Interest is one of the main reasons the economic and financial system is in ruins. It is an exploitative, parasitic practice and we've known that for thousands of years. But some people only care about their pockets.
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Let me know when you figure out a better way to put a price on the risk of loaning money.
As evil as you may think interest rates are- without a price on the risk of loaning money- access to loans dry up and only the already wealthy will have access to capital.
So that's a symptom of an underlying cause: the insanity of for profit college prices in the US. Other countries don't have this problem. There's also the obvious solution of giving them loans with 0% interest. Perhaps another option is to pay their tuition in exchange for working at the lender for a fixed number of years afterward.
Loaning money should not be done to make money, it's parasitic. It should purely be a charitable contribution without expecting a return. If the loanee decides, out of his or her own goodness to return more money than they took, then that's up to them.
Now the obvious and direct effect of this is that people will generally not loan their money. This is a good thing. The follow up is that they will invest their money in hopefully legitimate and moral ways.
> It should purely be a charitable contribution without expecting a return.
> Now the obvious and direct effect of this is that people will generally not loan their money. This is a good thing. The follow up is that they will invest their money in hopefully legitimate and moral ways.
What kind of investor are you referring to that doesn't expect returns? Even "social impact" investors expect returns in reputation, or in buttressing the foundation on which their primary profit driven business is built.
You can expect returns, but not fix them ahead of time as what people do with interest bearing loans (i.e. usury). Loaning money for money is parasitic and immoral. Investing that can incur a profit or a loss is fine in general.
> You can expect returns, but not fix them ahead of time
Fixing them ahead of time is an attempt to quantify risk. It doesn't eliminate risk - loan defaults happen. The riskier a loan, the higher the interest rate. As long as the lendee has the option of refinancing with another institution (i.e. there is a competitive market for loans), usury shouldn't be an issue. Usury is an issue when the lendee has no other resort due to being persona-non-grata in the credit system (i.e. people whose only option is payday loans)
Without loans, there would be no way for people without extraordinary amounts of capital to purchase such basic items of modern life as a home or a car. What other mechanism do you suggest for those? Also, a lot of businesses are not public investment like technology firms, i.e. a neighborhood deli. If they have multiple investors, they are just partnerships, often with the partners in the same family. Loans are how such businesses find "investors".
I'd like a world where housing (in the right place), transportation, and costs of small enterprise startup were cheap and good enough for everyone to pursue without loans, but we aren't in that world yet. Maybe some technology advancement (modular homes, self driving buses, 3d printers) will help to reduce the cost of these things such that people won't need to make such large purchases, but that's still to be seen.
You can try to rationalize it in any way you want, however, that does not change the fact that engaging in an interest bearing transaction is parasitic and immoral.
> What other mechanism do you suggest for those?
Pay in installments with 0% interest, for a reasonable period of time, not like we see today that even for auto loans they're giving them out to people who can't afford them over insane periods of time. This is a symptom of a corrupt underlying cause.
The hyper capitalistic economy today is built on consumerism. Pushing people to buy things they don't need. Once we eliminate easy debt, consumerism will go down, prices will stabilize, and producers will be forced to give out 0% interest loans if they want to sell (or people can buy in cash).
For small businesses, they can get investors to pitch in money in exchange for ownership of a specific percentage of the business. This way, the risk is carried by all parties, and both parties expect to either gain or lose, unlike with usurious loans.
Is it not parasitic practice to feed off the needy? When a small player does it, they're called "loan sharks", when bank or the Fed does it, it's "finance".
The bank is using your money to feed off the needy, the bank takes most of it, and gives you a small percentage of the money they made by exploiting them.
When I say interest I mean money for money transactions, like savings accounts in banks or bonds where the return is set ahead of time and is practically guaranteed (i.e. usury). Investing is fine since it can incur a gain or loss.
Because the borrower is out of options, and will have to resort to engaging in an interest based transaction, whereby he is exploited by the lender. It's not really voluntary at that point. Do you think anyone in their right mind wants to be on the paying side of an interest based loan?
I mean we're not just talking about sketchy payday lenders here, right? You're also saying that Fortune 500 companies that issue bonds are being forced into doing so by whoever's buying those bonds.
That's crazy though. There are plenty of reasons that a company might prefer to issue debt instead of selling more equity.
Sketchy or not, they're using the same immoral and parasitic principal to operate. I mentioned in another post how usury is so ingrained in today's financial systems by means of bonds, options, CDs, debt for debt, and so on. It's not trivial to explain in a paragraph or two.
By issuing debt, especially when not in dire need, the borrower is enabling others to engage in said parasitic practices.
You agree that loan sharks are immoral, but when banks do the same they're not immoral? It's literally the same behavior, but in a way that is "blessed" by the government (which includes bribery, I mean lobbying).
Hopefully it made people think about the current corrupt system we live in. They put band aids on the problems they have, without addressing the actual underlying causes, which means that things won't get solved.
I didn’t agree that loan sharks are immoral. Even a loan shark makes his borrowers strictly better off by giving them an option they otherwise wouldn’t have.
A loan shark makes his money literally by feeding off the poor, I don't see how that is not immoral. The moment a proper support system is in place, they'll disappear.
And if the loan shark weren’t there providing his service, his clients would be strictly worse off. He’s not forcing them to borrow money—he’s offering, and they’re free to say no.
Sorry, this is not an argument. There are things that can be illegal and/or immoral (loan sharking is both), even though there are "no better options". This is not how to build a sustainable society, and is one of the issues causing so many problem in today's society.
Not quite, because usury is deeply ingrained in the system, from bonds to CDs to buying debt for debt, etc. There are many usurious transactions that form the underpinning of the financial system that need to be abolished for things to be fair.
Even islamic banking expects some kind of ROI. Perhaps it isn't strict usury, but there is generally some kind of ownership or profit sharing happening.
Expecting is different from enforcing in the contract, as is the case with interest/usury. As long as the contract allows for a gain or loss (other caveats holding), then it should be fine in general. On a side note, there is no strict definition of what "Islamic banking" is, much of so called Islamic banking you hear about today, isn't.
