Money is the blood of our economic system. When nourished by a healthy flow of capital, ambition and enterprise can flourish and humanity’s full potential can be achieved. Once cut off from the blood supply, however, initiative and hope soon die and the rigor mortis of despair sets in.
Our financial institutions are the heart and circulatory system of the economy. If the flow of money is blocked by a build up of fear or greed in our bankers, then an economic coronary will surely follow. A mild attack is usually referred to as a recession. Think of it as economic angina. A more massive failure is usually called a depression. Think of it as an economic stroke. To cure a case of angina, bankers normally prescribe a rest from work for millions of otherwise healthy employees. This lowers their fever of hope and security and reduces their delusions of equality. In the case of a stroke, however, massive surgery is required as much of the cooperative tissue of society must be removed.
The principal medicine that bankers use to control the economy’s blood pressure is interest. Basically, interest is a tax on human potential. If a borrower can convince a lender that he or she has significant potential, then the lender will lend that person their own potential. The interest they must pay is like a royalty fee on their own initiative. In fact the only real difference between interest and taxation is that taxation is based upon past achievements whereas interest anticipates future achievement. That, historically, the benefits of tax revenues were more broadly dispersed throughout the general public than the benefits of private interest, is no longer very relevant since the primary purpose of collecting public taxes today is to pay interest on the public debt.
A planned scarcity of money is the key to maintaining high interest rates. Even the illiterate have been taught that if something is in short supply then you can expect to pay more for it. Even a child knows that a rare hockey card fetches a premium price. Few adults, however, know much about our monetary system. Most believe the myth that if there was more money available in the system that a shortage of goods would simply push up prices to absorb it, a fear commonly referred to as inflation. This theory may have been true in the distant past, before technology gave society an almost unlimited productive capacity. Today, however, the single largest component of most prices is interest. At first, this may seem unbelievable, but think about it... every step along the chain of production, from raw materials to finished products, involves borrowed money.
The lumberjack must finance the heavy equipment needed to get the logs out of the bush, the planning mill must finance the equipment to turn the logs into boards, the railway must finance the engines to pull the lumber to market, the furniture company must finance the machinery needed to turn the boards into furniture, the trucking company must finance the trucks to haul the furniture to the retailer and the retailer must finance his inventory and the costs of setting-up his store. In addition, all of these companies must finance their real estate. In order to stay in business, each one of these firms must recover their interest costs in their prices. At the end of the line, the consumer must pay the entire chain of interest that is embedded in the price of the furniture. In capital intensive industries this can amount to over two-thirds of the retail price. On top of that, most consumers must finance any major purchases that they make creating even more wealth for the lenders (consider the total interest paid on a 25-year residential mortgage, for example). If interest rates were lowered, and all businesses passed along all of their savings in interest costs to consumers, prices would tumble. Of course, in the short term, businesses would not pass along all of their savings to consumers. They would try to hold on to as much of the additional profit as they could. In a truly competitive marketplace, however, over the long term, competition would squeeze the excess profits out of the price. Whether or not a truly competitive market still exists today is another topic. The point here is that an abundance of money, rather than causing prices to rise, would most likely result in lower prices in the long term.
The bankers, however, don’t want you to know this. A shortage of money increases their profits and keeps people frightened about losing their jobs. Frightened people don’t ask for wage increases and don’t speak out against corruption. In fact, frightened people stop asking questions altogether. They're too busy just trying to survive... without having a stroke.
