Loans by modern banks rely on the issuance of new currency; it's a scheme which relies on diluting the value of citizens' existing currency. It's unethical; it's stealing from the many to enrich the few who will receive the credit once it's spent into the economy (going into friends' businesses). Kind of like how Carl Icahn sat on the Hertz board, made Hertz take out a huge loan, used the credit to award a huge contract to one of his other businesses and then let Hertz go bankrupt.

This is so misguided. Just raising interest rates by a few points has resulted in many thousands of people losing their livelihoods in under a year, because companies could no longer justify taking out loans. What you're suggesting is eliminating loans altogether. This is a fun dorm room thought experiment, but it's not even hyperbolic to say that if it were actually pursued, it would result in a huge number of deaths by starvation.

Modern Islamic countries without usury manage to feed their citizens so although I would agree that banning loans would cause a lot of pain in the modern economy, I can't see how it would cause mass starvation.

Exactly, and even in those cases, it only serves to enrich certain people who intermediate the loans and to satiate reckless or impatient consumers. It's more like gambling; it appeals to and takes advantage of human nature but doesn't benefit the individual; it only benefits the house. It doesn't actually provide any true value to society.

This is nonsense. We're rich. Broadly.

I disagree, loans can benefit both parties if they are well regulated. In these cases loans provide a lot of value for society. Reckless loans are a symptom of an under regulated system (or in the case of the GFC, a combination of under regulation and no effective enforcement).

Your "countries with Sharia law are good" argument might not be as compelling to me as you seem to think it is... Are there any good examples of non-authoritarian non-dictatorships in this space?

Edit to add: You're right, I guess, that our government would probably take over everything and narrowly dodge mass starvation with mere mass poverty, but that doesn't sound great to me either. And mass starvation isn't so far fetched either, there have been multiple such occurrences globally within the last century.

I didn't say they were "good", I'm just pointing out that they generally aren't starving, which means your point was hyperbolic.

I don't understand why the government would need to "take over everything" to avoid starvation. There's no technical reason that capitalism can't exist without usury. Again I'm not saying usury is good or bad, just that it doesn't 'need' to exist. I suspect it is good for society when well regulated (better use of capital), and horrible for society when allowed without limit (indentured servitude, instability e.g. GFC caused by immoral lending).

The question is which world are we living in? I'd argue the West is living in the latter world, the GFC is a symptom that shows that our financial system is causing more harm than good. In this case if the US had used the Islamic system, banks would have owned the assets they were "lending" for, and so would not be incentivized to make risky loans and sell them to unsuspecting investors. A bank isn't going to give a loan on an overvalued property if they know it will sit on their books until the losses are eventually realized.

> I don't understand why the government would need to "take over everything" to avoid starvation.

If the non-starvation examples are all dictatorships, then what's your point here?

I agree that it's possible for capitalism to exist without "usury". Definitions of "usury" tend to define it as "unreasonably high interest rates". Interest rates right now are like 7%, which isn't particularly high and certainly isn't "unreasonably" high.

The GFC isn't relevant to what's going on here. This is an entirely different (indeed in many ways an opposite) set of problems.

you're responding to someone using the traditional definition of "usury", a sense already marked as obsolete in web1913: "The practice of taking interest."

that is what is prohibited in sharia, charging interest at all, not charging unreasonably high interest

plausibly the other commenter should avoid using such confusing terminology, but i found their meaning reasonably clear from context

Yeah.

My point is that banning debt wouldn't cause starvation.

Apologies for the terminology, the other commenter is right that I was using the original meaning. I don't think the rate of interest is relevant since the mechanisms that make debt dangerous still exist at 7% or 70%. Lending to a "No Income No Asset" person who has 0 chance of paying off the debt is immoral at any interest rate.

I'm interested why you think the GFC is the "opposite" problem. Immoral lending was central in that story.

Lending money is like the grease in the gears of a liberal economy. In countries with such economies, the ability to purchase food is downstream of the economy operating smoothly. If you entirely remove the grease from the gears and the economy siezes up, you do put the ability for people to get food at risk. Agricultural business rely on lending, businesses that transport goods rely on lending, businesses that sell goods rely on lending. Sure, you can potentially avoid mass starvation by having a government step in and direct all that top-down. But that has been far from a universally successful "solution" in fairly recent history.

I agree that lending to individuals without assets or income is immoral. That is a very small sliver of debt activity.

Lending to a business based on an analysis of their future earnings potential is not immoral. It is a risk, but that's the business banks are in.

Honestly in the light of the day I'm not sure what point I was trying to make about the GFC, so I'll give you that one :)

I agree with everything besides “business X relies on lending.”

Businesses _in the west_ rely on lending. Islamic businesses _cannot_ morally or legally rely on lending, so they must have alternatives. And if you look at the alternatives you will realise that debt is not essential.

Sure, if all western governments banned lending tomorrow there would be crisis, but because any major change shocks an economy, not because economies _need_ debt.

Haha I knew you’d come around about the GFC, it’s definitely not a good example of the superiority of Western Financial system LOL

Like I've been saying, businesses either rely on lending, or they rely on a state directing things from the top down. The alternatives are giant sovereign wealth funds. I think lending is much better.

I've actually come back around on the GFC thing :) The way in which it's the opposite is that with the GFC we had low inflation and high unemployment and right now we have high inflation and low unemployment.

You can keep repeating yourself, but it is still false. I've provided an existence proof of why it is false, and you have supplied..."I've been saying"

The GFC was caused by bad lending regardless of the levels of inflation and employment. Of course you are free to keep believing it's the "opposite." Doubling down on preconceived ideas is a pretty good strategy to never learn anything new. I'd prefer if you would provide a reason for your beliefs because I might learn something if your reasons contradict my own. Sorry if I sound harsh but it feels like I'm responding to an echo.

I look forward to your interview with the Taliban finance ministry and Afghan central bank - let us know how they’re doing

I must have missed this one in my Inbox - I look forward to it too haha

But to be serious, I'm not arguing that the Islamic system is "better", just that it removes certain risks that unrestricted lending cause. I don't think the solution is to ban lending but instead to be aware of the risks and make sure your regulation and enforcement is adequate.

I hate knee jerk dismissal of alternative policies, so I felt I needed to point out to the parent commenter that there are places where there is no debt, and no hunger.

Believe me I wish there was no hunger in those places too

I definitely misspoke there: I meant that they have no debt and no mass starvation. I’m aware there’s a lot of poverty in the Islamic world, but it’s not because Usury is illegal.

It isn't not because of that either.

I’d need to see some statistics to be convinced either way.

When I think of poverty, I think of sub Saharan Africa. I believe debt is legal in most of those countries, so the odds are that banning debt is a small part of the poverty picture.

Ok.