6 ms·

When did we have 0% interest on houses in modern times? I said that mortgage interest contributes to bubbles, not that it's the only cause. Interest is more ins

When did we have 0% interest on houses in modern times? I said that mortgage interest contributes to bubbles, not that it's the only cause. Interest is more insidious, because it allows people who have wealth to gather even more wealth without putting in the appropriate risk to balance it, giving them the luxury to purchase assets easily, contributing to those bubbles somewhat indirectly. However, because of interest, those same wealthy people have an even bigger advantage. They take out mortgages, and after a while they can take out loans on said mortgages to acquire even more assets. It's genius really (in a very evil way). These things are very interconnected. Just banishing mortgages won't solve the issue. The economic system has to be fundamentally turned over.

NovemberWhiskey 6y ago
>However, because of interest, those same wealthy people have an even bigger advantage. They take out mortgages, and after a while they can take out loans on said mortgages to acquire even more assets. It's genius really (in a very evil way). A mortgage is a liability, not an asset. You can't take out a loan against a liability. Nothing you're writing here really makes any sense to me, despite the benefit of the doubt.
- gher-shyu3i 6y ago
  You can take out a loan on an existing mortgaged asset after you built some equity into it, especially if the asset increased in price during that period. You don't have to have paid it off. It goes to show how evil the entire setup is. It's basically laying domino blocks, the moment something happens, the entire thing collapses.
  - vageli 6y ago
    > You can take out a loan on an existing mortgaged asset after you built some equity into it, especially if the asset increased in price during that period. Is not a mortgage very similar to owning X% of a thing? Like, if I had a mortgage for $100,000 and I've paid $10,000 towards it, it's almost akin to owning 1/10 of the house (which would play out in the event of liquidation, all other things equal). That real estate tends to rise in value as an asset class is tangential to the topic of usary. It seems plain to me that there is a concept of the current value of something versus the future value of something, with the difference being expressed as interest (to some degree)?
    - neltnerb 6y ago
      You sound like you're defining "development" when you talk about the difference between the future and present values of something. But I guess if the people actually doing the development pay interest to the people they got money from to do the development then it is... interest to some degree? Of course that results in less net development (due to the interest paid) but am I at least describing it in a way you recognize as accurate?
      - selimthegrim 6y ago
        This is basically the Islamic redefinition of interest.
    - gher-shyu3i 6y ago
      If you paid $10k toward a $100k asset, most of that $10k actually goes toward interest because of how the loan is setup. Islam never denies that time and money are related, it just places moral restrictions on how money can be used in society without exploitation.
      - selimthegrim 6y ago
        I have some bad news for you if you think profit sharing is going to replace free cash flow as a metric for company expansion. What happens if there's no profit? Have you been watching that Khadim Hussain Rizvi video where he tells the Pakistan Army to just repay the IMF loans' principal?
        gher-shyu3i 6y ago
        If there's no profit, the investors and the company owners have taken the risk and share it equally. What's the problem? I'm not aware of Pakistan's Army deal with the IMF. If they took on an interest bearing loan, it's their problem they got themselves into.
        selimthegrim 6y ago
bertjk 6y ago
Ok, this is kind of fascinating. So interest is bad. Is rent bad? If I have a car or a house is it bad if I rent it out? How about if I had a bag of cash, is it bad if I rent that out? How are the two scenarios different?
- gher-shyu3i 6y ago
  Renting a car or house is very different from renting money. When you rent out a car, there are many logistics involved, and there needs to be work done to upkeep the car or house (maintenance, repairs, etc.). The asset itself is consumed. There is risk involved, and the "lender" (the asset owner) is not guaranteed profit (the house might burn down or the car might get totaled). Being a landlord is not easy. Compare that to money, which Islam sees as a means to an end, not as an ultimate goal in and of itself (that doesn't mean that Islam is against gaining wealth, on the contrary, as long as the wealth is gathered and spent in good, there is a lot of reward for it). Money when lent out is never consumed. It's an abstract thing that the lender is contractually owed it plus the lending fee (interest). For literally doing basically nothing, he's able to generate income while taking minimal risk, and exploiting the borrower at the same time. If the borrower defaults, the lender is able to go after him for not just the principal, but the interest as well. He'll go after his assets and sell them to make his basically guaranteed profit. Furthermore, it's possible to chain debt in a way that becomes a series of dominos, where if the first one topples, everything goes. We've seen this in 2008, it's inherently built into the system. You can't really do this with rent. While you can technically sub lease, there is a limit in practice, and because of fees, it isn't really feasible to go more than one or two steps. Not so with lending. You have borrowing on top of borrowing for instance, people take out loans against their partially paid for mortgages, to take out more mortgages, to buy property. Then the whole thing collapses at a moment's notice when the markets become finicky. Banks pool debts and sell them in packages, we've seen the end result of that.

