The enmity in the Middle East has more than one cause, but “Usury” is at the root of much of it. Usury is the religion based prohibition on charging or paying interest on loaned money. The rule is rooted in the Law of Moses:
Deuteronomy 23:19-20
Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury:
Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.
Leviticus 25:35-37
‘If one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so he can continue to live among you. Do not take interest of any kind from him, but fear your God, so that your countryman may continue to live among you. You must not lend him money at interest or sell him food at a profit.
When you hear someone lob out the phrase “Greedy Bankers”, the person is likely echoing the Arab hatred of being charged interest to borrow money and breaking Islamic law – or not borrowing the money and dealing with the consequences of poverty.
Now that the Arab countries are drowning in money, that creates a problem that is rippling through the global economy. My sense is that the world’s interest rates approaching 0% is not a coincidence.
Rich Muslims have at least two problems created by the prohibition on usury. When they want to attract money to build something like Dubai World (from other Muslims or from outsiders), they can’t finance construction with normal interest paying bonds. They have to structure the deal so that people or financial institutions lending money are buying ownership of the thing being built on the hopes of collecting rent after the project is completed, not earning interest starting from the day the loan is made. “Credit Default Swaps” on bonds that don’t pay interest is something of a paradox.
On the flip side, the pools of money floating around the middle east can’t buy interest bearing instruments like U.S. Treasuries or corporate bonds – so clever vehicles have to be created as intermediaries that provide religious separation between the payment of interest and the guilt of the investor. Global banks and Private Equity firms will be more than glad to fill that market for sharia compliant investments
Until the Jimmy Carter era, US states all had usury laws and retail banking was strictly in-state – they did not outlaw interest, but did limit the interest rate (typically 8-12% a year). The thinking was that loaning people money who are not capable of paying it back is a back door into slavery or indentured servitude. People today with $30k+ of credit card debt being charged 20%+ interest are the consequence of the end of the usury laws.
Arkansas’s Constitution has a 17% cap, so as Carter lost control of interest rates, the credit card business starting lurching toward being based in Arkansas. In 1980, Congress essentially Federalized credit card interest rates and made them not subject to state usury laws. Delaware became a haven for credit card issuers to borrowers in other states. (For bonus credit, who was Governor of Arkansas in 1979 and 1980?)
So here we are, re-learning the lessons of Hammurabi
Catholic teachings on usury are very interesting
Catholic teachings on usury
They introduce a distinction between “barren” money and “fruitful” money. As civilization developed, the idea of “investing” in an entity that would then produce goods was created, and that you would be rewarded for taking your hoarded money and instead using it in a way to create more wealth.
That’s a very descriptive distinction where we are today – even with money close to “free”, businesses will not make it fruitful. They see no reasonable way to build new plants or develop new products that will create more wealth than they started with. So the U.S. Dollar has transformed from “fruitful money” into third world “barren money”, which is just used as a method of storing value for the future, and conducting daily transactions used in day to day living. The Fed flooding the world with dollars and the government viewing profit as evil and wasteful has transformed our money into “barren money” again.
