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ProVobis
Guest
The banks avoid that problem by not lending at all, while the Fed keeps printing and printing.
Credit card borrowers aren’t so fortunate. But many never intend to pay back even without the interest. So they end up raising the rates, which are really lending costs, on others. The whole thing is a vicious cycle.
Credit card borrowers aren’t so fortunate. But many never intend to pay back even without the interest. So they end up raising the rates, which are really lending costs, on others. The whole thing is a vicious cycle.
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mikekle
Guest
He was definitely right about it being a ‘social ill’, sad that our society cannot see this though.
I can only imagine some of the things Jesus is going to do when he comes back…I think it will be as dramatic as when he threw out the greedy money changers in the temple, but this time will probably happen in a bank LOL
I can only imagine some of the things Jesus is going to do when he comes back…I think it will be as dramatic as when he threw out the greedy money changers in the temple, but this time will probably happen in a bank LOL
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ProVobis
Guest
I definitely would like to see that happen. Then perhaps we’ll start trading with Jesus coins/currency, forget the banks.
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Coatimundi
Guest
I am glad Pope Francis singled out such things as “pay-day loans.” However, I am sorry that the full text of his remarks are not available in English. Many people are confused about what usury is, and some clarifying remarks from the pope might help.
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mikekle
Guest
I think of ‘usury’ as charging interest on any money loaned. It is how our monetary system works in modern society, but that still does not mean it is right in Gods eyes.
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ProVobis
Guest
But what if one looks at “usury” as the cost of borrowing? Is it any different than the cost of doing business, which keeps people employed? Everyone and everything has a cost. This is not against God’s laws.
Perhaps EXCESSIVE usury is the real issue. I’ll agree that it doesn’t serve any societal purpose of anyone charging higher interest once a contract has been agreed upon and after the money has been lent. It’s totally unfair to put another in further debt than necessary.
Better yet, just forgive the loan altogether. Why stop with no interest?
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ProVobis
Guest
I think I’m beginning to see where Pope Francis is coming from. Currently a certain Argentinean (from where the Pope comes from) bond is at 19% interest. Yes, that is high and I would denouce that too.
However, the thing is that the market controls the underlying price of the bond, which has plummeted in recent years. And as any bond holder knows, when the price of the bond falls, interest rate increases. If bond price halves, the interest rate doubles. It basically is a sign of an extremely weak (and perhaps hyperinflationary at the same time) economy.
Now in the U.S. when the Fed senses a poor economy, it buys bonds, driving the price up which effectively lowers the interest rates. In the QE program, the Fed prints gobs of money and buys longer term bonds of differing due dates. But now it creates a moral hazard of another kind. It cuts the savings incentives, and puts insurance companies, pensions, and other reserves in riskier investments. Risks so high a mild downturn in the economy will trigger a severe market decline, which many municipalities have already started to feel.
However, the thing is that the market controls the underlying price of the bond, which has plummeted in recent years. And as any bond holder knows, when the price of the bond falls, interest rate increases. If bond price halves, the interest rate doubles. It basically is a sign of an extremely weak (and perhaps hyperinflationary at the same time) economy.
Now in the U.S. when the Fed senses a poor economy, it buys bonds, driving the price up which effectively lowers the interest rates. In the QE program, the Fed prints gobs of money and buys longer term bonds of differing due dates. But now it creates a moral hazard of another kind. It cuts the savings incentives, and puts insurance companies, pensions, and other reserves in riskier investments. Risks so high a mild downturn in the economy will trigger a severe market decline, which many municipalities have already started to feel.
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manualman
Guest
The church hasn’t said much about usury in recent centuries because it’s gotten harder to define.
Once it could be defined as the imposition of ANY interest charges because in those days there was little to no natural inflation and cash was a parking place for excess wealth, not the basis of everyday commerce.
When barter lost its primacy and economies became cash-based, the line between just return for risk vs usury became impossible to rigidly define. But kind of like we all know the difference between art that uses nudity versus pornography, the practical difference isn’t all that hard to discern in real life. Don’t engage in predatory lending. Payday loans, car title loans, most subprime mortgages (do they have those anymore?), many credit cards and so on… usury. It’s still out there and it’s still wrong.
Once it could be defined as the imposition of ANY interest charges because in those days there was little to no natural inflation and cash was a parking place for excess wealth, not the basis of everyday commerce.
When barter lost its primacy and economies became cash-based, the line between just return for risk vs usury became impossible to rigidly define. But kind of like we all know the difference between art that uses nudity versus pornography, the practical difference isn’t all that hard to discern in real life. Don’t engage in predatory lending. Payday loans, car title loans, most subprime mortgages (do they have those anymore?), many credit cards and so on… usury. It’s still out there and it’s still wrong.
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ProVobis
Guest
I agree. Bartering would resolve the issue. Or at least to some extent where credit isn’t extended and/or currency doesn’t fluctuate.
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markomalley
Guest
Nothing really new here.
