Is Usury a part of Capitalism ?

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You want a failure to pay a debt to be an actual crime?

1) That's going to be unacceptable to most people as this is not the 19th century.
2) Crimes are generally considered to be areas where an individual has committed a moral wrong, so.... having a crime without personal failing is pretty suspect, and likely to cause problems in our legal and political system.
3) We already have alternative systems, like bankruptcy. Bankruptcy may not be the best system, but the issue is that anybody who declares it still suffers(bad credit, which undermines their ability to get loans in the future, and is used in other commercial transactions). I mean, sure, if you have debtors prison, you'll get some more people to pay on their debt, but at what cost? Imprisoning people is a loss to society, both in the taxes needed to sustain these prisons, and in the lost labor.

Long-story-short: This sounds like an incredibly stupid idea.

People in debt are already kinda in a prison, of their own making of course. By putting them in jail its a guaranteed default, since theres no way they can pay you back ever?
Debt is slavery to me, so i don't take part in it, its this stupid perception issue people have, Such as basically, Saving up for item x, takes 300 days work (taking into eating accounts, leisure side things) Having item x today, pay back with 350 days work. it just doesn't make sense to me why anyone would think this contract a good idea. But i guess consumerism demands we buy now.

No, I was merely pointing out that the result of someone borrowing money without being able or willing to pay it back and someone stealing the same amount of money is more or less the same. Alternate systems not taken into account.



It was not meant as "hey guys we should do this" as much as "If I have $100 and I lend that to you, and you fail to pay me back I have $0, if you take the $100 from my wallet without me knowing, I have $0." Exaggeration not withstanding. From my perspective, it's the job of the lender to make sure that the borrower is capable of paying back borrowed capital, with a reasonable change in circumstances included such as interest rates going up.

One of the problems with things like Mortgage backed securities was that the banks sold the loans rather than held on to them and collected interest + payments like they used to do. With this, the loan officers and banks could quite frankly stop caring about the creditworthiness of customers. Certain countries actually have laws that prevent banks from doing this, by more or less saying "Banks that knowingly gave people mortgages that they couldn't afford, cannot require the borrower to pay it back".

Charging rent for the use of money is consistent with capitalism. Does that make it wrong?

ruveyn

By just about any established business principle it makes perfect sense. If you lend someone $100.000, then that's 100k you can't get a return on for as long as it takes them to pay it back, so interest payments are their return on equity. If a bank didn't charge interest then any loan made would be a loss for the bank and they'd eventually go bankrupt.

This thread isn't really about interest rates though, usury is usually taken to mean "excessive" or "abusive" interest, so not all interest would qualify. Most short term loans, such as credit cards do tend to have the usury issue, but it strikes me as being a result of a lack of collateral. If you borrow money for a house, the bank has an asset they can claim if you default, if you rack up $10.000 in credit card debt buying tequila and lap dances, the bank doesn't really have an asset to claim.

Islamic banking does have certain ways to avoid interest, since interest rates can be viewed as being haraam depending on interpretation and enforcement.

It's not an ethical, right/wrong question, of credit vs no credit. Best outcomes and highest performance of the economy for the populations it serves is the question. In that respect, yes, we need a reasonable system of credit - within a framework that prevents things from getting out of control.

So if you owed a ton of money and died what would happen will it be passed on to family?

generally the bank always makes money until there's a peasant uprising.

Under U.S. laws the children of people in debt do not inherit the debt. It dies with the borrower. However the estate of the borrower can be sued for complete or partial compensation. But the earnings of the children cannot be touched.

ruveyn

TM, the obvious difference is that a lender chooses to give money to a borrower with some recognition that the borrower may not be able to pay it back, and that's a biggie.