Compound Interest: Financial Weapon of Mass Destruction
by Ataul Wahid LaHaye
US Federal debt (It stood at 10 trillion dollars prior to the crisis)
How would you define the economic challenges facing us today?
In the heartland of capitalism, there is financial meltdown. In the Third World, millions are already suffering the ravages of a global food crisis caused by high prices.
Despite staggering advances in technology and human knowledge, despite
the fact that the development of human society has brought humanity to
a historic threshold where it is now possible not only to overcome scarcity
and exploitation but also to forge social arrangements where human
beings can truly flourish—despite all of this potential, social and economic
life are under painful duress and the ecosystems of the planet gravely
threatened. It is not for lack of resources or knowledge.
It is the result of the workings of a system driven by vicious competition
and the blind accumulation of profit based on exploitation—and backed by
massive military force.
2
This system is a horror and a failure and has inherent defects that will
ensure the continuation of this horror until a new system is adopted.
Is it necessary for humanity to live this way?
Is there another way? Is it possible to take hold of the productive
resources of society and to develop and deploy them in a rational,
planned, and society-wide way to meet human needs and to safeguard
the planet? It is possible to establish a radically different kind of economic
system and to create a society based on absolute and universal justice.
The question of a revolutionary change be it socialism, communism or the
introduction of a new world order could not be more relevant…and more
urgent.
The International Monetary Fund (IMF) agrees. In a Toronto Star article of
December 16, 2008 titled IMF official warns of more public unrest. The
writer states, “There will be growing social unrest unless the financial
system is reorganized to benefit everyone and not just a small group of
elite.”
This reorganization must replace the old system; depriving the old ruling
class of their political-economic-military power; and creating a new power
with new aims and new objectives and the means to implement those
aims and objectives.
As serious as this most recent crisis is, with all the havoc it is wreaking,
the system will not automatically collapse on its own. Absent an alternate
system, capitalism will put itself back together—in its own image and at
unimaginable social and ecological cost.
This is a dangerous situation. Things can change very quickly. The system
is revealing much about its basic nature and instability. Bigger jolts may
come and outrage may suddenly grow and give rise to protests or a
complete breakdown of civility. We may be wise to look at Revealed
scriptures for direction on this issue instead of recreating manmade
systems based on greed. Islam offers very comprehensive guidelines that
can get us out of the economic and ecological abyss. But will anyone
listen?
The History of Usury
In Jewish scriptures, charging interest was forbidden between “brothers”
but was allowed in dealings with “foreigners.” (See, for example,
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Deuteronomy 23:19, “You must not make your brother pay interest,” and
23:20, “You may make a foreigner pay interest, but your brother you
must not make pay interest.”)
The practice of usury – lending money and accumulating interest on the
loan – can be traced back 4,000 years. But it has always been
condemned, despised or banned outright.
During the life time of the Holy Prophet Muhammadsaw, forbiddance of
usury became established. This stance was reinforced by the teachings of
the Holy Qur’an, in the 7th century.
“O ye who believe! devour not interest involving diverse additions; and
fear Allah that you may prosper.” (Al Quran 3:131)
The prohibition of usury was adopted by the earliest Christian Church,
following on from Jesus’ expulsion of the money-lenders from the temple.
The Roman Catholic Church of the 4th century AD banned the clergy from
charging interest, a rule that was later extended in the 5th century to the
laity.
It was also a crime under Old English law until the sixteenth century,
when Martin Luther redefined the offense of “usury” to mean the taking of
“excess” interest.
The present debt…interest based economy began with the inception of the
Bank of England in 1694.
Is the banking system in reality a Ponzi scheme?
“All the king’s horses and all the king’s men cannot put the private
banking system together again, for the simple reason that it is a Ponzi
scheme that has reached its mathematical limits. A Ponzi scheme is a
form of pyramid scheme in which new investors must continually be
sucked in at the bottom to support the investors at the top. In this case,
new borrowers must continually be sucked in to support the creditors at
the top. The Wall Street Ponzi scheme is built on “fractional reserve”
lending, which allows banks to create “credit” (or “debt”) with accounting
entries. Banks are now allowed to lend from 10 to 30 times their
“reserves,” essentially counterfeiting the money they lend. Over 97
percent of the U.S. money supply (M3) has been created by banks in this
way.”1
How is Money Created out of Thin Air?
4
“But under existing laws, the banking system then makes the leap of
assuming that because they have money which can be lent, they have a
right to lend much more than they actually possess. Somehow they have
become fit practitioners of the fractional reserve banking system whereby,
as described above, they can lend simply by creating debits in their
computers, based on some ratio between their capital stock and their
lending ceiling.
