When a citizen goes to a banker to borrow $100,000 to purchase a home or a farm, the bank clerk has the borrower agree to pay back the loan plus interest. At 8.25% interest for 30 years, the borrower must agree to pay $751.27 per month for a total of $270,456.00.
The clerk then requires the citizen to assign to the banker the right of ownership of the property if the borrower does not make the required payments. The bank clerk then gives the borrower a $100,000 check or a $100,000 deposit slip, crediting the borrower's checking account with $100,000.
The borrower then writes checks to the builder, subcontractors, etc. who in turn write checks. $100,000 of new "checkbook" money is thereby added to the "money in circulation."
However, this is the fatal flaw in the system: the only new money created and put into circulation is the amount of the loan, $100,000. The money to pay the interest is NOT created, and therefore was NOT added to "money in circulation."
Even so, this borrower (and those who follow him in ownership of the property) must earn and take out of circulation $270,456.00, $170,456.00 more than he put in circulation when he borrowed the original $100,000! (This interest cheats all families out of nicer homes. It is not that they cannot afford them; it is because the bankers' interest forces them to pay for nearly 3 homes to get one!)
Every new loan puts the same process in operation. Each borrower adds a small sum to the total money supply when he borrows, but the payments on the loan (because of interest) then deduct a much larger sum from the total money supply.
There is therefore no way all debtors can pay off the money lenders. As they pay the principle and interest, the money in circulation disappears. All they can do is struggle against each other, borrowing more and more from the money lenders each generation. The money lenders (bankers), who produce nothing of value, gradually gain a death grip on the land, buildings, and present and future earnings of the whole working population. Proverbs 22:7 has come to pass in America. "The rich ruleth over the poor, and the borrower is servant to the lender."
To grasp the truth that periodic withdrawal of money through interest payments will inexorably transfer all wealth in the nation to the receiver of interest, imagine yourself in a poker or dice game where everyone must buy the chips (the medium of exchange) from a "banker" who does not risk chips in the game.
He just watches the table and reaches in every hour to take 10 percent to 15 percent of all the chips on the table. As the game goes on, the amount of chips in the possession of each player will fluctuate according to his luck.
However, the total number of chips available to play the game (carry on trade and business) will decrease steadily.
As the game starts getting low on chips, some players will run out. If they want to continue to play, they must buy or borrow more chips from the "banker". The "banker" will sell (lend) them only if the player signs a "mortgage" agreeing to give the "Banker" some real property (car, home, farm, business, etc.) if he cannot make periodic payments to pay back all the chips plus some extra chips (interest). The payments must be made on time, whether he wins (makes a profit) or not.
It is easy to see that no matter how skillfully they play, eventually the "banker" will end up with all of his original chips back, and except for the very best players, the rest, if they stay in long enough, will lose to the "banker" their homes, their farms, their businesses, perhaps even their cars, watches, and the shirts off their backs!