NovemberWhiskey 6y ago

>However, because of interest, those same wealthy people have an even bigger advantage. They take out mortgages, and after a while they can take out loans on said mortgages to acquire even more assets. It's genius really (in a very evil way). A mortgage is a liability, not an asset. You can't take out a loan against a liability. Nothing you're writing here really makes any sense to me, despite the benefit of the doubt.

gher-shyu3i 6y ago
You can take out a loan on an existing mortgaged asset after you built some equity into it, especially if the asset increased in price during that period. You don't have to have paid it off. It goes to show how evil the entire setup is. It's basically laying domino blocks, the moment something happens, the entire thing collapses.
- vageli 6y ago
  > You can take out a loan on an existing mortgaged asset after you built some equity into it, especially if the asset increased in price during that period. Is not a mortgage very similar to owning X% of a thing? Like, if I had a mortgage for $100,000 and I've paid $10,000 towards it, it's almost akin to owning 1/10 of the house (which would play out in the event of liquidation, all other things equal). That real estate tends to rise in value as an asset class is tangential to the topic of usary. It seems plain to me that there is a concept of the current value of something versus the future value of something, with the difference being expressed as interest (to some degree)?
  - neltnerb 6y ago
    You sound like you're defining "development" when you talk about the difference between the future and present values of something. But I guess if the people actually doing the development pay interest to the people they got money from to do the development then it is... interest to some degree? Of course that results in less net development (due to the interest paid) but am I at least describing it in a way you recognize as accurate?
    - selimthegrim 6y ago
      This is basically the Islamic redefinition of interest.
  - gher-shyu3i 6y ago
    If you paid $10k toward a $100k asset, most of that $10k actually goes toward interest because of how the loan is setup. Islam never denies that time and money are related, it just places moral restrictions on how money can be used in society without exploitation.
    - selimthegrim 6y ago
      I have some bad news for you if you think profit sharing is going to replace free cash flow as a metric for company expansion. What happens if there's no profit? Have you been watching that Khadim Hussain Rizvi video where he tells the Pakistan Army to just repay the IMF loans' principal?
      - gher-shyu3i 6y ago
        If there's no profit, the investors and the company owners have taken the risk and share it equally. What's the problem? I'm not aware of Pakistan's Army deal with the IMF. If they took on an interest bearing loan, it's their problem they got themselves into.
        selimthegrim 6y ago

bertjk 6y ago

Ok, this is kind of fascinating. So interest is bad. Is rent bad? If I have a car or a house is it bad if I rent it out? How about if I had a bag of cash, is it bad if I rent that out? How are the two scenarios different?

gher-shyu3i 6y ago
Renting a car or house is very different from renting money. When you rent out a car, there are many logistics involved, and there needs to be work done to upkeep the car or house (maintenance, repairs, etc.). The asset itself is consumed. There is risk involved, and the "lender" (the asset owner) is not guaranteed profit (the house might burn down or the car might get totaled). Being a landlord is not easy. Compare that to money, which Islam sees as a means to an end, not as an ultimate goal in and of itself (that doesn't mean that Islam is against gaining wealth, on the contrary, as long as the wealth is gathered and spent in good, there is a lot of reward for it). Money when lent out is never consumed. It's an abstract thing that the lender is contractually owed it plus the lending fee (interest). For literally doing basically nothing, he's able to generate income while taking minimal risk, and exploiting the borrower at the same time. If the borrower defaults, the lender is able to go after him for not just the principal, but the interest as well. He'll go after his assets and sell them to make his basically guaranteed profit. Furthermore, it's possible to chain debt in a way that becomes a series of dominos, where if the first one topples, everything goes. We've seen this in 2008, it's inherently built into the system. You can't really do this with rent. While you can technically sub lease, there is a limit in practice, and because of fees, it isn't really feasible to go more than one or two steps. Not so with lending. You have borrowing on top of borrowing for instance, people take out loans against their partially paid for mortgages, to take out more mortgages, to buy property. Then the whole thing collapses at a moment's notice when the markets become finicky. Banks pool debts and sell them in packages, we've seen the end result of that.