The Debt as a Virus Theory and the Problem in Paying Back All Interest

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Executive Summary

The debt as a virus theory is centered on the fact that as banks create money, banks only create the principle, and there is not enough money created to pay back the interest on the principle.

Introduction

This is explained in the following quotation.

“Money is created when banks lend it into existence. When a bank provides you with $100,000 mortgage, it creates only the principal which you spend, and which then circulates in the economy. The bank expects you to pay back $200,000 but over the next 20 years, but it doesn’t create the second $100,000 interest. Instead, the bank sends you out into the tough world to battle against everyone else. – Banking on the People

Source: Banking on the People

https://www.amazon.com/Banking-People-Democratizing-Money-Digital-ebook/dp/B07R3F6ZX7/

This point is critical not to skip over. Let us review this section of the quote.

The bank expects you to pay back $200,000 but over the next 20 years, but it doesn’t create the second $100,000 interest.

This is important because banks create money within countries. However, if banks do not create interest, how is there enough money to pay back the interest on a broad scale? And naturally, the higher the interest rate, the greater the problem. This is the exact reason why Michael Hudson has explained that historically there were things called debt jubilees where some of the debts were canceled. Without periodic debt jubilees, the debt becomes unsustainable.

Now let us move on with the rest of the quote.

To bring back the second $100,000. I have come to the conclusion that greed and fear of scarcity are in fact being continuously created and amplified as a direct result of the kind of money we are using. We can produce more than enough food to feed everyone and there was definitely enough work for everybody in the world. But there was clearly not enough money to pay for it all. The scarcity is in our national currencies. In fact, the job of central banks is to create and maintain that currency scarcity, the direct consequences that we have to fight each other in order to survive.” – Banking on the People

Think about the statement..

The job of the central bank is to create and maintain currency scarcity.

This would seem to be more consistent with when countries used gold and silver as money, as there is a true restriction on the amount of precious metals that can be brought into existence as this is a physical process, and precious metals are chosen because of their scarcity. However, with double-entry bookkeeping, which is what loan entries (that become money) are, this is a curious statement that the job of the central banks is to ensure currency scarcity.

This is the exact reason why Michael Hudson has explained that historically there were things called debt jubilees where some of the debts were canceled. Without periodic debt jubilees, the debt becomes unsustainable.

The following quotation explains the creation of unsustainable debt levels.

“In the 2018 book called The Road to Debt Bondage: How Banks Create Unpayable Debt, political economists Darrell Delamaide estimates at only 20% of the money supply is actually available for loan payment. This is the money held and deposit accounts the money we expect to spend on our everyday purchases and expenses, including paying down loans, the money that we don’t need for expenditures, we save or invest in some way.

For the system to be maintainable, the gap between the debt and money available to repay needs to be closed in some way. Ancient rulers did it with periodic debt jubilees debt forgiveness.” – Banking on the People

Scarcity for the Many, But Not for The Elite Few

And there is another overlay on top of this because there is not universal scarcity applied in a private banking system. The scarcity is only directed at the broader citizenry. For connected individuals, there is an open line of credit.

How Private Banking Interests Places Hidden Elites at the Front of the Line to Receive Government Money Creation or Social Credit

Private central banks and banking, in general, place some people at the top of the hierarchy, with no real scarcity, while perpetuating scarcity upon the majority. In this way, a banking system designed for elite ends allocates credit and money to select individuals. And the most select individuals are those with the strongest connections to the elites that control the banking system.

This is why then-Treasury Secretary Hank Paulson did not want any oversight into how the TARP money was spent and why the same secrecy was applied during the coronavirus bailout that was administered without oversight by then-Treasury Secretary Steve Munichen. It is also why the Fed has never been audited and loans money to any bank (domestic or foreign) without oversight from the US government. In fact, the Fed states that it must have not oversight to perform its duties.