Monday, August 15, 2016

Usury Question and Answer

As loyal readers may have noticed, we like to get those softball questions to answer . . . you know, the kind from people who clearly don’t know what they’re talking about, but who “jus’ gotta” show somebody else up.  Next best, of course, are those who make a snarky comment asserting something that we know isn’t true.  Take for instance the following comment we got in response to someone coming across our ideas on monetary reform, i.e., interest-free money and the Banking Principle:

Give Me a Break!
Only Islam prohibited usury?
The monetary system you’re describing has already been invented and in practice for centuries, by guess who . . . gasp . . . the Muslims. Islamic Finance is a cornerstone of commerce in countries ranging from Saudi Arabia to UAE. The key trait is a ban on “usury” charging of interest.
Does this reduce inequality? Perhaps on a broad enough scale, in knowledge-based service economies rather than resource-extraction economies. Then again, we’ll never know, as the rest of the world is intent on casting ideas from the Islamic world as fanaticism or “terrorist ideology”. Give me a break.
Uh, huh.
Now, we’re not exactly sure if we’ve been castigated for “casting [out?] ideas from the Islamic world as fanaticism or ‘terrorist ideology’.”  It’s not entirely clear whether the commentator is casting us out for casting others out, or he is saying our ideas are going to be cast out because we stole them from the Muslims.
In any event, the monetary system we describe was (gasp) in use for thousands of years before Islam (gasp, gasp).  Aristotle (gasp) described it, but the ban on usury — taking a profit where no profit is due or has been made (gasp) — was universal for thousands of years before that (gasp, gasp, gasp, gasp . . . must cut down on all that smoking).
Always and everywhere wrong.
This is because usury is considered theft, and theft is a violation of private property.  This was not only in the west, but the east.  For example, the Laws of Manu label the usurer an eater of pus and filth, or something equally disgusting.
Pagans, Jews, and Christians all prohibited usury as well as Muslims.  As for interest-free money, that has been around ever since human beings began exchanging their respective productions.
The vast majority of documents that survive from the ancient world are not great works of literature, like the Iliad or the Epic of Gilgamesh.  No, they are “money contracts,” i.e., mortgages, bills of exchange, drafts, promissory notes, and so on.
The only financial instrument that we can think of not invented in ancient times is the consumer credit card, and that really isn’t new, either.  It’s simply a new type of what Henry Thornton (“the Father of Central Banking”) called a “fictitious bill,” i.e., a financial instrument not backed by an existing asset or issued for a productive purpose that is reasonably expected to generate its own repayment.  In money, credit, banking, and finance, the words and the forms might change, but non novum sub soles — “nothing new under the sun.”
Give you a break?  Sure.  Arm or leg? as Mom used to say.

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