But if bankers can do this, why can’t you or I? If I have $1,000, why can’t
I then lend $10,000 and collect the corresponding interest? The answer is
that a bank has a government charter and supposedly can guarantee
through various safeguards that the people to whom it lends can repay.
But the fact is that banks can only be created by people who are already
rich, can put up some initial capital, build a functioning business, and
obtain the government charter mentioned above. Once they do this, they
are the masters of the world.
But these principles are poorly recognized. Money, and therefore credit, is
viewed as private property, even though most of it, as stated previously,
is made by banks ‘out of thin air.’ It is no exaggeration to say that the
existing system is one whereby the financial elite has confiscated and
privatized the most important public resource of all, more important than
water, land, electric power, etc. This has resulted in much of the world’s
wars, and poverty.”2
Whatever you pay as interest that it may increase the wealth of the
people, it does not increase in the sight of Allah; but whatever you give in
Zakat seeking the favor of Allah — it is these who will increase their
wealth manifold. (Al Quran 30:40)
The spiraling interest problem. How can a financial system based
on interest work?
To make my point here I collect quotes from four different sources.
“The problem is that banks create only the principal and not the interest
necessary to pay back their loans. Since bank lending is essentially the
only source of new money in the system, someone somewhere must
continually be taking out new loans just to create enough “money” (or
“credit”) to service the old loans composing the money supply. This
spiraling interest problem and the need to find new debtors has gone on
for over 300 years — ever since the founding of the Bank of England in
1694 – until the whole world has now become mired in debt to the
bankers’ private money monopoly.”3
5
As British financial analyst Chris Cook observes:
“Exponential economic growth required by the mathematics of compound
interest on a money supply based on money as debt must always run up
eventually against the finite nature of Earth’s resources.”4
“The parasite has finally run out of its food source. But the crisis is not in
the economy itself, which is fundamentally sound – or would be with a
proper credit system to oil the wheels of production. The crisis is in the
banking system, which can no longer cover up the shell game it has
played for three centuries with other people’s money.”5
“The business cycle is essentially a financial cycle. Upswings tend to
become economy-wide Ponzi schemes as banks and other creditors,
savers and investors receive interest and plow it back into new loans,
accruing yet more interest as debt levels rise. This is the ‘magic of
compound interest’ in a nutshell. No ‘real’ economy in history has grown
at a rate able to keep up with this financial dynamic. Indeed, payment of
this interest by households and businesses leaves less to spend on goods
and services, causing markets to shrink and investment and employment
to be cut back.”6
Money as a Public Utility
“Rather the solution lies with the federal government taking back its
constitutionally-authorized control of the credit of the nation from the
financiers and managing it as previously stated—as a public utility. There
is no need to eliminate capitalism, change the basis of property
ownership, abolish corporations, etc., because the organization and
administration of the production process is essentially irrelevant to the
real problem.”7
A Litany of Failed Rescue Plans — Why the Banking System has
Failed?
“Credit has dried up because many banks cannot meet the 8% capital
requirement that limits their ability to lend. A bank’s capital – the money
it gets from the sale of stock or from profits – can be fanned into more
than 10 times its value in loans; but this leverage also works the other
way. While $80 in capital can produce $1,000 in loans, an $80 loss from
default wipes out $80 in capital, reducing the sum that can be lent by
$1,000. Since the banks have been experiencing widespread loan defaults,
their capital base has shrunk proportionately.”8
6
The 700 billion bank bailout plan announced on October 3, 2008 involved
using taxpayer money to buy up mortgage-related securities from
troubled banks. This was supposed to reduce the need for new capital by
reducing the amount of risky assets on the banks’ books. But the banks’
risky assets include derivatives – speculative bets on market changes –
and derivative exposure for U.S. banks is now estimated at a breathtaking
$180 trillion and $54 trillion in credit default swaps.
“The taxpayers are already tapped out, so the Treasury’s ‘special deposit’
will no doubt come from U.S. bonds, meaning more debt on which the
taxpayers have to pay interest. The federal debt could wind up running so
high that the government loses its own triple-A rating. The U.S. could be
reduced to Third World status, with ‘austerity measures’ being imposed as
a condition for further loans, and hyperinflation running the dollar into
oblivion.”
When the embattled banks demand a bailout because they are “too big to
fail,” the taxpayers can respond, “You have already failed. It is time to try
something new.”9
“With the “bailout”, the public debt has spiraled. America is the most
indebted country on earth. Prior to the “bailout”, the US public debt was of
the order of 10 trillion dollars. This debt is composed of outstanding
treasury bills and government bonds held by individuals, foreign
governments, corporations and financial institutions.”
