 Money Lending, It's History and Philosophy, by Dr. Yaron Brooke. Throughout history, they've been called evil, blood-sucking, money-grubbing parasites. Authorities in the Middle Ages damned them as spiders, toads, and all creatures diabolical. Medieval artists saw them drag down to hell by the bag of money around their neck. Their actions were sinful according to the Catholics and, I quote, a great huge monster like a werewolf to Martin Luther. In the 20th century, both left-wing environmentalists and the Christian right hate them. The writer Ezra Pound described their work as, quote, the core of evil, the burning hell without let up, end quote. Shakespeare, Dickens, Dostoevsky, modern literature and popular novels depicted them as villains. They are condemned as useless, overpaid, paper-shuffling parasites. These are the users of the Middle Ages, the bankers of the 19th century, and today's Wall Street financiers. They are the people who make money from money, the money lenders. Their activity has been condemned by almost every thinker in history, even those who disagree on almost every other issue, Plato, Aristotle, Aquinas, Adam Smith, Marx, Keynes, the good guys as well as the bad guys. In spite of all this, money lenders have worked to make commerce and industry possible since money was first used. They funded the first trade between the Christians in Europe and the Saracens of the East. They backed the new merchants of Italy and later Holland and England. They supported Spain's exploration of the new world and funded gold and silver mining operations. Without them, the successful colonization of America would have been impossible. And most important, they fueled the industrial revolution by supplying the necessary capital to new entrepreneurs in England, the US, and Europe. They made possible the steel, railroad, automobile, and every other industry. In the late 20th century, they provided billions of dollars to finance the computer, telecommunications, and biotech industries. Without the financiers, without the markets and institutions, none of our material wealth would exist. So the question we are asking today is, given their enormous contribution to human well-being, why have they been so mistreated? Why do they continue to be mistreated? My goal is to explain the universal hostility towards one of humanity's greatest benefactors, the moneylenders, and what is required to replace this hostility with the gratitude that is the moneylenders' right. You will also learn the paradoxical role played by Aristotle in the moneylenders' reputation, how his own argument against moneylending, which was adopted by centuries of scholastic thinkers, was destroyed by his own methodology. Moneylending is the root of all finance. It is the most elementary financial transaction in which person A lends person B X dollars for a fixed period of time and requires that the money be returned with interest. This practice of making money from money has been vilified for thousands of years. Today's lecture, however, is not on finance or economics. We will be discussing philosophy and history primarily. I will examine the changing views of moneylending by philosophers and economists and the culture in general against the background of a history spanning more than 1,000 years. I am assuming a certain context of knowledge that you know something of the history of the West and you are familiar with the general philosophical attitudes of different historical eras. I am also assuming that you know, at least at some level, that moneylending is a productive and economically valuable activity. Proving this is beyond the scope of this current talk. However, a thorough economic defense and explanation of the productivity of finance already exists in the writing of the Austrian economists and in my course in defense of financial markets available at the Einwand bookstore. Moneylenders throughout history have been called users, a term that connotes wickedness. However, usually according to the Oxford English Dictionary, is, and I quote, a premium on money given on loan or the fact or practice of lending money at interest. It is what we consider today as taking interest. It is only in modern usage that it means, quote, the practice of charging, taking or contracting to receive excessive or illegal rates of interest for money on loan. We shall see how the concept of usury evolved. I will use the term usury primarily in its original sense, a synonymous with lending money at interest. While Greek and Roman culture were somewhat hostile to usury, I think the modern hostility has its roots in Christianity. Thus, let us start the historical journey with the Dark Ages, a time when the church ruled men's lives. William Manchester describes the Dark Ages as, quote, stark in every dimension, famines and plagues culminating in the Black Death and its recurring pandemics repeatedly thinned the population. Among the lost arts were Brick Lane, in all of Germany, England, Holland and Scandinavia virtually no stone buildings except cathedrals were raised for ten centuries. Peasants labored harder, sweated more and collapsed from exhaustion more often than their animals. Now in this world, the concept of an economy had little meaning. Human society had reverted to a primitive, pre-civilized state and barter was the only means of trade. For centuries, money disappeared from European commerce. Now some trade did exist as did some lending, but loans were made with goods and the interest was charged with goods. These loans enabled people to survive the tough times inevitable in an agrarian society. Yet the church violently opposed this mild level of life-sustaining lending. During this period, the Bible was considered the fount of all knowledge. For every question, every problem, scholars consulted the Bible for answers and the Bible clearly opposed usury, lending money or goods at interest. The prohibition against usury has its roots in the Old Testament. God says to the Jews, thou shalt not lend upon usury to thy brother, usury of money, usury of vitals. And later it says, unto a stranger, thou mayest lend upon usury. In other words, Jews could not engage in usury with other Jews, but were allowed to make loans at interest to non-Jews. Although the New Testament does not condemn usury explicitly, it makes clear that one's moral duty is to help those in need. Thus, to give them money or goods without the expectation of anything in return, neither interest nor principle. As Luke states, quote, lend hoping for nothing again. Jesus' expulsion of the money changes from the temple is merely a dramatic parable of the evil of profit and of profit generated by loaning money in particular. Christianity opposed usury from its beginnings and reinforced its moral objections with legal restrictions. In 325 A.D., the Council of Nicaea banned the practice among clerics. Under Sholomon, the Church extended the prohibition to everyone, defining usury simply as a transaction, and I quote, way more is asked than is given. In 1139, the second letter in Council in Rome denounced usury as a form of theft and required restitution from those who practiced the sinful act. In the 12th and 13th centuries, strategies that concealed usury were also condemned. The Council of Vienna in 1311 declared that any person who dared claim that there was no sin in the practice of usury should be punished as a heritage. Now, the Bible's double standard allowed Jews to lend to Christians since Jews did not see Christians as their brothers. For lengthy periods during the Middle Ages, both church and civil authorities allowed Jews to practice usury. Many princes, who required substantial loans in order to pay bills and wage wars, allowed Jewish users in their states. They rationalized this by reference to the fact that the Bible did not prohibit Jews from engaging in usury. Europe's Jews, who were already barred from most professions and from ownership of land, found money lending a profitable, hazardous profession. Now, I have a lot more to say about Jews and money lending during the Middle Ages and why I think it's at the roots or one of the causes of anti-Semitism in Europe, so please ask me about that in the Q&A if you're interested. From the outset, there were clearly problems with the biblical interpretation. How could it be that Jews were prohibited from lending to other Jews but were allowed to lend to strangers? Saint Jerome's solution was that it was wrong to charge interest to one's brother. And to Christians, all other Christians were brothers. But it was fine to take usury from one's enemy. Usury was perceived as a weapon that weakened the borrower and strengthened the lender. So if one loaned money at interest to one's enemy, that enemy would suffer. Now, this actually led Christians to the absurd practice of lending money to the Saracens, their enemies, during the Crusades. Now, Christian thinkers viewed economic life as a zero-sum game. That is, every winner entailed a loser. The lender seemed to grow