Some commie online was upset that lenders charge interest, claiming that it is usury. He feels that loans should be interest free. Being that I have completed the finance and economics courses for my MBA, this is where I decided to help educate him. I shouldn’t have bothered.
Lenders have expenses.
They have fixed administrative costs like accounting, clerks, and other things that they must pay for. Those costs are the same for every loan.
Then there are the variable costs, the cost of defaults. About 1 percent of those who have a 750 or higher credit score default, but this rises to more than 15% of those with a score of less than 600. This default rate means that interest rates must be higher for those who have a higher chance of default. If interest rates are capped, then lenders will simply refuse to lend to those whose likelihood of default makes it uneconomically feasible. That tends to mean minorities, who historically have much higher default rates.
The commie went on to handwave that point away, saying it is a bad approach to paying for things.
In response to this, I posed a question:
So what’s the alternative? It takes about 14,000 hours of labor to build a house, plus materials. Where does the money come from?
Here are the alternatives that he proposed. I answer each in turn.
1) We could eliminate the usury/interest rates system altogether. If it’s too expensive, we have no business buying it yet. If a low cost bought huge portions of America, we can restore that same value.
Much of that was when each person was building their own house, growing their own food, etc. Have you built your own car? House? Can you? Most people cannot. Money is what makes specialization possible. Sometimes, a transaction takes more money than you have on hand. The cost of waiting to save and pay cash isn’t practical. Try living in a carboard box while you save to buy a house.
2) We could have a fixed flat member fee. Nothing too small, nothing too big. Something that keeps a company in business, especially when factoring in multiple customers. We could cap the compounded debt.
How large would the membership fee go to buy a house or a car? What would be the terms? Imagine walking to work for 5 years while you make payments on a car that you don’t yet have.
3) We could simply cap the profit of compounded debt.
What would happen then would be that no one with bad credit would get a loan.
4) We can focus on reducing the root costs of resources (wood, etc.) after eliminating interest rates.
The largest expense in almost any business is the cost of labor. To build that house, you still need to fund those thousands of hours of labor. Who pays for that, and how?
5) The sellers could get monthly payments directly while cutting out the middleman. Extra cost could be minimal.
So you want the sellers to also be the lenders. That’s inefficient and actually increases costs. Now the seller’s funds are tied up in the products that haven’t yet been paid for. The time between selling the inventory and receiving payment is called the cash conversion cycle. Without financing, this could mean years of a company waiting to be paid for things like appliances, homes, and cars. There will still be defaults, meaning that those costs will be passed on to consumers. Also, only wealthy people and those with good credit will receive goods. Minorities need not even apply.
6) Sellers can start by asking for a lump sum in the beginning to give them a buffer before monthly payments.
Again, with sellers asked to also be lenders. This disrupts the seller’s cash conversion cycle. Funds that are tied up in inventory that has already been sold are not available for the company to continue operations, causing losses and delays. This is expensive. The term here is called “The Time Value of Money.”
7) The seller of resource materials can drop their prices for the seller of products.
So now you want the suppliers to bear the costs? The electrician drops prices for the home builder. Now how does that work?
8) Financial aid (if spending isn’t going to the people, why is it so much better for government money to go to the usury sin of lenders?) To eventually pay off the government in a fixed fee of profit. No fee. Failure to cover is taxed — last resort.
So the government will pay interest instead of consumers? This results in unsustainable debt, or in runaway inflation.
9) A non-profit source of assistance to fill in a time of struggle.
Where does this non-profit get their funding? Money is a material, just like steel, wood, or labor. It has to be paid for. Someone, somehow, someway will bear the costs of money. It will be the consumer who has to wait until he can get a house or car on layaway, the business that has paid for labor and materials and now can’t use those funds for the next project because they are awaiting payment, or the taxpayers who have to fund the government. It’s a cost, and someone will pay for it. You are expecting the government, who has famously paid $600 for a hammer, to control costs.
