The three major mainstream schools of economics (Keynesian, Monetarist/Chicago, and Austrian), as well as both capitalism and socialism, all assume as a given that wealth must be concentrated. As Keynes put it,
The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably. (John Maynard Keynes, The Economic Consequences of the Peace (1919), 2.iii.)
This is because the underlying assumption is that all savings to finance new capital formation can only be accumulated by reducing consumption (past savings). This means you need a small number of private individuals who own as much as possible (capitalism), or the State that owns everything (socialism) This is because only those who produce far more than they consume can accumulate savings in this manner.
The powers-that-be never consider the possibility of financing by increasing production in the future (future savings), which would require a broad distribution of capital ownership to remain viable, and restricting production to what is consumed, not to accumulate for reinvestment. This would be a personalist, rather than a capitalist or socialist system.
Thus, the whole financial services industry is designed to do one thing, while being used in the exact opposite way. All the experts assume that everything is financed out of existing savings.
The case is different for “future savings” money, that is, money not based on past savings but that is created by lending for the purpose of producing marketable goods or services.
This leads into the reason for bringing usury into the discussion. The phenomenon of über-wealth was made possible only because of a unique combination of public and private sector usury, that is, massive money creation for non-productive purposes of which a very few already-wealthy individuals were able to take extreme advantage.
|Hilaire Belloc, sneering at Keynes.|
Hilaire Belloc addressed the problem of usury in a number of essays. In at least two he claimed that while the ancient world was brought down by widespread private usury, the modern world would meet its demise through public usury. While something of an oversimplification, there is a great deal of truth in Belloc’s analysis. (See, e.g., Hilaire Belloc, “The Heresy of Mohammed,” The Great Heresies. Rockford, Illinois: TAN Books and Publishers, Inc., 1991, 45-46.)
It cannot be denied that if governments had not created such incredible quantities of money backed with their own debt — which is pure usury — the global debt crisis would not exist. Further, the phenomenon of über-wealth and the problems it has caused for governments and citizens would not have come about. Finally, the Great Reset would not have gained any traction if the global debt crisis and the über-wealth phenomenon were not an issue in the first place.
This situation is not, however, hopeless. We need a non-usurious understanding of money as a social tool to which everyone has access to replace the idea, rooted in past savings, that money and credit are the purview of a chosen elite mandated by God to rule the world and every aspect of everyone’s lives.
|"You're both stuck in the slavery of past savings."|
First, future savings money should not be used for consumption as there has not yet been production to back the promise. That is why most consumer credit today must be regarded as pure usury, along with the bulk of modern government debt.
What about a productive project financed with future savings? Is the lender due anything? Emphatically, yes — but it might not be what most people today think.
Because no existing money is lent when money is created out of future savings, a share of the profits — interest — is out of the question. Instead, because the money is created by lending for future production, the lender is entitled to a one-time service fee based on the amount of new money created, not an ongoing periodic charge representing a share of the profits.
Thus, where a loan of past savings bears interest, a loan of future savings is discounted. Someone who borrows $100,000 of existing savings at 5% per year for a productive project owes the lender $100,000 plus 5% of the unpaid balance if any part of it is outstanding.
Someone who borrows $100,000 of money newly created by lending discounted at 2% (Despite the fact that almost all current financial and economic literature refers to the discount rate as an interest rate, it should be obvious that is not the case.) — and thus received a net of $98,000 — owes the lender $98,000 principal, plus a $2,000 service fee. Out of this $2,000 the lender must cover the costs of creating the money, any risk premium, and a profit. If a lender cannot cover his costs and a reasonable profit out of the discount, he should not make the loan.
Of course, there are other considerations for making a commercial loan, which we will look at in the next posting on this subject.#30#