A Banker and Ten Humans

Submitted by SadInAmerica on Mon, 09/08/2008 - 7:35pm.

Ten humans decide they want to start their own community, but they have no common "money" to build their economy on. A banker agrees to help them out. He loans each person $10 (money that he simply "prints up" in his basement) and agrees to accept "interest only" payments on the loans at a rate of 10%. (A tiny $1.00 payment per person, per year.) So, the community begins with a total money supply of $100. Prices in the community are set according to this money supply and everything seems fine.

At the end of the first year, the banker gathers everyone together to collect his interest. Each of the ten people surrenders their $1 "interest only" payment, but none of them stop to consider (after making the payment) that all ten of them still owe the banker $10 each. How can everyone pay their debt if the community's total money supply is now only $90? (There are no longer enough dollars in circulation to pay the banker the $100 he is owed.)

Although the common people might not have figured this little problem out, they can't help but notice (as the community starts its second year) that getting a "fair price" for their products and services seems a little tougher than the year before. Prices seem to be going down. -But only the banker knows why. (There are fewer dollars in circulation; this drives the purchasing power of each dollar up. As the purchasing power of each dollar goes up, the number of dollars people can sell their products and services for goes down.)

By the end of the second year, one of the borrowers (a wise businessman who has managed to accumulate $15) makes his interest payment AND pays off his debt in full. So, as everyone else makes their second $1.00 "interest only" payment, he pays both the interest due and the $10 he originally borrowed. This reduces the community's total money supply by another $20. ($10 in "interest payments" plus the businessman's $10 principle payment.) There are now only 70 dollars (to be shared by all ten people) and nine people still owe the banker the full $10 ($90 in total debt.)  

Two more years pass - two more people have worked very hard to earn enough to pay off their debts. So, by the end of the fourth year, the money supply is reduced by another $38. ($18 in "interest" payments plus another $20 from the two individuals who, despite the difficulty, managed to earn enough from the shrinking money supply to pay off their loans.) There is now only $32 left in the community, to be shared among all ten people - and seven of those people still owe the banker $10 each ($70 total)

At this point, it will be nearly impossible for those who are still in debt to make their $1.00 interest payments, let alone pay off their debt. (Where once there was $10 for each person in the community, there is now only $3.20.) With so few dollars left in circulation, the purchasing power of each dollar has gone through the roof. Prices have fallen drastically and the economy is in shambles. If the banker does not "help the people out" (by putting more money back into the community) bankruptcies are inevitable; bank seizure of property is inevitable, financial ruin is inevitable. 1

The businessman (who paid his debt off first) approaches the banker. He explains to the banker that the people want to work; it's just that times are tough. At its height, his business employed half the town. Now, he is down to just a couple employees and he has had to cut their pay - he just can't afford the $2.00 per year salary anymore (and even at that rate, HALF of their pay is being eaten up by their annual interest payment - they can barely feed themselves!)

He points out if the banker agrees to fund a new / ambitious project the town will spring to life. There will be jobs for all and the suffering will end. But he also points out, without the project, many people are likely to default on their loans…the businessman just doesn't see how the people will be able to continue making their payments in such a depressed economy. "Please Mr. Banker" he says "you've got to help us out."

The banker agrees to the loan, and it's a whopper ($100.) The businessman is ecstatic. Shaking the banker's hand, he promises to make good on the loan. He's not only certain his new venture will be profitable, he's certain the whole town will benefit. "Oh, thank you Mr. Banker" he says sincerely, "you have done a good thing here!"

But nobody stops to think that there is now $132.00 in the economy to cover $170.00 of debt. And each year, $10 in interest will be due on the new $100 loan and $7 will be due on the $70 that was unpaid from before. The banker knows the math…and with a smile he creates the $100 "out of thin air" and the cycle starts over.  

Welcome to the "debt-based" monetary system. Whether it is a small community or a powerful nation, any economy built on this fraudulent system is doomed. Its debt is mathematically inescapable and, if the people ever try to pay off their debts (or if the banks simply refuse to renew loans) the money supply will evaporate and financial ruin will follow.

When the Federal Government talks about "paying off the national debt" it is LYING to you. It cannot do this without destroying our economy - the bankers that created our Federal Reserve System in 1913 built "dependency" into the system. It was designed to create ever-expanding, inescapable debt. By inflating (and deflating) the money supply, our wealth (as a nation and as individuals) is at the mercy of the bankers.

Josiah Stamp (former director of the world's first Central Bank) had these words for the common man: "…if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money."

In his defense, he was against our current "debt-money" system, saying: "The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in."

We must free ourselves from this monetary system; we must demand honest money. If you need more information on this topic, the following short book is available.

   Joe Plummer - September 6, 2008 - source JoePlummer

1: Just a side note: The banker could technically spend ALL of the interest he has collected back into the economy to ease the pressure (quite a deal for him as the dollars he has "earned" will be worth a small fortune) but this does not change the fact that the debt is inescapable. As the debts are paid, the money supply shrinks. Without new loans (new debt) the economy will grind to a halt and those still holding debt will have no choice but default.

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Submitted by SadInAmerica on Mon, 09/08/2008 - 7:35pm.