”The interest on the US government debt comes to nearly half a trillion
dollars annually. The taxpayers are now on the hook for the Fed’s
‘enhanced liquidity facilities’ as well, meaning the billions in loans that the
Fed has been and will be making to an unprecedented range of financial
institutions, exercising obscure provisions in the Federal Reserve Act
totaling over 3 trillion dollars. We the taxpayers are paying interest to the
Fed so that the Fed can use taxpayer money to bail out its banking cronies
from their gambling ventures. At the very least, doesn’t it seem that the
Fed and the banks should be paying interest to us for the privilege of
drawing on the national credit card?”10
Is the present system still feasible?
“The U.S. federal debt has reached crisis proportions, approaching $9
trillion in 2007. U.S. Comptroller General David M. Walker has warned
that just the interest on the debt will soon be more than the taxpayers
can afford to pay. He observed in 2003:
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We cannot simply grow our way out of [the national debt]… . The
ultimate alternatives to definitive and timely action are not only
unattractive, they are arguably infeasible. Specifically, raising taxes to
levels far in excess of what the American people have ever supported
before, cutting total spending by unthinkable amounts, or further
mortgaging the future of our children and grandchildren to an extent that
our economy, our competitive posture and the quality of life for Americans
would be seriously threatened.”11
“The banking scheme itself has failed again. As was learned by painful
experience during the Great Depression, the economy cannot be rescued
by simply propping up failed banks. The banking system itself needs to be
overhauled.”12
Is there an Alternate System?
“The alternative to this independent “central bank” system is what used to
be called ‘national banking.’ A state-owned central bank issued the
national currency as an agent of the government, and the government
spent the money or lent it into the economy for internal development and
public needs. The ‘seigniorage’ on this money — the difference between
the cost of creating it and its face value – accrued to the government,
which got the money debt- and interest-free. The goal of the international
bankers was to privatize this system and bring it under their control. The
central bank would still create the national money supply, but it would
lend the money to the government, leaving the government with a
massive debt on which it owed interest.”13
Fortunately, we don’t need the credit of private banks. A sovereign
government can create its own.
“The Bailout”: The US Administration is Financing its Own
Indebtedness
”Ironically, the Wall Street banks —which are the recipients of the bailout
money — are also the brokers and underwriters of the US public debt.
Although the banks hold only a portion of the public debt, they transact
and trade in US dollar denominated public debt instruments Worldwide.
In a bitter twist, the banks are the recipients of a 700+ billion dollar
handout and at the same time they act as creditors of the US
government.
We are dealing with an absurd circular relationship: To finance the bailout,
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Washington must borrow from the banks, which are the recipients of the
bailout.
Rather than solving the problem, will the ‘rescue’ plans seem
destined to make it worse?
The October 2008 financial meltdown is not the result of a cyclical
economic phenomenon. It is the deliberate result of US government policy
instrumented through the Treasury and the US Federal Reserve Board.
This is the most serious economic crisis in World history.
The ‘bailout’ proposed by the US Treasury does not constitute a ‘solution’
to the crisis. In fact quite the opposite: it is the cause of further collapse.
It triggers an unprecedented concentration of wealth, which in turn
contributes to widening economic and social inequalities both within and
between nations.
The levels of indebtedness have skyrocketed. Industrial corporations are
driven into bankruptcy, taken over by the global financial institutions.
Credit, namely the supply of loan able funds, which constitutes the lifeline
of production and investment, is controlled by a handful of financial
conglomerates.”14
Was the collapse of the banking system planned?
“Knowing that at a certain juncture the pyramid of trillions of dollars of
dubious sub-prime and other high risk home mortgage-based securities
would come falling down, they apparently determined to spread the so-
called ‘toxic waste’ ABS securities as globally as possible, in order to
seduce the big global banks of the world, most especially of the EU, into
their honey trap.
They had help. In recent testimony under oath by Mr. Lynn Turner, Chief
Accountant of the Securities & Exchange Commission (SEC) testified that
the SEC Office of Risk Management which had oversight responsibility for
the Credit Default Swap market, an exotic market worth nominally some
$62 trillions, was cut in Administration ‘budget cuts’ from a staff of 146
down to 1 person.
Under President Clinton in 1999 and the leadership of Senator Phil Gramm
(now co-chair of the McCain campaign), Congress repealed the Glass-
Steagall Act which removed Depression-era laws separating banking,
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insurance, and brokerage activities and helped pave the way for the next
wave of financial integration and fraud.
