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Is Usury a part of Capitalism ?

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androbot2084
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01 Jul 2012, 5:33 pm

It's a big deal because interest costs are exponential.



ruveyn
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01 Jul 2012, 5:35 pm

androbot2084 wrote:
It's a big deal because interest costs are exponential.


They are not. If they were no one would be able to borrow money.

ruveyn



androbot2084
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01 Jul 2012, 5:41 pm

People can borrow money but there is no way to pay it back once the interest costs snowball. At 20 percent interest the amount you owe doubles every 5 years. After 50 years you will owe 1000 times more than you borrowed. And bankers wonder why there used to be a year of Jubilee.



edgewaters
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01 Jul 2012, 5:42 pm

ruveyn wrote:
androbot2084 wrote:
It's a big deal because interest costs are exponential.


They are not. If they were no one would be able to borrow money.

ruveyn


In math, if the values are increasing, and if the values consistently show a percentage increase, it is an exponential growth function. All interest is an exponential equation.



ruveyn
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01 Jul 2012, 5:49 pm

edgewaters wrote:
ruveyn wrote:
androbot2084 wrote:
It's a big deal because interest costs are exponential.


They are not. If they were no one would be able to borrow money.

ruveyn


In math, if the values are increasing, and if the values consistently show a percentage increase, it is an exponential growth function. All interest is an exponential equation.


Only if it is compounded. Simple interest is a matter of multiplication simpliciter. And loan interest is computed on a declining balance, otherwise it could never be repaid along with the principal.

ruveyn



edgewaters
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01 Jul 2012, 7:45 pm

ruveyn wrote:
Only if it is compounded. Simple interest is a matter of multiplication simpliciter.


The most common forms of borrowing (example, credit cards) are compounded; you pay interest on the interest, not just the principal.



ruveyn
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01 Jul 2012, 8:25 pm

edgewaters wrote:
ruveyn wrote:
Only if it is compounded. Simple interest is a matter of multiplication simpliciter.


The most common forms of borrowing (example, credit cards) are compounded; you pay interest on the interest, not just the principal.


On loans you pay interest on a diminishing principal balance.

On investments and bank accounts interest is added up on interest.

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androbot2084
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01 Jul 2012, 8:32 pm

But if you stop making payments the interest grows exponentially.



ruveyn
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01 Jul 2012, 9:10 pm

androbot2084 wrote:
But if you stop making payments the interest grows exponentially.


Or you file for bankruptcy.

If you are able to repay the loan it is NOT exponential. The payments decrease with the remaining principal.

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androbot2084
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01 Jul 2012, 9:18 pm

it could take 30 years to pay off a high interest credit card.



ruveyn
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01 Jul 2012, 9:29 pm

androbot2084 wrote:
it could take 30 years to pay off a high interest credit card.


Or less. If people are stupid about credit cards they will pay dearly.

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johansen
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01 Jul 2012, 10:34 pm

why don't we just let everyone loan out 100 times as much money as they have?


There is no solution to fix the boom-bust-recovery-boom-pacivity-fraud-too big to fail-Kaboom-bust business cycle, other than to actually throw bankers in jail when they break the laws. we seem to have forgotten how to do that.

now, back to centeral banks issuing fiat at will...
well, what do you think they do with the money they make?
it certainly isn't invested back into the nation.



edgewaters
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01 Jul 2012, 10:44 pm

ruveyn wrote:
On loans you pay interest on a diminishing principal balance.


Not necessarily. If you can't cover the interest in each payment, then it's exponential. The less you are able to afford it, the more you will pay. In this way, interest can become an exploitation of poverty itself, directly.

This can happen through no fault of the borrower (or lender), for instance if a person suffers an injury on the job and can no longer work.

Not that I am saying we should forbid charging interest on loans, but we can make rules to avoid or mitigate situations like this, which can be dangerous for both parties as well as third parties and society as a whole.



TM
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02 Jul 2012, 7:27 am

edgewaters wrote:
ruveyn wrote:
On loans you pay interest on a diminishing principal balance.


Not necessarily. If you can't cover the interest in each payment, then it's exponential. The less you are able to afford it, the more you will pay. In this way, interest can become an exploitation of poverty itself, directly.

This can happen through no fault of the borrower (or lender), for instance if a person suffers an injury on the job and can no longer work.

Not that I am saying we should forbid charging interest on loans, but we can make rules to avoid or mitigate situations like this, which can be dangerous for both parties as well as third parties and society as a whole.


What do you suggest we do though, since from a pragmatic perspective the borrower has taken money from the lender, if they are unable/unwilling to pay it back that might as well be called stealing and be covered under the law resulting in a prison sentence.



ruveyn
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02 Jul 2012, 11:05 am

edgewaters wrote:
ruveyn wrote:
On loans you pay interest on a diminishing principal balance.


Not necessarily. If you can't cover the interest in each payment, then it's exponential. The less you are able to afford it, the more you will pay. In this way, interest can become an exploitation of poverty itself, directly.

This can happen through no fault of the borrower (or lender), for instance if a person suffers an injury on the job and can no longer work.

Not that I am saying we should forbid charging interest on loans, but we can make rules to avoid or mitigate situations like this, which can be dangerous for both parties as well as third parties and society as a whole.


This ultimately leads to default which terminates the collection. The amount owned NEVER goes to infinity. Ever.

ruveyn



edgewaters
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02 Jul 2012, 11:07 am

ruveyn wrote:
edgewaters wrote:
ruveyn wrote:
On loans you pay interest on a diminishing principal balance.


Not necessarily. If you can't cover the interest in each payment, then it's exponential. The less you are able to afford it, the more you will pay. In this way, interest can become an exploitation of poverty itself, directly.

This can happen through no fault of the borrower (or lender), for instance if a person suffers an injury on the job and can no longer work.

Not that I am saying we should forbid charging interest on loans, but we can make rules to avoid or mitigate situations like this, which can be dangerous for both parties as well as third parties and society as a whole.


This ultimately leads to default which terminates the collection. The amount owned NEVER goes to infinity. Ever.

ruveyn


It doesn't need to go to infinity to be exponential. To be merely exponential, it only needs an exponent (5 to the power of 4 for example). Likewise, exponential growth can be a finite process.