When we borrow, banks create money out of thin air and demand interest for it:

http://www.trading stocks.net/html/banks_create_money.html

Money is NOT what is printed by the FED. Money is the credit, the IOUs created by the banks. The relentless inflation that we have seen for almost 100 years is the testimonial. Banks make these impossible promisses and when they get into trouble, they are made whole by the FED while the ordinary citizens loose their homes, businesses, their life time savings.

Then average Joe works for 30 years to pay his mortgage with hard earned money, while the bank continues to have a claim on his house just because they created money by making a promise to pay (which they never fullfil). This fractional reserve banking and interest based monetary system is destined to fail. Deflationary crash is built into it. Therefore they allowed mortgage interest deduction from income, to make the music last longer. After they ran out of prime borrowers, they went through sub-prime. Otherwise deflationary crash would have arrived sooner. Therefore they changed the bankruptcy rules in 2005 to have a claim on borrowers’ future income. Then they created too big to fail and scared the congress to bail them out at tax payer expense. In other words, they ran the bankrupt system knowing that it would crash, but at the end the bill still went to the tax payer.

An entire nation cannot borrow for decades, inflate the money supply and the prices (including stock prices) with borrowed money and hope that all will be fine when the borrowing stops! Why? Because when entire money supply is debt (which is principal), principal + interest cannot be paid back. It cannot be earned. Thus some of us are guaranteed to go bankrupt. This is the nature of deflation beast.

Some claim that this makes mortgage contracts an “impossible contract” since some of the borrowers are guaranteed to foreclose. But due to the systemic problem, courts reject to hear it. It is time for people to understand how we are being conned and change the system for good. There is a way to make it fair and balanced and still have flexibility for growth. Benjamin Franklin realized it long time back.

People (the representative government) can create it’s own money. Borrowers can borrow from other people (government banks) and the government can print and spend the interest portion into the economy via public services so that borrowers can earn it and pay back. This fixes deflation in a fair way (unlike printing money and giving only to the bankrupt banks).

Inflation can be avoided when the government receives the interest payments from borrowers and destroys them since an equal amount has already been spent into the economy.