In late 2000 when Gramm chaired the Senate Banking Committee, he
pushed through the Commodity Futures Modernization Act which
prohibited federal agencies from regulating financial products called credit
default swaps, which have been used to back up the mortgage-based
securities. The credit default swaps are the major reason for the 54 trillion
dollar liabilities that are threatening financial institutions worldwide.”15
“In 2003, during the height of the predatory lending crisis, the OCC Office
of the Comptroller of the Currency invoked a clause from the 1863
National Bank Act pre-empting all state predatory lending laws, thereby
rendering them inoperative. The OCC also promulgated new rules that
prevented states from enforcing any of their own consumer protection
laws against national banks.”16
“The unfolding financial crisis has been arriving in wave after destructive
wave. People have lost their homes, their jobs, their savings, their health,
their marriages, their kids, and finally their hope.”17
”In the past, Egypt, Babylon, Persia, and Rome fell when a small
percentage of the population controlled nearly all of the wealth. Today,
the rich have never been richer nor the poor poorer. The concentration of
wealth has been achieved by conquest, as well as by one of the most
powerful tools of empire, compound interest.”18
How does the paying of interest affect the overall economy?
“Wearing blinders to avoid confronting any reality that would suggest that
banks cannot make money ad infinitum by selling more and more credit –
that is, indebting the non-financial economy more and more – government
officials such as Treasury Secretary Paulson or Federal Reserve Chairman
Bernanke are professionally unable to acknowledge this problem, and it
does not appear in most neoclassical or monetarist textbooks. But the
underlying mathematics of compound interest are rediscovered in each
generation, often prompted by the force majeur of financial crisis.
We have reached the Ponzi stage of the business cycle. It was the phase
in which debtors no longer were able to pay off their loans out of current
income (as in Stage #1, where they earned enough to cover their interest
and amortization charges), and indeed did not even earn enough to pay
the interest charges (as in Stage #2), but had to borrow the money to
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pay the interest owed to their bankers and other creditors. In this Stage
#3 the interest was simply added onto the debt, growing at a compound
rate. It ends in a crash.
It is much like a tax, a monopoly rent levied by the financial sector.
Is Interest is much like a tax levied by the banks?
It is a con game. Financial gains have soared since 1980, but banks and
institutional investors have not used them to finance tangible capital
formation. They simply have recycled their receipt of interest (and credit-
card fees and penalties that often amount to as much as interest) into yet
new loans, extracting yet more interest and so on. This financial
extraction leaves less personal and business income to spend on
consumer goods, capital goods and services. Sales shrink, causing
defaults as the economy is less able to pay its stipulated interest charges.
The moral of ancient and modern history alike is that a critical point
inevitably arrives at which economies either adopt hard creditor-oriented
laws that impoverish the population and plunge downward socially and
militarily, or save themselves by alleviating the debt burden. This attempt
is necessarily in vain. No amount of money can sustain the exponential
growth of debt, not to mention the freely created credit and mutual
gambles on derivatives and other financial claims whose volume has
exploded in recent years. The government is committed to “bailing out”
banks and other creditors whose loans and swaps have gone bad. It
remains in denial with regard to the debt deflation that must be imposed
on the rest of the economy to “make good” on these financial trends.”19
The penny invested by Augustus Caesar in 8 BC would be worth 3 trillion,
trillion, trillion, trillion dollars today at 6 percent compound interest. The
world only has around 100 trillion dollars in total wealth today.
The system based on compound interest can’t simply work!
The Government plan is to create more debt. Can this work?
“Here’s why the plan for the government to recover the money is whistling
in the dark: It calls for banks to “earn their way out of debt” by selling
more of their product – credit, that is, debt. Homeowners and other
consumers, students and car buyers, credit card users and their
employers – the “taxpayers” supposed to be helped – are to pay the
repayment money to the banks, instead of using it to purchase goods and
services.
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The imbalance between creditor demands and debtors’ ability to pay is
indeed the problem! It denies that the problem is debt above and beyond
the ability of the economy at large to pay, and higher than the market
price of property and assets pledged as collateral.
Creating a system for the banks to ‘earn their way out of debt” means
creating yet more interest-bearing debt for the economy at large.’20
Shifting wealth from ordinary citizens to the very rich, caused by
interest.
