Why do we pay interest? on loans? why do we have to if it is our govt?

Question

The govt lets the federal reserve make money, the federal reserve loans banks money, we borrow from the banks,

why do muslim countries not charge their people interest?

Answer 1

Democracy is the theory that the common people know what they want and deserve to get it good and hard.
H. L. Mencken

People want things for free and are willing to let their neighbors pay for it. Politicians are too chicken to say no, and take out loans.

First, lets take care of some vocabulary. The deficit is the fiscal year difference between what the Government takes in from taxes and other revenues, and the amount of money the Government spends. Think of the total debt as deficits plus accumulated surpluses.

Deficits require the Treasury to borrow money to raise cash needed to keep the Government operating. Money is borrowed by selling Treasury securities like T-bills, notes, bonds and savings bonds.

"We are putting our children in debt. It must be stopped." These are the vigorous words heard from politicians of all stripes when talking about the national debt and the budget deficit. The problem is that one person's pork is another's bacon - or possibly bread and butter.

In the not too distant past, there was a bitter contest over the Federal budget. It triggered a deep concern over the rocketing growth of our astronomical national debt. In the late '90's the news was filled with reports of the Titanic clashes between the Congress and President Clinton over the Federal budget. This fierce confrontation even resulted in the laughable-if-it-wasn't-so-sad shutdown of non-essential Federal services. Only bit of fast thinking at the helm combined with some legerdemain from Robert Rubin kept the U.S. financially afloat and saved us from the embarrassment and complications of international default on Federal debts.

We seem to have gotten complacent since then. Today over $1,000 in taxes per year must be collected for every man, woman and child in the United States simply to pay the interest on the national debt. All other Federal activities have a hard time competing with the line item for Federal debt service.

The public debt is currently growing at nearly a billion dollars a day! That is thousands of dollars per second! It's nearly inconceivable. Try blinking your eyes. There went $5,000-$10,000.

It may seem as if the national debt is a nebulous topic with little impact on you, your family or your place of employment. You may have faith in the elected officials you have put into office to watch over just such issues. Many people feel that their one voice is too small to make any real difference. Not true. Here is an example of how it affects you: About 25 cents out of every dollar of total tax revenue collected is immediately wolfed down by the hideous interest on the Federal debt. You don't "get" anything for the first 25% of your tax assessment. Picture a teen gone wild with the family credit card. It's all fun and games until the family struggles to keep up with minimum payments and the interest that keeps growing like some monster from an old "B" movie.

A substantial amount of money simply vanishes from constructive use. It cannot be re-invested in the economy in any way. You certainly cannot invest it to secure your future. No company will experience the opportunity to grow and create jobs because of your investment. You cannot spend it and thereby directly stimulate the economy. Twenty-five percent of your tax assessment is jettisoned into the black hole of Federal debt service.

Some of your neighbors and even some multi-national companies or foreign governments can be recipients of these interest payments. They may put these funds back into our economy by purchasing goods and services. But for the most part, a substantial portion of the average American family income is evaporating under the hot sun of the interest on this "family debt".

And on this farm we have some pigs. Ee I Ee I Oh. Their names are Duplicative, Outdated, and Wasteful (government programs).

Answer 2

The Tradeoff between Mortgage Prepayments and Tax-Deferred Retirement Savings From the Working Papers of the Federal Reserve Bank of Chicago By Gene Amromin, Jennifer Huang, and Clemens Sialm, One of our own federal banks—Chicago's Federal Reserve Bank—has determined that by accelerating mortgage payments instead of stashing money in tax-deferred accounts, more than one in three Americans are making the "wrong choice ," and are giving up potentially important arbitrage gains. The mortgage overpayments, the Fed's recent report says, is a "mis-allocation" of funds that costs people $1.5-billion a year. If consumers changed their allocation by not sending excess payments to their mortgage company, and instead put that money in some form of tax-advantaged savings, they would reap a median gain of between 11 and 17 cents per dollar.

Answer 3

The govt. run by old craps lack common sense and doesn't understand today's problems which common man face. They are still unaware about price hikes, inflations, loan debt etc, In the initial years when farmers distress came to attract public attention it was said that indebtedness through use of Bt Cotton were the main cause for farmers suicide. Here it is important to notice that in the context of Indian history the moneylender is considered to be a particularly evil person and the farmer an unwitting subject of his machinations. Moreover, in recent times there has been a considerable ideologically driven movement against the use of Bt crops. As a result the initial causes indebtedness and Bt Cotton were easily accepted to be the causes of farm suicides. a variety of causes that essentially boiled down to this: India was transforming rapidly into a primarily urban, industrial society with industry as its main source of income; the government and society had begun to be unconcerned about the condition of the countryside; moreover, a downturn in the urban economy was pushing a large number of distressed non-farmers to try their hand at cultivation; the farmer was also caught in a Scissors crisis; in the absence of any responsible counselling either from the government or society there were many farmers who did not know how to survive in the changing economy. Such stresses pushed many into a corner where suicide became an option for them At least one study from the Punjab also pointed at the dramatic misuse of agricultural chemicals in farmer households in the absence of any guidance on how to correctly use these deadly chemicals and linked it to the rise in farm suicides wherever farm chemicals were in widespread use. With these incompetent fellas it is not a wonder that most cases of farmer suicide comes from Maharashtra state even though the union minister for agriculture is also from the same state. People can't expect any good from either central or state govt. as both will always blame each other for the mess.

Answer 4

Imagine you have a thousand dollars to spare. You think about putting it into real estate, or maybe the stock market. Both are likely to increase your investment over time. You can buy a government savings bond, which is very safe but only pays a little interest. Or you can lend it to your friend, who has offered much more interest but is a higher risk. What do you do? Interest is the cost of money. If we don't pay interest, people will do other things with their money. If we don't pay higher interest for higher risk, people will always go for the safe investment.

Answer 5

The federal government pays interest on the deficit. That is the way the world works. Money earns interest. Borrowing costs interest.

Answer 6

Banks borrow from Federal Reserve, and FR borrows from Elites who always charge interest.

Regards.

Answer 7

If money were free from the Federal Reserve, banks would borrow and lend recklessly, causing inflation and colossal systemic risk. Oops, we've had that even with a price on the money the Fed lends! This can only mean one thing, our financial and economic system is broken.

Answer 8

If there was no interest, everybody would loan as much money as possible resulting in a massive and stomache turning inflation. Interest ensures that onyl serious people who are willing to work hard for their money borrow money. The non-serious oes go banktup and rightly so.

Answer 9

Banks charge interest as a penalty for the loan. The fed regulates the % that banks can charge. The Government does not make a dime from bank interest.

Answer 10

What don't you understand about capitalism ? It's a risk and reward system. If your that worried about paying interest, DON"T BORROW MONEY !!!! Borrowing money is not a right in this Country.