But love your enemies, do good to them, and lend to them without
expecting to get anything back. Then your reward will be great…
Even in ancient scriptures, there is allusion to the fault of lending for the purpose of receiving back more than what was lent. Based upon extensive thought and examination of the evidence and arguments, I firmly believe that borrowing and lending at usury (and any interest rate) is bad for society.
The Bible uses the word "usury". Today, the politically correct term used for "usury" is "interest rate". Usury is defined as "interest," or is sometimes defined as an exorbitant or excessive rate of interest. But which is the real definition, really? Is it any interest rate, or is it excessive interest?
It is acknowledged by society that loan sharks who charge very high interest rates are criminals, because they charge too much interest. It is widely acknowledged that excessive credit card interest rates are criminal--commercial banks even teach this! TV commercials show that charging high interest rates is like robbery, as they picture a raid of Vikings or Bandits as representing their competitors' interest rates.
If excessive usury is bad, why isn't a low interest rate bad, too? Where do you draw the line? Where is the moral absolute? What makes a 25% annual interest rate criminal, but a 15% annual interest rate not criminal? Or, is a 15% rate criminal, and a 5% rate ok?
I think any interest rate is bad, and I'll tell you why.
The borrower is the servant to the lender. And in the United States, we have outlawed slavery since the end of the Civil War.
The problem of interest rates is perhaps the most important topic regarding money. Almost every sort of financial commentary on the general markets contains a comment on what the interest rates are, or should be.
There is nothing more confusing than reading commentary of various economists. Some will say a lower interest rate is bad for the economy (because it will lead to too much economic activity and inflation), while others will say a higher interest rate is bad for the economy (because it can choke off growth, and cause bankruptcy, or deflation). Some will say a lower interest rate is good for the economy (because it is the needed stimulus, and to prevent deflation), others will say a higher interest rate is good for the economy (because it will slow down economic growth, and prevent inflation).
What a mess of contradictions! Supposedly, sometimes growth is bad, and sometimes good. Supposedly, sometimes inflation is bad, and sometimes good.
Occasionally, you will read that the problem is that the Federal Reserve is setting interest rates, and that the solution should be that the free market should set interest rates. But is that the real solution to the problem of interest rates?
It is far more rare to read of any economist who condemns all usury in the first place, and I really wonder why. Where have all the moralists gone?
Isn't it a false set of options when the discussion is framed as if the choice is to have either a lower or higher interest rate? How about the option of no interest rate (and no lending) at all? Why isn't that option widely discussed?
Why do people just assume that loans, charged at interest, are needed for a society to grow and prosper? I believe that is a false assumption, and I'll try to explain why. I believe that loans, charged at interest, are like a chain around the neck of society, and cause it to stagnate and die.
Loans are generally fraudulent in their nature from the very beginning, and I will describe several examples.
First, I have to thank Ted Butler for this first example. Ted has written that metal leasing (loaning) is by nature fraudulent. He says that the lender (the central bank) lends out the gold (or silver) to the borrower (the bullion bank). Then, the borrower (the bullion bank) loans out the gold again to the mining company. Then, the mining company sells the gold (to a fourth party) to raise the paper money needed for expanding production. If this process were repeated for any other asset, it would be fraud. You cannot sign a lease on a house, make rent payments, and in the meantime, sell the house on the open market, and pocket the proceeds to hire someone to build a new house. You cannot rent a car at the airport, and sell the car at the local used car lot, and take the proceeds to buy another car.
But why is lending allowed for money? I believe the key difference is that gold and silver are fungible, meaning that every unit is similar enough to another so as to be little different whether the same exact brick of gold or silver is returned. That's the beauty of gold and silver as money. It is one key reason why gold and silver are money, whereas other things like houses, cars, numismatic coins and diamonds are not money.