When money is created by the banks and loaned to governments or
business at interest, it is mathematically impossible to pay back all the
money with interest. Not all debts can be repaid, so foreclosures occur. In
this way wealth is continually transferred from the poor to the rich.21
“In just a matter of days, we have seen literally trillions of dollars offered
to the financial services sector by national treasuries and central banks
across the globe. Britain alone has put $1 trillion at the disposal of the
bankers, traders, lenders and speculators; and this has been surpassed by
the total package of public money that Washington is shoveling into the
financial furnaces of Wall Street and the banks. These radical efforts are
being replicated on a slightly smaller scale in France, Germany, Italy,
Russia and many other countries.
The effectiveness of this unprecedented transfer of wealth from ordinary
citizens to the top tiers of the business world remains to be seen. It will
certainly insulate the very rich from the consequences of their own greed
and folly and fraud; but it is not at all clear how much these measures will
shield the vast majority of people from the catastrophe that has been
created.
The 30-year mantra by our governments has been a deliberate and
outright lie. The money was there — billions and billions and billions of
dollars of it, trillions of dollars of it. We can see it before our very eyes
today — being whisked away from our public treasuries and showered
upon the banks and the brokerages.
How could governments find billions to shore up banks when they
said all along that there was no money for basic social needs?
Let’s say it again: The money was there all along.
12
Money to build and generously equip thousands and thousands of new
schools, Money to revitalize the nation’s crumbling inner cities, making
them safe and vibrant places for businesses and families and communities
to grow.
Money to provide decent, affordable and accessible health care to every
citizen, to provide dignity and comfort to the elderly, and protection and
humane treatment for the mentally ill.
Money to provide affordable higher education to everyone who wanted it
and could qualify for it. Money to help establish and sustain local
businesses and family farms, centered in and on the local community,
driven by the needs and knowledge of the people in the area, and not by
the dictates of distant corporations.
Money to strengthen crumbling infrastructure, to repair bridges, shore up
levies, maintain roads and electric grids and sewage systems.”22
How does an economic system based on interest result in war?
“And frighteningly, if capital stays true to its form, then we can expect a
really big war some time soon. It is, after all, the only way all that surplus
capital can be literally burned up. It was a major cause of WWI and II and
it will, unless we get rid of the bastards, be the cause of WWIII, or IV or is
it V, I’ve lost count of the major wars they’ve initiated under one pretext.
The bottom line is that they’re going to have to do something and do it
soon. But the insanity of a global capitalism must surely be apparent to all
(except the corporate media of course). On the one hand, we have
pundits talking about a global solution with regard to the regulation of the
flow of capital across state borders and on the other, we have every
nation doing its own thing!
But it stands to reason that if every nation is in competition with every
other nation for markets, then hell will freeze over before they consider
anything as sane as a global economic order that benefits ordinary
people.”23
O ye who believe! fear Allah and relinquish what remains of interest, if
you are believers. But if you do it not, then beware of war from Allah and
His Messenger; and if you repent, then you shall have your original sums;
thus you shall not wrong, nor shall you be wronged. (Al Quran 2:279-
280)
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Is Interest a threat to our environment?
“Debt-based monetary systems are the building blocks of empires, and
generally empires collapse or topple when they have destroyed their
ecological base. The current global empire severely threatens the forests,
the oceans, the climate, the fertility of the soil, the aquifers, the bees, and
innumerable other species, including humanity.”24
The IMF’s and World Bank’s structural adjustment policies ensure debt
repayments on money that was created from nothing by the lender
countries, by requiring countries to cut spending on education and health;
eliminate basic food and transportation subsidies; devalue national
currencies to make exports cheaper; privatize national assets; and freeze
wages. Such belt-tightening measures increase poverty, reduce countries’
ability to develop strong domestic economies and allow multinational
corporations to exploit workers and the environment
Nearly 80 percent of all malnourished children in the developing world live
in countries where farmers have been forced to shift from food production
for local consumption to the production of export crops destined for
wealthy countries.
IMF loans and bailout packages are paving the way for natural resource
exploitation on a staggering scale. The IMF does not consider the
environmental impacts of lending policies, and environmental ministries
and groups are not included in policy making. The focus on export growth
to earn hard currency to pay back loans has led to an unsustainable
liquidation of natural resources.
And because of their taking interest, although they had been forbidden it,
and because of their devouring people’s wealth wrongfully. And We have
prepared for those of them who disbelieve a painful punishment. (Al
Quran 4:162)
The International Community and the International Financial
System. What purpose does it serve?
“In recent times there have been numerous communications revolutions,
including radio, television, and the Internet, and social movements have
also arisen. At the same time there has also been the consolidation and
expansion of corporate power served by new centers of supranational
power, such as the World Bank, the International Monetary Fund, and the
World Trade Organization.”