10) Pay as we go. A product might need to be covered completely, but duration of services could be ongoing payment. Instead of a government paying a lump sum of a project, they only shell out service cost totals as the project goes on, that way if there’s a cancelation, it basically freezes the pay where it is at, instead of being trapped a lump sum covered by loans and then owing the initial cost and a potentially unending debt with immeasurable interest rates, the costs of services are already covered.
So you pay for the land to be cleared. Then save for a few months before you have the money to pay for the underslab work like plumbing to be done. Three more months for the outside walls, ad nauseum, ad infinitum. Twenty years of being homeless later, you finally are ready to move into your house. This is just a repeat of your first point- and still won’t work.
11) Lay Away. Pay First. Receive after. No middleman.
Again with the point of paying for it before you get it.
12) A combination of these things..
None of which will work, for the reasons above.
His answer to all of this? He focused on the “Time Value of Money” and the cost of money.
“That’s the cost of money” ignores everything I just said. I know that my wages don’t satisfy my time. Time is not an objective value. Too bad. Your explanation is some weak sauce.
The base issue here is that young people (who make up the majority of useful idiots) have no concept of money, value, or economics. My son once asked me (when he was 4 years old) for some expensive toy. I told him that we don’t have money for that, and his reply was to tell me to go get more from the ATM. Communists display all of the economic knowledge of a 4 year old who wants a new toy.
30 Comments
McChuck · October 8, 2025 at 5:35 am
I don’t have a problem with a modest rate of interest for loans. The time rate of money is a real thing, and opportunity costs always exist. I have a problem with banks (and that includes credit card companies) charging exorbitant rates of interest for – nothing.
The money (most) banks lend doesn’t cost them anything except their normal operating expenses. They make the money up on the ledger books and credit your account with it. Funds ex nihilo. When you repay your loan, the funds return to nothing – except for the interest you pay, which is profit to the bank. From digital bits the loans were formed, to digital bits the loans are retired. Banks can lend infinite amounts of money, because the reserve ratio (how much they have on hand compared to how much they lend out) is currently 0%. To reiterate, the money the bank lends you doesn’t come from your neighbor’s savings accounts. It is made up out of thin air and keystrokes on a computer. The banks have, in effect, been allowed to print their own digital currency, in unlimited quantities.
“As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.” https://www.federalreserve.gov/monetarypolicy/reservereq.htm
When someone defaults on a loan, the banks actually loses nothing but the value of the interest not paid. The bank then writes off the default as a business loss, as if the money had been real. You see, on their books, the money loaned out (which came from nothing and nowhere, remember) becomes an asset, not a liability. So when you default, the value of the asset becomes a loss, the quarterly revenue is reduced on the books, and the bank pays a bit less in taxes.
Yes, this also means that when you pay back your loan, the bank’s assets decrease – except for the interest and fees you paid with real money, which is pure profit.
But what about the money in your savings account? Isn’t that also an asset? Of course it is. The reason it’s not readily available, despite the bank handing out loans from nothing at all, is that the bank uses 90% of your deposit money playing in the stock and bond markets. But that’s a different topic.
P-Tar · October 9, 2025 at 12:42 pm
Ding-ding-ding! Winner-winner, chicken dinner!
It’s the fractional reserve banking underpinning the whole currency system that we should be worried about: NOT the interest rates. Banks create new currency when they make loans, they’re not loaning from a fixed wallet, like slobs like us would have to do… Every one of their loans drives up inflation, and it accelerates. They can even loan currency into existence to themselves at the Fed’s base rate with no additional interest.
This is why the dollar is worth $0.02 vs. what it was in 1913 when the Fed was set up. I asked an AI this question just now: “Is new currency created when a bank makes a loan under fractional reserve banking rules?”
