Compound Interest and Profit fit neatly into the Micro World

These are not the features of our monetary system of production that have or will cause grief.

Obamanomics will not even oppose them -- they, as with the Keynesians and the New Dealers, are acceptable at reasonable rates.

The problem is to normalize the creation of investment capital for production of needs, and not allow the tail of interest and profit to wag the dog that produces real output.

Sovereign money can overcome deficits in demand. Production can overcome deficits in supply.

The "matter of interest " is a "matter of degree". Usury is not necessary, and it begins around 5% when our productive potential at full employment is as high as it is today.

I'm confused. We're not at full employment, so our current productive potential has not been reached. If we had full employment, our productivity would be considerably greater. If we transfered people from non-productive financial services (and similar) jobs and placed them into the productive economy - providing full employment with modern technology - I would not be surprised to see our productive economy producing twice what it does now.

Agree--IF America or all nations WERE to discover benign methods for

(1) supporting private enterprise-- with zero taxation (except to discourage smoking and similar conduct -- if possible, and to protect low pricing of necessary items--by, say, taxing alternative uses of ingredients that we want to be favored for use as food, medicine, etc.,), and

(2) supporting strategic government enterprise for exotic energy systems, education, prohibitively expensive research and development, public health and infrastructure, environmental repair and protection, fire and flood prevention, etc., etc., etc.,

with full employment of potential capital and willing labor as a major purpose, THEN the economic output of such nations would be many times its current size in units and money measures.

What then compels us to run are economy on so few cylinders? Is it money and banking? Is it corruption in Congress? Is it the heavy weight of history and habit? Is it inexplicable?

Answers may be less effective than accidental change: within the past two months the Federal Reserve has directly bought US Treasuries: this is the method we used to finance WW II ahead of bond sales to the private sector and tax revenues collected from that sector.

I will allow such heroic ad hoc measure to be credited to both Obama and Bernanke. What we do not know is how the Executive branch team of economic gurus sees this possibility: will they use such funding to rescue the middle class? Will they use it to prevent a race to the bottom in global labor and environmental standards?

I criticize the President for not using the bully pulpit to demand Congress support such uses. He has, instead, claimed that decades of inattention to the poor, the infrastructure, the environment, and the economic security of most Americans, cannot be cured overnight. In fact it can. Government spending of money created by the Federal Reserve can cure deflation overnight.

The cure will set us up for hyperinflation. To prevent that unintended outcome the people and its political institutions must be prepared to compel people and firms with money in excess of a safe ceiling to save such money and not spend it until it can be absorbed by a much enlarged supply system.

In return for such compelled savings, government would have to offer inflation protection for the savings. When we returned to normal spending, savings balances would have lost no purchasing power.

If I am right--why am I so alone? Well, I'm not alone. I'm supported by Martin Wolf (Financial Times) and Mathew Forstater, learned economist, now, and in the history of economics by Abba Lerner and Richard Vickery. The latter is a Nobel Laureate, the former deserved to be the same.

Johngelles writes
"The "matter of interest " is a "matter of degree". Usury is not necessary, and it begins around 5% when our productive potential at full employment is as high as it is today."

It seems to me that any economy who running costs are internalized (through interest, for example) is designed to suffer as its users will find that it can never run as efficiently as it needs to.

My OED tells me that 'usury' is money with interest, but has a special section which states the legal term means 'money with excessive interest'. This is a semantic shift which occurred as those in power became reliant upon it. Both the bible and Qu'ran ban usury--in its original sense of interest.

It has been understood for thousands of years that a monetary system based upon compound interest is not sustainable. It is for this reason that interest is banned in many religions and philosophies.

Simply banning usury is, however, an inadequate solution - this has been tried through periods of history, and is always sidestepped (a modern example is 'Islamic Banking'.)

The most elegant solution is the charging of a demurrage upon currency. Interest is not banned, it may be charged where genuine risk is involved - but any such debt is monetary in nature and will attract the same demurrage as cash.

It appears that vested interests making up 'the establishment' never seem to get the message - so we are destined to suffer endless cycles of economic collapse and rebirth.

A more careful reading of the Bible would reveal that the Jews were forbidden from charging usury when lending to each other, but were free to charge usury when lending to foreigners.

A double-standard which would have made Isreal the wealthiest and most powerful nation on Earth had this law been properly followed. Instead, they charged interest when lending to each other, thereby destroying their nation from within.

I'm under the impression that the vested interests know full well what they are doing and try to time the bottom of the collapses to be just high enough to avoid the civil revolt that could get themselves killed. All the while using inflation and deflation to steal wealth from those who create it.

I understood riba to mean - 'taking in return any value greater than the value given'. This excludes any form of interest or 'making money from money' - not only excessive interest as in the concept of usury.

In Islamic law - this principle is applied in conjunction with zakat - which in effect is a demurrage (2,5%) upon the financial wealth of the rich, proceeds of which are to be distributed to needy travelers and to the poor.