Once upon a time, people actually got paid to lend money.

It was something that early humans called "interest." The way it worked was that I would loan you money and you—get this—would promise to pay me back more than that. Why would you do something so crazy? Because that was the only way to convince me to part with my money in the first place. Not only that, but there'd be plenty of other people who'd want me to lend to them instead, so you'd have to outbid them too.

That, at least, is how it was for the first couple millennia of financial history. In other words, up until a few years ago. But now central banks are doing what didn't seem possible before: cutting interest rates into negative territory. Switzerland has gone the furthest with a negative 0.75 percent rate; Denmark isn't far behind at negative 0.65 percent; Sweden actually just cut its rate even deeper to negative 0.5 percent; the eurozone is at negative 0.3 percent and maybe more soon; and Japan just joined the club last month with a negative 0.1 percent rate. This has not only pushed short-term borrowing costs below zero, but, in the case of Switzerland and Japan, even 10-year rates too. In all,over $7 trillion worth of debt has a negative yield now.

Up is down, black is white, and people are paying for the privilege to lend, not borrow. It's about one step away from dogs and cats living together—mass hysteria.

So why are central banks doing this now, and why would anyone ever buy a bond that pays a negative rate? Well, they're cutting rates for the same reason they always do: because growth and inflation are both too low. Negative rates should help that by not only lowering borrowing costs for households and businesses, but also by boosting exporters with a weaker currency. After all, who wants to pay a European bank to hold your money in euros when an American bank would pay you to hold it in dollars? Nobody who can help it. And selling your euros to buy dollars is just another way of saying that there's less demand for euros, so its price falls.

That brings us to the bigger question, though: why on earth would anyone pay their bank to deposit money in it? That's what was supposed to make negative interest rates inconceivable. People would just start holding their money in cash that didn't cost them anything instead of a bank account that did—right? Well, it turns out cash does not mean what you think it means. At least not for negative interest rates that are only slightly so. As Paul Krugman points out, keeping your money in cash isn't free assuming you don't just stuff it in your mattress. Safes cost money, and as long as negative interest rates cost less, people will keep their money in banks. Nobody knows where that is, but somewhere around a negative 2 percent rate seems right.

The only problem with negative interest rates is that our financial system wasn't built with them in mind as even a possibility. Banks, you see, don't like to pass the full cost of negative rates on to their depositors for fear of losing them, but do feel like they have to pass the full benefits of negative rates on to their borrowers for fear of losing them to a competitor. That means that their interest income—the difference between what they pay to borrow and charge people to borrow—is squeezed even more than it already was when rates venture into negative territory. How big a deal is that? Just take a look at the chart below: Japan's financial stocks have fallen 25 percent in just the two weeks since they introduced negative rates.

Who could have known: it's tough to make money from lending when you have to pay to lend.

Source: Bloomberg

If negative hurt bank earnings so much that they cut back on lending—which, to be clear, hasn't been the case so far—then it's possible that they wouldn't help the economy all that much. And that would mean we're in a lot more trouble than we thought. Think about it like this. Central banks around the world are already printing quite a bit of money, but that hasn't been enough to stop global markets from flashing a bright red recession warning. So if it turns out that negative rates don't do much to revive growth, then there's not a lot more central banks can do—or so the story goes. I don't think that's true since central banks can always print more money or promise not to raise rates for a long, long time, but markets are worried it is.

The moral of the story, then, is that you should borrow money if you think have any need for it. There's never been a better time in history.

Aaron of Lincoln (born at Lincoln, England, about 1125, died 1186) was an English Jewish financier . He is believed to have been the wealthiest man in Norman England; it is estimated that his wealth exceeded that of the King.^[1] He is first mentioned in the English pipe-roll of 1166 as creditor of King Henry II for sums amounting to £616 12s 8d in nine of the English counties. He conducted his business through agents, and sometimes in conjunction with Isaac, fil Joce; by these methods building up what was practically a great banking association that spread throughout England.

He made a specialty of money lending for the purpose of building abbeys and monasteries. Among those built were the Abbey of St. Albans, Lincoln Minster, Peterborough Cathedral, and no less than nine Cistercian abbeys. They were all founded between 1140 and 1152, and at Aaron's death remained indebted to him in no less a sum than 6,400 marks. Some of these debts may, however, have been incurred by the abbeys in order to acquire lands pledged to Aaron. Thus the abbot of Meaux took over from Aaron lands pledged to the latter in the sum of 1,800 marks; Aaron at the same time promising to commute the debt for a new one of only 1,260 marks, which was paid off by the abbey. After Aaron's death the original deed for 1,800 marks was brought to light, and the king's treasury demanded from the abbey the missing 540 marks. This incident indicates how, on the one hand, Aaron's activity enabled the abbeys to get possession of the lands belonging to the smaller barons, and, on the other, how his death brought the abbeys into the king's power.

Norman House - frontage on Steep Hill

Aaron not only advanced money on land, but also on corn, armour, and houses, and in this way acquired an interest in properties scattered through the eastern and southern counties of England. By the time he died, in 1186, he was perhaps the richest man in Britain, his wealth possibly exceeding the king's. Upon his death Henry II seized his property as the escheat of aJewish usurer, and the English crown thus became universal heir to his estate. The actual cash treasure accumulated by Aaron was sent over to France to assist Henry in his war with Philip Augustus, but the vessel containing it went down on the voyage between Shoreham and Dieppe. However, the indebtedness of the smaller barons and knights still remained, and fell into the hands of the king to the amount of £15,000, owed by some four hundred and thirty persons distributed over the English counties.