Answer: “Yes, under fractional reserve banking, a bank creates new money when it makes a loan because the loan amount is credited to the borrower’s deposit account, effectively increasing the overall money supply beyond the initial reserves held. This new money is in the form of a demand deposit, not physical currency, and represents a new claim on the money supply, not a direct creation of physical cash.
How Money Creation Works:
1) Deposit: You deposit money into a bank.
2) Reserve Requirement: The bank is required to hold only a fraction of that deposit as a reserve.
3) Lending: The bank can then lend out the remaining amount as a new loan.
4) New Money Creation: The bank credits the borrower’s account with the loan amount, which is a new deposit. This is new money, as it increases the total amount of deposits in the banking system.
5): Money Multiplier: This process can repeat, as the new loan becomes a deposit in another bank, which can then lend out a portion of it, creating even more money. This process is known as the money multiplier effect, where an initial deposit can lead to a much larger increase in the total money supply.
What’s the risk a member bank of the Federal Reserve can’t get an injection of cash instantly to cover loan defaults that threaten their books? Remember those bigass bailouts at the end of Bush II and Obama’s 1st term? The ‘economists’ just pulled the number they needed out of a hat… “Yeah, a trillion dollars sounds like a big enough number…” Then it became two trillion, then three, through ‘quantitative easing’…
And when we the people strenuously objected, from both sides of the aisle (man, nostalgia much?), Congress voted against it, then they got a talk in a dark room, and the next day they all reversed themselves and voted for the bailouts, with rumors floating they were told ‘there will be tanks in the streets’ if they didn’t vote yes on the bailouts.
So… Who’s _really_ taking the risks to support our system of currency and credit, here? I sure AF can see who’s paying the price for it.
Noway2 · October 8, 2025 at 7:38 am
“Time value of money”, that’s a good way to put it. Reminds me of the economic classes talking about net present value, etc. Yes, the credit markets add a lot of liquidity to the system and make things possible that would otherwise be impossible or impractical. Your post is spot on.
However, there is something to the counter argument to the current system, specifically when it comes to things like credit cards and how many average people are buried in debt on them. Part of that is on them, but as ubiquitous as it is, I also can’t help but sense there is a social problem as well.
This gets compounded by things like the Federal Reserve and their interest rates scam while screaming inflation that they and the Treasury have largely caused. The current inflation, unlike the 1970s, is caused by excessive govt. spending, much like around and shortly after WW2. Interest rates won’t combat it. They may temporarily lower it due to side effects, but they don’t address the problem. The only thing it does is create record profits for banks while sucking the wealth out of the people. Yes, they made poor choices that put them in that situation, but these 30% rates are ridiculous. The “punishment” rates for someone who is falling behind don’t help either. I get the idea of the lender wanting to get while the getting is good if they think a default is possible, but there is also a creating your own future aspect.
I am fortunate to be one of those who’s not in substantial debt or have large card balances that I’m carrying. Consequently, I can see both sides of the argument, and see somethings that are wrong, but I also attribute them to non free, aka rigged or govt. influenced, markets. You are also correct that minorities are more likely to be poor and have lousy credit, but that is not racist.
DrBob · October 8, 2025 at 9:32 am
To your points 5 and 6, that’s a land contract and is a terrible idea. I recently sold a cabin that I’d built and two buyers approached with an offer of a land contract purchase. No for two reasons. !. I want my money now to buy my next cabin. 2. When you default, I bear the expense of suing your no-good ass to return my property which you may have damaged since you’ll be as lazy with my property as you are with your money. I saw this in the late 70s when interest rates were 17%.
Divemedic · October 8, 2025 at 9:47 am
Not my 5 and 6. None of those ideas are worth anything
JimmyPx · October 8, 2025 at 9:50 am
Like all commies he just won’t come out and say “housing is a RIGHT man” as is health care food, electricity, internet, a car, etc.
Frankly this is exactly why communism fails. People want free shit but don’t want to work for it.
