Sunday, May 24, 2015

A Case For Usury

There is an incoherent but typical pro-usury article at a hip young site called  The one-minute explanations being for the Sesame Street generation:

There is no objective criteria for what rate of interests is “usury”

The objective fact is usury causes harm in all instances.  It is a process of concentrating economic power in eer fewer hands, to the tipping point where a tiny minority literally call the shots.  This occurs regardless of the amount, rate or duration.

Traders have the right to trade by any terms they wish

Yes, obviously... irrelevant...

Interest is essential to the investment process

Prove it.

Charging interest is essential to guiding the investment process, 

Prove it.

which cannot be sustained by charity 

No one has asked the investment process to be guided by charity.

even it were forthcoming due to the economic calculation problem. 

What does the economic calculation problem have to do with charity?

 Interest rates are required to direct investments to their most productive use.  

Not internal rate of return? Return on investment?  Not personal aspirations?  Only interest rates?  And loans at interest is the only means of investment?

Interest-driven investment is essential to economic growth, and therefore to the very existence of industrial civilization. 

Mere assertion, nothing to warrant the claim.

If charging interest were outlawed, industrial societies would quickly collapse due to the inability to efficiently allocate savings.

Who advocates outlawing interest?  The theory implicit here says if interest rates went to zero, industrial societies would collapse.  Interest rates have gone to zero, and industrial societies are collapsing, in the asset categories of false economy interest-driven investments.  By legalizing (protecting) interest rates, the predators were able to concentrate ever more power in their own hands, and malinvest and misallocate vast swathes of productive capacity.  Interest allows ever fewer people to allocate savings contrary to the savers benefit.

“Loan sharking” is caused by government failure  Loan-sharking (charging high interest rates backed up by the threat of violence) reflects the fact that the loans are being given to creditors with a high risk of default. The need for violence is due to the failure of governments to see this fact, or to adequately enforce the loan contracts (such as with overly lax bankruptcy laws), rather than any immorality inherent in moneylenders.

This from  All we need is good government? How about merely not enforce interest provision ins contracts, as gambling debts are not enforced in law?

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