THE BIG LIE OF ECONOMICS
By John C. Turmel, B. Eng.
May 19 2004
Most people are used to borrowing from the chartered banks
which charge interest because they have depositors they must
pay interest to. Above the chartered banks is the Bank of
Canada which does not need to pay interest to any depositors
and so can create and lend new money like a casino creates
and lends new chips. When every citizen signs up for an
online interest-free Bank of Canada account and credit card
and needs pay no debt service on the loan,
John Turmel's LETS and UNILETS strategy is to use the Bank
of Canada to permit all citizens and corporations to convert
interest-bearing chartered bank debt to interest-free
central bank debt so that all payments go against principal
until debts are finally paid off, no matter how slow the
repayment schedule. It's the interest growth on debt that
keeps people in debt forever. Interest-bearing currency is
simply replaced by interest-free currency and getting
everyone eventually out of debt bondage.
HOW "MORT-GAGE" INTEREST CREATES A DEATH-GAMBLE
All Economics is based on the false premise that "interest fights
inflation" when the truth is that "interest causes inflation." Almost
everyday in every financial story of every newspaper and radio or
television program, it is repeated over and over the interest fights
inflation. They all agree that interest causes unemployment but all have
been conditioned to believe that it is necessary to fight inflation.
"Inflation is coming so we'll have to raise interest rates" is hypnotically
chanted like a mantra.
The word "mort-gage" is derived from the French word "mort" meaning "death"
and "gage" meaning "gamble". Bankers create the money supply when they make
loans. Producers are forced to gamble by borrowing newly created
Principal(P) to pay for production costs and then inflating their prices to
recuperate both the created Principal and the non-created Interest (P+I)
from their sales. Because total goods priced at (P+I) can never be sold
when consumers only have P dollars available, a minimum amount of goods
must remain unsold and a minimum number of producers must fail and suffer
foreclosure. The economist Keynes likened the mort-gage death-gamble to the
game of musical chairs. Just as there are insufficient chairs for all to
survive the musical chairs death-gamble, so too, there is insufficient
money for all to repay (P+I) and survive the mort-gage death-gamble.
P < principle, I < Interest, i < Interest Rate, t < Time
|Production Costs (Principal)||100||P||1|
|Production Prices (Debt)||100+I||P+I||exp(it)|
|Purchasable Value (Survivors)||100/(100+I)||P/(P+I)||1/exp(it)|
|Unpurchasable Value (Non-Survivors)||I/(100+I)||I/(P+I)||1-1/exp(it)|
|For Unemployment = 0, let:||I=0||I=0||i=0, t=0|
The odds of survival are always set by the interest rate(i).
P/(P+I) survive, I/(P+I)
do not. The equation for the minimum inflation (J) we must suffer is the same as the
equation for unemployment (U) because the fraction of the people foreclosed on
is the fraction of collateral confiscated.
Though we are led to believe that inflation is caused by an increase in the money chasing the goods (Shift A), actually, it is caused by a decrease in the collateral backing up the money (Shift B) due to foreclosures. Though both inflations shifts feel the same, the graph shows inflation is not the inverse function of interest, it is the direct function exposing the Big Lie that interest fights inflation.
