The Refutation Of Usury

 

Hello, good evening and welcome, Shalom, Assalamu alaikum. This is another Internet Sermon by the notorious Alexander Baron, but in future I will be dispensing with the formalities. This short rant concerns the biggest problem of our age: the corrupt, debt-based financial system.

When money is loaned commercially, it is taken for granted that said loans will attract interest. Is this reasonable? Is it fair? Is it just? If you take a hundred dollars or whatever out of your pocket and give it to the man next door on a promise, you may not get anything back. So interest is a form of compensation, the credit risk.

Banks do not lend money; if you think they do, you are a member of an uninformed and dwindling minority, so check out my speech Pay Wealth-Creators, Not Banksters to learn the truth. Banks do not lend money, they create credit and sell it at interest, but let’s stay with you and your neighbour; this is a real loan, and unless you lend him the money purely as an act of kindness, you are entitled not only to compensation for the risk taken but for forgoing any profit you may have made by investing that money elsewhere. Or so the theory goes.

It is usually taken for granted that you can buy more with money today than you will be able to next year, and certainly if you lend a considerable sum of money over a lengthy period; unless you charge interest, you will lose out. Is this true? Yes, and no. The practice of usury has long been defended because this is assumed to be true. Way back in 1816, Jeremy Bentham published a defence of usury based on that assumption.

So do prices always and inevitably rise? Let us take a rather dramatic example, this incorporates one of my personal favourite snippets of information.

Let us roll back the clock to February 1927. You need the money to make a trans-Atlantic phone call, one of around a half hour duration. I agree to lend it to you. How much will this call cost? Would you believe a hundred and fifty pounds? The phone call in question was around that much between the New York office of lyricist Edgar Leslie and the London office of music publisher Lawrence Wright.

How much would a half hour trans-Atlantic phone call cost you today? Using Skype in your local Internet caff, you could make a half hour call with video for less than one pound; in real terms that is probably less than .1% of the 1927 rate.

More to the point, let us imagine that I had loaned you not £150 but £100 in 1927, a nice round figure. I charge you 3% interest. In the first year, you pay the interest only, £3, so the entire principal is still owed. Let’s imagine that the next year, the interest rate rises to 5%, and again you pay only £3 on the loan. Now the total owed is £102.

Now let us imagine that we are not talking about 5% per annum, but 5% per month, and that this interest is compounded monthly; that is very important, we are not talking about simple interest, but compound interest. Currently, payday loans attract far higher interest rates than that.

When people fall behind with payday loans repayments, they can go into enormous debt, and when this is compounded: compound interest on compound interest, they can never break free. It should be clear that this kind of exploitation, which can be used to suck people dry, involves generating a profit for the lender far, far greater than he could ever have made from a regular investment. The same thing applies to both the national debt and local government debt. Once the borrower is saddled with a crippling debt, it becomes a syphon that drains wealth from the producer to the lender. If you want a clearer understanding of how this happens, please check out Gordon Brown’s Poker Lesson; I wrote that for you as much as for Gordon Brown.

Usury: compound interest on compound interest, is both totally immoral, and a parasitic mechanism by which wealth is drained from the have-nots to the haves. So what is or should be the alternative? If you lend someone money, real money that comes out of your own pocket, you should be entitled to compensation, a fee. There is no reason there should not be an additional fee or penalty if the loan is not repaid according to the agreed schedule, but the idea that a lender should be entitled to compound interest, and that this should be compounded indefinitely, should not be permitted.

When a loan is made for business purposes, there should be not interest but profit-sharing, in Islamic parlance this is known as musharaka. The world is clearly drowning in debt; there is more debt in the world than there is money, which is just as clearly absurd. It is only by the abolition of usury that this lunacy can be resolved.

Furthermore, the national debt, the debts of all nations, is compounded not merely year in, year out, but decade in, decade out. This means that you, the taxpayer, are footing the bill for the financial elite in perpetuity. The big question is, are you prepared to continue to slave under the yoke of the usurers, like every previous generation, or are you going to do something about it?

To A Video Of The Above


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