But Ted Butler's example goes to show the main problem of loans, which is that paying them back can be impossible under certain circumstances. For example, you cannot pay back a house after you have sold it to someone else! The situation in the metals markets is similar in that that much of the gold and silver that has been leased into the market has been crafted into jewelry over time. Thus, that precious metal is no longer fungible, but is now in a drastically different form, and cannot be easily repurchased to return to the original lender.
If Ted's argument is correct, then he is really arguing that all loans are fraudulent by nature, and I do tend to agree, even though money is fungible. The reason is that the fungible nature of precious metal does not overcome the fact that money is not borrowed to be used, like a car or house is used, money is borrowed to be spent or sold! The false assumption is that spending money is the only use for money, and clearly, spending money is not the only use for money. Another use for money is to save it! And clearly, selling a borrowed thing is not wise. It is not even wise to borrow for the purpose of making an investment, because investments are risky.
The other false assumption is that lending money to a borrower is the only way to put the money to productive use, because the borrower will invest it in a project. But this is also a false assumption, because the person who would be the usurer could also become the investor directly.
Now, loaning paper dollars should really be criminal, because the creator of paper dollars (that lender of last resort, the Federal Reserve) could, by a policy decision, cut back on lending. If this happens, then it would really be impossible to pay back dollars, and the enslavement process of servicing the loans at an interest rate would really accelerate.
The next big reason why loans are generally fraudulent in nature is that banks generally do not loan gold, they loan paper dollars, or credit. The borrower never really borrowed anything tangible and real in the first place.
This next example goes back to the time of Andrew Jackson, who fought the central bank of the United States, and refused to renew its charter. Jackson noticed a real estate bubble developing because banks were freely loaning paper dollars for the purpose of land speculation. But the banks never loaned gold. They would only loan paper money. So Jackson passed a law saying that all land purchases had to be paid for in gold coin. Since banks would not loan gold, the real estate bubble quickly collapsed, and economic reality was re-established. (Let this serve as a warning to people holding overvalued real estate today.) Calculate the value of your home in gold or silver coin. Is it really worth that or not?
The next example is from the time of World War II, and this is a much more frightening example of the fraud of the bankers. By 1945, the end of World War II, the debt of the United States government was $259 billion dollars, up from $43 billion in 1940. See www.publicdebt.treas.gov/opd/opdhisto3.htm Now, remember, this was during the time when gold was officially $35/oz. Let's do the math on that, and see how much "gold equivalent" we borrowed. $258,682,187,409 / $35/oz. = 7,390,919,640 oz. That's 7.4 billion oz. of gold equivalent. Gold is usually quoted in tonnes, and to convert, we divide by 32,152 oz./tonne. And so, that comes to 229,874 tonnes. That's the value of the dollar debt of the U.S. government at the end of WWII.
A quick look at www.gold.org/discover/knowledge/faqs/index.html shows that all the gold mined in the history of the world up to 2001 is a mere 145,000 tonnes.
Therefore, it is impossible for the U.S. government to have borrowed anywhere near 229,874 tonnes of gold. The loan was a fraud to begin with, and therefore, does not have to be repaid in any way, shape, or form! It is extortion upon extortion to require interest to be paid on a loan that was fraudulent to begin with! Loan sharks are more honest than the people who loaned the U.S. government the money to win WWII. After our soldiers came home after fighting for the freedom of Europe, they should have finished the job, and fought for our economic freedom right here at home! What good does it do to fight for freedom, only to be enslaved once again to the debt the moment you are free?
The way this fraud was perpetuated on the people was that the debt was sold to the people in the form of "war bonds". Using marketing and advertising, it became a patriotic thing to loan money to the government, and thus, the people who held war bonds obviously did not want that debt to default. That's quite a bit of economic trickery. But to pay off the bonds, taxes had to be collected from all the people, once again, so the people did not benefit.
