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Free issue of MICHAEL

*by*

**Alain Pilote**

**It is very important to understand this point: the**

**total debt can never be paid off, for it represents**

**money that does not exist. Louis Even explained**

**it so brilliantly and simply in his fable,**

*The Money*

*Myth Exploded.*

**(**

*See page 3.*

**) In the fable, Oliver**

**lends money at a rate of 8%, but any rate – even**

**1% – would create an impossibility to pay back**

**the entire loan, principal and interest.**

Let us suppose the five shipwrecked people on

the island decide to borrow from Oliver a total of

$100, at 6% interest. At the end of the year, they

must pay Oliver the interest of 6%, that is to say,

$6. 100 minus 6 = 94, so there is $94 left in circula-

tion on the island. But the $100 debt remains. The

$100 loan is therefore renewed for another year,

and another $6 of interest is due at the end of the

second year. 94 minus 6, leaves $88 in circulation.

If they continue to pay $6 in interest each year, by

the seventeenth year, there will be no money left

in circulation on the island, but the debt will still be

$100, and Oliver will be authorized to seize all the

properties of the island’s inhabitants.

**Production has increased on the island but not**

**the money supply. It is not products that the banker**

**wants but money. The island’s inhabitants were mak-**

**ing products, but not money. Only the banker has the**

**right to create money. So, it seems that it was not**

**wise for our five fellows to pay the interest yearly.**

Even borrowing the interest won’t solve any-

thing but will only delay the final bankruptcy. Let us

suppose that at the end of the first year, the five fel-

lows decide not to pay the interest, but to borrow

it from Oliver, thereby increasing the loan principal

to $106. “No problem,” says Oliver, “the interest on

the additional $6 is only 36 cents; it is peanuts in

comparison with the $106 loan!” So the debt at the

end of the second year is: $106 plus the interest at

6% of $106, $6.36, for a total debt of $112.36 after

two years.

At the end of the fifth year, the debt is $133.82

and the interest is $7.57. “It is not so bad,” thought

the five guys, “the interest has only increased by

$1.57 in five years. We can handle that.” However,

after 50 years, the situation is quite different. The

debt is $1,842.02 and the interest due on the debt is

$104.26.

**At no time can the debt be paid off with**

**the money that exists in circulation, not even at the**

**end of the first year:**

there is only $100 in circulation,

and a debt of $106 remains. And at the end of the fif-

tieth year, all the money in circulation ($100) won’t

even pay the interest due on the debt: $104.26.

**All money in circulation is a loan and must be**

**returned to the bank, increased with interest. The**

**banker creates money and lends it, but he has the**

**borrower’s pledge to bring all this money back,**

**plus money not created. Only the banker can cre-**

**ate money: he creates the principal, but not the**

**interest. And he demands that we pay him back,**

**in addition to the principal that he created, the in-**

**terest that he did not create, and that nobody else**

**created either. (In the example mentioned above,**

**the banker lends $100 and wants to get $106 back.)**

**As it is impossible to pay back money that does**

**not exist, debts accrue. The public debt is made up**

**of money that does not exist, that is to say, the in-**

**terest that has never been created, but that govern-**

**ments nevertheless have committed themselves to**

**paying back. An impossible contract, represented**

**by the bankers as a “sacrosanct contract”, to be**

**abided by, even though human beings die because**

**of it.**

Put all these results on a chart: the horizontal

line across the bottom of the chart is marked off in

years, and the vertical line is marked off in dollars.

By connecting all these points by a line, we trace a

curve, and you see the effect of compound interest

and the growth of the debt. (

*See chart next page.*

)

**There is no way we can get out of debt**

**Since all money is created as a debt**

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Fr e issue of MICHAEL