That’s why every communist government becomes a police state and the lazy slacker is forced to work from the barrel of a gun and much of the work is done by people in “labor camps” ie gulags.
I read a good book years ago that said that the Soviet Union could not have survived without having millions of people being slave labor in gulags.
mike fink · October 8, 2025 at 5:47 pm
Our host has a book in the Training Manuals section of the masthead that was a collection of Marine Corps Gazette counter insurgency essays from 1962. The manual is ” The Guerilla, And How To Fight Him”. I had a hard copy that was well used when I was a teenager. One of the parents probably threw it away on me in an attempt to change the direction of my life,
Anyway, there is a chapter on Soviet Partizans behind German lines in WW2, and the German counter partisan strategy in different locations. One of the better local efforts saw the Germans hand land and livestock back to local Kulaks and also allowed them arms to defend the new private property from Soviet holdouts living in the forests. This worked because the Soviet collective farms were hated by everyone except the Soviet administrators. Local partisans were badly set back in this area.
The Germans had much bigger problems though and soon that region was behind Soviet lines again
Elrod · October 8, 2025 at 11:42 am
I realize this is the equivalent of urinating into a stiff wind, but it is possible for him to understand that if any of his proposals worked, or worked even barely well enough to be reasonable considerations, someone would have already been doing them, and quite probably on a fairly wide scale?
@HomeInSC · October 8, 2025 at 12:46 pm
Tell hime that when he is the lender he can define the terms🤣
Dan · October 8, 2025 at 1:25 pm
Arguing with or attempting to educate leftists is a pointless waste of time and energy. Most are incapable of thinking let alone learning. The few that can learn already understand, they just don’t like or profit from the current paradigm so they are seeking to destroy it. You don’t argue with commie leftists. You give them one way helicopter rides.
Honk Honk · October 8, 2025 at 3:23 pm
Property is theft to the comrades.
Will man ever move on from stale 19th century fairytales?
Botan · October 8, 2025 at 4:33 pm
I remember the “$600” hammer. I also remember a person testifying that there were “overhead” expenses like administrative cost production of manuals, etc. that are applied by dividing those cost equally over each item. So a million $ plus item has $550 cost added and a $50 hammer has $550 = a $600 hammer. I am assuming that is still happening.
Barbarus · October 8, 2025 at 8:06 pm
It’s worse than just admin and manuals.
I used to work for a firm making electronic naval equipment, and at one point a PO showed us a system that (he told us proudly) did what one of our products did at a fraction of the cost.
His system was a set of modules, repurposed from something else, arranged on shelves and connected up.
Our (short production run) system had to be designed, the design approved by procurement officials, constructed according to standards including performance, operating temperature range, shock resistance, and so on and so on. Then it had to be tested against all that, and any issues fixed and re-tested. I’m sure the PO’s system really did do what the Navy needed at a fraction of the cost; the difference is that no bureaucrat wants it to be his fault something went wrong and the thing he ordered didn’t meet some vaguely relevant standard or other.
JimmyPx · October 8, 2025 at 8:28 pm
That is also a way to hide the expenses for black projects.
Jack up the supposed prices to silly levels on approved and “white” projects and then funnel that money to black ops.
Beyond that the Cocaine Import Agency also has plenty of money for black ops.
Steve · October 10, 2025 at 10:23 am
MilSpec is a huge factor here. There’s a MilSpec for everything they buy. It takes lots of man-hours to write the specification that hammer must meet, face hardness, that it is good for x million strikes against a certain material, that it can pull x million nails, etc. Then the company has to do the testing to show it does that, by creating some kind of mechanism, and certifying it. It cost the company I worked for in the ’90s spent around $50k to get a MilSpec for a more environmentally acceptable Cosmoline, and, yeah, that brought the per-unit price up quite a bit. Of course, they wrote it such that it included certain parts under patent, so no generics may apply.
