Saturday, January 7, 2017

Renting some money

Don't think I will refrain from thinking about something just because I don't know much about it.  My friend introduced me to the book "Debt: The First 5000 Years".  It sounds interesting and informative.  Unfortunately, I can't read it or even start reading it for a while.  I have too many other very good books that I have already started on and been distracted by other things before finishing them.  

Most of the last few centuries have included more widespread use of interest, the explicit debt I incur when I rent money.  I guess both Christianity and Islam have at one time or another forbidden followers from charging for the loan of money.  I haven't read enough to know just what it was that prompted the prohibitions or what reasons have weakened or changed the rules to allow the use of interest.  I have a book that intrigues me called "Pious Property" which is described as the story of how Muslim immigrants to America have been able to see their way clear to home ownership through modifications to the language and terms of a mortgage.  When I discussed the book a bit with my friend with a financial career and background, he slipped in the comment that "interest makes the world go 'round".  

As is often the case, the terms of the deal matter.  If I borrow $100 from you and you agree to accept only the very same bills and coins back to close my debt, having the money for a while may not be very helpful to me.  I probably won't bother borrowing from you.  Maybe, like the wicked witch of some stories, you will hound me or worse unless I give you my child.  The general idea of virtuous activity is that you can use the money I loaned you to create some expansive idea or business or project and earn enough to repay the debt and the reasonable interest I charge for having loaned you my money.  Hopefully, I will still have a profit after paying the rental on my money and giving you back your loan.

The business of debt can be transacted in "favors" instead of money.  I can do you a favor and inform you afterwards that you owe me.  I can make it clear that what I expect in return is undecided at this time but when I know, I will spell out the terms of repayment.  In this arrangement, I can communicate to you that repayment as specified will forestall unpleasant visits from my brothers.

A different angle on the subject of stewardship of money is told in the Gospel of Matthew 25 14-30.  The parable of the talents seems to be a clear support for capitalistic activity, using money to get money.

I have been listening to "Outsmart Yourself" a Great Course by psychologist Prof. Peter Vishton.  He says that several studies have explored people's natural feelings about interest.  The experiments ask about giving you $10 now or a greater amount in a day or so.  How high must the later amount be for you to choose waiting?  Many people want the tenner now unless they will get maybe $13 or $14 tomorrow.  That is asking 30% or 40% in one day, not annually.  If I say you will get $10.70 tomorrow, you will probably choose the money now if you are like most of the study subjects.

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