137 lines
7.0 KiB
Markdown
137 lines
7.0 KiB
Markdown
---
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title:
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The Usury problem
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...
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The Christian concept of usury presupposes that capitalism was divinely
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ordained in the fall, and that we are commanded to use capital productively
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and wisely.
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This is quite different from the communist concept of usury, which is that
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making money on a mortgage is sinful, because only labour is productive
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and capital is unproductive. The communists rejects interest, and all return
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on capital, full stop. Not that it matters, since communist money is
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worthless, and no one has any productive property under communism.
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Christians are allowed to make money from loans made for productive
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purposes, provided the loan actually turns out to be productive –
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Christians are allowed to profit from capital goods, and allowed to profit
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from loans made to create capital goods. If the loan turns out to be a bad
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use of capital, if it turns out to be an unproductive use of capital, the
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lender has to share the pain with the borrower. The lender gets back the
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house in the housing slump, and the cattle in a drought.
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Credit card debt, however, is unlikely to be productive. And missed payments
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are not productive either, and should not become a profit centre for someone
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who lends money to short time preference people who probably should not be
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borrowing.
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The old Christian concept of usury is that you can lend money at interest
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against productive property, but not against the person. If you lend against
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the person, the debt is erased by full repayment without interest, and if you
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charge interest, not recoverable against the person, only against his credit
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rating.
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So, you lend money to the peasant to buy some cattle, the cattle produce more
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cattle, and you get some of the extra cattle, or, more conveniently, a fixed
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amount of money per year for the peasant’s use of that cattle, or the
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mortgagor’s use of that house. The loan is secured by productive property,
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not secured against the person, and you are entitled to some of that
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production.
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And if things don’t work out, he is free and clear if he returns the cattle or
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the house.
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The Islamic ban on usury is similar to the Christian ban, but their frame is
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rather than the lender shares the risk, rather than the lender is charging
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rental on a productive property. The dark enlightenment frame is game
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theoretic, that the lender often knows better than the borrower what is a
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bad loan for the borrower, and should not have incentive to trap the
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borrower in a bad loan, but all these different frames amount to the same
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thing in the end -- if the loan goes well, the borrower winds up paying
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back more than he borrowed, and if it goes badly, both parties suffer the
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consequences. If you finance your house from Dubai Islamic Bank, and
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the house appreciates, it is exactly the same as if you financed your house
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from Bank of America. The difference happens if the bank lends into a
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housing boom, and then there is a housing slump.
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If you lend money to buy a house in the middle of a housing boom, you
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collect interest on the mortgage, but then there is a housing slump, the
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mortgagor returns the house in good order and condition, but in the middle of
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housing slump, the mortgagee is sol under the old Christian laws, and the mortgagor, though now houseless, is free and clear of debt.
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Well, lenders did not like that. They wanted their money even if things did
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not work out, and they wanted to be able to lend money to someone to throw a
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big party, someone who probably did not understand the concept of compound
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interest, and then own that someone.
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And the Jews of course operated by different rules, and Kings would borrow
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from the Jews, and then give the Jews exemption from the Christian laws, so
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that they could lend money against the person to Christians.
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And then, things got messier with fractional reserve banking.
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People want to lend short and borrow long, borrow money with fixed schedule
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for paying it back in many years, and lend money with the proviso that they
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can have it back at any time, money on deposit.
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And so, the magic of term transformation. The banker takes in ten thousand
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gold pieces on deposit, returnable on demand at low interest, and lends out
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nine thousand gold pieces on land, on cattle, and on conspicuous consumption,
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at rather higher interest.
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The banker hopes that not everyone will try to withdraw at the same time.
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And, since the banker does not want to find himself in the real estate
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business when there is a slump in real estate prices, or the cattle business
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when there is a drought, he lobbies against the Christian rules on usury,
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and in favour of the Jewish rules. If you buy a house on a mortgage, and the
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price falls below the mortgage, he wants to sell the house over your head,
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and then go after you for the difference.
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Since it is rather dangerous to move gold around, and safer to move
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ownership of gold around, people, instead using gold pieces as money,
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start using banknotes as money, bits of paper backed by claims against real
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property, if the lending is more or less Christian, and claims against real
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people, if it is not all that Christian.
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And then, one day it rains on everyone, and everyone hits up the bank at
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the same time for the money they had stashed away for a rainy day, and
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you have a financial crisis.
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And, under the rules the bankers lobbied for, the angry depositors can take
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all their stuff, and probably give the bankers a horsewhipping.
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So the bankers rush to the government, and say, “financial crisis, bailout”
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And then instead of banknotes backed by claims against property, you get
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government notes backed by claims against taxpayers.
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And here we are. Jewish rules, fiat money.
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Well, how does cryptocurrency address this? It is backed by absolutely
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nothing at all.
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No, not quite nothing at all, for what it is backed by is the that cryptocurrency
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can be owned more securely than anything else, and moved across the
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world at the speed of light, making it very useful as money. You own
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crypto currency by having the secrets that control it, which are harder for
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governments or bad guys to find, and a lot easier to transport through
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airports. What it is backed by is that it is a form of property right that is
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easy to defend, and a form of property that is easy to move around.
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Now it is probable that if cryptocurrency successfully replaces the dollar,
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the same story will begin again from the beginning, only with crypto
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currency in place of gold, but we are starting out from a clean slate. You
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cannot lend cryptocurrency against the person, because you cannot *find*
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the person. So when, in the future, people start borrowing and lending in
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crypto currency, the Christian rules will be inherently in effect when the
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process starts all over.
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So, clean slate. Keeping it clean may well turn out to be difficult.
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But gold was inconvenient and dangerous to move around, so people
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preferred to move claims against bankers around. So, it will prove a lot
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easier for people to hang onto cryptocurrency, rather than leaving their
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gold with the bankers, so the pressure to repeat the story that happened
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with gold will be considerably less.
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