Divemedic · October 10, 2025 at 10:31 am
Exactly. In creating those standards to ensure a reliable hammer, they increase costs to the point where it would be more cost efficient to buy a dozen junk hammers. A great example of this is buying a 10 point deep socket set from Snap On. That set will cost $284.
Or I can buy a similar set from Harbor Freight for $35.
At least for my use, I can’t justify paying eight times as much. Sure, Snap On makes good, quality stuff, but are they eight times better than Harbor Freight? Not for my purposes.
Sure, there are times when better quality is a wiser choice- if I am buying life support equipment, like a SCUBA regulator or a parachute, I will pay for quality because my life depends upon it. Same for self defense ammo, or even body armor. However, when buying a hammer or a socket set, not so much.
AuricTech · October 8, 2025 at 11:48 pm
One of my favorite economic philosophers is Nathan Detroit:
“Being I assume the risk, is it not fair I should assume some dough?”
Divemedic · October 9, 2025 at 4:17 am
Under your plan, a 5 year mortgage would cost the same as a 50 year mortgage. Again, time value of money. For a 30 year mortgage, the interest rate is 2.38% using your example.
Why would someone lend you money for 30 years to make a small profit when they could make a series of shorter termed investments and make far more?
If you think that is a successful business model, feel free to open a bank and become wealthy at it.
AuricTech · October 9, 2025 at 8:21 am
My comment was intended to illustrate the principle of risk requiring reward, not specific ratios.
Unknownsailor · October 9, 2025 at 2:13 am
The mistake everyone makes is looking at a mortgage loan by monthly payment. I prefer to look at them over the total life of the loan. It shocked me the first time I did this, and it should shock you.
So:
Go plug this into a mortgage calculator: $425k purchase price, 20% down, 30 year fixed at 6.417%. Use my current costs for property taxes of $285 a month, and homeowner insurance of $110. (Zip code 98310.) I used mortgagecalculator.org for this example.
Total monthly payment: $2525.34
Borrow amount: $340k
Interest paid over the life of the loan: $426,982.18 <- THAT RIGHT THERE should be ILLEGAL
Total paid over 30 years: $909,122.18
Banks should loan at a profit, yes, but not 125% profit. We'll do it this way instead: Mortgage loan is borrowed amount plus 40%. $476k is the repayment amount using my example. Divide by 360, there is your PITI: $1322.22, or $1717 all in with taxes and insurance from my example.
If a bank can't sustain mortgage lending while making $136k profit on this loan, and every other loan like it, it should not be a bank.
Michael · October 9, 2025 at 6:23 am
Well, not an economist (but then again looking around at the economic mess today…)
Your example of the mortgage “profit” of 125% over 30 years discounts a few things.
125% divided by 30 years is around 4% profit yearly for loaning out money. Not bad per say but not as impressive as saying 125% and misplacing the Time Value of Money that could be loaned out at a higher rate many times over during that 30 years.
That 4% annually is paying the banks operating costs, LOST Money when loans go bad and such.
Not to mention the risk of that fixed 6% loan when interest rates go up.
I know you work on a tugboat or similar from your blog. What pray tell does your company pay for loans to cover operating expenses? Very few businesses operate from daily income for various reasons. Grocery stores I know live and die from access to daily rotating credit for buying restock and such.
I suspect it’s a tad higher than that fixed mortgage rate?
I admire Divemedic trying to use logic on emotional debates. I do talk to people not to change their mind per say but to determine if they are actually capable of change or emotionally drive ideologues to be remembered when the lights go out.
McChuck · October 9, 2025 at 6:39 am
You want to pay less than 40% total interest on your loan? Get a ten year loan. Problem solved.
You can’t afford those payments? Then quit complaining. TIME IS MONEY.
Stefan v. · October 9, 2025 at 6:09 am
The last time I went to the only pub in town where you could enjoy a smoke with your beer, a couple of university students sat at a table behind me.
