[cryptowonderdruginvogue]

How the church said it was a sin to ask for interest if you let a friend or family member borrow money
But what do they do with the extra money they recieve?
Put in the bank and gain interests.

Another reason why I hate organized religion.

[Danny Himself]

What church was this? Evidence?

[cryptowonderdruginvogue]

A simple form of banking was practiced by the ancient temples of Egypt, Babylonia, and Greece, which loaned at high rates of interest the gold and silver deposited for safekeeping. Private banking existed by 600 b.c. and was considerably developed by the Greeks, Romans, and Byzantines. Medieval banking was dominated by the Jews and Levantines because of the strictures of the Christian Church against interest and because many other occupations were largely closed to Jews. The forerunners of modern banks were frequently chartered for a specific purpose, e.g., the Bank of Venice (1171) and the Bank of England (1694), in connection with loans to the government; the Bank of Amsterdam (1609), to receive deposits of gold and silver. Banking developed rapidly throughout the 18th and 19th cent., accompanying the expansion of industry and trade, with each nation evolving the distinctive forms peculiar to its economic and social life.

[Danny Himself]

That was an awfully long time ago. We've learned from history that we should all be allowed to make money off of our own families and friends, regardless of religion.

[cryptowonderdruginvogue]

just saying

[Hip Priest]

Originally Posted by cryptowonderdruginvogue

How the church said it was a sin to ask for interest if you let a friend or family member borrow money
But what do they do with the extra money they recieve?
Put in the bank and gain interests...

I suspect the original idea had a lot to do with circumstance at the time. Nowadays people get loans for cars and holidays and any number of other irrelevent things, but back then people were in dire straits. Loans were for food and other essentials - is it right to charge interest on that ie to make a profit from other people's desperation? I suggest that it isn't.

Saving money is a very different matter; the bank keeps my money safe, I get some interest, they make a profit. No-one is desperate, no-one is hurt.

If you were starving, I would give you what you needed. I'd have to be a right **** to make a profit out of it.

The church doesn't (and certainly shoudn't - I know there are some dodgy sorts) demand money - there's no membership fee and no charge for attending. All money given is done so as a ggesture of goodwill or love.

[alyasa]

It's interesting you mention this, because, now, I'm not too clever with money, but from what little I know, Islam actually disallows interest on loans, and in general. I'm not too sure how it works, but Islam has its own system of banking. Just thought you'd be interested to know. I feel like finding out more...

[sonicl]

^
You beat me to it. There is an increasing demand in the UK for "Islamic loans".

[alyasa]

That sounds promising....

[alyasa]

A good read, I think, for those so inclined; to read that is...
-------------------------------------------------------------------------
Philosophically, interest is prohibited due to the perceived exploitation of one class of people by another.

In the case of consumption loans which are generally made to people who neither have the luxury of savings to meet urgent personal needs nor have access to any other means of acquiring financing, the prohibition of interest is mainly for humane purposes. In the case of loans for productive purposes, it is not deemed fitting for lenders of capital funds to be assured of receiving a rate of return while users of such funds--the entrepreneurs--have no assurance of direction and magnitude of returns. It is socially unjust to guarantee a predetermined return for any one party when the existence of entrepreneurial profit is uncertain.

Interest is also viewed as a transfer wealth from the poor to the rich, thus increasing the inequality in distribution of wealth, which is contrary to the Islamic social interest which stands for co-operation and brotherhood. Moreover, it is thought that interest creates an idle class of people who receive their income from accumulated wealth, thus depriving the society of their labour, skills, and enterprises.

Interest-Free Alternative

The Islamic solutions, commonly referred to as Profit & Loss Sharing (PLS), suggests an equitable sharing of risks and profits between the parties involved in a financial transaction. In the banking business, there are three parties - the entrepreneur or the actual user of capital, the bank which serves as a partial user of capital funds and as a financial intermediary, and the depositors in the bank who are the suppliers of savings or capital funds. There are two different partnerships of the type mentioned in Islam: the partnership between the depositors and the bank, and the partnership between the entrepreneur (or the borrower) and the bank.

Under this proposal, financial institutions will not receive a fixed rate of interest on their outstanding loans, rather, they share in profits or in losses of the business owner to whom they have provided the funds. Similarly, those individuals who deposit their funds in a bank will share in the profit/loss of the financial institution.

As opposed to the present system of banking, where bank profits arise from the difference between the interest it receives from borrowers and the interest it pays to its depositors, the source of bank profits in interest free banking is the differences in the profit sharing ratios. The entrepreneur and the bank agree upon sharing of the profit with a higher proportion going to the entrepreneur, while the depositors share a comparatively smaller proportion of the bank's profits.

The Islamic principle of Sharakah stipulates that the partners are free to determine the extent of their profit-sharing ratio regardless of their capital contributions. Losses, on the other hand, are to be shared strictly in proportion to their capital contributions. In the case of the division of the pro- fits between a financial institution and various borrowers, however, it is suggested that the central bank should be able to control the profit/loss share ratio. This practice will not only reduce unhealthy competition among financial institutions, but also enables the central bank to influence the allocation of resources among various sectors of the economy according to national priorities and monetary policy directives.

To ensure timely payment of the loan plus the institution's share of the profits (if any), a fine could be imposed on those borrowers who do not pay on time. To conform with the principals of the Shari'ah, these fines must be deposited with the government treasury rather than given to individual financial instit utions. Other punishments such as confiscation of property and blacklisting delinquent borrowers are also suggested.

Two problems have been cited as inherent in the traditional banking system, both arising from the asymmetric availability of information between the two parties involved in a financial transaction. Adverse selection refers to the possibility that potential borrowers who are the most likely to produce an undesirable outcome are the ones who more actively seek out a loan, and are thus the most likely to be selected. Moral hazard occurs when the borrower engages in activities undesirable by the lender after the loan has been granted. The PLS system addresses both issues.

