Welcome to Ansar Finance Group

Are Usury and Debt related?
A Definition of Terms
Creation of Debt
Usury and Debt on a Global Scale
Back to Usury main page

Are Usury and Debt related?

Islam, in common with the other Abrahamic faiths, prohibits usury since usury allows one to benefit at the expense of another. Nowadays usury is part of the capitalist system and economies use this as a tool to control monetary policy. Most financial institutions charge interest when lending money to clients and this means that one party is indebted to the other for a fixed term.

This section of the web site discusses whether or not usury and debt are related.

A Definition of Terms

A debt is that which is owed. Deferred sale agreements and loans require both sides to agree on a standard of deferred payment.

This is often a sum of money, but not always. Sometimes the debt owed can be a good or service, or even a financial instrument. One may for instance, borrow shares and pay for them later with the shares, plus a premium for the privilege of borrowing. There are numerous types of debt obligations. Larger sums of borrowed money are very common for significant purchases such as mortgages that are paid back with an agreed premium over time or all at once at a later date. An outstanding interest-bearing debt (of money or any other item) will increase through time if it is not repaid more quickly than it grows.

Usury commonly means interest on loans and these became an accepted practice of the business world. Interestingly, many of the early Western philosophers including Plato, Aristotle, Cato, Cicero, Seneca and Plutarch criticised usury. In the legal reforms of the Roman Republic (340 BC), usury and interest were banned. However, in the later periods of the Republic the practice was common and under Julius Caesar a limit of 12% was imposed due to the great amount of debt arising through usury.

"Since ancient times, more undeserved wealth and abusive power have been concentrated to an unassented few by institutionalized usury, than by any other form of oppression."
http://www.perfecteconomy.com/principal---what-is-usury.html

Creation of Debt

Illusions of prosperity appear as large amounts of money are borrowed and utilised within society. So, when "credit" is loaned out to borrowers, additional wealth circulates giving the appearance of abundance. Paying that money back involves interest, and as credit grows interest payments likewise increase as one can see in the world today.

When viewed in the overall, lending by commercial banks actually causes a net expansion of money supply. In other words commercial banks actually create the money that they lend. However, modern commercial banks do not lend the applicant something tangible (a gold coin for example), they instead lend the applicant an intangible credit which may appear as a figure on a bank statement (for example in the form of an overdraft limit).

The original loan, the "principal" amount, must be paid back with the interest charge, hence the amount of the repayment will always be greater than the loan amount. At those times when the supply of money contracts because of widespread efforts to repay outstanding debt, a recession or depression may arise. Prices may begin to fall in such circumstances and if the banking system calls in debts during such a period, debtors who are unable to refinance their old loans may be required to give up their assets to the banks at a fraction of their previous price. By these means, banks accrue vast sums of tangible assets. All this by lending money that they have created from nothing. As a consequence, borrowers can become the slaves of lenders, living on the "treadmill of debt."

Usury and Debt On A Global Scale

The third world is a classic example of the harm inflicted upon people by interest bearing debt. Many of these countries are unable to repay the interest on their loans, let alone the principal. It is easy to blame these problems on corrupt governments or poor economic policies, but then how is one to explain the fact that the United States is the biggest debtor in the world and the national debt of the U.S. is greater than that of the entire Third World? It seems that debt is a feature of something other than simply corruption or poor economic management. For the Western nations, the debt burden is less pressing that for, say, Ethiopia. The United States can borrow as many dollars as it needs in order to repay yesterday's debt . after all the dollar is created by the United States . On the other hand, Ethiopia cannot simply create dollars out of nothing in order to repay its debt.

For those third world countries that walk the treadmill, aid is not a solution. To solve the root cause of poverty in third world countries requires the removal of interest from the monetary and banking system. And we would argue that, in the rich world, solving the debt problem requires precisely the same approach.

"Who goeth a borrowing goeth a sorrowing." - Benjamin Franklin.

There is alas much truth in the wisdom of the elders. Usury is not a condition of the 20th/21st centuries, it has been with us as long as anyone can remember and unless we do something about it today , it will with us as long as anyone will be able to remember.

(Ref: http://www.brillig.com/debt_clock/)