mf - story #6706 - Yes, I think that Is

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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posted by jenni on March 1st, 2015 at 7:50PM

Don't lend dollars when you know there is a fixed supply of three dollars. What kind of island is this? ;) People on islands could use fruit as a commodity.

I think interest can sustainably exist as I understand it as more of a incentive for the loaner to loan out their wealth than as something to do with inflation.

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posted by dennisn on March 1st, 2015 at 7:53PM

So you're saying interest can't exist on that island, using that fixed currency. (Note: bitcoin is (will be) a fixed supply currency.)

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Can they divide the dollars or by jenni on March 1st, 2015 at 9:17PM.

Yes, the currency is divisble. by dennisn on March 1st, 2015 at 9:18PM.

I am not sure :) by jenni on March 8th, 2015 at 9:25PM.

Actually in this example it wo by dennisn on March 9th, 2015 at 5:58AM.