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Don't downvote me here please. Honest question. If you want some of my money, and I am willing to give it to you if you pay me back with a little extra due to c

Don't downvote me here please. Honest question. If you want some of my money, and I am willing to give it to you if you pay me back with a little extra due to compensate for my worry that you'll not pay me back... what's wrong with that? Why am I a bad person for agreeing to it?

makotech222 7y ago
It's bad because you are using your heightened position (having lots of capital) to negotiate a relationship with someone in a weakened position (in need of capital) and profiting from it. This same logic applies to landlords/tenants, and to business owners/workers. Throughout history, it also applies to King/Serf, Master/Slave, etc. This is somewhat the basis of Marxist thought. There is lots of material about this, if you want to learn more. The goal of Marxism is to eliminate this dichotomy, and create a single class of people.
vincent-toups 7y ago
This is a totally fine and ethical arrangement. What makes someone a bad person is if they see that, for whatever reason, these kinds of arrangements are inadequate to meet the needs of people (and particularly children of people) to have a decent life and they do nothing. High interest rate loans to people who can never repay them don't do much of anything to help actually lift people out of poverty. Being in the loan business is fine, but accepting a world where a kid's entire life is stunted because of who they happen to have been born to is not.
- 20after4 7y ago
  This seems to me almost impossible to change. Of course a child's entire life is hugely affected by genetics and upbringing. That's not even to mention the connections anf opportunity gained through family ties. It may be unfair (debatable) but it's the way of the world.
  - vincent-toups 7y ago
    Sure, the genetics are not easy to fix, but we can and must fix problems like crushing poverty, shitty infrastructure that poisons kids, and lack of good public education. These are not even remotely intractable problems and its the most ridiculous kind of prevarication to suggest that they are.
paggle 7y ago
Because some people are too poor and/or too bad of decisionmakers to get loans. If someone's eating just one potato a day, you loan them money and you know they're not going to invest it in a business, they are going to buy a second potato to quell the hunger pangs and now they're back where they started but now they owe you a potato + 15% every month. You don't give a handgun to a toddler or a case of whiskey to an alcoholic, for someone who can't ever repay your loan, then it's not ethical to loan to them.
magicsmoke 7y ago
You are correct that a higher interest rate is supposed to compensate the lender for the risk that the borrower defaults and the lender loses all his collateral. But when the lender can garnish the borrower's future wages, sabotage his job applications, and force the borrower to repay with the threat of criminal prosecution, the lender's risk of losing his initial collateral goes down significantly. What justifies the lender charging exorbitant interest rates when he has all these tools available to avoid the loss of his initial investment and earn even more profit? I think that combination why usury is reviled. It's not just the high interest rates, but the tools and punishments lenders use to lower the risk of default below what justifies their high rates. It's high interest rates + debtor's prisons that's really repulsive. Having a lender offer you higher terms because he says you're more likely to default, but then refusing to let you default and seizing your economic production for the rest of your life.
- wutbrodo 7y ago
  > It's not just the high interest rates, but the tools and punishments lenders use to lower the risk of default below what justifies their high rates It obviously often doesn't work out this way, but the baseline assumption in a competitive market should be that businesses aren't able to charge significantly over the market-clearing price. OTOH there's no evidence behind your assertion that rates are "unjustifiably" other than a gut feeling, only one step removed from the classic "money doesn't have time value, any interest payment is theft". Why do you think the price is higher than the risk would imply (including the cost, delay, and failure rate of recovery efforts), and why wouldn't a competitor have filled the gap with lower rates? Again, I get that markets aren't instantly perfectly efficient, but there's usually something you can point to that shifts the equilibrium away from efficiency.
  - magicsmoke 7y ago
    Well, my assertion for why people dislike usury isn't because of just high rates, but high rates + unreasonable measures to ensure repayment. Focusing the discussion to whether the rates are a particular economically justified number or not ignores the social aspects of usury. Even the article doesn't just focus on high interest rates, but discusses hectoring people during their daily lives, calling bosses, friends, and family to shame them into repaying, and linking credit ratings to job applications. Maybe the outrage on usury would be lower if it was legislated that lenders cannot use public shaming, criminal sanctions, or garnishing wages to force repayment on someone that has stated their intent to default on their loans. The borrower would be blacklisted from the lender in the future and overall interest rates would go higher due to less recovered funds. However, there may be less outrage because as I stated, the key issue isn't just rates but rates + unreasonable lender behavior. The difference between a bank and a loan shark isn't just different rates, but that a bank will only downgrade your credit rating in a default while a loan shark will break your legs. If you're interested in some reading, check out David Graeber's "Debt: The First 5000 Years." It's a pretty interesting presentation of the social nature of money beyond just a number on a balance sheet.
micmil 7y ago
https://en.wikipedia.org/wiki/Usury https://en.wikipedia.org/wiki/Usury Learn the difference between a legitimate loan and predatory practices. There is a distinct difference between capitalizing on a market and pure exploitation. The Wall Street/Harvard Business ideal is the latter.
033803throwaway 7y ago
I don't downvote. It is a cowardly habit. There is nothing wrong with investing in a productive enterprise and expecting to share in the profits of that enterprise. If a man is starving (or, worse, has convinced himself he needs a new iThing when he does not) and you loan him money you are either violating charity or enabling debt-peonage, respectively. This is setting aside the exponential nature of compound interest, which is why debt-based economies always go bust, and focusing on the individual morality of the transaction.
