Imagine if the concept of interest charges disappeared. You would not earn interest on your savings, but you would also not be charged interest on your debts. Who knows, some flat-rate service fee may cover the bank’s costs instead.
In fact, I hear the Arab world once had a banking system like that for religious reasons, and still may. I wonder if their reality is less ridden by instances of personal financial troubles than the western system because of it?
Is there anyone in the know to say something interesting about the topic?
Thanks.
ability to borrow money allows faster development of businesses, corporations, etc. If interest per se did not exist then would probably end up with something else, perhaps akin to arab style (investing instead of lending). If that didn’t exist, then something else, perhaps if nothing else were allowed than gov’t would do all the investing through taxes and grants.
#1 by aeronut626 on November 3rd, 2009
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no
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#2 by BrooklynNellie on November 3rd, 2009
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What’s the incentive to save or lend?
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#3 by mel on November 3rd, 2009
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no interest? many people would be out of work. There would be no profit in money lending, or money market funds, credit cards.
Banks would have no reason to exist.
Would anyone not paying interest have any incentive to pay off their bills?
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#4 by rojoe_58 on November 3rd, 2009
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That is a good idea but…There would be Many.many banks closing.
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#5 by fiddlesticks9 on November 3rd, 2009
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Actually the concept of ‘interest’ on money causes inflation, since ‘interest’ is not the result of specific INPUT, or WORK, but merely an arbitrary ‘charge’ , often ridiculously high, as a result of GREED.
Another ‘arbitrary’ problem with the economy is "suggested retail price" of goods which has ABSOLUTELY NOTHING to do with the actual, real, fair price of producing the goods + a ‘fair profit’……..it again is just an arbitrary, manufactured ‘price’ which is set arbitrarily by business, and most DEFINITELY contributes to inflation. It is also called ‘greed’.
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#6 by angrysandwichguy1 on November 3rd, 2009
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Do a Google on "usury" and you will get lots of info on the historical background concerning lending and borrowing capital. The problem, though, is that "some flat-rate service fee" will not cover the outlays and risk banks have to make and take. Remember, banks are not charitable organizations; they take on financial risk in an attempt to make money, for themselves.
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#7 by Joe Doe on November 3rd, 2009
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What if you wanted to barrow money ..like say for a house ? .. who would loan you money for free .. how would you offset inflation .. I think it has to many bugs ..of coarse that just my opinion
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#8 by Heathen on November 3rd, 2009
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In a capitalistic society the answer is no. Money is like any other commodity and subject to the laws of supply and demand. The "price" you pay for money is interest.
Say you have got two people that want to start a business but don’t have enough money. They both go to the bank, but the bank has a limited supply of money to lend and can’t lend to both. Who does the bank lend to? To whomever will pay the higher price.
On the other hand, banks want more money to lend so that they can charge interest to make money. Who do you give your money to? The bank that’s willing to pay you higher interest.
Without interest, undeserving people would get as much money as the next. That would lead to inferior products and loss of innovation.
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#9 by floyd lover on November 3rd, 2009
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Banks will never make interests-free loans,because that’s their money-maker. If you could borrow interest-free, soon the whole country would be in debt, because people would have no incentive to pay their loan promptly,and defaults would be the norm,not the exception.
Point 2: If you had a million bucks in someone’s bank that they’re using (hoping you won’t withdraw), wouldn’t you like some stipend of some sort for keeping your money there? They’re using your money for their capitalistic ventures and their bottom line………….
The religious thing you mentioned- If I’m not mistaken, there were no loans or savings involved in the final synopsis=the rich ones helped the poor ones and that was pretty much it. You didn’t borrow in anticipation of paying more,this is true, but you did pay back what you borrowed- the lender usually did have some sort of vested interests in mind when he made the loan to you, be it a favor -whatever.Nothing is free in this(or any) world!
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#10 by micky_says on November 3rd, 2009
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No.
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#11 by Emperor Norton II on November 3rd, 2009
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Interest charges are the results of the concept of economy.
Without a motive to invest money via third parties (i.e. banks, investment groups, et cetera) people and institutions would need to redistribute their scarce resources themselves.
Even a flat rate fee would be a type of interest. Or are you specifically refering to an interest rate percentage?
Personal financial troubles are due to ignorance, not interest.
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Thomas Sowell’s "Basic Economics"
#12 by larry n on November 3rd, 2009
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ability to borrow money allows faster development of businesses, corporations, etc. If interest per se did not exist then would probably end up with something else, perhaps akin to arab style (investing instead of lending). If that didn’t exist, then something else, perhaps if nothing else were allowed than gov’t would do all the investing through taxes and grants.
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