Essay on Money And Interest

Essay on Money And Interest

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Interest was generated as the outcome of transactions between borrowers and lenders, one of the earliest financial activities that have ever appeared in human history. However, the functionality of interest is developed by the evolution of money, an idea that in fact appeared later than interest. The modernization of money and interest never takes a monotonous path: sometimes it breeds financial prosperity, but the next time it may bring catastrophe. As with fire, economists and policymakers throughout the history keep monitoring and intervening in money and interest, trying to grasp these tools but not get hurt. People interpret underlying signals sent by interest and implement monetary policies to boost economies and avoid aberrations.
Past failures in financial history have proved that the current understanding of money and interest needs further adjustments. Therefore, how do money, interest rates, and financial system really interact with each other? To answer that question, people had better delve back into the financial history and look for any remains from those ruins. This research is intended to make some contributions: the very financial environments demand the abstraction of money, and that development provokes revolutions of the nature of money and the expression of interest, leading to stronger economic vitality and more severe endogenous threats at the same times.
The Birth: Calves as Interest
During the time of Mesopotamian civilization, people usually borrowed and lent agriculture factors to each other as a means of supporting their own production or surviving unexpected disasters. However, the repayment was often accompanied by an extra portion of the loan. This idea of compensation for lending was materialized o...

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...well in terms of inflation. Those signs illustrate that gain seems to be smaller than loss from low interest rates and expansionary monetary policies. Recovery is postponed, and economies are hurt by resulting debt deflationary spiral.
Through the abstraction of money and the increasing power of interest control, global economies have experienced stronger growth and expansion. However, without the boundary set by intrinsic value, financial markets are entering into new traps. Fiat money and interest rates are intended to avoid excessive expense, but the rising disbelief of their validity adds up new costs. How longer can people believe in the value of fiat money? And is the control over interest rates really the best way to regulate markets? Debates never stop. However, the ultimate question should always be: whether in God we trust, or in credit we trust.

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