On Finance - part 2
I had previously posted (at http://www.wakeupfromyourslumber.com/node/4216) a hypothetical scenario, involving the swapping of a risky income stream (such as the dividends from a share in a business) for a smaller, but less risky income stream (such as a pension).
There are many urgent issues that preoccupy us on this site. Nevertheless, for people who care about the issue of interest and whether it is ethical, here are a few quick points:
(1) Different people have different appetites for risk, and the trading of risk is common in a modern economy.
(2) One example of trading of risk is any kind of insurance. Another example is hedging in the equities market.
(3) If trading of risk is considered OK, then interest must also be considered OK. For example, by buying a share in a business, you can get a a risky income stream, which can be traded for a fixed income stream. The net effect is that fixed interest payments are received on the initial investment.
(4) Therefore, although people may consider interest to be unethical (for religious reasons or otherwise), the concept of interest is inevitable as soon as you allow trading of risk.
(5) The issue of Central Banking is about how to regulate the money supply, and how to inject newly created money into the economy. The issue of Central Banking is important, but it is possible to discuss the ethics of interest without mixing it up with Central Banking.
With regards,
-kk
"If trading of risk is considered OK..."
It's not.
Brotherhood requires a 50-50 share in risk.
If certainly should NOT result in a formula wherein the "high risk" (poor) individual must pay MORE than the "low risk" (rich) one to borrow money.
This is the most extreme form of exploitation.
There is no way around it - lending for profit is a sin.
Lending should be an act of brotherhood.
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"Money" has no value - people do.
If you are against any trading of risk then you are, at least, being consistent.
Nobody will object to the existence of interest-free banking. The only question is whether it is desirable to make laws banning transactions which both parties consider mutually beneficial, and do not negatively affect any third party.
Let people have options, and ultimately the soundest system will prevail.
yes, in addition to being a strong advocate of 50-50 risk sharing in all cooperative endeavors [except lending, in which debt MUST be paid back (unless forgiven) - but WITHOUT interest], I am against trading in risk - it is an entirely unproductive practice that is predicated on profiting from the misfortune of others.
It's a sin - and for good reason.
Eventually, it (and the concentration of wealth and industry that comes with monopolies) results in the kind of obscene economic landscape that you see today, where the physical economy is shrunken and shriveled (essentially dying across the board), while the financial or "trading" economy is "robust," continuing its ever growing expansion (with the help of an out-of-control monetary system, expanding by the second).
So, yes I oppose trading in risk.
And as far as "banning" interest based lending - being a strong libertarian and understanding the logistical consequences of such a ban, I have considered it carefully.
I've concluded that, yes, it should be banned in principle. But, in practice the ban should be administered not under criminal law, but under civil law, resulting in the disgorgement of any interest-based profit. Criminal prosecution should be reserved for those who have committed such egregious harm as to deserve severe punishment.
Ultimately, my goal is not to control what people do in their transactions but to LIMIT it to that which is wholesome for ALL people - productive transactions only - not exploitative ones.
Also, please note that the practice of charging interest would NOT be nearly as prevalent in an economy where the monetary system is NOT monopolized by private corporations, because access to money through wholesome co-operative means would be the norm, as opposed to the exception, and desperation would be rare.
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"Money" has no value - people do.
Your (-kk) view is based upon a modern economy. It implicitly implies that you assume this system is correct.
However some things you describe as normal are (according to me) not as they present themselves.
A good example is
insurance I know a Muslim community where if someone is struck by (for example natural) disaster the others (mostly the rich) help out. This is how it should be done. This would however not work in an individual centered modern society.
Western/modern insurance doesn't work that way.
Generally you pay an amount of money each period and you have the following chances.
You may call this exchanging risks, but I just call this gambling.
To confuse you even more they call things insurance, which are not really insurance but public facilities like "health insurance". Nearly everybody needs to go to the doctor once in a while, "health insurance" just means you can go to the doctor when (not if) you become sick.
However this might be different in the US where coverage is pretty primitive or so I read.
Risks
There is a difference in just exchanging risks and gambling. When doing healthy business (which inherently contains some risk) both parties benefit from the same transaction. Gambling is different one party can only win when the other is losing.
You might say that a loan with interest is better than nothing at all, and thus both parties are better of.
The poor borrower however doesn't have a choice but the lender who has money does.
It just like selling rope to someone trapped in a well for a ridicules large amount of money.
Both parties do benefit. However benefiting from others misfortune is exploitation.
I do on the other hand understand your unwillingness to let the state sort everything out.
This personal freedom issue has however already been (maybe somewhat indirectly) addressed in my and other posters previous posts.
I guess we'll have to agree to disagree on two counts.
Firstly, I think there's nothing inherently wrong in transferring risk to somebody who is able and willing to accept it.
Secondly, and more importantly, I have a problem with anybody who wants to impose their views on others.
As long as there is no ban on Islamic banks, which there isn't, people are free to go there and deposit their savings and get loans. Nobody is forcing desperate people to go to non-Islamic banks. In Islamic banks, I guess savers will not get any interest, and borrowers will have to pay "fees" for a loan of a fixed term. It sounds a lot like interest to me.
truly a brilliant comment.
I will have to make use of your analogy for insurance - it's excellent.
kk - your points are not inconsistent with the outcome that we advocate.
Besides, the system already imposes itself in so many evil ways now - I can't understand why you object to discouraging exploitation through interest.
Collecting interest is not exchanging risk between two equals who are willing and able to do it. It's exchanging it between someone privileged and another who is desperate and most likely unable to assume the risk.
There's only one way to do discourage people from collecting interest - by penalizing them for doing it.
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"Money" has no value - people do.