14
Alex Carey said:
“The twentieth century has been characterized by three developments of
great political importance: the growth of democracy, the growth of
corporate power, and the growth of corporate propaganda as a means of
protecting corporate power against democracy.”25
“During this time money and resources have flowed from poor countries to
rich industrialized nations. The Structural Adjustment Programs forced
upon nations by the World Bank and the IMF have meant shifting food
production from domestic needs to export crops, devaluing local currency
to encourage exports, cutting social spending on health and education,
reducing wages, privatizing national industries, selling off natural
resources, and removing tariff protections for local industries. Hunger,
unemployment, hardship and inequality are the direct and calculated
results of these World Bank policies.
Maximizing profits is the primary value in modern economics. The
economic measure of monetary flow is directly related to the rape of the
earth, the amount of exploitation occurring within a country, and how
effectively the world’s parasites are expropriating the labor of others and
the natural world.”26
What may the future hold?
Richard C Cook a former U.S. federal government analyst states:
“Maybe the party is finally over. Maybe at the end of their 300-year reign,
starting roughly with the creation of the Bank of England in 1694, the
financiers have finally succeeded in doing enough damage to the world
economy that the rest of us are willing to take action. Or maybe there will
be a sufficient distraction by more war in the Middle East and elsewhere.
Maybe peak oil or global warming will intervene with destruction on too
large a scale to ignore. Or maybe we’ll just limp along into the sunset.
Only time will tell. But however the change may happen, it remains the
author’s conviction that, one way or the other, a fair and intelligent
monetary system will someday exist on the planet earth.”27 28
Compound Interest:
Financial Weapon of Mass Destruction
Around 1980, when interest rates were soaring, Johnny Carson quipped
on The Tonight Show that “Scientists have developed a powerful new
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weapon that destroys people but leaves buildings standing – it’s called the
17% interest rate.” Compound interest is the secret weapon that has
allowed a global banking cartel to control most of the resources of the
world. The debt trap snapped shut for many countries in 1980, when
international interest rates shot up to 20 percent. At 20 percent interest
compounded annually, $100 doubles in under 4 years; and in 20 years, it
becomes a breathtaking $3,834. The devastating impact on Third World
debtors was underscored by President Obasanjo of Nigeria, speaking in
2000 about his country’s mounting burden to international creditors. He
said:
“All that we had borrowed up to 1985 was around $5 billion, and we have
paid about $16 billion; yet we are still being told that we owe about $28
billion. That $28 billion came about because of the injustice in the foreign
creditors’ interest rates. If you ask me what is the worst thing in the
world, I will say it is compound interest.”29 30
“By 2001, enough money had flowed back to First World banks from Third
World debtors to pay the principal due on their original loans six times
over; but interest had consumed so much of those payments that the total
debt had actually quadrupled. In 1980, median income in the richest 10
percent of countries was 77 times greater than in the poorest 10 percent.
By 1999, that gap had grown to 122 times greater. In December 2006,
the United Nations released a reported titled ‘World Distribution of
Household Wealth,’ which concluded that 50 percent of the world’s
population now owns only 1 percent of its wealth, while the richest 10
percent of adults owns 85 percent. At interest compounded annually, the
debts of the poorer nations can never be repaid but will just continue to
grow.”31
O ye who believe! Devour not interest involving diverse additions; and
fear Allah that you may prosper. (Al Quran 3:131)
It has been estimated that eliminating interest charges could cut the
average cost of infrastructure, sustainable energy development, and other
programs in half.32
“Third World economies might finally escape the iron grip of the
international bankers, bringing a 300-year global banking empire crashing
down.
The size of the stakes was suggested by Tarek El Diwany, a British expert
in finance and the author of The Problem with Interest (2003). In a
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presentation at Cambridge University in 2002, he quoted a 1997 United
Nations Human Development Report which said:
Relieved of their annual debt repayments, the severely indebted countries
could use the funds for investments that in Africa alone would save the
lives of about 21 million children by 2000 and provide 90 million girls and
women with access to basic education.
El Diwany commented, “The UNDP does not say that the bankers are
killing the children, it says that the debt is. But who is creating the debt?