It was a friday evening, and I just wanted to sit there with an earbud in and listen to a decent sermon by an old preacher, Bill McDaniel, and swill my beer, and smoke a pipe, and ponder my lot. These commies were loudly solving the nation’s problems (most if not all of which had been caused by their ilk), until I finally caved and violated my rule of Leave The Peeples Alone. I dissected their Wonderful Plans in series and detail and asked them how moral it was to force others to pay for them. Unless they were subsidised by rich parents or were already independently wealthy, chances were that they were “studying” and also eating and drinking on the generous taxes mulcted from the pockets of the mostly working class peasants that were the regulars in that pub, myself among them.
They couldn’t rebut my assault on their regurgitated commie crap, but they did pay up and scram, right quick. I don’t go there anymore, but my country is run by people like that. Some day, they will shoot me and dump me in a ditch.
Chicken Inspector · October 9, 2025 at 8:36 am
I am no fan of Muslim/Islamic anything, but consider their cost-plus or lease to own house financing models. It’s up to the bank to determine how much to charge, but theoretically one’s $500,000 loan will not cost one $1,000,000 as is often spelled out in the Truth in Lending Statement. The bank retains title to the property until the terms of the Sales Contract/Lease Agreement are satisfied. Per Gemini AI:
In some Islamic cultures, it is true that loans can be structured with a fixed fee, but they are not based on the concept of a percentage of the loan principal. Charging interest, known as riba, is forbidden in Islam. Instead of lending money, Islamic financial institutions use different contract structures to make a profit while adhering to Sharia (Islamic law).
Common Islamic financing methods
Murabaha (cost-plus financing): In this method, the financier or bank buys an asset (such as a house or car) on behalf of the customer. The bank then sells the item to the customer at a pre-agreed, higher price, with repayment made in fixed, interest-free installments. The profit is a fixed sum built into the sale price, not a variable interest rate.
Ijara (lease-to-own): The financial institution buys the asset and then leases it to the customer for a fixed rental payment. Over time, the customer gradually buys shares of the asset, and ownership is transferred when the final payment is made. The bank’s profit comes from the rental payments.
The core principle is that a lender should not make a profit simply from lending money. Profit should be generated from trade and risk-sharing, as seen in the murabaha and ijara models.
Divemedic · October 9, 2025 at 8:49 am
This is no different. The interest is still paid, its just called something else.
Also, I checked and both Saudi Arabia and the UAE use the same mortgage system as in the US. Which nations are you talking about?
Chicken Inspector · October 9, 2025 at 9:36 am
Again per Gemini AI (Google):
Countries Where Murabaha and Ijara Are Widely Used
Middle East & GCC:
Saudi Arabia, Bahrain, Qatar, the UAE, Kuwait, and Sudan are prominent users of Murabaha and Ijara, with some making related standards mandatory.
Asia:
Malaysia, Indonesia, and Bangladesh are major centers for Islamic finance, including these products. Pakistan also uses Murabaha extensively.
Africa:
Countries like Nigeria and Sudan have adopted Islamic finance products including Ijara and Murabaha, with the IMF noting potential in Sub-Saharan Africa.
The point I was trying to make isn’t that the bank doesn’t get to make money. It does. And should. Again per Gemini AI (Google):
Based on prevailing rates in October 2025, a $500,000 conventional loan would likely accumulate significantly higher costs over its lifetime than a Murabaha financing arrangement for the same amount. While both structures result in a fixed repayment amount, they operate on fundamentally different principles.
Conventional loan
A conventional loan structure involves borrowing money directly from a lender and paying it back with interest over time. The total cost of the loan includes the initial principal plus the accrued interest.
Cost calculation (30-year conventional mortgage)
Prevailing interest rate: As of early October 2025, a typical 30-year fixed-rate mortgage was around 6.35% for a well-qualified buyer.
Loan amount: $500,000
Total interest paid over 30 years: Using a standard mortgage calculator, the total interest on a $500,000 loan at 6.35% for 30 years is approximately $618,349.