samschooler 7y ago
So you’re not a bad person. If you design it like a bank, charge a reasonable interest rate, deny people you know can’t pay you back, and give up on getting a return on people who legitimately can’t pay you back for unforeseen reasons. That would be fine. But what these companies are doing is essentially giving a loan to anyone, at an incredibly high interest rate, to pretty much anyone who applies. If they can’t pay back, they keep increasing interest, charging fees and if it get really bad, they will make claims on the victim’s future wages. You’re a bad person if this is how you do it.
- pinkfoot 7y ago
  "deny people you know can’t pay you back" The banks in Kenya do deny these lenders credit. Which is exactly why they actively approach the higher-credit lenders.
- zornado 7y ago
  The high interest rate is for the high risk. If anyone who could qualify for a lower interest rate, wouldn't go and borrow at the higher interest rate.
  - ohazi 7y ago
    High interest is only for high risk when the lender is forgiving more of their loans. That's the risk - too much forgiving means they need to make up the difference with a higher rate for the fewer people who do pay it back. The parent is arguing (correctly) that you can't have both high interest rate and a low/zero rate of loan forgiveness while claiming to be ethical.
    - joeyrideout 7y ago
      Respectfully, zornado is correct and I'm not sure why he's being downvoted. The market cannot operate without a free market for risk-taking and a free market for assessing confidence of repayment as expressed in interest rates. Borrowers are not entitled to money at a set interest rate in the private market (I would argue this should apply to the public market as well, or at least the markup through banks should be minimized). Saying "these interest rates are too high" is the credit market equivalent of saying "the price of this car is too high, give it to me cheaper". The individual defaults if they file for bankruptcy. Until then the terms of the loan, voluntarily signed, determine an interest rate and an obligation to repay. The lender is not obligated to forgive a loan; if that were the case credit liquidity would be nonexistent. (IANAL)
deogeo 7y ago
The problem comes when you use the money form the loan in a competitive market - e.g. real-estate. The availability of credit increases what people are able to pay, and hence the price. To buy a house, a loan becomes a requirement, which benefits the lenders, as their market grows. I should add a disclaimer: While this is a harmful consequence of loan availability, I wouldn't conclude from it that credit is harmful in sum. E.g. higher house prices eventually increase the supply (there are exceptions, like if the supply is limited by some other factor, like land availability). But whatever the other effects of credit may be, empirically, it sure does look like it concentrates wealth.
FussyZeus 7y ago
If you were two people who started on a more or less level playing field, it wouldn't be. The problem with these kinds of systems (at least the ethics of them) is that what conservatives call the "West" which is to say, America, Europe, sometimes Russia depending, or what can also be called the "1st world" is yes, wealthy, yes, successful, but that a great deal of that wealth and success was derived from colonial exploitation of these other countries. So, in simpler terms, we've spent more or less 4 centuries robbing these people blind, stealing their resources, occasionally their actual people, and murdering them in droves as we did. And now, we sold them cheap phones, and linked them to a network of banks that allow westerners to loan them a tiny, infinitesimal amount of money to us, in exchange for getting a profit when they pay it back. Now there are people who are going to downvote you and also me because they don't like being reminded that the alabaster clad civilization we all enjoy is built on the backs of just, stressful amounts of slavery, be it literal slaves, economic slaves or political slaves, but it's true. It's also true that our vaults are packed to the brim with wealth that was taken from those who had rightful claim to it. These are unambiguous historical realities. We here are not fortunate; we are the victors in a war that's been going on since about the time the first iteration of the Dutch East India company was chartered; the war between the haves, and the have-nots. And we have won so hard that it will probably take generations of dedicated effort to make things even remotely equal again. Edit: Just to make this clear, when I say we are not "fortunate" I merely mean to say that it is not good fortune or some divine will that's put us in this position, as is a common citation of those seeking to maintain this status quo. I'm saying that it was a concentrated, often violent effort that put us here.
- wutbrodo 7y ago
  I don't disagree with much of what you're saying, but it's orthogonal to the claim that credit availability and its attendant worst cases is worse than lack of credit availability. I'm not sure the evidence supports this: even well-known "horrible exploitation" like payday loans have significant evidence behind the fact that they're net beneficial to the communities they serve. It seems to me that this is one of those cases where people are conflating a larger problem (global poverty) with a system that incrementally helps the situation (access to credit), due simply to its adjacency. The outcome, in this case and others, is to advocate for making these people's lives _worse_ by removing access to credit. That is to say, I'm a stronger theoretical supporter than most of radical global redistribution, whether as recompense for colonialism or out of a duty to our fellow humans. But this is more or less a complete non sequitur when it comes to debt, since that responsibility, to the extent you agree with it, says nothing about whether access to credit is helping or harming these people (and all the evidence I'm aware of says that marginal credit extended to the developing world tends to help, though this is an oversimplification).
coldtea 7y ago
>what's wrong with that? Why am I a bad person for agreeing to it? It's not about "a little extra" (a fixed amount), it's about the interest (which can get many times the amount). Historically and globally, from the ancient Greeks to the Arab world, and from Japan to Americas, in all kinds of moral systems, people agreeing to it are not just "bad people", but the scum of the earth. Historically also, loaning, from ancient Babylon, to 19th century USA, and even today in many places, has been closely associated with slavery. Many ancient slaves were debtors, all the way to debt bondage, indentured servitude, and so on.