The bankers are of course. And they are creating the debt by lending
money that they have manufactured out of nothing. In return the
developing world pays the developed world USD 700 million per day net in
debt repayments.”33
“In 1980 the Southern countries’ debt amounted to $567 billion; since
then, they have paid $3,450 billion in interest and write-offs, six times the
original amount. In spite of this, that debt had quadrupled by the year
2000, reaching $2,070 billion.”34
“Third World debt has been compounding at over 20 percent per year
between 1973 and 1993, from $100 billion to $1.5 trillion [only $400
billion of the $1.5 trillion was actually borrowed money. The rest was
runaway compound interest]. If Third World debt continues to compound
at 20 percent per year, the $117 trillion debt will be reached in eighteen
years and the $13.78 quadrillion debt in thirty-four years.”35
The Holy Quran comments:
Those who devour interest do not rise except as rises one whom Satan
has smitten with madness. That is because they say: ‘Trade also is like
interest;’ whereas Allah has made trade lawful and made interest
unlawful. So he to whom an admonition comes from his Lord and he
desists, then will that which he received in the past be his; and his affair is
with Allah. And those who revert to it, they are the inmates of the Fire;
therein shall they abide. (Al Quran 2:276)
An economist agrees.
Dear Mr. LaHaye,
Thanks for your nice comment.
Indeed, the high concentration of wealth and the compounded interest
17
rate mean that such a concentration will go on accelerating in the coming
years. Forbes magazine, for example, do no include people in its wealthy
list of individuals those who do not have one billion dollars. This is
madness on a high scale and the Bush-Cheney administration and
other ultra conservative governments are responsible for this situation.
Greetings,
Rodriquez Tremblay Economist
Interesting Quotes on the Banking System
In Billions for the Bankers, Debts for the People (1984), Sheldon Emry
commented:
Sir Josiah Stamp, president of the Bank of England and the second richest
man in Britain in the 1920s. He declared in an address at the University of
Texas in 1927:
The modern banking system manufactures money out of nothing. The
process is perhaps the most astounding piece of sleight of hand that was
ever invented. Banking was conceived in inequity and born in sin … .
Bankers own the earth. Take it away from them but leave them the power
to create money, and, with a flick of a pen, they will create enough money
to buy it back again… . Take this great power away from them and all
great fortunes like mine will disappear, for then this would be a better and
happier world to live in… . But, if you want to continue to be the slaves
of bankers and pay the cost of your own slavery, then let bankers
continue to create money and control credit.
Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta
in the Great Depression, wrote in 1934:
We are completely dependent on the commercial Banks. Someone has to
borrow every dollar we have in circulation, cash or credit. If the Banks
create ample synthetic money we are prosperous; if not, we starve. We
are absolutely without a permanent money system. When one gets a
complete grasp of the picture, the tragic absurdity of our hopeless position
is almost incredible, but there it is. It is the most important subject
intelligent persons can investigate and reflect upon.36
Graham Towers, Governor of the Bank of Canada from 1935 to 1955,
acknowledged:
18
Banks create money. That is what they are for… . The manufacturing
process to make money consists of making an entry in a book. That is all.
… Each and every time a Bank makes a loan … new Bank credit is
created — brand new money.37
Robert B. Anderson, Secretary of the Treasury under Eisenhower, said in
an interview reported in the August 31, 1959 issue of U.S. News and
World Report:
[W]hen a bank makes a loan, it simply adds to the borrower’s deposit
account in the bank by the amount of the loan. The money is not taken
from anyone else’s deposit; it was not previously paid in to the bank by
anyone. It’s new money, created by the bank for the use of the borrower.
President Thomas Jefferson had the following to say on this issue:
“If the American people ever allow private banks to control the issue of
their currency, first by inflation, then by deflation, the banks and
corporations that will grow up around them will deprive the people of all
property until their children wake up homeless on the continent their
fathers conquered. The issuing power should be taken from the banks and
restored to the people, to whom it properly belongs.”38
EPILOGUE
The penny invested by Augustus Caesar in 8 BC would be worth 3 trillion,
trillion, trillion, trillion dollars today at 6 percent compound interest. The
world only has around 100 trillion dollars in total wealth today.
So, human economic activities cannot keep pace with such degree of
compounding even with a meager 6% compound interest rate. All
systems that indulge in significant interest based loans be they countries,
companies or individuals are bound to fail. But before, their eventual
demise the struggle created by this compounding leads to immorality,
exploitation, loot and plunder and wars.
So in conclusion:
Those who devour interest do not rise except as rises one whom Satan
has smitten with madness. That is because they say: ‘Trade also is like
interest;’ whereas Allah has made trade lawful and made interest
unlawful. So he to whom an admonition comes from his Lord and he
desists, then will that which he received in the past be his; and his affair is
with Allah. And those who revert to it, they are the inmates of the Fire;
therein shall they abide. (Al Quran 2:276)
19
1
THE COLLAPSE OF A 300 YEAR PONZI SCHEME: THE REAL DEBATE IS CRONY SOCIALISM OR
FINANCIAL SOVEREIGNTY Ellen Brown, October 16th, 2008.