Every economist in world has been taught that inflation is Shift A. No Economics curriculum mentions the other possibility, Shift B. This is not accidental. Yet when most people who have not been conditioned by Economics studies are asked whether prices will go up or down when the interest rates are raised, they are quick to agree that a merchant must pass on increased interest costs by raising prices. And yet, very few notice that this logical conclusion is in direct contradiction to the Big Lie which is repeated over and over in all our media and Economics text-books. I/(P+I) has been called the Miracle Equation because it exposes the Big Lie of Economics that inflation is the inverse function of the interest rate when it is actually a direct function. Letting I=0 eliminates both involuntary unemployment and inflation! So, if interest does not fight inflation but actually causes inflation, then there is no logical reason for keeping interest in our banking system's computer programs. This explains why the LETS banking system software offers interest-free credit to all while suffering no inflation and also explains why the 1350 Non- Governmental Organizations at the Millennium Assembly in 2000 adopted Resolution C6 to Governments in the Millennium Declaration to "restructure the global financial architecture" with an "alternative time-based currency" Section 5: What the UN must do: h) Another area of study should be the UNILETS (United Nations International Local Employment-Trading System). i) Local Exchange, Trade and currency practices should be developed further and examined for international application. The abolition of debts and the eradication of interest are essential components in pursuing sustainable human development. j) The adoption of the time standard of money and abolition of interest rates are both ideas worthy of consideration. Our mission therefore is to expose the Big Lie of Economics for our friends and neighbors. Every time you read the Big Lie in your newspaper, point it out. Every time you hear it on the radio or television, point it out. There are opportunities to expose the Big Lie of Economics almost every day. We must either work to install an interest-free banking system or continue to suffer the consequences of poverty we've been suffering throughout the history of humankind. Here is the best way you can test this out yourself from the Game Theory example at the end of the LETS Engineering Mathematics at http://www.cyberclass.net/turmel/bankmath.htm
GAME MODEL: MORTGAGE PLANET VS. UNILETS PLANET
MORTGAGE PLANET VS. UNILETS PLANET In his book `The Theory of Games and Economic Behavior' mathematician John Von Neumann stated that "important questions in economics arise in a more elementary fashion in the theory of games." In the commercial war for markets, buyers in the economy decide who sells their goods and who fails to sell. Models used by economists are flawed by guesses and approximations about what the economy will choose. The only way to perfectly model the economy is to use fair chance to select winners and losers in repeated trials (Monte Carlo methods) and to then statistically determine the expected results. To demonstrate the difference between the interest on a Mort-Gage loan and the service charge on a Life-saving LETS Greendollar loan, consider the following economic game. The necessary game equipment for "mort-gage" is: 1) a fair chance mechanism like a coin, cards, dice, etc.; 2) a bowl representing the Economic Pool containing 3 types of energy tokens representing food, clothing, shelter (e.g. knives, forks, spoons). 3) a bowl representing for the Money Pumphouse Bank containing currency of dimes and pennies representing units of monetary liquidity.
MORT-GAGE PLANET Step 1: Borrow currency: Businesspeople put their collateral (watch or pen) in the Bank Bowl to borrow 10 million dollars (1 Dime) of money at 20% interest with the last player getting 10 pennies for his 10 million dollars. Each owes the pumphouse bank 12 million at the end of the game. For 6 players, 20% works best. For 3 players, 50%; for 10 players, 10%. Step 2: Invest in production: Each player invests their 10 million into the Economy Pool in exchange for a product token they intend to sell. Step 3: Marketing production: To cover their minimum costs, (Principle + Interest), players charge at least 12 million for their product token. Flip a coin between two sellers of food to fairly model who the economy chooses to buy from at the demanded 12 million price. Do the same for the two clothing sellers. Then between two shelter sellers. Then for the remaining food and clothing vendors, and then between the two remaining players. Step 4: Results: Since each dumped 10 million into the Economic Pool and each winner took out 12 million, eventually, the economy runs out of money leaving some products unsold, those producers bankrupted and foreclosed upon, and the currency now backed up by less collateral, the same money chasing less watches, the heretofore undiscovered inflation Shift B.
LETS NO-INTEREST PLANET: Step 1: Borrow currency: Businesspeople pledge their collateral to borrow 12 million (1 Dime 2 Pennies) of money at a 1-time $2 million service charge. They owe 12 million to the pumphouse bank at the end of the game. Step 2: Invest in production: Each player invests their 10 million into the Economy Pool in exchange for a product token they intend to sell, just like on Mort-gage planet, then use the extra 2 million (Pennies) borrowed to pay the banker's service charge into the Economic pool. Step 3: Marketing production: To cover their minimum costs, (Principle + Service Charge), players charge 12 million to sell their product token. Use fair chance again to determine who the economy chooses to buy from. Step 4: Results: Since each dumped 12 million into the Economic Pool and each winner took 12 million out, the economy had exactly enough money to leave no products unsold, no producers bankrupted, no foreclosures with the currency still backed up by the same watches, no shift-B inflation.
On Mortgage Planet, the bank demands payment of money it never created (usury) while on the LETS Planet, the bank demands payment of money it did create (service charge). With money matched to the prices of goods produced, there can never be involuntary unemployment or inflation.
If you want your time-based Bank of Canada interest-free account where you can pay off all your interest-bearing debts and then all future payments go against the principle thereby eventually getting you out of debt, you must teach your friends how to play the Mort-gage vs. UNILETS games. Start teaching how debt slavery works or you'll end up its chains for therest of your life.
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