makotech222 7y ago

It's bad because you are using your heightened position (having lots of capital) to negotiate a relationship with someone in a weakened position (in need of capital) and profiting from it. This same logic applies to landlords/tenants, and to business owners/workers. Throughout history, it also applies to King/Serf, Master/Slave, etc. This is somewhat the basis of Marxist thought. There is lots of material about this, if you want to learn more. The goal of Marxism is to eliminate this dichotomy, and create a single class of people.

vincent-toups 7y ago

This is a totally fine and ethical arrangement. What makes someone a bad person is if they see that, for whatever reason, these kinds of arrangements are inadequate to meet the needs of people (and particularly children of people) to have a decent life and they do nothing. High interest rate loans to people who can never repay them don't do much of anything to help actually lift people out of poverty. Being in the loan business is fine, but accepting a world where a kid's entire life is stunted because of who they happen to have been born to is not.

20after4 7y ago
This seems to me almost impossible to change. Of course a child's entire life is hugely affected by genetics and upbringing. That's not even to mention the connections anf opportunity gained through family ties. It may be unfair (debatable) but it's the way of the world.
- vincent-toups 7y ago
  Sure, the genetics are not easy to fix, but we can and must fix problems like crushing poverty, shitty infrastructure that poisons kids, and lack of good public education. These are not even remotely intractable problems and its the most ridiculous kind of prevarication to suggest that they are.

paggle 7y ago

Because some people are too poor and/or too bad of decisionmakers to get loans. If someone's eating just one potato a day, you loan them money and you know they're not going to invest it in a business, they are going to buy a second potato to quell the hunger pangs and now they're back where they started but now they owe you a potato + 15% every month. You don't give a handgun to a toddler or a case of whiskey to an alcoholic, for someone who can't ever repay your loan, then it's not ethical to loan to them.

