across the board’. It becomes a gain for some and a loss to others. Interest payments siphon some of the actual buying power of the money lent, from the borrowers who pay interest, to the lenders, who receive interest. Interest is thus a private tax that drives monopolization of money and distorts the Free Market The most benefit goes to the money issuing Central Banker or other Bankers/ Financiers. Obviously when the Bust comes these Bankers/Financiers get blamed the most, but they are only operating as the System directs and, in a System where interest is allowed, they have no alternative.

“Above, far above the prejudices and passions of men soar the laws of Nature. Eternal and immutable, they are the expression of the creative power; they represent what is, what must be, what otherwise could not be. Man can come to understand them: he is incapable of changing them.” – Vilfredo Pareto

Allowing the concept of accumulating interest by treating money as if it is an exception to Nature’s Laws, by which it would otherwise depreciate, and developing financial systems not in accordance with Nature’s laws, will only seem effective for a little while. The Law of Entropy cannot be denied and, sooner rather than later, such a system has to collapse and a new and lower level of value of money in the financial system arrived at. The larger the financial system, the shorter the interval between the ‘Busts’.

To really keep the Financial System or economy booming it is essential that the ‘Trust’ in the value of ‘Money’ be maintained, that a slight devaluation of money in accordance with Nature’s Laws be built in to the system, the concept of ‘Interest’ thereon be reviewed, and finally that the ‘Money’ be encouraged to be kept in circulation to generate wealth which would more than compensate for its devaluation.

Rising interest rates encourage release of more money into circulation which causes interest rates to fall, calling for shutting off flows of money till rates rise again. Falling interest rates prompt Lenders to hold back (dam) their cash until rates rise again, a practice that is a major cause of economic downturns. This means in economic downturns there is no cash in circulation, creating a situation where there is no means of keeping score, thus encouraging ‘Barter Clubs’ and other cashless alternatives, even though there is no actual shortage of demand or supply.

For instance, if consumers wanting to purchase vegetables cannot get their hands on cash, Shopkeepers/Grocers are soon affected. That in turn affects the vegetable distributors, transporters and eventually even the farmers. In every step of the chain where getting paid once provided the Money needed to pay someone else, lack of money flow brings all business to a halt. Then, as the incomes of everyone linked to vegetables dries up, the reduction extends in all directions money once took as it passed through their hands. Through the whole interlinking web of exchange, transactions that might otherwise have happened suddenly don’t. Although, initially there may be just as many vegetables for sale and just as many customers eager to have them, suddenly no one is buying enough because there isn’t enough cash in circulation. This lack of circulation could be because of discontent with the interest returns or with lack of confidence or trust in the ability to get expected value.

Pages: 1 2 3 4 5 6 7 8