Money and Interest Money is generally defined as a medium of exchange. Money is anything that has value and is used to acquire other products and services.
Merchants and customers could exchange products and services using whatever “money” they deem worthy. One could exchange sea shells for a hair cut. Another could use frogs to acquire a sack of potatoes, only if the merchant was willing to accept frogs.
From the past and into the present, gold and silver have long been regarded as the constant and true means of exchange – real money. Gold and silver have value - real value, and have always maintained a consistent worth. In fact, as late as the 1950s, the United States “Federal Reserve Notes,” which are debt instruments, state,
This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank. (emphasis added)
Lawful money was gold and silver. One could exchange the debt instrument (Federal Reserve Note) for real money.
The current Federal Reserve Notes state, “This note is legal tender for all debts public and private.” What a change! America now has a currency referred to as “legal tender” – not money.
This short history lesson has a purpose. While we commonly refer to the United States Federal Reserve Notes as “money,” money that is not backed by anything of value, it is noteworthy that the central bank of the United States, the Federal Reserve Bank, prints this “money” out of nothing but paper and ink, without providing anything of value to justify the creation of these purely debt instruments.
The significance of this fact is that the Federal Reserve Bank charges interest and collects a tremendous profit by loaning this money to the United States government. The Federal Reserve does nothing but spend 5 cents a bill to create currency. And this is a common practice with central banks throughout the world.
Consequently, banks throughout the United States, which are part of the Federal Reserve Banking System, also loan money and charge interest for doing nothing.
Consider the following example:
A man decides to buy a house. He is “approved” for a loan. When it is time to close the loan, the man must sign a Promissory Note. By signing this “Note” (a promise to pay back the principal loan amount plus interest), the bank then creates a debit/credit entry into its ledger, its balance sheet. The bank creates “money” out of thin air and writes a “check” to the new homeowner to pay for the house.
The bank has done NOTHING and collects 6 to 8 % interest from a man who has promised to pay the debt created out of nothing.
One final consideration is to measure the worth of money. What is a “dollar” worth? What was it worth yesterday? What will it be worth tomorrow? Will the value remain constant? The answers to these questions are not encouraging.
It is an absolute certainty that a gallon of milk contains 64 ounces. It is a measurement and quantity that will not change. A carton of eggs contains twelve and this will not change. What is a “dollar?” How is the value of money measured?
We know that it is worth less now than five years ago. Why does the value of money depreciate? Money is worth less over time for two of many reasons. First, money is not backed by a stable and reliable asset of value like gold and silver. Without a stable asset backing money, it becomes a “fiat” currency subject to manipulation.
Second, the inflation of money, the increase of the supply of money into the economy, decreases its value.
Subsequently, it takes more money to buy the same or less than was purchased a year ago. It is no surprise that a car purchased for $8,000 in 1987 costs $14,000 in 2007. A gallon of milk in 1982 cost $1.50 compared to $3.00 today.
Discussing the decreasing value of money increases the significance of interest payments. Consider a couple who purchases a house by signing a 30 year mortgage loan. Over the life of the loan, the husband and wife will make mortgage payments as the value of the dollar decreases. If only for inflation, they will have less purchasing power to provide for life as their interest obligation remains the same.
The central bank and local banks are not only unaffected by the devaluation of money, they benefit. As the value of money drops, the banks continue to make a tremendous profit. This creation of “money” and the charging of interest are usury and a sham. It is a deplorable practice.
Most people, if they were to loan a neighbor an egg, would do so without charging interest. Most would not expect or demand an additional egg in return for loaning the first. Why is money any different?
Suppose a father owns his house outright and he needs to pay for an operation for an ailing child. He borrows money by collateralizing his property to the debt. If he is unable to pay the principal and interest rate, he will lose the only asset he truly owns. The charging of interest and excessive interest has far reaching socio, economic and spiritual implications.
A Heavenly Loan Foundation is committed to loaning funds without charging interest. Religions from all around the world acknowledge this principle and practice. And we thank you for sharing our vision.
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