richer without effort at the expense of the borrower who became poorer. As one contemporary English theologian wrote, the user wants to make a profit without doing any work, even while he is sleeping. Unsurprisingly, users suffered for their profession. Preachers used their sermons to vilify the user who became the universal symbol for evil. Stories describing their horrible deaths and horrific existence in hell were common. In one sermon, a prominent French bishop argued, God created three types of men, peasants and other laborers to assure the subsistence of others, knights to defend them and clerics to govern them. But the devil created a fourth group, the users. They do not participate in men's labors and they will not be punished with men, but with the demons. For the amount of money they received from usury corresponds to the amount of wood sent to hell to burn them. Users were evil, said the church, because their profits were obviously selfish. Since they became rich without appearing to do any work, they were considered unproductive. Since the lender's gain was the borrower's loss and the borrower was often poor, they were considered exploitative or unchristian. But the fundamental condemnation of usury during this early period was dogmatic. The Bible said it and everyone accepted it. Morality from the evil thinkers had little connection with productivity or reality, only with Scripture. Now even if the thinkers at the time cared about the productivity of money lending, there was little economic activity to suggest that usury had any practical value. This is one period in history where it would be impossible to observe the merits of usury and very easy to believe that its main function was exploitation. After all, this is a world in which, according to William Manchester, I quote, abduction for ransom was an acceptable means of livelihood for skilled but landless knights. Where the level of everyday violence, deaths in alehouse, brawls, bouts with staves, or even plain football or wrestling was shocking. That's the church's view that usury was evil incarnate, even though based on biblical authority would have been difficult to dispute. Now the 11th century brought significant changes. Through trade with the far east and exposure to the flourishing cultures and economies of North Africa and the Middle East, economic activity increased throughout Europe. This activity created a greater demand for capital, for credit. Money lenders arose throughout Europe to fill the need. Between the 11th and 13th centuries, Europeans imported many goods from the south and east. But more important, they imported knowledge. The Arabic numerical system, double entry bookkeeping, mathematics, science. Most importantly, they discovered the works of Aristotle. Aristotle's works soon became the focus of attention in all of Europe's learning centers, and his writings had a profound effect on the scholars of the time. No longer were biblical references enough for the young intellectuals. They had discovered reason, and they required that their ideas be grounded in it. While they were still handcuffed by their Christianity and therefore spent most of their time trying to rationalize Christian doctrine, their acceptance of reason and the efforts to incorporate it were truly heroic. Like earlier Christian scholars, but for far different reasons, Aristotle believed that usury was unjust. In his first book of politics, he writes, The most hated sort of money making and with the greatest reason is usury, which makes a gain out of money itself and not from the natural use of it. For money was intended to be used in exchange, but not to increase its interest. And this term usury, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore, of all modes of making money, this is the most unnatural." Aristotle shared the Christian view that economic activity was a zero sum game. He believed that charging interest was immoral because money is not reproductive. Here is his argument. If you allow someone to use your orchard, the orchard bears fruit every year. It's productive. From this fruit, he can pay you rent. But money is merely a medium of exchange. When you loan someone money, they receive no value from the money itself. The money does not create more money. It's barren. So an exchange of $100 for $100 plus $10 in interest is unjust, since you receive more than you gave, and what you gave could not have brought about 10% increase. Making money from money is therefore unnatural because money cannot multiply itself or bring about the multiplication of an orchard. The platonic remnant in Aristotle led him to believe that every good has some intrinsic absolute value, that $100 was worth $100 and could be worth only $100. He either did not consider or reject the idea that money loses value over time as it's used to the lender's postpone or that money could be invested in other economic activity to create wealth. For Aristotle, money could not itself yield anything extra. The lender's gain could not come from any attribute unique to money. So it had to come from defrauding the borrower, in other words, by abuse and injustice. For Aristotle, the reason usury was immoral lay in reality in the fact, as he perceived it, that it did not seem to improve human life, that it was not productive. For the next 400 years, the theologians and lawyers struggled with Aristotle's idea, producing several rationalistic arguments against usury. To begin with, they updated Aristotle's argument for the baroness of money, confirming that the usury was an unnatural parasite. As one of them put it, quote, usury is sinned against nature by wanting to make money, give birth to money, as a horse gives birth to a horse. They also argued that usury generated an unnatural separation between ownership and use of a good, claiming that usury was like asking two prices for wine, one price for the wine and one for drinking it. And similarly, the usury generated profit for the lender from goods that didn't belong to him, those goods owned by the borrower. As one scholastic put it, he who gets food from that money, whether it be pieces of money or anything else, gets it from a thing which does not belong to him, and it is accordingly all the same as if he were to steal it. Now, the most economically significant scholastic observation about usury came from Thomas Aquinas, who observed that interest is the price asked for time. Users seek a pretext to make the prohibited business appear fair by claiming compensation for time. That is their intention, said Aquinas, sorry, that this is their intention, said Aquinas, is evident from the fact that they changed their interest rates according to the duration of the loan. However, the medieval believed that time was a common good. It belonged to no one in particular, but was a gift from God. Thus they believed that users wanted to defraud God. Contemporary prohibitions even condemned the fact that usury did not stop working on the Sabbath. Interest was still working. Which was God's day. 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Click the dealer locator link to find a dealer near you and go to SoCalHondaDealers.com to suggest a random act of helpfulness for someone you know. Now, while the idea that an individual's own time was centuries away, Aquinas' identification of the value of time and its relationship to interest was original and valid. Indeed, interest is compensation for a delay in using one's own funds. It is compensation for the user's time. Aquinas' era would later be corrected by his greater legacy. His reintroduction of a self-correcting method. Reason. While the scholastics came to similar conclusions as those reached by earlier Christian thinkers, they now defended their views by reference to the perceived economic reality created by usury. The biblical references were now only part of their argument against usury. The issue of its economic worth, its productivity, became their central concern. Thus, the discussion turned away from Scripture to reality. The question became, is money barren? Does usury have a productive function? Now, this is Aristotle's great achievement. Aristotle, through Aquinas, turned the human mind back to reality, away from faith and away from Scripture. It would take hundreds of years for this to develop fully, but the type of arguments made during the late Middle Ages show the beginnings of a revolution. As time passed, these scholastic arguments had to contend with a profound adversary and new economic reality. The economic expansion and growth and trade that occurred in southern Europe, starting in the 12th century, required capital. Thus, users were plentiful. They were often Jews, but just as often they were Lombards, Tuscans, and others. Money lenders made it possible for the church to finance the Crusades. They allowed kings to wage wars and merchants to trade across vast distances. While the merchant credit they extended was technically usury, they were selectively allowed to continue their