2
Monetary Reform and How a National Monetary System Should Work by Richard C. Cook.
3
THE COLLAPSE OF A 300 YEAR PONZI SCHEME: THE REAL DEBATE IS CRONY SOCIALISM OR
FINANCIAL SOVEREIGNTY Ellen Brown, October 16th, 2008.
4
Chris Cook, “A New Dawn for Iran,” Asia Times (October 9, 2008).
5
THE COLLAPSE OF A 300 YEAR PONZI SCHEME: THE REAL DEBATE IS CRONY SOCIALISM OR
FINANCIAL SOVEREIGNTY Ellen Brown, October 16th, 2008.
6
Parsing Mr. Paulson’s Bailout Speech The Unprecedented Giveaway of Financial Wealth Story By Dr.
Michael Hudson.
7
Monetary Reform and How a National Monetary System Should Work by Richard C. Cook.
8
THE SUBPRIME TRUMP CARD: STANDING UP TO THE BANKS Ellen Brown, June 26th, 2008.
9
THE SUBPRIME TRUMP CARD: STANDING UP TO THE BANKS Ellen Brown, June 26th, 2008.
10
Financial Meltdown: The Greatest Transfer of Wealth in History How to Reverse the Tide and Democratize
the US Monetary System by Ellen Brown.
11
Spiraling US Federal Debt Triggers Decline of Dollar A Non-Inflationary Solution to the Federal Debt Crisis
by Ellen Hodgson Brown.
12
THE COLLAPSE OF A 300 YEAR PONZI SCHEME: THE REAL DEBATE IS CRONY SOCIALISM OR
FINANCIAL SOVEREIGNTY Ellen Brown, October 16th, 2008.
13
BEHIND THE DRUMS OF WAR WITH IRAN: NUCLEAR WEAPONS OR COMPOUND INTEREST?
Ellen Brown, November 13th, 2007.
14
Who are the Architects of Economic Collapse? Will an Obama Administration Reverse the Tide? by Michel
Chossudovsky.
15
F. William Engdahl: Behind the Panic: Financial Warfare and the Future of Global Bank Power.
16
Evolution of the Apocalypse - Empire’s Demise - Human Renaissance by Carol Brouillet.
17
Predatory Lenders’ Partner in Crime How the Bush Administration Stopped the States from Stepping In to
Help Consumers By Eliot Spitzer Thursday, February 14, 2008.
18
Evolution of the Apocalypse - Empire’s Demise - Human Renaissance by Carol Brouillet.
19
Parsing Mr. Paulson’s Bailout Speech: The Unprecedented Giveaway of Financial Wealth Story By Dr.
Michael Hudson Oct. 18, 2008.
20
Parsing Mr. Paulson’s Bailout Speech: The Unprecedented Giveaway of Financial Wealth Story By Dr.
Michael Hudson Oct. 18, 2008.
21
Evolution of the Apocalypse - Empire’s Demise - Human Renaissance by Carol Brouillet.
22
The 30 Year Lie Of The Market Cult The God That Failed By Chris Floyd 10-16-8.
23
The Capitalist Shakedown Written by William Bowles.
24
The Capitalist Shakedown Written by William Bowles.
25
How Corporations Destroyed US Democracy by Propaganda, http://tiny.cc/UCT9Q.
26
How Corporations Destroyed US Democracy by Propaganda, http://tiny.cc/UCT9Q.
27
Monetary Reform and How a National Monetary System Should Work by Richard C.
Cook.
28
http://www.globalresearch.ca/index.php?context=va&aid=5615
29
Jubilee 2000 news update, August 2000.
30
Behind the Drums of War with Iran: Nuclear Weapons or Compound Interest? By Ellen Brown.
31
Behind the Drums of War with Iran: Nuclear Weapons or Compound Interest? By Ellen Brown.
32
Margrit Kennedy, Interest and Inflation-free Money (1995), discussed in Deidre Kent, “Margrit Kennedy
Inspires New Zealand Groups to Establish Regional Money Systems,” McKeever Institute of Economic Policy
Analysis, www.mkeever.com (2002).
33
Behind the Drums of War with Iran: Nuclear Weapons or Compound Interest? By Ellen Brown.
34
“The Morals of Money-Lending,” The World Guide, www.henciclopedia.org.
35
J.W. Smith, The World’s Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 143.
36
Parsing Mr. Paulson’s Bailout Speech The Unprecedented Giveaway of Financial Wealth Story By Dr.
Michael Hudson.
37
Monetary Reform and How a National Monetary System Should Work by Richard C. Cook.
38
Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802).
