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The Interest Mechanism
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SteveC
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Join Date: Jul 2004
Location: Boston
 
2005-04-14, 15:54

Those who know me know how I rail about Interest all the time, so I created a one page flyer that shows the connection between a Geometric Progression, Compound Interest and Inflation.

Most of the conflicts in society can be traced to the magic of growing numbers:2+2=5

In my local paper today:
Quote:
BOSTON— A federal court has issued a temporary restraining order freezing the assets of Amit U. Mathur of Shrewsbury and his investment company, Entrust Capital Management Inc. of Worcester, for allegedly misusing $3.1 million in funds from clients, including Commerce Bancshares Corp. chairman and majority owner David G. “Duddie” Massad Sr.

The Securities and Exchange Commission, which sought the order, said yesterday that Mr. Mathur, 34, raised almost $16 million from about 15 investors beginning in 2001, but then allegedly used his clients’ money to buy a Porsche sport utility vehicle, jewelry and New England Patriots season tickets.

Some of the money also was allegedly gambled away at casinos, while Mr. Mathur and his company told clients that their investments were earning double-digit returns, the SEC said. Only about $780,000 remains of the original $16 million, according to the SEC.
Duddie is actually a car dealer. There is now more money to be made in financing cars than selling them (See Ford Credit and GMAC Financing) so naturally this big auto dealer wanted to own a bank, thus self-financing his own sales and doubling his profit. (Commerce Bank)

Because he thinks making Interest is "normal" he naturally was willing to invest his surplus in other "vehicles" (pun intended) that would generate a return. Afterall, once he owned his inventory and still had cash available, he wouldn't want to "sit" on his money.

As we can see in the above article, the guy he gave it to was happy to "use" it. :-)

Insurance works the same way. You give a guy a bundle of cash in the expectation that he will be giving you more back later IF you lose at the gambling table. Insurance is always betting against yourself. The fact that this guy took the money and blew it at Foxwoods (a local casino in Connecticut) just makes the irony more rich. Duddie undoubtedly thinks he got ripped off, but all the people who purchased cars at inflated prices because of interest were treated "fairly."

So what was the purpose of the profit from interest if it was just going to get vaporized in an investment? Had the guy not squandered the money, the funds still could have been lost in legitimate investments. Financially the only difference was the fraud of the stockbroker, not the losses themselves.

In the old days, Kings would hire alchemists to turn lead into gold. The stockbrokers are expected to do pretty much the same thing with 2+2=5. Just as many alchemists knew that it was hopeless, they went through the motions and did make some scientific discoveries. Likewise, we go through these same motions and make mathematical discoveries.

The Kings believed that turning led into gold was literally possible. They WANTED to believe it was true.

We should now be able to agree that 2+2 does not equal 5, as easily as saying that one cannot turn lead into gold.

Please download this flyer, print it, read it, think about it, and pass it around.

To end Aparthied in South Africa it was necessary to divest of the stocks there. HOW we use our money is a very powerful tool. Money is only an intellectual agreement, and if we refuse to accept Interest as "normal" then it will slowly cease to exist.

Last night I went to a talk by Noam Chomsky. I gave him the flyer and asked a couple of questions, too. Somebody from the audience asked him if "Social Responsible Investing" worked. He dodged the question. Then I asked him a couple of questions which revealed that he has not thought about this topic at all. The answer he should have given is "absolutely not." (I stated that to him.) Lending money is okay, (everybody needs capital sometime) profiting from it is not.

Geometric progression shows the social costs of Interest in mathematical terms, but the problem is still the intellectual idea that money should be used in this manner. If all the churches, colleges and unions divested of all their stock tommorrow, we would have a social revolution overnight.

Of course, we would still need some rules to live by, but the "Masters" are not the neo-cons, Congress, unions, corporations, or political parties, the "Masters" are ideas. The Interest Mechanism describes how an "idea" plays out.

The question we all need to ask ourselves is: Are we masters of ideas or are we enslaved by them? That is the central difference between the thinkers and the followers. But there is nothing that a thinker does that everybody else can't do. While I think Mr. Chomsky is wrong, I still stand on his shoulders. Progress is when the student becomes smarter than the teacher.

If we make this one intellectual change, many of the difficult issues we struggle with will melt away. I am working on some other materials, but this one sheet will help a lot of people understand the concept. I handed them out last night after the lecture and got into a lot of conversations about it.

The key is to realize that money is just an intellectual agreement. It isn't real. We do not have to structure the money and the Federal Reserve the way it is structured. All of the contentious debates of 240 years ago were about the formation of the banks. We now have proof that they made the wrong choice. Who is going to protect the bank if and when it fails? The taxpayers, through another insurance mechanism. We are enslaved by an idea.

Change one idea, change the world.

http://www.behappyandfree.com/pdf/Ge...rogression.pdf
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