activities, but by both paper and civic authorities. They were too valuable to be shut down completely. Thus, the church implicitly condoned a moral practical dichotomy. While it was a moral, usury was necessary and therefore allowed selectively. Indeed, while the church claimed that justice was its main concern in prohibiting usury, its behavior suggests otherwise. Church officials, particularly from the 12th century on, frequently manipulated the usury doctrine and its enforcement to bolster the financial power of the church. When it wanted to keep its own borrowing costs low, the church enforced the usury prohibition. At other times, the church readily loaned money for interest. Monks, who are among the earliest money lenders, offering carefully disguised mortgages throughout the Middle Ages. The church itself was often a lender. Vatican documents revealed that they engaged in hard-nosed treatment of delinquent borrowers. They were often threatened with excommunication if they did not repay the loans on time. Church officials looked the other way to usury of a favored transgressor. The Florentine banks, for example, the Medici's since the church was a regular borrower while continuing to condemn usury. Now, to facilitate the church's selective opposition to usury, religious and civil authorities created many loopholes in the prohibition to avoid the stigma associated with usury. As early as 1220, a new term was coined to replace certain forms of usury. The concept was of interest. The modern word interest derives from the Latin verb interior, which means to be lost. Note that interest was considered to be a loss, not a profit, which is totally consistent with the church's zero-sum economics and altruism. Compensation for a loan was illegal if it was a gain or profit, but if it was reimbursement for loss or expense, it was permissible. Thus, interest was considered compensation due to a creditor because of a loss which he had incurred through lending. It was, in a sense, damages not profit. Therefore, interest was allowed sometimes while usury never. So, some money lenders were allowed to charge interest as a penalty for delayed repayment of a loan, provided that the lender preferred repayment to the delay-plus interest. That is, provided that it was a sacrifice. Loans were offered structured in advance, so that such delays were anticipated and priced, and the prohibition on usury was avoided. Many known money lenders and bankers, like the Belgian lombards, derived their profits from such penalties. Over time, the view of costs or damages for the lender was expanded. The lender's time and effort in making the loan could be a reason for charging interest. A far-lose interpretation allowed for interest to be charged if the lender could show an obvious, profitable alternative use for the money. If by lending he suffered from the inability to make a profit elsewhere, the interest was allowed as compensation for the potential loss. Indeed, according to some sources, even risk, economic risk, was viewed as worthy compensation. Therefore, if there was a risk that the debtor would not pay, interest charged in advance was permissible. Now this is a major breakthrough. The legitimization for advanced recognition of a venture's risk and for compensation and advance for this risk was a giant leap. The recognition of the idea of certainty and uncertainty in planning and in economic calculations is evidence of the influence of Aristotle's epistemology in the period following the 13th century. While economic activity continued to grow during the late Middle Ages and the prohibition on usury was evaded or even ignored, the people of the time suffered greatly. Users were forced to pay restitution and driven to poverty. They were often excommunicated. In the case of Jews, they were often violently attacked and murdered. They say a high-risk profession. Spiritually, moneylenders were constantly under attack. They were the devil's henchmen and were sure to go to hell. It was common to hear stories of users going mad in old age out of fear of what awaited. Remember, people took their faith very seriously. They truly believed in hell. The Italian poet Dante, for example, placed them in the seventh rung of hell, incorporating the traditional medieval punishment for usury, which was eternity with a heavy bag of money around one's neck. Users in Dante's hell are forever weighted down by their greed. Prophets believed Dante should be the fruits of labor and usury entailed no actual work. He believed that the deliberate intellectual choice in such an unnatural action as usury was the worst kind of sin. It is a wonder that anyone, let alone so many, defied the law and their faith to practice money lending. In that sense, the users were truly heroic. By defying their religion and placing themselves in danger, they made their material lives better. They made money. And by doing so, they made possible economic growth for the first time in hundreds of years. It was thanks to a series of loans, for example, from local money lenders that Gutenberg was able to make his printing press commercial. The early bankers made possible advances in commerce and industry that would grow into the economy of the Renaissance and later the Industrial Revolution. By the end of the Middle Ages, though everyone condemned usury, few could deny its practical use. Thus the Middle Ages established a split that exists to this day between what is proper and moral and what is practical and economically necessary. Usury was tolerated as necessary for economic advancement and for the enrichment of the powers to be church and prince. But morally condemned, economics and morality was split. In the following centuries, man increased his understanding of the productivity of usury but added virtually nothing to its moral evaluation. The start of the 16th century brought about a commercial boom in Europe. It was the golden age of exploration. Trade routes opened to the new world and expanded to the east, bringing unprecedented trade and wealth to Europe. To fund this trade, to supply credit for commerce and the beginnings of industry, banks were established throughout Europe. For example, Genoese and German banks funded Spanish and Portuguese exploration and importation of new world gold and silver. Part of what made this financial activity possible was the new and necessary tolerance in some cities towards usury. The Italian city of Genoa, for example, had a very relaxed attitude towards usury and moneylenders created many ways to circumvent the existing prohibitions. It was clear to the city's leaders that the financial activities of its merchants were crucial for Genoa's prosperity. However, the leaders and principal tolerance could not last and at the first economic downturn, the city's financiers were attacked. Although the Catholic Church's official view towards usury remained unchanged until the 19th century, the Reformation which occurred principally in northern Europe brought about a mild acceptance of usury. This could indeed be one reason. Southern Europe, which was heavily Catholic, lagged the rest of Europe economically from the 17th century onwards. Now, Martin Luther, a leader of the Reformation, believed that usury was inevitable and should be controlled but allowed by civil law. Luther believed in the separation of civil law and Christian ethics. This view was not a result of his belief in a separation of state and religion, but because he believed the world to be too corrupt to be guided by Christianity. He viewed men as, quote, ''incorrigibly depraved and the world a theater of their demonic aggressions.'' Christian ethics and the Old Testament commandments would become the subject of utopian dreams, unconnected with political or economic reality. He deemed usury a matter for the civil authorities and thus he believed that usury may be permitted. However, Luther still considered usury a grave sin and in his later years wrote that I quote, ''There is on earth no greater enemy of man after the devil than a great money and usurer, for he wants to be God over all men. And since we break on the wheel and behead high women, murderers and housebreakers, how much more ought we break on the wheel and kill, hunt down, curse and behead all usurers.'' In other words, civil authorities should allow usury as in general because it was inevitable. Men will be men. But condemned in the harshest terms by the moral authority. This is the moral practical dichotomy in action sanctioned by an extremely malevolent view of man and the universe. John Calvin, another Reformation theologian, had a more lenient view than Luther. He rejected the notion that usury is actually banned in the Bible. Since Jews are allowed to charge interest from strangers, God cannot be against usury. It is fantastic to imagine that by strangers God meant the enemies of the Jews. It is horrible and un-Christian, Calvin thought, to legalize discrimination against one's enemy. According to Calvin, usury does not always conflict