R u ready for an interest free world?

P Leigh

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I don‘t fancy another recession, I‘ve been through a couple, they are miserable times and this is going to be the worst yet. We know its coming but appear unable to do anything about it. If it was an asteroid heading to earth governments would not be allowed to just let it hit and hope, we would expect them do to everything possible to prevent the collision. Now I’m not an oxford educated economist my only experience of how economies work come from being part of the real economy and not the virtual economies of high finance and government. The problem I see is not banks need re-capitalising so they can lend it is the people and businesses who need re-capitalising so they don‘t have to borrow!

On average we are each £30 000 in debt and apparently its our huge debts and the less well offs inability to service them that has caused the trouble in the first place. To get our economy back on track the governments plan is to re-capitalise banks so they can lend even more money to an already massively indebted population. Well what if people don’t want to borrow any more money, what if the huge mortgages that we push around in wheel barrows are making us ill, what if we decide to stay in for the next year and eat cabbage and potatoes and reduce our debts? I don’t fancy a cabbage and potato economy but I don’t fancy taking on more debt either so I will say it again we need to re-capitalise the people, but how?

Reduce interest rates down to zero, not just for the banks but for everyone! All mortgages adjusted to an interest free world, all business loans, all credit card bills, every last loan reduced to the capital only!. The central banks around the world are heading for zero hell Japan is nearly there already at 0.3% so just do it and get it over with but this time tell the banks who is in charge and make them pass it on! The banks as a business are a nonsense, they are bankrupt, worthless entities without government backing no one would use them no one would trust them and why should we? They should provide a service and get paid just as any other government employee.

Personally I don’t feel it should be necessary to explain this further but Paulson got a lot of stick for trying to save the worlds economy on three sides of A4 so I will waffle on little more.

First of all this is not a policy of easy money it is a policy of cheap money. It was easy but expensive money that caused the sub prime meltdown, they couldn’t afford the interest as the banks racked it up. Capital only would have been a breeze. Why is it that banks charge the most interest to the poorest people there by making their live even more difficult than it already is? If I didn’t know better I’d say that was the rich living off the poor, but if you want to deal with poverty I think banking is a good place to start. The fundamental problem with banking has always been why should someone lend with out a reward given that there is a risk you won’t get the money back? Well it appears that you will always get it back thanks to the government underwriting the system so perhaps the question should be why should you make any profit if nothing was ever risked?

There is money to made in banking but it should come from providing a service and charging for it. Even assessing clients for loans could be charged for even if they are ultimately declined, this would deter time wasters and encourage people to consider carefully whether they need the loan or not. We don’t want to be encouraging more personal debt and once people personal debt levels are low enough people will soon find they can purchase with cash what they had previously needed credit for.
The biggest risk of a zero base rate is the effect it will have on the currency. Traditionally high interest rates support the currency however in resent months this has not been reflected in exchange rates. It appears that a bigger factor is the world perception of our economy and if things are looking good the currency will hold out. Another factor in exchange rates is the amount of any given currency that is circulating, recently the government has offered to put a half trillion into the banks in effect printing lots and lots of money.

I understand the arguments for the current system and it has worked ok for the most part but its screwed now and interest free economic models are the only way out. This is far from a new idea indeed it goes back thousands of years, I believe a most famous advocate of an interest free economy was Mohammed. I’m sure Muslims all over the world would be very supportive of a western nation tipping their cap to Mohamed. I’m sure many Christians would like to point out that Jesus was anti usury but I don’t think it was that high up his agenda. In fact should the bank of England adopt a shia compliant fiscal policy then increased Arab investment would be very likely, a good line of credit on our oil needs is the least I’d expect.

Well that’s economy fixed now what about that other problem climate change……….**** we are doomed aren’t we? Alternatively we could gear our economy towards conservation instead of consumption, standards of living will not fall just because we became less wasteful and an economy is an economy no matter what we are trading. The carbon credits scheme could work very well as a global currency after all carbon is carbon no matter where it is being emitted. How about all the rich people being taxed on their carbon footprint? Just because you have made a lot of money through your endeavours does not give you the right to consume more resources than everyone else. You want to run a billion dollar yacht or drive a car that does 4 mpg then you pay for its environmental impact, or become a green billionaire and pay no carbon tax its voluntary. If the meek are to inherit the earth it better be soon because there will be nothing left in a couple of decades.

I know the clever people who chose to govern us will end up at zero base rate but I doubt the citizens and businesses will see it, it will be just for banks. There is a way to mitigate recession and it wont cost a bean, draw as much of your salary in cash as possible and inflate the cash economy. Banks and government hate cash and the more you use the more leverage we get. On that revolutionary foot note I think I’ll quit, thanks for you time
P Leigh

Very interesting. I think it's the common sense approach many ordinary Americans are already taking. My husband and I are up to our eyeballs in debt but decided no more. We don't need anything more and we don't want anything more. From here on out, we cash our paycheck, pay the bills, and the rest we carry in cash to pay for our weekly expenses.

It is relatively stress-free to do that, requires the absolute minimum in book-keeping, and causes us to be more fiscally conservative since we literally see each dollar we spend go out of our wallet.

Our plan is to pay off the debt ASAP and never do it again. We don't even care if we never own a home again at this point. We're just sick of a credit-based world. The other week we realized that HALF our income goes to debt (minus the mortgage!). Yeah, some of it's "necessary" debt like medical bills and student loans. But a lot of it isn't. At the time, it seemed normal and right to charge stuff like an appliance, a computer, tools for work, or to buy a vehicle on credit so it was new and reliable. Now that we make good money and see none of it, it seems stupid. We realize we could have a really great life at this point if we hadn't already spent all our money before we made it.

It's a dumb move we only intend to have made once. Cash for me, thanks.
Interest makes the world go 'round.

Two guys found these farmers selling watermelons for $1 each. So they bought 100 and drove them over the mountain and sold them out of the back of the truck for $1 each. After they counted their money, the gas, the time, they looked at each other and wondered where they went wrong. The one guy finally figured it out and said, "We need to buy a bigger truck!"

The Jews went into money lending 2000 years ago because the Christians thought it was against scripture. The Muslims still believe so and conjure up complicated methods so they can get money on time, without violating their scripture.

If I'm the watermelon middle man I'm not going to invest my money unless I can sell for a profit and get a return. Same for the farmer, he wouldn't provide the melons on credit unless his risk was covered. Or an investor, if he provided some 'seed' money he'd want some return.

Sure you can save your money and buy as you go, build a house as you go, not live in an instant gratification world. Or you can leverage your money over time, taking a risk that inflation will cover your investment, yes there is risk in all methods.

Circuit City just went chapter 11 today...they were using credit to float their cashflow and now that cash isn't flowing they are in trouble.

Currently with the way the economy is going I'd rather be mortgaged to the hilt....but I'm not.
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Economies have been around thousands of years and issue of intrerest for and against has been argued all this time. No one wll win the arguement until both systems have been tried. We are going to a zero base rate like it or not i'm just saying we should all have access to it and not just banks. I think that if you believe in gods writen word then you are compelled to be against usury. Personally I believe religous texts are all the work of men (not even women) but there is knowledge and wisdom to be gained from all of them.