Continued from Yesterday
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, Constitutional Monetary System of Lincoln and Bradbury Pound initiative of His Majesty’s Treasury in 1914. 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. The Peasant Land Bank of Russia in 1880 that provided interest-free loans to the liberated peasantry can also be utilized as an interest free model. The system of Rural Cooperative Foundations (RCFs) of Peoples Republic of China which played a pivotal role in the curtailment of rural usury during 1980s can also be employed in usury free arena. The worldwide adoption of “Local Exchange Trading Systems (LETS)” which are interest free barter arrangements can also be helpful in trammeling interest. The LETS banking system promulgated by Margrit Kennedy and Mr. John Turmel of Canada may be given a due coverage by the media for its application in the orb.22 In the opinion of this writer, the interest free banking sector that operates on the motto of “no interest on deposits and no interest on loans” may put to use an entrance fee for catering the daily and monthly needs of the banks and employees. In this manner, the banks shall become the places of public good and services where each and every individual would contribute to the common good and welfare of a society. The entrance fee may be considered as a service charge. Another way of meeting the needs of interest free banks is by imposing bank tax on the public by governments. That can only happen when all interest free banks are nationalized. It is also added that the interest free banking sector should introduce an interest free interbank lending market by completely abolishing interbank rates.
Stephen Zarlenga in his book “The Lost Science of Money” shows that the monetary reform is more a matter of morality and law than of economics. He also advocates the evolution of monetary department into a fourth branch of government that should work for the common good and nationalization of money creation process which is a precondition for solving the usury problem and its wealth concentration effect.23 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. Furthermore, the International Financial Institutions (IFIs) like IMF, World Bank and Asian Development Bank (ADB) should initiate interest write off programs for all the developing countries under special initiatives. In 1996, the IMF and World Bank sowed the seeds of the Heavily Indebted Poor Countries (HIPC) for a group of 38 developing countries. But the new initiatives should include the interest write off programs for all the developing countries 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. The newly founded IFI of Asian Infrastructure Investment Bank can also make use of interest free models for channelizing prosperity and tranquility in underdeveloped nations. As far as the recovery of loans from governments is concerned, it can be dwarfed by galvanizing the debt-equity swap method. In addition, The International Financial Institutions should come up with sound and safe Structural Adjustment Programs (SAPs) so that these efforts should not give air to Neocolonialism or Neo-imperialism and sovereignty of the underdeveloped nations should not be compromised. Hence, it is concluded that the economic salvation depends on the total elimination of interest and usury based fractional reserve banking and Margin Trading.
The writer is the medical graduate of Xi’an Jiaotong University, P.R. China and hails from District Karak, Pakistan. He can be reached at email@example.com.
1-Karl Marx, Capital Vol. III Part V, Division of Profit into Interest and Profit of Enterprise. Interest-Bearing Capital, Chapter 23, Interest and Profit of Enterprise.
2-The Lost Science of Money by Stephen Zarlenga, Page 182.
3-The Scholastics Analysis of Usury by John T Noonan.
4-Essay: - “The Morality of Money lending: A Short History” by Yaron Brook, Economics, History, From The Objective Standard, Vol. 2, No. 3.
5-A Brief History of Interest by Stephen Zarlenga, December 18, 2010, AMI.
6-“Defining Judaism- A Reader” edited by Aaron W- Hughes, Page 53.
7-“Defining Judaism- A Reader” edited by Aaron W- Hughes, Page 54.
8-Meezan Bank’s Guide to Islamic Banking by Dr. Muhammad Imran Ashraf usmani, Page 65 (First Edition 2002).
9-Equity Capital: From Ancient Partnerships to Modern Exchange Traded Fundsby Geoffrey Poitras.
10-The Lost Science of Money by Stephen Zarlenga, Page 191.
11-Letter of John L – King to Margrit Kennedy, January 8, 1988,
Source:-Interest and Inflation Free Money, Page 12.
12-Thomas Greco “Money: Understanding and Creating Alternatives to Legal Tender”, page 36.
13-“An essay on the law of usury” by Mark Ord, Page 4.
14-“An essay on the law of usury” by Mark Ord, Page 4.
15-“A History of Russian Economic Thought: Ninth Through Eighteenth Centuries”, Page 81
16-“A History of Russian Economic Thought: Ninth Through Eighteenth Centuries”, Page 82.
17-Informal Institutions and Rural Development in China by Biliang Hu, Page 102.
18-Ibn Maja, also in Musnad Ahmed
19-Abu Dawud, also in Ibn Majah
20-Policy Basics: Where Do Our Federal Tax Dollars Go? Center on Budget and Policy Priorities. March 4, 2016.
21-Debt servicing eats up 42.36pc of FBR's revenue –Daily the Nation, Pakistan, July 3, 2016.
22-Interest and Inflation Free Money by Margrit Kennedy,
& LETS Banking Systems Engineering Math by John C. Turmel
23-The Lost Science of Money by Stephen Zarlenga, Page 667 & 675.