with God's law. So not all usury need to be damned. There was a grave difference between taking usury in the course of business and setting up as a usurer. If a person takes a profit on a loan on only one occasion, he's not a usurer. The crucial issue he thought is the motive. If the motive is to help others, usury is good. If it is profit, usury is evil. Calvin claimed that the moral status of usury should be determined by the golden rule. It should be allowed only in so far as it does not run counter to fairness and charity. Interest should never be charged to a man in urgent need or to a poor man. The welfare of the state should always be considered. In any case, a maximum rate should be set by law and should never be exceeded. Thus he concluded that interest could neither be universally condemned, nor universally permitted. The 16th century was not completely barren, however. Mali Naus, a French jurist, made significant contributions to liberate usury from scholastic rationalism. Against the argument that money is barren, Mali Naus observed that everyday experience of business life showed that the use of any considerable sum of money plus human effort yields a service of importance. He argued that money assisted by human effort does bear fruit in the form of new wealth. Just as Galileo would later apply Aristotle's method to physics and thus refute Aristotle's specific ideas in physics, Mali Naus, in refuting Aristotle's argument, uses Aristotle's method. Aristotle's philosophy with its emphasis on reality, on observation, is self-correcting. The method undercuts his rationalistic argument against usury. As the economy grew and financial activity intensified, the notion that money was bound was defeated by the counter-evidence in reality itself. Now there was sufficient evidence for an honest man to see it. Unfortunately, just as Galileo was to suffer for his ideas, so Mali Naus suffered for his honesty in his work. The Church forced him into exile and his book was placed on a list of banned books. Nevertheless, his ideas made their way around Europe and had a significant impact on further discussion of money lending. As a result of the work of Luther, Calvin and Mali Naus, the prevailing view that emerged in the late 16th century was that money is not barren. It plays a productive role. However, usury is not Christian. It is motivated by a pure desire for profit and can be used to exploit the poor. It is useful but not moral. Therefore it should be controlled by the state, subjected to regulation, to protect the exploited and rein in the ability of financiers to make money. This view has influenced almost all attitudes about usury since then. In a sense, Luther and Calvin are responsible for today's so-called capitalism. They are responsible for the guilt many people feel about making money. They are responsible for the guilt that causes people to gladly regulate the functions of capitalism. They are responsible for the guilt that has destroyed capitalism over the last century. Moreover, the Protestants were the first to explicitly recognize and sanction the moral practical dichotomy. While we know how corrupt the 16th century view is, it was a considerable improvement over what came before. It allowed individuals who were not intimidated by Christian theology to practice money lending without legal persecution. Although limited by government constraints, the prevailing concessions allowed economic progress. Though far from free, financial activity flourished under its relatively loose chains. The first country to establish a legal rate of interest was England in 1545 during the reign of Henry VIII. The rate was set at 10%. It is no accident that within 50 years England was able to embark on history's first successful for-profit colonization. One of England's most significant intellectuals of the 17th century, Francis Bacon, realized the benefits money lending provided to merchants and traders by providing them with capital. He also recognized its value in providing liquidity to consumers and businesses. Although Bacon believed that the ideal would be lending a 0% interest as the Bible required, he accepted that this was utopian. And that, quote, it is better to mitigate usury by declaration than suffer it to the rage by connivance. Bacon proposed two rates of interest of usury. One allowable to everyone set at a maximum of 5%. The second rate was to be higher but only allowed to certain merchants and lent only to known individuals. The license was to be sold by the state for a fee. Again, interest and usury were pitted against morality. But for the first time, someone acknowledged that money lending was so important that the legal rate had to offer enough incentive, a higher rate of interest to attract enough lenders. Bacon recognized that some loans justified a higher rate of interest. In spite of this progress, artists continued to compare usurers to idle drones, spiders, and bloodsuckers. And the playwrights personified the money-grubbing users in such characters as Sejal's Overreach, Mezze's Mammon, Luca, Horde, Grype, Bloodhound, these are names of characters. Probably the greatest work of art, vilifying the user was written during this period, The Merchant of Venice by Shakespeare, which immortalized the character of the Jewish user, Shilok. In the story, Bassanio, a poor nobleman, needs cash in order to court the heiress Portia. Bassanio goes to the Jewish money lender, Shilok, for a loan, bringing his wealthy friend Antonio to stand as surety for it. Shilok, who has suffered great rudeness from Antonio in business, demands a security for the loan, not Antonio's property, which he identifies as being at risk, but a pound of Antonio's flesh. The conflict between Shilok and Antonio incorporates all the elements of the arguments against usury. Antonio the Christian lends money and demands no interest. As Shilok describes him, and I quote, How like a fawning publican he looks, I hate him for he is a Christian. But more than that, in low simplicity, he lends up money gratis and brings down the rate of usurances here with us in Venice. If I can catch him once upon the hip, I will feed him fat, the ancient grudge I bear him. He hates our sacred nation, and he rails, even there where merchants most congregate on me, my bargains, and my well-won thrift, which he calls interest. Cursed be my tribe if I forgive him. He kind of likes Shilok. Shilok the Jew takes usury. He is portrayed as a lowly, angry, vengeful, and greedy Jew. When his daughter elopes and takes her father's money with her, he cries, Oh daughter, oh ducket, oh my daughter, not sure for which he cares more. It is clear that Shakespeare understands the issues involved in usury. Note Shilok's legitimate hostility towards Antonio, because Antonio loaned money without charging interest, and thus brought down the market rate of interest in Venice. It might easily be Midas Mulligan talking about Eugene Lawson, the banker with a heart. Even Aristotle's barren money, barren money argument, is present. Antonio, provoking Shilok says, quote, if thou will lent this money, lend it not, as to thy friends, for when did friendship take a breed for barren metal of his friend, but lend it rather to thine enemy, who if he breaks thou massed with better face, exact the penalty. Friends do not take breed for barren metal, in other words, offspring for money, usury. Usury is something one takes from an enemy. Now it's important to note that great art has an important function in shaping popular attitudes. The depiction of Shilok, just like Dante's depiction of users, concretized for generations, the false view of money lending, and thus helped make the package deal of usury and evil and evil a part of the culture. Thus as late as 1600, medieval morality and economics are alive and well, even if they are increasingly out of step with the economic practices of the time. Now the European economy continued to grow throughout the Enlightenment, culminating with the Industrial Revolution. Increased activity in every sector of the economy contributed to this growth. Significant banking houses were established, providing credit to a wider way of economic endeavors. The Bering Brothers and the House of Rothschild were just the largest of the many banks that would ultimately help fuel the Industrial Revolution, funding industry and railroads. Understanding of the important productive role of usury continued to improve over the next 400 years, continuing the Aristotelian legacy of the Renaissance, yet the moral evaluation of usury would change very little. Altruism in one form or another continued to hamper the acceptability of usury. In the mid-17th century, Northern Europe was home to a new generation of scholars who recognized that usury served a useful and essential economic purpose, and it should be allowed freely. Three men made significant contributions in the process. Claudius Salmatius, a French scholar teaching in Holland, thoroughly refuted the claims about the barrenness of