Total repayment cost: $500,000 (principal) + $618,349 (interest) = $1,118,349
Murabaha financing
While a Murabaha rate can vary based on market conditions, the total cost is fixed upfront and will not change. For a home, the Murabaha price is typically calculated using a benchmark such as the prevailing conventional interest rate. A representative Murabaha transaction for a $500,000 property might look like this:
Financier’s cost to buy the house: $500,000
Financier’s fixed markup/profit: $200,000 (This amount is fixed for the duration of the repayment term).
Total sale price (the Murabaha debt): $700,000
Total repayment cost: $700,000 (plus closing costs)
Personally, I’d rather pay $400,000 less for the same exact thing. That’s just me though.
Divemedic · October 9, 2025 at 6:55 pm
I think we need a post on this. Coming soon.
Ludwig · October 9, 2025 at 11:28 am
Even minor interest rates will eventually bankrupt and destroy any person, business, or country.
Look around.
Usury is a sin, and the reason the wealthy get power over the poor.
Many of his ideas may have merit, and deserved to be explored. And for those who say someone would have tried them already, don’t be naive. Nations fight world wars to keep the usury powers in place.
I don’t think you people have a grasp on how deep the usury problem goes. It is not just 4 percent a year or whatever. Like a VAT tax, but even worse, the interest tax is levied on almost every single dollar spent. For a house, the contractor has financed his truck and tools, and sometimes even his labor. He also has to charge enough to pay for his own mortgage and personal credit card bills. The supply houses which provide lumber, concrete, plumbing, etc. all have their property, plant, equipment, and inventory, often also payroll, on loans charging interest. All that interest gets added to the products that are purchased. Even the real estate agent has her car loans, and credit cards charging interest which all has to be covered by the cost of selling the house. It goes on and on. Down to the cost of the burrito that his work crew eats. The cost of compound interest on a single loan is nothing compared to the cost of interest that is levied on almost everything in society and has to be included when figuring out the amount of the loan necessary to pay for a thing.
Then, also, consider the fact that often credit just allows the prices to be bid higher. Housing would never have reached the prices it has if the buyers had to pay serious down payments and even save in order to buy a home.
I also have an MBA. I can promise you that the finance and economics courses are only geared to have you support the system that is in place. They are no more credible than your history courses, social studies courses, or gender studies courses.
Here is a fundamental question: Why does the Federal Reserve (a private organization) have the right to create money and loan it at interest to the Federal Government when the Federal government can just as easily create its own money and spend it into the economy interest free?
Why are your savings and checking account balances considered the property of the bank, and only a liability to you?
Why can a bank create money out of nothing for loans, but then take possession of real, tangibe goods when the fiction of their loan does not get paid back?
And, if money is created to make a loan, when does the money to pay the interest on the loan get created? If there is no source of created money for interest, then the interest itself is just preying upon other sectors of the economy in a diabolically complex game of musical chairs which eventually ends up in bankruptcy with the borrower in poverty and the lender owning everything.
Your communist ‘student’ may not have all the answers, but at least he is smart enough to see the problem.
Steve · October 10, 2025 at 10:34 am
The Fed at least puts a fig leaf on the problem. If you left those decisions to Congress, they would fund every boondoggle, rather than just most of them. You cannot leave fiat money production in the hands of government, any more than you can with any other group of unaccountable counterfeiters. No, you can’t audit the fed per se, but you can see some of the bigger stuff, like however much was spent on remodeling their building.
Steve · October 10, 2025 at 10:44 am
@Divemedic, it’s not just the young that have a poor understanding of money and credit. It may start like your 4 YO son, not having a firm understanding of how this all works, but some people never really outgrow that. They just replace that faulty set of ideas with another faulty set of ideas.
As you said above, There’s a reason interest is what it is, and it’s not “usury”. Start your own bank and see how easy it is.
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