magicsmoke 7y ago

You are correct that a higher interest rate is supposed to compensate the lender for the risk that the borrower defaults and the lender loses all his collateral. But when the lender can garnish the borrower's future wages, sabotage his job applications, and force the borrower to repay with the threat of criminal prosecution, the lender's risk of losing his initial collateral goes down significantly. What justifies the lender charging exorbitant interest rates when he has all these tools available to avoid the loss of his initial investment and earn even more profit? I think that combination why usury is reviled. It's not just the high interest rates, but the tools and punishments lenders use to lower the risk of default below what justifies their high rates. It's high interest rates + debtor's prisons that's really repulsive. Having a lender offer you higher terms because he says you're more likely to default, but then refusing to let you default and seizing your economic production for the rest of your life.

wutbrodo 7y ago
> It's not just the high interest rates, but the tools and punishments lenders use to lower the risk of default below what justifies their high rates It obviously often doesn't work out this way, but the baseline assumption in a competitive market should be that businesses aren't able to charge significantly over the market-clearing price. OTOH there's no evidence behind your assertion that rates are "unjustifiably" other than a gut feeling, only one step removed from the classic "money doesn't have time value, any interest payment is theft". Why do you think the price is higher than the risk would imply (including the cost, delay, and failure rate of recovery efforts), and why wouldn't a competitor have filled the gap with lower rates? Again, I get that markets aren't instantly perfectly efficient, but there's usually something you can point to that shifts the equilibrium away from efficiency.
- magicsmoke 7y ago
  Well, my assertion for why people dislike usury isn't because of just high rates, but high rates + unreasonable measures to ensure repayment. Focusing the discussion to whether the rates are a particular economically justified number or not ignores the social aspects of usury. Even the article doesn't just focus on high interest rates, but discusses hectoring people during their daily lives, calling bosses, friends, and family to shame them into repaying, and linking credit ratings to job applications. Maybe the outrage on usury would be lower if it was legislated that lenders cannot use public shaming, criminal sanctions, or garnishing wages to force repayment on someone that has stated their intent to default on their loans. The borrower would be blacklisted from the lender in the future and overall interest rates would go higher due to less recovered funds. However, there may be less outrage because as I stated, the key issue isn't just rates but rates + unreasonable lender behavior. The difference between a bank and a loan shark isn't just different rates, but that a bank will only downgrade your credit rating in a default while a loan shark will break your legs. If you're interested in some reading, check out David Graeber's "Debt: The First 5000 Years." It's a pretty interesting presentation of the social nature of money beyond just a number on a balance sheet.

micmil 7y ago

https://en.wikipedia.org/wiki/Usury https://en.wikipedia.org/wiki/Usury Learn the difference between a legitimate loan and predatory practices. There is a distinct difference between capitalizing on a market and pure exploitation. The Wall Street/Harvard Business ideal is the latter.

033803throwaway 7y ago

I don't downvote. It is a cowardly habit. There is nothing wrong with investing in a productive enterprise and expecting to share in the profits of that enterprise. If a man is starving (or, worse, has convinced himself he needs a new iThing when he does not) and you loan him money you are either violating charity or enabling debt-peonage, respectively. This is setting aside the exponential nature of compound interest, which is why debt-based economies always go bust, and focusing on the individual morality of the transaction.

samschooler 7y ago

So you’re not a bad person. If you design it like a bank, charge a reasonable interest rate, deny people you know can’t pay you back, and give up on getting a return on people who legitimately can’t pay you back for unforeseen reasons. That would be fine. But what these companies are doing is essentially giving a loan to anyone, at an incredibly high interest rate, to pretty much anyone who applies. If they can’t pay back, they keep increasing interest, charging fees and if it get really bad, they will make claims on the victim’s future wages. You’re a bad person if this is how you do it.