money lending, showed its important productive function and even suggested that there should be more users, since competition between them would reduce the rate of interest. Other Dutch scholars agreed with him, and Holland, partially as a result, soon became the world's commercial and financial center, the wealthiest state in Europe. Robert Jacques Trougot, an 18th century French economist, made the next significant advances, to go as the first to identify usury's connection to property rights. He argued that a creditor has the right to dispose of his money in any way he wishes, and at whatever rate the market will bear, because it is his property. To go also was also the first to fully understand that the passing of time changes the value of money. He saw the difference between the present value and future value of money, concepts that are at the heart of any modern financial analysis. To go even corrected the medieval notion that time belonged to God. Time belongs to the individual who uses it, and therefore time could be sold. During the same period, Jeremy Bentham wrote a treatise entitled, In Defense of Usury. Bentham argued that any restrictions and interest rates were economically harmful, because they restricted an innovator's ability to raise capital. Since innovative trades inherently involved high risk, they could not be funded at high interest rates. Limits on permissible interest rates, he argued, would therefore kill innovation, the engine of growth. Correcting another medieval era, Bentham also recognized that restrictive usury laws harmed the borrowers. Credit markets would shrink under such restrictions, but demand would not, so potential borrowers would have to seek loans in an illegal market, where they would have to pay a premium for the additional risk of illegal trading. The foundation of Bentham's argument on usury, at least, was perhaps his most important contribution, his belief in the virtues of contractual freedom. I quote, My neighbors being at liberty have happened to concur among themselves in dealing at a certain rate of interest. I who have lent, I who have money to lend, and Titus, who wants to borrow it, of me, would be glad, though one of us to accept the other to give an interest someone higher than theirs. Why is the liberty they exercise to be made a pretense for depriving me and Titus of ours? Thus, for perhaps the first time, usury has a kind of moral defense. Unfortunately, Bentham and those that followed him undercut their defense of usury with their philosophy of utilitarianism. Rights, liberty, and therefore money lending were valuable only because they increased some social utility, the greatest good for the greatest number. Bentham dismissed individual rights as nonsense upon stilt and was willing to sacrifice them for the sake of the general mass of felicity in the world. He thus undercut to Go's major achievement and by invoking altruism doomed usury's first moral defense. Following Bentham, all significant 19th century economists, Ricardo, Mill, say, considered the issue of usury to be obvious. Interest rates should be determined by freely contracting individuals. These economists, followed later by the Austrians, especially Manga and Bonbovic, developed sound theories of the productivity of interest and gained a significant economic understanding of its workings and its productive role. England was the country that most freely adopted these ideas and indeed owes much of its economic success in the 18th and 19th century to its relatively free financial markets and institutions. Unfortunately, English scholars never resolved the moral practical dichotomy inherent in their altruistic and social justification for usury. For example, 100 years before Bentham, John Locke, one of the most important enlightenment intellectuals and the father of individual rights, supported legalizing usury and, quote, borrowing money upon usury as equitable and lawful as receiving rent for land. But Locke also wrote, I quote, money is a barren thing and produces nothing, but by compact transfers that profit that was the reward of one man's labor into another man's pocket. Of course this is inconsistent. If money is barren and interest is truly just a redistribution of wealth from the producer to a passive provider of capital, then how is it equitable and fair? This is an early variant of the labor theory of value, all wealth is produced by manual labor. 100 years later, the father of economics, Adam Smith, had progressed no further in his evaluation of money lending. In its defense, he wrote, as something can everywhere be made by the use of money, something ought everywhere to be paid for the use of it. Now that's simple and elegant. However, Smith believed that the government must control the rate of interest, that unfettered markets would create excessively high interest rates. In turn, this would hurt the economy. Since he thought that society's welfare was the only justification for usury, the government must intervene to correct the errors of the invisible hand. Though Smith was a great innovator in economics, he was not in philosophy. He accepted the common philosophical ideas of his time, including altruism and, like Bentham, justified capitalism only through its social benefits. If his analysis showed a failure in the market, the government should intervene. Smith's notion of a legal interest rate was that it should be slightly higher than the market rate, what he called the golden mean. Government intervention is the logical outcome of the utilitarian defense of usury. Smith's idea of a golden mean or perfect interest rate remains with us to this day. Alan Greenspan in today's very visible hand, who in searching for the perfect rate alternately establishes artificially low and artificially high rates. Despite their flaws, the thinkers of enlightenment had created sufficient economic understanding and philosophical understanding to fuel the industrial revolution throughout the 19th century. The 19th century was Aristotle's century, the combination of centuries of slow economic progress. Facts and reason had supplanted faith. Individualism had taken hold and the profit motive was at least acceptable. Although enlightenment thinkers and some brilliant economists had embraced Aristotle and ignited the fires of freedom and capitalism, in the preceding years, the field of philosophy was left to Aristotle's enemies. As capitalism neared a glorious maturity a new more consistent brand of altruism created by Kant, Hegel, and their followers was sweeping Europe. Kant's new more consistent altruism would find no value in money lending and given his view of this world as unreal, user's practical benefits would be discarded as irrelevant. The combination of Kant's philosophy and economics is Marxism. Marx revived the medieval notion that all production was a result of manual labor. Laborers, however, did not retain the wealth they had created. The capitalists took advantage of their control over the means of production, secured to them by private property to loot the labor's work. According to Marx, money lending and other financial activities were not productive but exploitative. Money lenders exerted no effort, did no productive work and yet reaped the rewards of production through usury. As a 20th century Marxist put it, the major argument against usury is that labor constitutes the true source of wealth. The dishonesty in this statement should be evident to anyone familiar with the industrial revolution occurring at the time. Now, Marx adopted all of the medieval cliches, even the despised Jewish money lenders. Listen to this. What is the profane basis of Judaism? Practical need, self-interest. What is the worldly cult of the Jew? Huxtering. What is his worldly God? Money. Money is the jealous God of Israel beside which no other God may exist. Money abases all the gods of mankind and changes them into commodities. Marx believed that Jews were evil, not because of their religion, as others were climbing at the time, but because they represented self-interest. And this is truly what he hated about usury and what about financiers? This evident self-interest. Now, culture in the 19th century was dominated by artists who, like Marx, resented capitalism in general and the capitalists and the money lenders in particular. Dickens, of course, gave us the immortal image of Ebenezer Scrooge. And wasn't the disgusting old lady who a Skolnikov murdered in crime and punishment a usurer and in the brothers Karamazov, Dostoevsky writes, I quote, It was known, too, that the young person had been given to what is called speculation and that she had shown such marked abilities in the direction so that many people began to say that she was no better than a Jew. It was not that she lent money and interest, so not that particular sin, but it was known, for instance, that she had for some time passed in partnership with old Karamazov actually invested in the purchase of bad debt for a trifle, a tenth of their nominal value, and afterwards had made out of them ten times their value. In other words, she was buying junk bonds. The great era of capitalism, of great banking houses and financial success, ended with a tide turning against usury and money lending, returning to the images of the dark ages. Marx put money lenders back into Dante's Inferno, and they have yet not been able to escape. Now, the most influential economist of the 20th century, John Maynard Keynes, while supposedly rejecting Marx, shared his hatred of the profit motive and usury. He agreed with Adam Smith that government must control interest rates, otherwise investment would suffer. On a deeper level, he revived the old Reformation idea that usury is a necessary evil. I quote, When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have had ridden us for 200 years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. But, beware, the time for all this is not yet. For at least another hundred years, we must pretend to ourselves and to everyone that fair is foul and foul is fair, for foul is useful and fair is not. Averice and usury and precaution must be our gods for little longer still, for only they can lead us out of the tunnel of economic necessity into the daylight. Now, when the Great Depression occurred in the U.S., it was the moneylenders on Wall Street, not surprising who were blamed. As if the R put it, we must apply social values more noble than mere monetary profit. The rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence have admitted failure and have abdicated. Practices of unscrupulous money changes stand indicted in the court of public opinion, rejected by the hearts and minds of men. And so the so-called solution for the problems of the Great Depression was government intervention throughout the economy, but especially in the regulation of interest. In 1934, the greatest bank in American history, J.P. Morgan, was broken up into several companies. Sound familiar? After 1933, banks were restricted in all aspects of their activity, the interest rates they could pay their clients, the rates they could charge, and room they could lend to. The system of regulation came to disastrous conclusion in the 1980s with the banking and SNL crisis. But even then, it was the bankers who were to blame. Over the centuries, usury has come to mean excessive interest. In the U.S., at the state level, and in most other countries, usury laws still exist that restrict the rate of interest that can be charged on personal loans. In 1913, in New York, a moneylender who issued loans to people who could not get them at conventional banks appeared before court on the charge of usury. In the judgment the judge wrote, you are one of the most contemptible users in your unspeakable profession. That poor people must be protected from such shocks as you, and we must trust that your conviction and sentence will be a notice to you and all your kind, and that the courts have found a way to put a stop to usury. Men of your type are cursed to the community, and the money they gain is blood money. A true medieval opinion. And no difference in principle from the sentencing judges' words nearly 80 years later to Michael Milken, whose crime was dealing with junk bonds, bonds that paid a high interest, that paid usury. Payday loans are the latest form of moneylending to be branded with a scarlet letter U. These loans carry annualized interest rates as high as a thousand percent, since they are typically very short-term to be paid back on payday and the default rates are very high. These loans and huge demand last year $14 billion were issued to more than 8 million people. The banks issuing these loans have found ways, just as banks always have, to circumvent state usury laws. A recent Wall Street Journal article examined these loans, and presented no theoretical or philosophical arguments for or against them. It did, however, tell the stories, over and over again, of many people whose lives have been destroyed as a result of not being able to pay back the loans. Journalists today have no ideas, only emotions. A similar story in the LA Weekly last year was titled Shylock 2000. It describes horrific stories of borrowers gone bankrupt and concludes, I quote, What's astonishing about this story is that 400 years after Shakespeare created that voracious lender Shylock, such usury may be perfectly legal. What is truly astonishing is that after 400 years in which the market has proven the incredible benefits generated by money lending of all kinds, journalists, intellectuals, and politicians still rail against usury. What is astonishing is that after all the good that bankers have given to this world, they are still being demonized. The hatred of usury is alive today at the dawn of the 21st century. Just observe the treatment offered financiers in today's movies and TV shows. The slogan, Abolish Usury, appears frequently at rallies protesting globalization, animal rights, and biotechnology. The new left and the new Christian right are committed to an anti-usury agenda. They proclaim that, I quote, the righteous man is not a usurer and that lending money at interest gives us the opportunity to exploit the passions and necessities of other men by compelling them to submit to ruinous conditions. And a robbed and left destitute under the pretext of charity. And the anarchists, the so-called defenders of liberty, members of the libertarian coalition share this view. I quote, liberty insists on the abolition of the state and the abolition of usury, on no more government of man by man and on no more exploitation of man by man. Unfortunately, this is not astonishing. Once you consider the fact that fundamentally 20th century ethics across the spectrum are no different than those of the Middle Ages, all parties share a common ethical root, altruism. Then you write, gets it from the Bible, then you left from Marx and the libertarians from anyone they feel like. Consequently, the breach between the moral and the practical is as wide as ever. If the accepted moral standard is sacrificed to society or to one's neighbor, then neither usury nor profit in general can be morally justified. When reality is not the measure of truth, then the stories of ruined borrowers today have the same power over people that such stories had in the Middle Ages. The ability to ignore the benefits of usury has not changed because the Aristotelian Revolution has not been completed. Although serious economists today uniformly recognize the economic benefits of charging interest or usury on loans, they rarely, if ever, attempt a philosophical or moral defense of this position. Today's economists either reject philosophy completely or adopt a moral practical that is split, accepting the notion that while usury is practical, it might not be moral. Modern philosophers seem to have no interest in a topic at all, partially because it requires them to deal with reality and partially because they know they know that self-interest, capitalism and everything they entail are evil. For the most part, they have long accepted Marx's position on money and they have all accepted altruism as their moral standard. To the extent that they refer to money lending at all, they consider it axiomatically unjust. Yet no honest man can deny the benefits of money lending. By the 19th century, all the necessary evidence existed to conclude that money lending was a productive and noble activity. The wealth that capitalists and financiers had created was all around. The Austrian economists had refined the theory of the productivity of money. Property rights and the attribution to the individual had already been identified as reason that usury at any rate acceptable to the parties was moral. It was known that interest was a price placed on an individual's time, the individual who loaned the money. What then was missing? A philosophical revolution that explained all the known facts in moral terms. Objectivism is that revolution. Einrand has provided us with a morality where the individual's life is the standard of value, where productivity is a virtue, a requirement of life, not a social utility, and where profit is moral. Objectivism recognizes man's right over his own time and money and his right to contract freely. And Einrand made the brilliant induction that the greatest product of power is the human brain, not human muscle. That what exists is a pyramid of ability, not Marx's pyramid of exploitation. For hundreds of years, men suffered for the belief that worldly success in general and money lending in particular was practical, but immoral. For the first time in history we have a consistent philosophy in which the moral is the practical and vice versa. Objectivism sweeps away 2,000 years of philosophical corruption and injustice. We are now armed with ideas that place money lenders and its practitioners, the users, the bankers and the financiers in a proper historical place. As heroes of production, as heroes who in spite of pollution played a vital role in the spectacular material progress of the West. And if you consider the wealth created by money lending when it was condemned as evil, imagine what is possible when Einrand's morality finally unleashes armies of these greedy heroic men. Thank you. Any questions? To be a money, a successful money lender it seems to practice justice very scrupulously and it occurs to me that might be one contributing factor to why they were vilified by the Christian world. I was wondering if you'd comment on that. Money lenders do not automatically lend money to everybody. They lend money to those individuals who they think will pay it back. Either those individuals who have real productive endeavors, real profit making enterprises or those individuals that they view as honest and therefore even if they're going to use the money for consumption will find a way to pay it back. So there have been a lot of people throughout history who have been denied money from money lenders. And there is no doubt for just reasons and there is no doubt that that has played a role. There is a factor of envy there where those people who do not qualify, who do not get the money were envious so I think that's absolutely right. Is that what you meant by justice? Yeah, I was curious about the role You know, I did not find anything in my research to suggest that that actually happened. I found a lot more of the people who had borrowed money and couldn't pay it back and their attitude towards users and if somebody asked me the question about the Jews I'll elaborate on that. Thank you for a fascinating talk Dr. Brook. I was wondering if you could explain how the opponents of money lending explained that there was such a high demand for borrowing money and why people would borrow money in the first place. Is it because the money lenders were somehow deceiving these people or these people were just short-sighted and easily tempted by immediate gains? Yeah, I think it's mostly the second. It's that people are short-sighted they needed the money so they were willing to accept it on any terms the money lender was exploiting them and because these people were in desperate need, the vision particularly in the middle ages was not of a businessman borrowing money in order to go out and build ships and send them across the seas and bring back merchandise and make money. The vision of the person borrowing the money was of the poor person who didn't have anything to eat today and therefore needed some money and instead of Christian charity instead of giving it to him they were charging interest and therefore making even poorer in the long term. Of course that was factually incorrect most of the money was being lent by businessman but they just ignored that fact and created lots of loopholes to make it possible at the same time. Hi, I'm the helpful Southern California Honda person and recently, we've been doing Random Acts of Helpfulness like surprising a deserving dad with a brother or a friend or a friend or a friend or a friend or a friend or a friend or a friend or a friend or friend like surprising a deserving dad with a brand new grill and helping give back to our veterans and during the Honda Summer Spectacular event we can help you too with a great deal on a reliable award winning Honda like the Accord, the 2018 North American Car of the Year. Click the dealer locator link to find a dealer near you and go to SoCalHondaDealers.com to suggest a Random Act of Helpfulness for someone you know. Could you please comment on money lending and anti-Semitism? Now as I said the Bible creates this double standard where Jews are not allowed to lend money to other Jews, but are allowed to do so for strangers, so they can lend money to strangers. And the Christians perceive the strangers to be enemies. That is the Jews were allowed to lend money to enemies because as I said, money lending was viewed as a zero sum game and therefore they were harming the enemy by lending the money. So imagine that you are Christian in the Middle Ages and you need money and you go to the Jewish user and you get along, so A the Jew is committing what for you would be a mortal sin, you would go to help for this. They are charging you interest because according to the Bible you're the enemy and they're making money off of it and becoming rich. So the Christian needs the Jew because they need the money but they hate them for it at the same time. Now, you know, Jews at the time were described as enriching themselves through Christian blood and the opposition of Jewish Jews was often violent in England in 1190 the Jews of York were massacred in an attack planned by members of the nobility that owed money to the Jewish money lenders. In this and many other attacks on Jewish communities their accounting records were the first thing to be destroyed. As one eyewitness wrote I think that at the roots of there the Jews disaster where the huge infinite sums of money which barons, knights, citizens and peasants owed them in 1290 largely as a result of antagonism generated from the money lending activity Jews were expelled from England there was no Jewish community in England until the 17th century. So for 500 years there were no Jews in England. So there was a lot of violence that it was a result of the fact that they were perceived as exploiting the Christians because usually it was exploitation as making money off of the blood of Christians and I think that that together with the fact that supposedly they killed Jesus you know if you combine those at least early on was at the very root of the anti-Semitism I think practically for the day-to-day Christian in the street the fact that these guys were charging of interest was a lot more real than what happened to Jesus thousands of years earlier. It's unusual to be surprised by libertarians but I was surprised by your remark that libertarians were opposing lending money at interest and they seemed to tolerate everything should be permitted and I'm just wondering is this fairly widespread among libertarians now? You know you can find every position under the world within the libertarian party it's not the official position of the libertarian party but there is definitely a segment of anarchists within there that are definitely opposed to usury and there's extensive use of this and I'll admit that in searching I even encountered some libertarian lists that were debating and they were debating usury because if it was a topic open to debate and some were for and some were against so I'm not surprised by anything that I read I had a question in my mind you said that the Jews weren't allowed to be in business they weren't allowed to own property where did they get the money to lend anybody? That's a good question Remember that the original loans starting in the dark ages are small they weren't goods the Jews I think this is probably a completely different talk were a lot more thisworldly even through the dark ages I think that whatever business they were involved in in different periods the Jews migrated throughout Europe by the way as a result of these prohibitions they kept going to the place that was going to be most liberal to them where they could make a little money in trade or in something else and you didn't have to have a lot of money they accumulated wealth slowly with small loans in the dark ages they'll have much larger loans later on but that's a good question I don't have a complete answer I'm not sure what they were exactly doing in the dark ages I wonder if you could comment on money lending at greater than legal interest rates by illegal outfits like the mafia where there might be a real economic need let's say a restaurant for a loan at 75% because they can't get credit somewhere else is there any legitimacy to extra legal groups like this lending money is there an economic value being produced and follow up question I guess to what extent can they legitimately enforce or try to collect the debts this has an interesting legal protection there's an interesting history here and really the whole personal loan business that started in the United States was originally illegal banks dealt with primarily with wealthy individuals and with corporations because the risk the risks involved in giving personal loans to individuals were high and they could not legally charge an interest rate from those individuals that were just given the risk you have to charge an interest rate to high interest rate to compensate for the high risk and what happened was a whole industry was created in the early part of this century in the US of what we call loan sharks or money lenders that were outside the law and the real problem that they faced and this had nothing to do with mafia or anything they faced a real objective problem how do we collect we can't sue these people we can't take them to court and what happened was that they relied in a sense on the fact that often borrowers won't repeat borrowers and they needed to keep on good terms with these people but the default rates were enormous as