Real meaning of interest-based banking

The basic nature of money has changed. Money is now debt, which is lent to Government and public at interest by institutions that create it out of thin air. Charging of interest is not only a moral problem but has serious practical implications.
When paper money was first introduced it was redeemable in gold. In April 1933, government of USA issues an executive order to general public, directing them to surrendering all gold coins and bullion except jewelry with government authorities at a rate of $20 per ounce of gold. After all the gold was deposited with government, they changed the rate of gold to $35 dollars per ounce. In this process of manipulation, citizens of USA were ripped of 43 percent of their wealth. This was only the beginning of sophisticated form of slavery.
Later in Bretton Woods agreement in 1944 all the currencies of major countries were linked to US dollar. Central banks of member countries were asked to deposit their gold with the Federal Reserve. If they want their gold back, they have to exchange their currency with US dollar, and then the dollar will be exchanged for gold by Federal Reserve at a rate of $35 per ounce.
All major countries agreed. During Vietnam War and arms race between Russia and USA in 1960s, The US government printed much more dollars than the gold they had in reserve for financing their military expenditure. This led to inflation. In 1971 British government wanted to exchange their currency for actual gold. The US government knew that the game was up, because this would trigger other countries to exchange their paper currency for gold, especially gulf countries which have huge reserves of petrodollars.
So, President of USA, Richard Nixon retired to Kemp David and announcement was made that US government will not honour its obligation to exchange their dollars for gold. This was the end of gold standard. Modern paper currency is called a fiat money, because it has value as government said so. It is not backed by anything else. This worthless paper is not issued by governments but by independent organisations known as central banks at an interest to the government. There is no logical answer to this question why govt has to borrow from a central bank when they can print it.
Other banks create money whenever a loan is issued. The basic nature of money has changed. Money is now debt, which is lent to Government and public at interest by institutions that create it out of thin air. Charging of interest is not only a moral problem but has serious practical implications.
In order to understand implications of lending money on interest we have to first understand what interest actually interest. According to oxford dictionary, interest means “money paid regularly at a particular rate for the use of money lent, or for delaying the payment of debt. On analysing this definition it can be concluded that charging of interest on money breeds money over a period of time without any real production in an economy. Does charging of interest on money qualify as a legal business practice? There is actually a clear contrast between a business transaction and an interest based transaction.
In case of parties involved in a business transaction they can suffer a loss or a profit. Loss of one person may provide benefits to someone else, thus wealth is distributed and redistributed in an economy through business transactions. But in interest based transactions money lender is immunised from loss as the risk is wholly transferred to the borrower. So, distribution and redistribution of wealth stops.
Secondly, a business transaction involves real production of goods and services, while returns on interest based finance are separated from any economic activity. Here profits do not come from real production as it ought to be. Money lender is reaping what others are planting.
The practical consequences of lending money on interest are many:
Whether a borrower suffers a loss or profit, money lender has nothing to do with it as his returns are fixed, as a result of this, concentration of wealth will take place. The rate at which debt grows is faster than real economic growth until debtors are unable to pay off their debts. The interest on this huge debt continues to drain the economy. There is one way transfer of money from pockets of persons who toil for real production to the vaults of money lenders, who simply lend money on interest.
Every unit of currency issued by a central bank is issued at interest. The banking system has the monopoly on the production of currency and they loan each unit of currency with immediate debt attached to it. Where does the money to pay the debt come from? It can only come from banks again, which means the banking system has to perpetually increase its money supply to temporarily cover the outstanding debt created, which in turn is loaned at interest and creates even more debt. The end result is that this system is eventually slavery. For it is technically impossible for a government and thus the public to ever come out of self-generating debt.
Bankers have a monopoly over interest rates and money supply. They have strong lobbies and bargaining power to fulfill their motives. They usually engage in immoral practices like speculation for earning more wealth and power. A speculation is a short term buying and selling of asset that has a significant risk of loss but also a significant potential gain. Instead of analysing assets fundamentals, a speculator may trade an asset based on hunch. The real life consequences of speculation are very serious. This has been explained by Johann Hari, who has investigated the starvation of 2006 which struck a major part of the world.
This starvation was caused by speculation on food grains by Goldman Sachs, the world’s largest investment bank. This starvation affected around 200 million people, mostly children, caused riots in more than 30 countries and at least one government was violently overthrown.
This all started at the end of 2006 when food prices suddenly started to rise. During period of 12 months the price of rice shot up by 320 percent, maize by 90 percent and wheat by 80 percent. Then in 2008 prices fell back mysteriously to their previous level. An official of UN Special Rapporteur on the Right to Food Grains, Jean Ziegler calls it a silent mass murder entirely due to manmade actions.
During 1990s Goldman Sachs and other Banks lobbied for abolishing regulations for trading food grains. Suddenly the crops were turned into Derivatives which could be now traded through speculation by traders which has nothing to do with agriculture. A market of food speculation was born. Now the market for food has turned into food contracts based on theoretical future crops, and speculators drove the price through the roof.
The world’s most powerful and wealthiest investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. They gamble in a casino where the chips are the stomachs of hundreds of millions of innocent people.
Going bankrupt is a part of the risk of running a business. But when a bank goes bankrupt due to risky investment, improper management etc. governments are forced to bail them out because banks are too big to fail. A too big to fail is an institution that is so deeply interconnected with the economy that its failure could lead to economic crisis. When bankers are unable to pay their debtors and creditors this ripples through the economy, business can’t get loans, or pay their employees, people can’t pay for goods and services, tax revenue drops and all this can lead to economic collapse.
To prevent this catastrophic domino effect governments are inclined to rescue the big banks before they fail, usually with multibillion dollar loans called bailouts. Governments have become so indebted to bankers that they even do not have money to look after their citizens.
As bankers have greed of more and more earning, they promote mass credit facility to individuals who can’t afford costly items. This promotes spending on useless items which then  leads to consumerism. In consumerism an individual is not identified on the basis of values and ethics but on the basis of his ability to spend more. Consumerism is designed to get us to buy stuff we do not need in an effort to feel better than others.
Now humans are worth not by strength of relationships, but by what we are able to consume. Consumerism transforms society from a sensible people and strong relationships into superficial spenders looking for the next high. A phone costing one lakh rupees has very little use for most of the people who own it, this is an effect of consumerism.
At this point in history, virtually every human on this planet is enslaved, whether they knew it or not. This is not the crude and primitive slavery of ancient times but uses much more sophisticated methods that most of the enslaved are unaware of their conditions, and would in fact falsely believe they are free. This is a testament to the effectiveness of these invisible chains.

–    The writer has an MBA and M Phil. He can be reached at: