Phantom money

Suppose that the total sum of transaction at any one time was £M. This would be the money supply of £. If there were 10 houses being bought in this period they would cost £M/10 each. This is the true value of the house.

Now if the rich legalise usury and fractional reserve banking where loans are not backed by anything then the £M is not used to pay for things directly but rather to pay back interest. Then prices become a hypothetical projection based upon the money flow and the interest rate - they are no longer real.

In our micro economy. If people pay an interest rate of r, and pay off in so t cycles then the theoretical value of houses increases by:

inc. = ( r^t-1 ) / ( r-1 )

In other words much larger house prices can be afforded because only the interest adds up to M.

So at an interest rate of 1.02% for 10 cycles makes each house appear to be 11 times more expensive, and at 1.04% annual rate for 25 years make houses appear 42 times more expensive while the real value is still £M/10. The apparent value is simply an illusion created by the demon parasites that run the monetary system!

So in our micro system, houses worth £175,000 with 25year payment and 1.04% interest are really worth £4,000! Times 10 to be safe and you have the £40,000 figure from the previous but one post.

So the laws of economics remind us to avoid gaining interest on our loans as well as using loans! We are the losers otherwise! Greed never pays!

Here's an option.

Interest free Banking!!!!... I should read this and take action...
http://en.wikipedia.org/wiki/JAK_members_bank

p.s. Keynes who is coming under increasing attack because while rescuing the Americans from the 1930's recession has caused the current one is profoundly wrong as Howard Katz first alerted me. The Keynesian idea is that lowering interest rates creates freer money and stimulates spending which stimulates the economy. Previous logic was that increasing interest rates increased savings which gave the banks more to lend. Now that banks can lend whatever they want without limit the latter is irrelevant, and the forner logic has been taken to extremes. Spending has been stimulated artificially, "wealth" has been generated artificially (as demonstrated above) and the real economy is progressively ignored... until people wake up and they realise it was all a pointless dream.

btw Calculate the above for usury from well behaved banks... where the above is for banks with a fractional reserve of 0%.