Editor in Chief: Moh. Reza Huwaida Wednesday, March 21st, 2018

Road to Economic Liberty


Road to Economic Liberty

The monopolies of the Fractional Reserve Banking and Margin Trading revolve around interest which are contrary to the philanthropic objectives intended for beating the extremities of poverty and the creation of dignified channels of financial support for the down trodden with a view to achieve the lofty goal of egalitarian society in sustainable manner. The magic formula of Aristotle berated interest on the principle that it is a yield arising out of money itself, not a product of that for which money was provided. Charlemagne’s laws categorically prohibited usury in 806 CE.  The father of modern economics, John Maynard Keynes contended that without the abolition of interest, unemployment cannot be eradicated. Silvio Gesell castigated interest on the basis that his sales were more often related to the price of money (i-e interest) than people’s needs or the quality of his products. Gesell also launched “Stamp Script Movement” to make money a public service for a use fee but all his efforts went in vain. In 1919, Gottfried Feder wrote a book “Breaking the Shackles of Interest (Brechung der Zinsknechtschaft)” about the implications of interest and wealthy bankers. His endeavors led Adolf Hitler to proclaim that the kernel of National Socialism is breaking the thralldom of interest. Margrit Kennedy, the ink-slinger about the negative consequences of interest is considered as the mother of anti-usury movement in modern times. Thomas Greco in his book “Money: Understanding and Creating Alternatives to Legal Tender” says…
“The banks are continually making new loans and retiring old ones as they are repaid. In the aggregate, the debts owed to banks are increasing with the mere passage of time, because interest accrues over time. The money available to repay those debts, however, can be created only by the banks as they make additional loans.”
The major religions of the world deplore, condemn and prohibit interest in all its forms. The Manu Smriti of Hinduism categorically expresses sentiments for contempt of usury in chapter 11: verse 62. The Buddhist Jatakas refers to the practitioners of interest as hypocritical ascetics. The Holy Bible speaks about the proscription of interest in the books of Deuteronomy 23: 19, Leviticus 25: 36, Exodus 22: 25, Ezekiel 18: 13, Ezekiel 22: 12, Psalms 15: 5 and Luke 6: 35. The forbidding of interest in Holy Koran is mentioned in the Chapter of The Romans: verse 39, Chapter of The Family of Imran: verse 130, Chapter of The Women: verse 161 and Chapter of The Heifer: verses 275-281.
The Fractional Reserve Banking became a legalized form of economic sacerdotalism at national and international level after the establishment of Bank of England and the foundation of International Financial Institutions (IFIs). The era of this banking has affected the countries and humanity in form of interest payments on debts, business cycles, buying power, global imbalance of payments, increased taxation and positively skewed distribution of wealth. In the financial year of 2014-15, the UK government rewarded £34 billion overall interest on its national debt, which amounted to 4.6% of overall spending according to the Institute for Fiscal Studies (IFS). Pakistan allocated Rs 1360 billion for debt service in fiscal year 2016-17 that would represent 37.56% of FBR’s tax revenue. In Germany, the poor 80% pay one billion Euros in interest to the wealthy 10% per day which amounts to one seventh of German GDP.
Economists must keep on questing for an alternative of fractional reserve banking and a system of interest free credit. The Chicago Plan and Chicago Plan Revisited are the masterpieces for abolition of fractional reserve banking and imposition of Full Reserve Banking. The other variants of Full Reserve Banking include Kay’s Narrow Banking, Kotlikoff’s Limited Purpose Banking, Positive Money and New Economics Foundation’s plans for monetary reform. The substitutes also comprise Islamic Banking, Mutual Credit and Constitutional Monetary System of Lincoln. The best example of interest-free Full Reserve Banking is Jord Arbete Kapital (JAK) bank in Sweden while in the arena of Islamic finance, Akhuwat Model of interest free loans in Pakistan is considered to be more pragmatic than JAK model.
Stephen Zarlenga in his book “The Lost Science of Money” shows that the question of usury is far from settled, and that monetary reform is more a matter of morality and law than of economics. Therefore, it is imperative to the leaders and legislators of various nations to initiate interest write off movement for their respective countries domestically and internationally and promulgate the acts for complete abolition of debt service because it is the interest which is feasting on the flesh and bones of developing world especially those nations that are dependent on others and in which corruption and embezzlement are rampant. As far as the recovery of loans from governments is concerned, it can be dwarfed by galvanizing the debt-equity swap method. Hence, it is concluded that the economic salvation depends on the total elimination of fractional reserve banking and interest based Margin Trading.

The writer is the medical graduate of Xi’an Jiaotong University, P.R. China. He Can be reached at faisalrose739@hotmail.com.

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