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To: Jason_b
I am a partial gold bug, and sound money advocate, but I see a problem with a purely gold coin standard. Since there is only so much gold, and the yearly increase from mines is fairly small, where does the extra money come from to pay the interest? If you agree to pay a 5% return on borrowed mney, then where does the extra 5% of gold coins needed for this interest come from?
32 posted on 06/16/2003 9:37:24 PM PDT by plusone
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To: plusone
From people who are willing to give up their gold coins to buy what you produce. You need to understand that you produce something, that you consume less than you produce, that you borrow or save in order to buy tools that make you more productive than your competitors, that your business expands, that your efficiency allows you to lower your prices, which encourages people to buy what you produce, and that what they spend covers your debts plus interest. Your productivity pays for all your capital investment over time.

If more gold is needed, then it is needed by the economy as a whole, not just one individual borrower, or a bunch, who need to pay interest. And if there is demand for gold, then the miners will sense that demand and open closed mines, and find ways to increase their efficiency, and find new deposits.

There are stories on the web that by analogy, guys stranded on an island, they have a primitive barter economy, a banker shows up, lends them paper money on the condition that they pay it back with interest, with their cabin or hut, clothes, tools, as collateral. The guys always wind up losing their collateral to the banker because though the principal was lent, the interest never was issued. Therefore the guys always owed more paper money than was ever issued, and some collateral had to be surrendered. Eventually, the banker owned all the collateral, every real thing of value that the guys had made for themselves. The guys never saw it coming.

It is easier to see how it works with the island example, but the same thing is happening to the US. US citizens never saw it coming in 1913, that the US would be owned lock stock and barrel by the banks. Our debt just gets bigger, never smaller, and bankrupcy, forclosures are the banks taking the collateral. But it happens because the interest is never issued. The banks don't let the economy become totally destroyed, because then they'd have to start over. But they will let many people hurt and go into poverty. They will loot with taxes those who try to escape the system by saving and avoiding debt and give the proceeds to the suffering: socialism is spawned by paper money, and helps preserve the system for the bankers. The presence of the poor creates enough social tension to make socialism a political necessity even in the US.

So it is most interesting that you were worried about where the gold would come from so that debtors could pay interest. See you really need to worry about where the interest comes from to pay the debt+interest when only the principal is issued as debt, not the interest. The financiers know from the very beginning how it works---it is not an accident this happens. It is only a surprise (a nasty one) to the borrowers.

If that is still unclear, think of it this way. Imagine all the people sitting at the loan desks at all the banks. They are all borrowing money. They will all owe the principal back AND interest. You see how the principal gets into circulation. You tell me. Where are those same people supposed to get the interest? Some will be successful at getting money away from the others and will have interest plus principal to repay. Others will be short and will be insolvent. Their house as collateral will be confiscated. They will become your homeless and socialism will be established to help them. This is your United States of America in debt not following the Constitution. This is not what the founders designed for us. Can you visualize it? Do you get it? Read some of Thomas Jefferson's quotes on the web about bankers and banks.
55 posted on 06/17/2003 6:46:47 AM PDT by Jason_b
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