Publica wrote:Flawless Walruses wrote:
I detest theocracy in theory and in practise, but the prohibition on interest is something I've been warming to ever since the bailouts, and I realised how much risk (and more so, fragility) the government-backed "financial industry" externalizes onto the people.
Mohammed was a merchant before he entered the government business, and a free market fanatic even by modern American standards ("prices rise and fall in accordance with the will of God"), but he drew the line at state-subsidised usury.
If you're an entrepreneur in need of capital, find investors willing to take shares, was his system. If you can't find investors, your business probably sucks. Yes, Arabia and East Africa were doing the whole share-market thing a millennium before the West.
If you have capital to invest, find a business to take a share in (risks as well as rewards). If you're not willing to wear some of the risks, you don't deserve the rewards.
Either way, don't come howling to the government asking for a taxpayer-funded service, be it a bailout after a popular loss of confidence, or state-violence-backed enforcement on a compound-interest scam gone wrong.
Interest-bearing financial instruments make money and pay taxes in the short term, but the medium-term costs in enforcement costs, economic instability and political instability are not worth it (similiar to gambling and pyramid selling schemes). The only reason usury was legalised in early modern Europe (and its imitators since) is a combination of lack of foresight with massive political corruption.
My apologies for the slightly late reply, but I haven't checked the forums in a couple days.
By banning interest, we're not talking about the government, the government barely charges it. We're talking about banning banks from charging interests on loans. Not just to businesses, which , as you say, can make capital in other ways, but also to people. So no more mortgages. No more loans for hospital bills. It gets worse from there. You are welcome to argue that interest should be banned, but everyone who wants to buy a house isn't going to than you for it.
Its very simple - if you have a mortgage, you don't own the house. The bank does.
If you rent a house, you don't own it, the landlord does.
Why should governments spend money, take on unquantifiable risks, and accept systemic economic fragility just to favour the bank over the landlord?
IRL, as someone looking at buying property in the near future, I can tell you I don't thank the banking system for inflating the market with loans.
If one debtor can't pay, for whatever reason, the moneylender can use the government to repossess the asset. If all the debtors can't pay, the bank runs howling to the government for a taxpayer-funded bailout. And if the bailout doesn't suffice, the country slides into economic chaos.
At every step, risk and fragility is externalised from the bank onto somebody else - debtor or taxpayer or both.
Usury was illegal in the Western world for centuries longer than it has been legal. Our ancestors were quite familiar with the systemic problems it creates. And so was Mohammed.