[–] daskapitalist ago
What if I dont want equity?
How does interest create new currency? Imagine if the loan didn't involve any money, just labor: I'll do this work for you over the next week if you do the same in return a year from now, plus an extra day of work. No money at all, but still interest.
Interest is just recognition that things now are often more valuable than things in the future, because of the benefits they provide over time.
[–] 0100100-100110 ago
I lived in the middle east for a few years. Interest rates didn't exist. Instead it was tied into the price of the object. Paying in full have the cheapest price, the longer you wanted to make payments the more expensive the item became.
[–] whyamIevenhere 1 point 0 points 1 point (+1|-1) ago (edited ago)
Didn't realize this site was all Muslims and commies. Holy shit, you're all economic retards. Lost a lot of respect for voat over the last two days.
So what happens if you make a loan and no product is ever produced? What if it's to start a plumbing business?
[–] JohnGaltApproves ago
Lending money is a form of investment based on time preference. However, the total amount due in return, and expectation placed on timeframe for repayment before default should be fixed, not variable, and should not be allowed to be compounded.
If I have money and you wish to borrow $100 from me, you and I can agree that you’ll repay me $110 by the first of July, and if you fail to do so, the amount itself doesn’t increase, but I will inform others that you have failed to repay in full and on time.
What is wrong is if neither you or I have money, but I have connections that allow me to borrow from somebody else at a low rate, and then turn around and “lend” that same money to you at a higher rate, and when you fail to pay me for what I’ve “lent” you, I turn around and not only report you, but I also charge you increasing fees and compounded “interest” on your original loan.
The lender in today’s market has no wealth to lend, and no risk is taken in doing so. If their borrower defaults, they sell the debt and move along. If enough borrowers default, the government bails them out so they can keep lending.