Interest and Usury

As I proceed through the book on Islamic financing, in which usury (commonly mistaken as interest) is forbidden, I wonder what a market in which no usury occurs would look like.

I wonder if it can be quantified?  Can we quantify how much business is done under usury?  And if so, can we figure out the success/failure rate of such deals?  And then can we qualify what business activity is generally supported by usury?  I suppose, and this would be a moral judgment, that if usury was used to keep orphanages well provided that is one thing, but if usury kept crack dealers well funded that would be another.

If we are careful to notice the market (trade in goods and services) is a subset of the economy (the sum total of all human action), we already know that relatively little of the economy is supported by interest bearing agreements.  If you add up a ride to work, a neighbor giving you a pie, volunteer firemen and so on, surely the majority of the economy is not related to interest bearing agreements.

Next, the entire stock market, equities, has no interest aspect.  It is shared risk.  Bonds, that is debt, surely carry usury components, and in Islamic finance there are bonds, but they are not-interest bearing, the bondholder shares the profit and loss without taking equity or putting in money.  (Say a company wants to buy a new machine, and the vendor will not sell on credit.  A third party may guarantee the payment, with a view to enjoying some of the profit from the expanded business provided for by the new machine.  In this way it is like a bond, but no interest and a different kind of risk.)

Then there is of course usury (interest) in banking on everything from credit cards to auto loans to home loans.  Here is where the mischief lies.  Mismatched maturities (borrow low usury rates short term and lend high usury rates long term) and fractional reserve (multiplier effect on loans made and deposits of proceeds booked).  This is where both the magic of compound interest aggregates power in the hands of the few and in the same measure destroys the weal of the masses.

Even if usury is immoral, it is not illegal.  Nonetheless, in spite of the fact that untold wealth can be amassed through usury, people still resort to simple theft.

MFGlobal had little to do with usury, its stock in trade was hedging risk of farmers and commodities.  In this instance, the people running the company simply stole the investors money and directed it into their own accounts, for their own benefit.

Now listen to the former head of Goldman Sachs, former US senator, former New Jersey governor, the person head of MFGlobal and the next US Sec of Treasury, Jon Corzine had to say about himself and the stealing over a billion dollars:
“I sincerely apologize, both personally and on behalf of the company, to our customers, our employees and our investors, who are bearing the brunt of the impact of the firm’s bankruptcy,” Corzine says.
Bankruptcy is the problem?  No, taking peoples' money and using it as your own is the problem.  Bankruptcy is the result.

When people cannot see what they are doing is wrong even when it is clearly wrong, then how to expect them to perceive something more subtle, like usury, as wrong?

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