Ravochol, the FED is imposing extremely artificiall and low interest rates into the economy, what is wrecking any chance of recovering. This I consider this current recession a case for why usury is vital.
I’ll lend you my car, but you have to bring it back with a full tank.
ravochol, I really encourage you to study economics, because your question is filled with basic fallacies and misunderstanding of basic economics principle.
I suggest to start with “What ha government done to our Money” by Rothbard, and “Economics in One Lesson” by Hazlitt (both available in PDF for free online) .
I don’t see the problem. Ten people stand in a circle on January 1st, AD 1000. Then, they make a break for it and get to work. The interest owed on the loan isn’t “more metal in the form of a coin, or more coins”—it is real wealth, more goods, more junk that you owe me on January 1st AD 1001.
If the economy can’t grow, then someone’s going to lose—in this case the lender. Oops, his bad. He miscalculated the ability of the borrower to repay (as did the borrower).
Again, I don’t see the problem.
Edit: If from the very beginning people KNOW the economy can’t grow, then on January 1st, AD 1000, that loan will never be made in the first place. The fact that the loan IS made indicates people believe the economy WILL grow, and are taking risks based on this, their best guess of future economic conditions. Risks borne are not guaranteed to pan out well----loans made, therefore, may or may not be paid back, and everyone is aware of this going in. There is no problem here.
I will give the OP a point for the fact that usury is wrong. If you study the old testament of the Bible, God in fact stated that usury is a sin. So the question is, if I loan an individual 10 dollars and individual agrees to pay me back 20, where does the other 10 in fact come from? The individual is going to have to do something to acquire another 10 dollars. When I am paid back, I am being enriched by doubling my money, but essentially I did nothing to earn the extra ten dollars aside from having an extra ten to give away. If I continue to do this, I am enriching myself but what effect is it having on society. It’s allowing the borrower the use of the wealth when the borrower needs it but it is to his detriment later when he must pay me back 20. How can wealth generate value on its own?
Define usury.
“If I continue to do this, I am enriching myself but what effect is it having on society.”
What is the borrower using the money for?
http://www.youtube.com/watch?v=bFxvy9XyUtg
Please watch this. Please.
Your opinions are not facts. Two parties can voluntarily enter into any contract they wish without having to first check with you, thank god. You may find spanking wrong too, but why should that stop party A from voluntarily exchanging one hour of massage with one hour of spanking with party B?
Now as to WHY a borrower may find it beneficial to enter into a “usury” contract with a lender, you either need to get out on the street and see how capital/wealth actually gets created OR bone up on some basic economics.
Here’s a hint… Having access to your $10 for a year has value. In a free market, that value is called interest. The borrower can take advantage of opportunities that may come his way during that year – opportunities he would otherwise have to miss without access to your $10. The higher his estimate of the chance or size of those opportunities, the more he would be willing to pay you for the privilege of having access to your $10. By the same token, the more you value your own access to your $10 the less willing you would be to forgo that access and give it to someone else. Hence, depending on how much you value consuming or employing your $10 over the next year, you would demand something in return for forgoing access to them. That’s called interest, too. This is how borrower and lender – each with their own estimates, perceptions, and subjective valuations for access to your $10 – meet at a table and perform a voluntary exchange: an interest bearing loan.
Hope this helped.
Z.
I’ve seen this whole anti-usury stuff a lot of times. Most of the claims mention that defaults are inevitable when interest is charged on loans. This is provably false. Here’s a spreadsheet I found a while back and copied to my google docs that demonstrates this fact quite clearly:
https://spreadsheets.google.com/ccc?key=0AjxDQsI6Vb3XdHlvMldkX0Z6eFo5TFhaWVRiNFljc0E&hl=en
^ Yes, they conflate money quantity with flux. That one owes interest to another is a matter of flux, of how much money has to change hands, not necessarily how much money each has to have at some point in time. Charging 10% interest doesn’t mean the money supply necessarily needs to be at 110% in the future, just that the lender has only agreed to borrow out on the condition that the flux coming back in the future is 10% greater.
Sure some lender may hoard money and not buy anything back, but don’t forget that, like any profitable business in the free market, the capitalist has to earn his money, and he will have to outcompete other lenders; he will have to be generous in his interest rates, and live frugally not to spend his money back into the economy (or only in further investments and capital which will give greater returns for himself and those who use it). Generally, that’s a great thing still.
Then, even assuming the worst case scenario, that a lender may become retardedly stupid after acquiring a large portion of the money supply, and decide to either lock it in a safe and dump it in the deep sea or simply not borrow it or use it ever again, well, the rest of the money supply will appreciate and the economy goes on - or people can simply make a new medium of exchange…
But of course, they can’t do that if the state forces them to accept their notes, and fiddles with the value of the currency in obscure ways. But that’s something austrians generally also oppose. And that’s not a flaw of a “monetarist” system by any means.