4 ms·

Usury, which is to say lending at interest, will inevitably in aggregate lead to a tiny minority owning virtually everything. This is obvious to anyone who has

by User23 6y ago

Usury, which is to say lending at interest, will inevitably in aggregate lead to a tiny minority owning virtually everything. This is obvious to anyone who has basic high school math and understands that interest compounds geometrically and wages grow linearly at best.

throwaway123x2 6y ago
How do you run the economy without interest?
- xorx 6y ago
  I've read some non-mainstream theories that economies based on cash accounts and equity-only investments are possible. Some would argue that equity-only investment arrangements are better for society, as they align interests between capital and production in a way that recourse interest lending cannot. You can already see some fintech startups attempting equity-based home "loans", in which the "lender"'s lien is on a percentage of the future sale value of the home, not a fixed dollar amount. It will be interesting to see how this develops. I'm not sure how financing on consumer debt like credit cards and non-commercial vehicles would work, though. Perhaps discouraging consumer profligacy would be a feature, however, not necessarily a bug.
- rizalp 6y ago
  By barter? By producing something valuable and exchange it through fair trade, and using sound money (not worthless currency)
- jay_kyburz 6y ago
  In utopian reality, you could run a state owned bank that was run not-for-profit and only charged interest enough to cover losses and expenses.
  - User23 6y ago
    In real reality, Danish banks are charging 0% interest for mortgages and making their money off of closing fees[1]. Also the natural rate of interest is zero[2]. Just because you've been raised from birth to believe usury is necessary for the payment system (not the economy!) to function doesn't make it so. [1] https://au.finance.yahoo.com/news/danish-bank-introduces-new-20-year-0-per-cent-mortgaes-012823441.html https://au.finance.yahoo.com/news/danish-bank-introduces-new... [2] https://news.ycombinator.com/item?id=16414199 https://news.ycombinator.com/item?id=16414199 http://www.moslereconomics.com/wp-content/graphs/2009/07/natural-rate-is-zero.PDF http://www.moslereconomics.com/wp-content/graphs/2009/07/nat... (link is broken in the HN post)
dcolkitt 6y ago
> wages grow linearly at best. This isn't true at all. https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions https://ourworldindata.org/grapher/average-real-gdp-per-capi...
- leetcrew 6y ago
  gdp per capita is not a good proxy for wages.
  - dcolkitt 6y ago
    Labor share of GDP went from 64% in 1950 to 58% today. That means wages grew slightly slower than GDP per capita, that’s certainly not enough to mean wages grew sub-exponentially. For wages to grow linearly, labor share of GDP would have to fall exponentially towards zero. https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-labor-share.htm https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-...
- ajmadesc 6y ago
  Analyses like this show why we need to teach statistics in place of calculus in high school.
  - leetcrew 6y ago
    not really. the key mistake here is treating gdp is a proxy for wages when there is no direct connection between the two. in a pathological case, you could have a $1T GDP and have zero wages paid. the question of whether mean or median figures are more appropriate when talking about wages (what I assume you are alluding to with your statistics quip) is a side issue. no amount of statistics knowledge will help someone who insists on comparing apples to oranges.
leetcrew 6y ago
it may be true, but it's not obvious without making some unstated assumptions. inflation-adjusted returns on loans are not necessarily positive (though they usually are). interest compounds geometrically by definition, but subexponential wage growth is an observation that may depend on how you calculate inflation.
chordalkeyboard 6y ago
> will inevitably in aggregate lead to a tiny minority owning virtually everything. I’m not convinced. Perhaps this is the case with a permissive central bank encouraging consumer credit.
kansface 6y ago
I have strong doubts given the amount of churn among both the ultra rich and our biggest companies. No one seems to stay in the top 10 for more than a few decades.
findthewords 6y ago
Lending at interest only leads to unlimited aggregation if the risk of lending is zero. Zero interest rate policy and government backed securities is indeed as close to zero risk as possible in the real world.

by User23 6y ago

throwaway123x2 6y ago

How do you run the economy without interest?

xorx 6y ago
I've read some non-mainstream theories that economies based on cash accounts and equity-only investments are possible. Some would argue that equity-only investment arrangements are better for society, as they align interests between capital and production in a way that recourse interest lending cannot. You can already see some fintech startups attempting equity-based home "loans", in which the "lender"'s lien is on a percentage of the future sale value of the home, not a fixed dollar amount. It will be interesting to see how this develops. I'm not sure how financing on consumer debt like credit cards and non-commercial vehicles would work, though. Perhaps discouraging consumer profligacy would be a feature, however, not necessarily a bug.
rizalp 6y ago
By barter? By producing something valuable and exchange it through fair trade, and using sound money (not worthless currency)
jay_kyburz 6y ago
In utopian reality, you could run a state owned bank that was run not-for-profit and only charged interest enough to cover losses and expenses.
- User23 6y ago
  In real reality, Danish banks are charging 0% interest for mortgages and making their money off of closing fees[1]. Also the natural rate of interest is zero[2]. Just because you've been raised from birth to believe usury is necessary for the payment system (not the economy!) to function doesn't make it so. [1] https://au.finance.yahoo.com/news/danish-bank-introduces-new-20-year-0-per-cent-mortgaes-012823441.html https://au.finance.yahoo.com/news/danish-bank-introduces-new... [2] https://news.ycombinator.com/item?id=16414199 https://news.ycombinator.com/item?id=16414199 http://www.moslereconomics.com/wp-content/graphs/2009/07/natural-rate-is-zero.PDF http://www.moslereconomics.com/wp-content/graphs/2009/07/nat... (link is broken in the HN post)

dcolkitt 6y ago

> wages grow linearly at best. This isn't true at all. https://ourworldindata.org/grapher/average-real-gdp-per-capita-across-countries-and-regions https://ourworldindata.org/grapher/average-real-gdp-per-capi...

leetcrew 6y ago
gdp per capita is not a good proxy for wages.
- dcolkitt 6y ago
  Labor share of GDP went from 64% in 1950 to 58% today. That means wages grew slightly slower than GDP per capita, that’s certainly not enough to mean wages grew sub-exponentially. For wages to grow linearly, labor share of GDP would have to fall exponentially towards zero. https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-labor-share.htm https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-...
ajmadesc 6y ago
Analyses like this show why we need to teach statistics in place of calculus in high school.
- leetcrew 6y ago
  not really. the key mistake here is treating gdp is a proxy for wages when there is no direct connection between the two. in a pathological case, you could have a $1T GDP and have zero wages paid. the question of whether mean or median figures are more appropriate when talking about wages (what I assume you are alluding to with your statistics quip) is a side issue. no amount of statistics knowledge will help someone who insists on comparing apples to oranges.

leetcrew 6y ago

it may be true, but it's not obvious without making some unstated assumptions. inflation-adjusted returns on loans are not necessarily positive (though they usually are). interest compounds geometrically by definition, but subexponential wage growth is an observation that may depend on how you calculate inflation.

chordalkeyboard 6y ago

> will inevitably in aggregate lead to a tiny minority owning virtually everything. I’m not convinced. Perhaps this is the case with a permissive central bank encouraging consumer credit.

kansface 6y ago

I have strong doubts given the amount of churn among both the ultra rich and our biggest companies. No one seems to stay in the top 10 for more than a few decades.

findthewords 6y ago

Lending at interest only leads to unlimited aggregation if the risk of lending is zero. Zero interest rate policy and government backed securities is indeed as close to zero risk as possible in the real world.