UNDERSTANDING INTEREST RATES
by Dr. Lawrence Wilson
© July 2025, LD Wilson Consultants, Inc.
All information in this article is for educational purposes only. It is not for the diagnosis, treatment, prescription or cure of any disease or health condition.
DEFINITIONS
The interest rate is the rate that one has to pay to borrow money. It is expressed as a percentage.
The real interest rate. This is a theoretical interest rate that would be true if the Federal Reserve or other central banks in other nations did not manipulate the interest rate. See below for details.
The ideal interest rate. This is a theoretical percent number that would be true if the money system were not manipulated by the central bank and if the gold price were stable. Most economists believe that the ideal interest rate is about 10 to 12%.
The prime rate. This is the basic interest rate that banks charge customers for loans.
The fed funds rate. This is the rate the Federal Reserve in the USA charges banks to borrow money from the Federal Reserve.
A self-regulating system. This is a type of system that tends to regulate and balance itself if left alone. A natural market banking system would do this, but unfortunately most money systems are controlled.
Free banking. This is the phrase used to describe a nation where there is no central bank. America had this system for years before the central bank was established and the nation prospered greatly. Sixteen years after setting up the central bank, the Federal Reserve, America experienced the worst depression in its history.
Central bank. This is one bank in a nation that controls the entire money system. The central bank issues the currency, is supposed to maintain its value by not issuing too much (it never does this), and it sets interest rates. The government pays interest to the central bank if it has to borrow money.
A central bank is illegal and unconstitutional in America. The Articles of Confederation and later the US Constitution says that “the Congress shall coin or issue the money and fix the value thereof”.
Influence of the aliens. However, evil people set up the Federal Reserve bank in 1913 and it is still going in America. This is a project of the aliens, thugs, rogues or satans. Controlling the money gives them a lot of control over a nation.
II. WHAT ARE THE BENEFITS OF HIGH AND LOW INTEREST RATES?
HIGH RATES
A high interest rate is good for savers. A high rate means that one can simply put money into a bank and leave it there and it will earn a lot of money.
A high interest rate is also good for poor people who don't have accountants and attorneys to manage their investments and to give them fancy advice about stocks, bonds and more. High interest rates are good for the poor because one does not need fancy investments or experts. One can simply put one's money in a bank and they get an excellent return on their money.
A high interest rate is also less inflationary. People borrow less money when the interest rate is high. Borrowing less means there will be less money in circulation. Therefore there will be inflation and prices will remain fairly stable.
A high interest rate slows the economy and business. The reason is that businesses borrow money to build factories and more. If the interest rate is high, they tend to borrow less and build less. Also, it is more costly for people to buy homes, cars and other large items. This also slows the economy.
LOW INTEREST RATES
This is the opposite of the above. Low interest rates are very bad for saving because the interest on savings accounts paid by banks is very low.
Low interest rates are also much harder on poor people. The poor generally do not understand inflation well, don't have extra money to invest, don't own assets such as houses that increase in value during an inflation, and don't have attorneys and others to tell them how to invest.
Low rates encourages people to borrow money. This is sometimes called easy credit. People often buy too much or too big a house or car because borrowing is inexpensive.
Low interest rates stimulate business because it is cheaper for them to borrow money.
Low interest rates are inflationary because the central banks tend to print or issue more cash, which is needed.
A BALANCED OR IDEAL INTEREST RATE
The above explains that there are advantages to both high and low interest rates. The ideal is in the middle. Most economists believe that the ideal interest rate is about 10-12 %.
III. THE REAL INTEREST RATE
This is an important concept. We have explained that at this time the central bank of the United States, the Federal Reserve, and central banks in other nations all manipulate the interest rate to suit their own purposes.
The question arises, what is the real interest rate? Many economists say the real interest rate today is between 20 and 25%. The reason they say this is that it is possible today to earn 20-25% investing in gold. Gold has gone up this much over the past 10-20 years.
This determines the real interest rate because anyone who wants to borrow money must compete against other ways for lenders to make money.
For example, if someone wants to buy a house and borrow money to do it, in an ideal world when this person goes to a bank or even a friend to borrow money, the friend or bank will say, “i can earn about 20% by putting my money into gold. If you want me to lend you the money, you will have to pay interest to me of at least as much as gold is paying – about 20%.” That is the idea of the real interest rate.
Now, in reality, banks are not allowed to put all their money into gold. They must borrow some funds from the Federal Reserve, which only pays them 4.5% or so. The bank then adds a fee of their own and often lends out the money to customers at around 7.5% or so right now. Home mortgages are further manipulated by government housing welfare programs and this also affects the interest rate on home mortgages.
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