Fraud:
Fraud is an intentional deceit involving the false representation of facts made knowingly, intending to mislead another party into acting to their detriment, typically resulting in financial or personal harm.
Key Elements of Fraud:
- Misrepresentation: A false statement or omission of a material fact.
- Knowledge: The perpetrator knows that the representation is false or has reckless disregard for its truth or falsity.
- Intent: The perpetrator intends to deceive the victim.
- Reliance: The victim relies on the false representation.
- Damages: The victim suffers harm or loss due to relying on the misrepresentation.
Examples of Fraud:
- Financial Fraud: Deceptive practices that manipulate financial markets or institutions, such as insider trading or accounting fraud.
- Consumer Fraud: Deceptive practices used to cheat consumers, such as false advertising or selling counterfeit goods.
OpenAI. (2024). ChatGPT (4o) [Large language model]. https://chatgpt.com/c/bd7ad031-4f17-4620-bb02-fccde755bfe2
The article Banking Sleight of Hand describes how Compound Interest allows money today to be worth more than money tomorrow. This property of money is the rock on which Economics and Accounting are built. It preserves the myth that an organisation " makes money” by making a profit. It allows crypto-currency fraudsters to proliferate.
Compound Interest is fraud, a high unnecessary cost to the community, and a reduction in trust and cooperation within society.
Misrepresentation
Money is a social construct that relies on its users' collective agreement and trust. It functions because users agree to the promise that it can be exchanged for value.
Banks provide a service to users by creating government money via loans. The agreement is that the lender and borrower should pay the service cost of creating a loan. The lender pays by receiving a lower interest than the borrower's interest, and the borrower pays the interest. This is what happens with simple interest, and it is the way most users believe it happens.
Fraud happens because banks use compound interest accounting, which means the borrower pays the lender's share of the cost to the bank.
Knowledge
Banks are fully aware of deception but use it because it encourages lenders to deposit money in the bank, and borrowers have little choice but to go to a bank for a loan.
Intent
Banks know they can use simple interest to pay their fees, but they accept compound interest because all banks do it, and the government condones it.
Reliance
Borrowers have little choice but to borrow money or use credit from banks. The other sources of money, like loan sharks and venture capitalists, charge more for credit.
Damages
Borrowers pay double the amount they should, while banks collect the same amount. Sellers, including governments that set the rules, pay less for the bank’s service.
Who Should Fix It and How
Governments can fix the problem tomorrow by banning all banks from using Compound Interest on new government money loans. This will restore trust in the financial system, reduce the cost of creating money, and dramatically increase the productivity of any economy that adopts it.
Any government, including local governments, can ask a Bank to use Simple Interest on the government’s existing loans. If a Bank does not agree, the government can go to a Community-Owned Bank and ask to transfer the loan to the Community Bank if they use a Simple Interest Loan. If the Banks do not agree, the government can take their case to the Community-Owned Bank members and ask them to agree to the Community Bank using Simple Interest loans.