pinkfoot 7y ago
"deny people you know can’t pay you back" The banks in Kenya do deny these lenders credit. Which is exactly why they actively approach the higher-credit lenders.
zornado 7y ago
The high interest rate is for the high risk. If anyone who could qualify for a lower interest rate, wouldn't go and borrow at the higher interest rate.
- ohazi 7y ago
  High interest is only for high risk when the lender is forgiving more of their loans. That's the risk - too much forgiving means they need to make up the difference with a higher rate for the fewer people who do pay it back. The parent is arguing (correctly) that you can't have both high interest rate and a low/zero rate of loan forgiveness while claiming to be ethical.
  - joeyrideout 7y ago
    Respectfully, zornado is correct and I'm not sure why he's being downvoted. The market cannot operate without a free market for risk-taking and a free market for assessing confidence of repayment as expressed in interest rates. Borrowers are not entitled to money at a set interest rate in the private market (I would argue this should apply to the public market as well, or at least the markup through banks should be minimized). Saying "these interest rates are too high" is the credit market equivalent of saying "the price of this car is too high, give it to me cheaper". The individual defaults if they file for bankruptcy. Until then the terms of the loan, voluntarily signed, determine an interest rate and an obligation to repay. The lender is not obligated to forgive a loan; if that were the case credit liquidity would be nonexistent. (IANAL)

deogeo 7y ago

The problem comes when you use the money form the loan in a competitive market - e.g. real-estate. The availability of credit increases what people are able to pay, and hence the price. To buy a house, a loan becomes a requirement, which benefits the lenders, as their market grows. I should add a disclaimer: While this is a harmful consequence of loan availability, I wouldn't conclude from it that credit is harmful in sum. E.g. higher house prices eventually increase the supply (there are exceptions, like if the supply is limited by some other factor, like land availability). But whatever the other effects of credit may be, empirically, it sure does look like it concentrates wealth.

FussyZeus 7y ago

If you were two people who started on a more or less level playing field, it wouldn't be. The problem with these kinds of systems (at least the ethics of them) is that what conservatives call the "West" which is to say, America, Europe, sometimes Russia depending, or what can also be called the "1st world" is yes, wealthy, yes, successful, but that a great deal of that wealth and success was derived from colonial exploitation of these other countries. So, in simpler terms, we've spent more or less 4 centuries robbing these people blind, stealing their resources, occasionally their actual people, and murdering them in droves as we did. And now, we sold them cheap phones, and linked them to a network of banks that allow westerners to loan them a tiny, infinitesimal amount of money to us, in exchange for getting a profit when they pay it back. Now there are people who are going to downvote you and also me because they don't like being reminded that the alabaster clad civilization we all enjoy is built on the backs of just, stressful amounts of slavery, be it literal slaves, economic slaves or political slaves, but it's true. It's also true that our vaults are packed to the brim with wealth that was taken from those who had rightful claim to it. These are unambiguous historical realities. We here are not fortunate; we are the victors in a war that's been going on since about the time the first iteration of the Dutch East India company was chartered; the war between the haves, and the have-nots. And we have won so hard that it will probably take generations of dedicated effort to make things even remotely equal again. Edit: Just to make this clear, when I say we are not "fortunate" I merely mean to say that it is not good fortune or some divine will that's put us in this position, as is a common citation of those seeking to maintain this status quo. I'm saying that it was a concentrated, often violent effort that put us here.

wutbrodo 7y ago
I don't disagree with much of what you're saying, but it's orthogonal to the claim that credit availability and its attendant worst cases is worse than lack of credit availability. I'm not sure the evidence supports this: even well-known "horrible exploitation" like payday loans have significant evidence behind the fact that they're net beneficial to the communities they serve. It seems to me that this is one of those cases where people are conflating a larger problem (global poverty) with a system that incrementally helps the situation (access to credit), due simply to its adjacency. The outcome, in this case and others, is to advocate for making these people's lives _worse_ by removing access to credit. That is to say, I'm a stronger theoretical supporter than most of radical global redistribution, whether as recompense for colonialism or out of a duty to our fellow humans. But this is more or less a complete non sequitur when it comes to debt, since that responsibility, to the extent you agree with it, says nothing about whether access to credit is helping or harming these people (and all the evidence I'm aware of says that marginal credit extended to the developing world tends to help, though this is an oversimplification).

coldtea 7y ago

>what's wrong with that? Why am I a bad person for agreeing to it? It's not about "a little extra" (a fixed amount), it's about the interest (which can get many times the amount). Historically and globally, from the ancient Greeks to the Arab world, and from Japan to Americas, in all kinds of moral systems, people agreeing to it are not just "bad people", but the scum of the earth. Historically also, loaning, from ancient Babylon, to 19th century USA, and even today in many places, has been closely associated with slavery. Many ancient slaves were debtors, all the way to debt bondage, indentured servitude, and so on.