< HOME  Tuesday, November 08, 2005

Unemployment and, you guessed it, Interest!

People are unemployed when there is not enough money circulating in the economy to engage them in production.

Debt and interest are key. For example, take NY, there is high unemployment, and many infrastructure projects needed. But capital is needed to facilitate cooperation and exchange of labor. Money simply speeds up exchange of labor and products--hence the term currency, from the root word current, meaning flow. Why on earth should the money be taxed with interest?

Logically, the government should issue money interest free to facilitate these projects, but as it stands, central banks have a monopoly on issuing money and only allow it to circulate at interest. This is the crux of the problem. They control the money supply, and they want it returned to them in the same currency, only in a greater quantity than they issued--which is impossible.

When I say some people can't get out of debt, I do not mean no one can get out of debt. I am speaking from the macroeconomic perspective in terms of total currency.

If $100 in $1 dollar units are issued and loaned to five different persons at interest, all five will have to compete with eachother in order to pay off their loans plus interest.

Only 4 of them can get out of debt. There will not be enough money left circulating for the fifth to get out of debt no matter how hard he tries. This is a zero-sum result, inevitable with interest.

That person will garner little sympathy because he is healthy, and suffered no natural disaster. Yet he is unable to pay his debt because of a flawed monetary system.

If there is no interest, then he might still fall behind another, but generally, this will be a result of a natural disaster or illness. At which point the community gets together voluntarily and extends credit at no interest until the crisis passes.

Interest on government bonds has been decimating the physical infrastructure in america for decades. The US government spends 7x more dollars on interest than it does on education.

If a government has the legal authority to issue bonds at interest that ravage the budget, then not only does the government have the similar authority to issue interest free money to finance public infrastructure projects and fund education it has the moral duty to do so.


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