Monetary Reform

The typical way the cranks put it is this: If banks loan ten, where does the money come from to repay eleven? The difference between eleven and ten being, presumably, interest.

The question carries with it a number of implied false assumptions. The question itself is false. It begs the wrong answer. The mistake is to try to answer it rather than questioning the question itself.

The following story falls within the same category of logical fallacies:

"Three men go into a motel.

"The man behind the desk said the room is $30, so each man paid $10 and went to the room. A while later the man behind the desk realized the room was only $25, so he sent the bellboy to the room with $5. On the way the bellboy couldn't figure out how to split the $5 evenly between the three men, so he gave each man $1 and kept the other $2 for himself.

"This meant the three men each paid $9 for the room, which is a total of $27. Add the $2 the bellboy kept = $29.

"Where is the other dollar?"
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The predicate to the question should have been: Subtract the $2 the bellboy kept = $25. Where are the twenty-five dollars. Answer: The motel has it.
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As to the ten can't repay eleven fallacy, the answer is similar. The flux representing the flow of loans is the very same money as the reflux in payment of principal plus interest--the reflux is the flux delayed in time. Ten can't repay eleven falsely implies that the interest is something extraneous to loans, and must be extracted from outside the lending process. In reality ten is repaying ten. And it is empirically verifiable. Here's how: At zero interest none of the reflux is allocated to interest; all of it is allocated to principal. At a rate of interest X, X is allocated to interest, and the reflux - X is allocated to principal. It is entirely a matter of accounting in the books of lenders and borrowers. When plotted on the same graph against time, the flux and reflux curves are parallel regardless of the rate of interest.

MONETARY: ten can't repay eleven fallacy