From Pope Benedict XVI (1745):
26. {32} Wishing to close up the abyss of usury, which devours souls and swallows up property, we order under threat of the divine malediction that the constitution of the Lateran council against usurers be inviolably observed. Since the less convenient it is for usurers to lend, the more their freedom to practise usury is curtailed, we ordain by this general constitution as follows. Neither a college, nor other community, nor an individual person, of whatever dignity, condition or status, may permit those foreigners and others not originating from their territories {33} , who practise usury or wish to do so, to rent houses for that purpose or to occupy rented houses or to live elsewhere. Rather, they must expel all such notorious usurers from their territories within three months, never to admit any such for the future. Nobody is to let houses to them for usury, nor grant them houses under any other title {34} . Those indeed who act otherwise, if they are ecclesiastical persons, patriarchs, archbishops or bishops, are to know that they incur automatic suspension; lesser individual persons, excommunication, colleges or other communities, interdict. If they remain obdurate throughout a month, their territories shall lie henceforth under ecclesiastical interdict as long as the usurers remain there. Furthermore, if they are layfolk, they are to be restrained from such transgression through their ordinaries by ecclesiastical censure, all privileges ceasing {35}
Not like any of this is new stuff…regardless how the secular media would try to spin it.
From Pope Benedict XVI (1745):
- First of all, show your people with persuasive words that the sin and vice of usury is most emphatically condemned in the Sacred Scriptures; that it assumes various forms and appearances in order that the faithful, restored to liberty and grace by the blood of Christ, may again be driven headlong into ruin. Therefore, if they desire to invest their money, let them exercise diligent care lest they be snatched by cupidity, the source of all evil; to this end, let them be guided by those who excel in doctrine and the glory of virtue.
Encyclical Vix Pervenit
26. {32} Wishing to close up the abyss of usury, which devours souls and swallows up property, we order under threat of the divine malediction that the constitution of the Lateran council against usurers be inviolably observed. Since the less convenient it is for usurers to lend, the more their freedom to practise usury is curtailed, we ordain by this general constitution as follows. Neither a college, nor other community, nor an individual person, of whatever dignity, condition or status, may permit those foreigners and others not originating from their territories {33} , who practise usury or wish to do so, to rent houses for that purpose or to occupy rented houses or to live elsewhere. Rather, they must expel all such notorious usurers from their territories within three months, never to admit any such for the future. Nobody is to let houses to them for usury, nor grant them houses under any other title {34} . Those indeed who act otherwise, if they are ecclesiastical persons, patriarchs, archbishops or bishops, are to know that they incur automatic suspension; lesser individual persons, excommunication, colleges or other communities, interdict. If they remain obdurate throughout a month, their territories shall lie henceforth under ecclesiastical interdict as long as the usurers remain there. Furthermore, if they are layfolk, they are to be restrained from such transgression through their ordinaries by ecclesiastical censure, all privileges ceasing {35}
Not like any of this is new stuff…regardless how the secular media would try to spin it.
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mikekle
Guest
There are plenty of pay day loan, car title loan places and other such companies operating out there today, I see commercials for them all the time. Kind of strange they cracked down on sub prime mortgage (or at least that is what they have said), yet they let all these other places continue to gouge people on interest rates. I believe some of these places can legally charge over 30% interest!!! That should definitely be criminal, one could probably borrow money from the mafia at a cheaper rate LOL
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nishkalank
Guest
Capital is one of the factors of production. How can any enterpreuner start a business without borrowing capital. So when he borrowes capital the owner of the capital must get a return. That is called interest. Thus like labour getting his wages and the landowner getting rent, the capital gets interest and it is right and just. What Pope intends is that the owner of the capital exploiting the situation and exacting high and unreasonable interest. There are instances of charging 100 percent, 50 percent, 20 percent interest, which is just murder of enerpreunership.USuary or interest when extracted at high rates is nothing but exploitation.
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7_Sorrows
Guest
is it in Islam that they are prohibited from buying anything on interest? i was thinking i had read that somewhere.
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markomalley
Guest
Not allowed to charge interest on loans. The borrower and lender agree on a fixed amount to be provided in consideration of loaning the money (the same principle happens when a depositor puts money into the bank as well, by the way)
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ProVobis
Guest
Good point. The banks will figure out some way of gouging the public, interest payments or otherwise. Closing costs on mortgages, for example, can also be excessive if not prohibitive. And the depositors currently are taking it on the chin, as they are losing ground to monetary inflation.
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JimG
Guest
I’ve wondered about this myself. Bank loan rates are hardly exorbitant, but payday loan rates sure are. (So are credit card rates.) And yet they have the same customers returning week after week. Some of those places have great customer relations. Their customers love them, even while they are being gouged on interest.
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JimG
Guest
Before the industrial revolution, there was not anything you could do with money except spend it or hoard it. It didn’t earn interest. There was nothing to “invest” it in. So of course, lending excess money was like lending a cup of flour to a neighbor. The borrower couldn’t make any extra money with it, so it was unfair to expect a profit from lending it, any more than you would expect the return of two cups of flour when you only lent out one.
But now, money is no longer idle. It can earn a return—and is expected to do so. Consequently lenders expect a reasonable rate of return from lending.
But now, money is no longer idle. It can earn a return—and is expected to do so. Consequently lenders expect a reasonable rate of return from lending.
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Inisfallen
Guest
Over 30% interest? You have no idea. Payday loans typically have interest rates of several hundred percent, annualized. They are absolutely predatory lending, preying on desperate people who have no other choice.
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stinkcat_14
Guest
One of the problems with payday loans is that there are huge recordkeeping and other costs associated with making very small loans. While I agree that the interest charged is outrageous, I really don’t know what the alternative is. Because I certainly wouldn’t lend my money to the type of people who take out payday loans.
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