So large was the amount that a separate division of the exchequer was constituted, entitled "Aaron's Exchequer" (Madox, History of the Exchequer, folio ed., p. 745), and was continued till at least 1201, that is, fifteen years later, for on the pipe-roll of that year most of the debts to Aaron (about £7,500) are recorded as still outstanding to the king, showing that only half the debts had been paid over by that time, though, on the death of Aaron, the payment of interest ceased automatically, since the king, as a Christian, could not accept usury.

In 1190, Richard de Malbis (Richard Malebisse), a debtor of Aaron of Lincoln, led an attack on the family of Aaron's late agent in Yorkthat resulted in the death of the entire Jewish community, some 150 men, women, and children, at York Castle.

A house sometimes associated with Aaron of Lincoln still stands, also known as Norman House, and is probably the oldest private stone dwelling in England the date of which can be fixed with precision (before 1186). While the house is associated with a Jewish banker, and historically known as "the Jew's house", it is not known whether the house actually had any association with Aaron of Lincoln. Originally the house had no windows on the ground floor—an omission probably intended to increase the facilities for protection or defence.

What makes Aaron significant is that his career illustrates the manner in which the medieval Jewish communities could be organized into a banking association reaching throughout an entire country. Still, the ultimate fate of the wealth thus acquired shows that, in the last resort, the state obtained the chief benefit.

See also[edit]

• Exchequer of the Jews - the successor body to Aaron's Exchequer

THE BRICS SUMMIT

Half of Humanity Launches
a New World Economic Order

by Dennis Small

[PDF version of this article]

July 22—In mid-July, as the planet was being wracked by growing war horrors in eastern Ukraine, Iraq, and Gaza, and by economic depression caused by the death throes of the trans-Atlantic financial system, heads of state representing half of humanity gathered in Brazil and took the first steps toward creating a New World Economic Order.

The leaders of the BRICS nations (Brazil, Russia, India, China, and South Africa), met on July 16 in Fortaleza for the VI BRICS Summit, and the next day they were joined by the heads of state of South America in the capital city Brasilia. The BRICS account for 43% of the world's population and 27% of the planet's land area; when Ibero-America is added in, they jointly represent 48% of the human race, and one third of the Earth's land area (Figure 1).

At the summit and its numerous associated bilateral and multilateral meetings, that half of humanity adopted a project that is premised on rejecting the current casino financial system, and replacing it with one providing credit for high-technology development projects; on educating and training youth to meet the growth challenges of the future; on full respect for national sovereignty, banishing the imperial policy of regime change and wars; and on explicit promotion of the common good among nations—the Westphalian principle.

"History tells us the law of the jungle isn't the way of human coexistence," Chinese President Xi Jinping stated on July 16.

"Every nation should obey the principle of equality, mutual trust, learning from each other, cooperating and seeking joint benefits ... for the construction of a harmonious world, sustained peace, and joint prosperity."

The British Queen was not pleased by these developments, seeing in them an existential threat to the Empire. Lyndon LaRouche waspleased—for the same reason. For 40 years, the renowned American statesman has devised programs, and organized for them internationally, of global financial reform and great development projects—most recently his "Four New Laws To Save the U.S.A. Now!"—of precisely the sort that have now been placed on the agenda by the BRICS.

"The BRICS and allies are building a world system based on real value, not phony paper value," LaRouche stated July 18.

"They are deciding what real value is, and they are imposing it, which is the cost of the productive powers of labor in a changing situation."

The New Development Bank (NDB), formerly referred to as the BRICS Development Bank,^[1] ismultilateral development bank operated by the BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to the existing US-dominated World Bank and International Monetary Fund.^[2]The Bank is set up to foster greater financial and development cooperation among the five emerging markets. Together, the four original BRIC countries comprise in 2014 more than 2.8 billion people or 40 percent of the world’s population, cover more than a quarter of the world’s land area over three continents, and account for more than 25 percent of global GDP. It will be headquartered inShanghai, China.^[3]Unlike the World Bank, which assigns votes based on capital share, in the New Development Bank each participant country will be assigned one vote, and no countries will haveveto power.^[4]

Contents

  [hide] 

• 1 History
• 2 Structure and Objectives
  • 2.1 Development Capital
  • 2.2 Contingent Reserve Arrangement (CRA)
• 3 Notes and references
• 4 External links

History[edit]

BRICS leaders at the 6th BRICS summit in Fortaleza, Brazil. Left to right: Putin, Modi, Rousseff, Xi andZuma.

The New Development Bank was agreed to by BRICS leaders at the 5th BRICS summit held in Durban, South Africa on 27 March 2013.^[2]

On 15 July 2014, the first day of the 6th BRICS summit held in Fortaleza, Brazil, the group of emerging economies signed the long-anticipated document to create the $100 billion BRICS Development Bank and a reserve currency pool worth over another $100 billion.^[5] Both will counter the influence of Western-based lending institutions and the dollar. Documents on cooperation between BRICS export credit agencies and an agreement of cooperation on innovation were also signed.^[6]

Shanghai was selected as the headquarters after competition from New Delhi and Johannesburg. An African regional center will be set up in Johannesburg.^[7]

The first president will be from India,^[8][9] the inaugural Chairman of the Board of directors will come from Brazil ^[3] and the inaugural chairman of the Board of Governors will be Russian.^[3]