The problem isn't interest, it is fractional reserve banking.
Lets say we have the rich guy (A) and the poor guy (B). Now the poor guy lives in an unsafe neighbourhood, so he gives his money to the rich guy (A) to put in his safe.
Meanwhile another poor guys (C) needs a loan, so he goes the rich guy (A) and borrows some money.
Fractional reserve banking allows the rich guy(A) to lend out the poor guy's (B) money to C, instead of using his own money.
Now normally this works really well for A, because on the off chance that C cant pay up, A can just go and take all of C's stuff and sells it at a ridiculous profit, leaving C with no assets and a huge debt, plus fees and interest. And all the while A is still collecting a fee from B for holding his cash.
The problem is that fractional reserve banking works TOO well. See its actually better for A if C cant pay it back, because he gets all the assets, fees and interest as well as the money he lent out, which wasn't even his.
The crisis we face today came about because A lent out huge ammounts of money to lots of people he knew couldn't pay it back (C), specifically because he wanted to get their assets. BUT the money he lent out wasn't his, so when B came to get their money back off him, it was all lent out.. and when A tried to collect the assets, they weren't worth anything because he had recollected so many that demand had dried up and there were no more C's left to lend to.
We were allways going to reach this point with fractional reserve banking, and this isn't the first time it has happened. Time and time again around the world, something happens, everyone goes to collect their money and finds it isn't there.
What is most ridiculous is this proposed solution.
see in America, A not only lends to the poor suckers, he also lends to all the businesses in town and even the government(D).In fact A has the whole deal so stiched up that he even prints the money and the government has to borrow all its spending money from him.
So the bailout is D borrowing money from A with interest, to give it strait back to A.. without interest.
This of course will imediately result in inflation.
The problem isn't interest, it is fractional reserve banking.
Lets say we have the rich guy (A) and the poor guy (B). Now the poor guy lives in an unsafe neighbourhood, so he gives his money to the rich guy (A) to put in his safe. Meanwhile another poor guys (C) needs a loan, so he goes the rich guy (A) and borrows some money. Fractional reserve banking allows the rich guy(A) to lend out the poor guy's (B) money to C, instead of using his own money.
Now normally this works really well for A, because on the off chance that C cant pay up, A can just go and take all of C's stuff and sells it at a ridiculous profit, leaving C with no assets and a huge debt, plus fees and interest. And all the while A is still collecting a fee from B for holding his cash.
The problem is that fractional reserve banking works TOO well. See its actually better for A if C cant pay it back, because he gets all the assets, fees and interest as well as the money he lent out, which wasn't even his.
The crisis we face today came about because A lent out huge ammounts of money to lots of people he knew couldn't pay it back (C), specifically because he wanted to get their assets. BUT the money he lent out wasn't his, so when B came to get their money back off him, it was all lent out.. and when A tried to collect the assets, they weren't worth anything because he had recollected so many that demand had dried up and there were no more C's left to lend to.
We were allways going to reach this point with fractional reserve banking, and this isn't the first time it has happened. Time and time again around the world, something happens, everyone goes to collect their money and finds it isn't there.
What is most ridiculous is this proposed solution.
see in America, A not only lends to the poor suckers, he also lends to all the businesses in town and even the government(D).In fact A has the whole deal so stiched up that he even prints the money and the government has to borrow all its spending money from him.
So the bailout is D borrowing money from A with interest, to give it strait back to A.. without interest.
This of course will imediately result in inflation.
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