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posted by jenni on March 1st, 2015 at 1:19PM
What would be the incentive for the loaner to loan out their money if not to make a profit or other form of compensation? Kindness? Generosity? Why do followers of Islam think it is wrong to make a profit?
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posted by dennisn on March 1st, 2015 at 4:23PM
Yes, I think that Islam expects people to help their fellows out of kindness, rather than "exploitive" profit and greed. My coworker also presented the economic argument that if there is a fixed supply of currency, there will never be enough of the currency to cover the loans + interest -- ie. the loans can never mathematically fully be paid -- ie. it creates a perpetual debt-based society. It can also be viewed as a form of fraud, if it's mathematically pre-established that the loans can never be all repaid -- promising the impossible is fraudulent?
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posted by jenni on March 1st, 2015 at 6:42PM
Just because there is interest involved does not mean there is no kindness. Its like a 'thank you for lending me cash when I needed it, therefore here is some for you to enjoy.'
People could commodify goods and services (for example we could trade in chocolate and cash) to pay back loans with interest therefore running out of a currency is not a problem. As long as there is an agreement beforehand it sounds like it could work out. If it is mathematically pre-established that the loans can never be all repaid and all parties know of this dilemma then don't lend out? Promising the impossible is fraud and people do this all the time (they are known as sketchy individuals ;) therefore it is up to the individual to know who to trust and what is possible vs impossible and up to the loaner to know whether or not the loanee will be able to give back what is due.
Trust and a hope that the world never runs out of chocolate is needed.
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posted by dennisn on March 1st, 2015 at 7:14PM
If you have three people on an island (as my coworker suggested), and say there is a fixed supply of 3$ distributed equally among them, and one guy asks for a 1$ loan with 1$ interest payment, that guy now needs to repay the lender 2$. Where's he gonna get that money?
Your point about interest not necessarily being mean or exploitive is a good one.
Your point about chocolate actually indirectly leads to one possible solution, even though you might not be aware of it. In particular, the supply of chocolate is not fixed (as my original condition stipulated), so it can be "inflated" to supply debt obligations. But is inflation the only solution? Can interest sustainably exist with a non-inflating currency?
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