Usury laws

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What's everyone's take on them?

Isn't usury banned in Christianity, Judaism, and Islam?

there was a time, when i was in the military, that it was necessary to borrow money, no matter the 'cost'. it was not unusual to pay 25%/50% interest. never borrowed more than i could pay back out of the next paycheck. it was not a problem for myself.

for those who let the problem become unpayable, that's a crisis.

don't know the answer. i remember what it was like, decades ago, to be very young, homeless, and penniless. it's so tough to be desperate.

Criminal interest rate prohibitions exist to protect consumers in situations in which they have unequal bargaining power.

To my way of thinking, in the context in which leverage and personal borrowing has grown by astounding amounts, even greater regulation of the marketplace has become critical.

In the West religious rules do not govern commerce.

In strict Muslim and Orthodox communities personal loans are not made at interest. Business loans are handled another way. Instead of A borrowing from B at interest, A and B form a business partnership. If the business prospers B sells his interest to A and walks away with an amount greater than he brought into the partnership in the first place. No interest is paid, yet B make a profit for having made the money available to A. Easy Peasy.

ruveyn

The OT prohibition on usury says not to charge interest on loans to other Israelites. Charging interest to foreigners was fair game.

Islam has some bizarre system that gives them loopholes around the ban on interest.

For my stance on usury laws, it depends on the specific case. There are definitely instances of predatory lending that should be discouraged. In particular, "my" congressman (bought and paid for by Sally Mae) a few years ago worked through some legislation to enable a doubling of student loan interest rates. Since almost no one can afford to pay for a university education upfront in the US, there is little choice but to take out student loans, and high interest rates on them constitute predatory lending in my view, especially given that those debts are immune to bankruptcy protection.

Orthodox Jews use the same ploy. The loan is cast in the form of building a partnership. If the business succeeds then the one who provided the capital sells his half of the partnership out at a profit. His profit takes the place of interest.

ruveyn

If you have it to spare and you are part of a community [planet earth?] then you should make it available for the betterment of the community at no extra profit to yourself [your reward being in the 'intrinsic' satisfaction in seeing your community prosper], if it is something essential to someone who needs and you can spare it it should be a gift, this is just co-operative humanistic co-operative behavior.

The charging of interest has kept the third world poor and driven inflation in the first world, it has stopped families from being able to build up their resources and reinforced and widened class/wealth distinctions... religious proscriptions aside it is anti social and disruptive.

peace j

So are you talking about charity, or are you talking about leverage?

Is your use of, "should," a qualitative statement (you should be nice to people), or a compulsive statement (you should pay your taxes)? If it is the former, I agree with you.



Here I disagree. Monetary policy is the principal lever that government's have to exercise some degree of control over the economy. By raising interest rates, government's tighten the money supply, which increases the value of each individual unit of currency. This tends to limit inflation, not contribute to it. Easing the money supply, by lowering interest rates, makes it easier to borrow, and tends to diminish the value of the currency, encouraging inflation.

Which destroys savings. Which impedes capital formation. Which inhibits expansion of businesses.

Populist "easy money" policy sounds kind and just, but it ruins economic growth.

ruveyn

Someone should tell Bernanke and Greenspan and Geithner that.

Which is why central banks' principal remit is the control of inflation.

So long as inflation in under control, monetary policy can allow for ongoing low interest rates. Don't confuse low interest rates with quantitative easing.

If business expansion were limited to capital, or to some minimum percentage of capital, then business expansion would be strictly limited to the amount of new capital available in the marketplace. By allowing for leverage to finance business expansion, then economic growth can be sustained.

The key piece that was missing in the last cycle was a reliable ratings system that properly valued debt instruments. If everyone is getting rated AAA, then the market cannot make an accurate assessment of risk and return.

Yes and No. Usury is definitely forbidden for personal loans necessary to maintain life and limb. For business loans are there work-arounds which I have already described.

ruveyn

That right there is one of the most succinct explanation I've yet heard for what happened to the market a few years back, yes other things played a part but the failure of the ratings system is what got the most people hurt.

Interest ought to be correctly called usury. There is plenty of relevant information on this topic at The UsuryFree Eye Opener - just do a search for it at any search engine.

I attracted random spam! w00t!!

No it is not. The first mission is to promote employment. Or at least that's how the Fed's mission goes and those of longer-established central banks. Newer central banks like the one for the euro, established under neoliberal plutocracy, has unfortunately succumbed to the disease you mention here.