Since the profit and loss sharing emphasises distribution of both risk and profits between the lender and the borrower when a loan is made, the lending institution need only worry about the profitability of the proposed project for which the loan is requested rather the credit-worthiness of the firm to which they are lending. This leads to more conservative decisions made by the lender and to a more careful monitoring of the borrower.

Similarly, in the western banking model, heavy-handed bank regulation and the availability of deposit insurance have replaced the need for monitoring bank activities by depositors. Consequently, as far as small depositors are concerned, deposits in one bank are very similar to deposits in another bank, and hence there is no need to monitor bank activities. The Islamic, interest-free system, on the other hand, imposes the burden on depositors of gathering information about the safety, soundness, riskiness, and profitability of the bank. This will eventually lead to a sounder banking system, although the unwillingness of depositors in the short run to go through the lengthy process may lead to short-term reduction of savings in the banking system.
The source text

[Rob Instigator]

Originally Posted by Hip Priest

I suspect the original idea had a lot to do with circumstance at the time. Nowadays people get loans for cars and holidays and any number of other irrelevent things, but back then people were in dire straits. Loans were for food and other essentials - is it right to charge interest on that ie to make a profit from other people's desperation? I suggest that it isn't.

Saving money is a very different matter; the bank keeps my money safe, I get some interest, they make a profit. No-one is desperate, no-one is hurt.

If you were starving, I would give you what you needed. I'd have to be a right **** to make a profit out of it.

The church doesn't (and certainly shoudn't - I know there are some dodgy sorts demand money - there's no membership fee and no charge for attending. All money given is done so as a ggesture of goodwill or love.

this is not exactly right hipriest.

you deposit your money in a ban savings account. They, in turn, loan tyour money out as if it wa stheirs, and get a very large return in interest from it, of which you are lucky to see maybe maybe a 1.5% interest return on your savings.

[Hip Priest]

Originally Posted by Rob Instigator

this is not exactly right hipriest.

you deposit your money in a ban savings account. They, in turn, loan your money out as if it wa stheirs, and get a very large return in interest from it, of which you are lucky to see maybe maybe a 1.5% interest return on your savings.

I would refer you to the first point I made, that nowadays those loans are largely for non-essential items (car, house, holiday etc) and so there is little moral objection to that profit-making, from me anyway.

Of course, whatever organisation you loan from or save with, at some point there will be a direct or indirect link to bad business or bad ethics. At some point a bank's investments, however carefully structured, will almost inevitably be linked with the likes of COca-Cola, Nestle or any other number of organisations.

I tried to pick the most ethical bank for my savings, and I tried to pick the most ethical lender for the mortgage, but I'm probably tolerating some level of dodginess somewhere.

[Rob Instigator]

most banks make 90% of their loans to corporations, not to individuals.
Banks are allowed to loan out 10 times the amount of money that they actually have in their accounts (don;t ask me why, some republicrat made that shit up).

[Hip Priest]

Originally Posted by Rob Instigator

most banks make 90% of their loans to corporations, not to individuals.

I was sticking with the individual loans because that was more relevent to my anti-interest theory. I have no real worries about the percentages, just the ethics.

Originally Posted by Rob Instigator

Banks are allowed to loan out 10 times the amount of money that they actually have in their accounts (don;t ask me why, some republicrat made that shit up).

Is that not because when a deposit is made, the bank is required to put aside 10% or so as reserve, and is then allowed to loan out the other 90% or so?

THat could be totally wrong - I've only really looked at the ethics, rather than the mechanics.

[sonicl]

This thing of being able to lend 10 (or however many) times as much as is deposited is going to frustrate me now. I did economics A' level, and learned about that, but I can't remember it any more.

[Hip Priest]

From something called Anatomy of the Bubble, it would seem:

"...Now, what proportion of its total deposits do you suppose
a bank lends? How much would you think it was
safe to lend? The half? Three quarters? All? The fact is
—and even those who know it well and take it for granted
are astonished in those moments when they stop to reflect
on it—the fabulous fact is that a bank may lend ten times
its deposits. That is to say, for each actual dollar of other
people's money it has received and locked up in its safe,
it may lend or sell ten dollars of credit money.
Not every bank does lend ten to one—ten dollars of
credit to one of cash in the vault; but if you take the
banking system entire it has the potential power to erect
credit in that ratio to cash. Ten to one was the formula
adopted by the United States Treasury and other Federal
Government agencies in their campaign against hoarding.
In official messages broadcast over the country people
were exhorted to stop hoarding and bring their money
back to the banks on the ground that each dollar of actual
money in hiding represented a loss of ten in the credit
resources of the country, and that each dollar of money
brought back to the banks represented an increase of ten
dollars in credit for the common benefit of trade, commerce
and industry.
The beginning of all modern credit phenomena is in
this act of multiplication, performed by the banker. How
can a bank lend credit to the amount of ten times its cash
deposits ?
Perhaps the easiest way to explain it will be to tell
the story of the old goldsmiths who received gold for safe
keeping and issued receipts for it. These receipts, representing
the gold, began to pass from hand to hand as
money. Seeing this, and that people seldom touched the
gold itself or wanted it back, so long as they thought it
was safe, the goldsmiths began to issue paper redeemable
in gold, without having the gold in hand to redeem it
with."

[alyasa]

Jesus, when I think about all these closet paedophiles running the global financial system and giving themselves ten times the money they have (free money!), it sends shivers through me. I bet they're all in the Swiss Alps, walking around in leather crotchless panties, giving each other handjobs...