What good does it do for us to have to pay over 50% in taxes at the highest levels? Wouldn't it be better to live in a nation that had lost a war and had to pay only a 30% tribute tax?! It would be less! Historically, slaves paid 50% of their productive capacity to their masters. Historically, feudal serfs paid 30%. Today, what is the difference? Aren't we are a nation that is enslaved economically?
And the only reason we have the income tax is, in theory, to pay off the usurious loans of the government, which were fraudulent to begin with.
Many belief systems throughout the world condemn usury. I, being a devout Christian, reference the bible to better understand the morality of usury. There are four verses (Exodus 22:25, Leviticus 25:36,37, Deuteronomy 23:19 ) that prohibit lending money at interest, or usury.
Usury is defined in one of them.
Leviticus 25:36, "Take thou no usury of him, or increase:…" (KJV)
Man has a history of redefining and manipulating language to justify actions of greed. The definition of usury and the addition of the term "excessive" may be a very good example.
Laws must be precise. If they are not precise, they are void for vagueness. The law must define its terms. Usury is defined as any increase, not just "excessive interest". If a word such as usury meant "excessive interest," then I believe that God, who gave mankind language ability in the first place, would have also defined what "excessive" was. The definition would have included a percentage, such as 1% or 5%, and also a time frame, such as a year or a month. If usury meant "excessive interest," then the passage in Leviticus 25:36 would have said "…or EXCESSIVE increase…" but it did not.
No, it was man who tried to re-define the word, to justify his disobedience to it, and to deceive people. But if it is wrong to be a deceiver, it is also wrong to allow yourself to be deceived by those who practice usury!
It is not wrong to invest, own, and then produce more. It is wrong to lend and take more. I believe that the Bible teaches that each man should be free to enjoy the productive capacity of his own work.
Usury was forbidden, unless when lending to a stranger, (Deuteronomy 23:20) which meant someone who was not an Israelite. The verse is clear that avoiding usury would lead to economic blessings for the entire land.
In a global economy, where all men should be treated equally under just laws, can there really be any such thing as foreigners? According to the new standard set by Jesus when he said to "love your enemies," is there any allowance for lending at usury to a stranger?
Nehmiah Chapter 5 is a really great story on usury that I strongly urge you to read. It describes the problems of usury, and it compares the bondage of usury to the bondage of slavery. The setting was Jerusalem, after some of the Israelites had returned from a 70-year captivity in Babylon (because they had not obeyed God's laws, such as the laws on usury). The more wealthy slaves, however, still had to purchase their fellow Israelite slaves who did not yet have the wealth to buy their own freedom. But upon their return to Jerusalem, the wealthy people began lending to the poor people. The poor people soon realized that they were in economic bondage, not much different than before. The debtors complained. A person in Israel was supposed to live free, not in bondage. So Nehemiah thought about the problem, and he ended up condemning the usury, and the taking of usury, and said that it made no sense to enslave a people with debt who you just bought to be free from slavery.
7 I pondered them in my mind and then accused the nobles and officials. I told them, "You are exacting usury from your own countrymen!" So I called together a large meeting to deal with them 8 and said: "As far as possible, we have bought back our Jewish brothers who were sold to the Gentiles. Now you are selling your brothers, only for them to be sold back to us!" They kept quiet, because they could find nothing to say.
9 So I continued, "What you are doing is not right. Shouldn't you walk in the fear of our God to avoid the reproach of our Gentile enemies?
10 I and my brothers and my men are also lending the people money and grain. But let the exacting of usury stop!
Clearly, debt at usury is like slavery. Clearly, the borrower is the servant to the lender.
The clear answer to the problem of how usury enslaves people is to avoid debt, and avoid using debt currency. The use of gold and silver as money will bring economic freedom and prosperity. As people free themselves from the fraudulent system, it will create a boom in gold stocks, and especially silver stocks, since silver is more undervalued than gold.
I produce a free weekly silver stock report on 90 silver stocks. To receive this free report in email, sign up at www.goldismoney.com
January 18, 2004
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