WTF? "Sharia compliant finance"

Post Reply New Topic

It is achieved throug partnership. Your lender become your "partner" and if your business prospers you buy out his share which consists of his original contribution plus profits. If the business loses you still buy out his share with what cash you have. That is how the rule against interest is by-passed. Orthodox Jews also use the same procedure.

ruveyn

For those interested in the history of money lending see http://gvanv.com/compass/arch/v1405/fahey.html

The Christians during the middle ages also abjured money lending and this permitted the Jews, for a long time, to monopolize this very profitable activity and gave birth to some of the animosities involved in antisemitism which pervaded through Europe for centuries and finally culminated in the Holocaust.

Some banks in UK offer such "interest free" mortgages: The banks buys officially the house and you buy the house from the bank in monthly settlement (of which the sum is higher than the price the bank paid), so proforma no interest are involved, just buying and selling, in reality it is just an other name for the interest.

But Christian merchants and even the church found ways around. When e.g Jakob Fugger paid for the election of Charles V to become Roman Emperor against the candidature of Francoise I of France and Henry VIII of England (a sum of 500'000 Gulden - a amount beyond even the annual income of the kings) he gained as a form of payment the revenue of the silver, tin and cooper mines of Charles in today's Austria and Hungary. This system was also used by the church when the church provided credit (mills, real estate, etc.). An other way was hidden charges: So credit for a half year was given in Reichsthaler (ca. 26g of silver) and paid back in Joachimsthaler (ca. 28g silver), so a hidden interest of roughly 16%.p.a.

The Wall Street Journal recently had a feature article on Fugger and the colony for poor people he built in Augsburg to make all his critics, including Martin Luther, all of who said he was too rich, shut the hell up. Interesting guy. When he died, he left his heirs seven TONS of gold! At $750/oz, I'm not sure what that is in today's money, but it surely made him a billionaire, the world's first. It's worth noting that the Fuggerei, as it's called, has nothing to do directly with the modern Fugger family, although the family has permanent seats on the board. Today's Fuggers, while rich, aren't billionaires by any means.

It's worth noting that the financing laws in Sharia didn't stop Islam from becoming the world's most powerful empire at a time when Europe was still in the Dark Ages. For a thousand years lending, and money in general, practically disappeared in most of Europe. People grew their own food. What they couldn't grow or make themselves, they traded food to local craftsmen for. Lords got a ready supply of food in exchange for overseeing the serfs. It would have been a superior system if not for the constant fighting between nobles over territory, a situation much like that in Africa today.

After the experience with Rome, and everybody being in massive debt that was impossible to pay and that was only wiped out by the end of civilization, NOBODY wanted to go back to a monetary system, until events forced them to. It is interesting to speculate what would have happened if the laws against lending had been more strictly enforced, and the Jews prevented from opening "counting houses" (aka banks). Europe might be like Africa, mired in tribalism and hopelessly behind the times. Colonization would likely be the province of Islam or maybe China, if it happened at all. Dare I say it, the world might be a better place without modern technological civilization.

It is always difficult to compare money, but in real terms he would be certainly a billionaire. His balance was approx. 2 Mio. Gulden, one Gulden was 36 Groschen and 5 to 10 Groschen was the weekly wage of a worker. So his fortune was in the region of 130'000 to 260'000 annual incomes of a worker. Quite considerable, especially if you remember that even important cities didn't have more than 20'000 or 40'000 residents.



This was was caused by Phillip II of Spain - he declared bankruptcy and and so the Spanish government bond went into default and lost their value. His son Anton Fugger was less careful to back-up investment.



But changed drastically in the 15th century with the development of trade first in northern Italy than in rest of Europe. The most common way of bookkeeping in Germany is called the "Italian Bookkeeping". At the end of 16th century you have the most finanicial instruments of today developed including stock companies or instruments of credit. Even manipulation of exchanges were known. Sir Thomas Gresham for example helped with manipulations of the Antwerp exchange Edward VI and Elizabeth I to get rip of a vast amount of the deficit inherited from henry VIII.



This constant fight was the direct result of this feudal system: Wealth and influence was measured in holding land. The only way to gain land holdings was war. Up the raise of modern state Europe was in constant war and it was never clear on which site whom stood when.



I don't think so - I am mid 40s; without civilisation it would very likely that I would already dead.