a consequence of the default rates being enormous and the inability to collect when it defaulted what would happen to interest rates they would go even higher so what you found was the fact that this is illegal drives the interest rates up it makes them higher I would doubt that these people serve an economically useful function a lot of the people who borrow money from them are poor people who want to open businesses now true a lot of the people who borrow from them want to go out on a night of gambling but you know you find out about these people very quickly and they can't borrow money anymore but the real bulk of the people who are borrowing money are people who are doing it for good reason or productive people who are going to try and pay it back so you know I'm not going to justify the tactics of the mafia I think the mafia took over the business because of the collection problems the non-violent money lenders were charging let's say they were charging 75% interest the mafia could come in and charge 50% because they could collect so like prohibitions and other things like drugs and alcohol and so on gambling and prostitution the organized crime because they create these economic opportunities for organized crime the prohibition on interest throughout American history and I'm sure to this day in some sectors have created opportunities for organized crime to step in and take over the business they give a better service at a lower interest rate because of the ability to collect it's interesting that even today that these payday loans are illegal in most states and that banks are running a risk of being persecuted by the states in which they operate now again they found all kinds of loopholes and bankers from the beginning of time have been ingenious and I've got example after example of the way they issued the the flaunting banks in the 12th century had offices in London in Paris in Germany in Jerusalem during the Crusades I mean these were international banks and they were never doing they were never money lending at interest they always found a way to call it something else and to pretend that it was something else other than what it really was which was usually bankers have always been very creative doing this in American history I've given courses where I've described how American bankers got around the 33-34 banking regulations and how they the amount of effort, the amount of intelligence the amount of labor that has gone into is huge and it's horrific if you think about what would have happened if that intelligence and labor and productivity would have gone into finding ways to legitimately increase productivity rather than having to fight the fight government regulations so even today in the Wall Street Journal and the states are trying to clamp down and if there's a struggle who will step in the mafia will step in to take care of these months can you comment on the practice of charging artificially low interest or zero interest on loans the long-term effects that might not be all that obvious there's an organization called Habitat for Humanity which I think was founded by Jimmy Carter and a very wealthy Georgia businessman who's a fundamentalist Christian and I think this is an organization greatly admired by our right-wing conservatives because they build houses without government involvement but they lend money to people at zero interest because they say it's prohibited in the Bible to charge interest for loans and other than the fact that it's going to take a lot more philanthropy to keep a group like this going I would think for a longer are there any other consequences to a policy like that that might not be all that obvious well I mean it's a misallocation of capital the fact that they're giving it at zero they're giving it for non-economic reasons obviously and therefore the money's not going to its most productive use they're going to have high default rates which is going to continuously I mean they can't make money so they have to continuously get contributions and loans you know if people want to do it for charity's purpose you know and the people who are giving their money know that it's charitable that's fine the problem with these organizations is they advocate this across the board that is the Christian right advocates zero percent interest across the board and the most vehement attacks and usury are from the right the most vehement the whole book, the books on Amazon that are just attacking usury and they're all from the Christian right they are vehemently against us so and I think that a lot of these charitable organizations do more than just build houses they advocate for the kind of lending that they do I'm wondering in your research whether you found any correlation between money lending laws and bankruptcy laws that's a good question I mean I can't think of any offhand although it sounds like there would be and if you look at I mean it's interesting that in the United States over the last I'm not an exporter of bankruptcy laws but probably over the last 70 years or something we've had this incredibly lenient bankruptcy laws which basically say that if you file for bankruptcy it's like the Christians if you go and confess all sins are forgiven if you file for bankruptcy which is the equivalent of a confession all debts are forgiven you know there's no doubt what effect that has what happens to interest rates in a case like that interest rates are higher in the U.S. economy because of our bankruptcy laws there is absolutely no doubt about that the reason interest rates are credit costs are 18, 21 and if you have low credit rating 25 to 28% is because if you file for bankruptcy they can't come and get your furniture if they could get your furniture the same effect of the mafia if they could collect then there's no doubt interest rates are lower one of the trends in history that you see and this is not related to the bankruptcy question but the freer an economy is the lower the rates of interest and there's no doubt that in the U.S. if we had more freedom if we had less regulation if we had more rational bankruptcy then interest rates would be significantly lower real interest rates that are charged out the market not the ones that Alan Greenspan sets what's your opinion of a lender who would lend actually in hopes of a default and the higher profits he expects to make in terms of a foreclosure on a house for example I have reason to believe there are such lenders and I think they're going to be used as an excuse for a further attack on lending now I don't know how that works I mean because I think that according to the legal system in foreclosure you're only supposed to get back the amount that you lend out plus what the courts decide is a reasonable rate of interest but even if that occurred I think that it would be hard for a business like that to keep going I think that relying on foreclosure when a lot of times when you arrive to close on something it's not there anymore or it's not in the shape you expected it to be it's a very risky business so I just don't think it's economically viable there's no doubt that the Shylock's of the world Shylock asks for a pound of flesh because he wants Antonio's life he hates him and he wants to kill him there are people like that and they are used as the example of living where people are guided by emotions rather than by facts and reason that has a huge impact and that's why while student article doesn't have to give an argument against you it just gives examples it just gives stories could you comment further on the relationship between altruism and the views of lending I see the lenders are generally pictured as the haves and the borrowers as the have nots yeah I mean that's partially an issue of the zero sum world the money lenders are making money growing in wealth as the borrowers are declining in wealth are losing money so it's obvious that they are doing it for profit and for personal gain I also think that the financiers in general this is not limited to money lenders they have a hard time explaining what it is that they do in the productivity Bill Gates can pretend to be an altruist he can come out there philosophically he is but he can actually come out and say Microsoft is good for the world all of you use this piece of software I'm not just trying to make money I'm trying to help you I'm trying to be nice to you and even then he's persecuted and condemned what do the financiers bring out I mean it's not what the financiers what the money lenders do is not perceptual it's conceptually requires explanation we make Microsoft software possible now that's a difficult argument it's an argument that has been made and can be made and easily made if you accept reason but they can't hide as I think businessmen do today behind a product so they are more explicitly and obviously selfish they are making money that's what they go when you ask a trade on Wall Street what are you doing today making money all he does is deal with money he's not dealing you ask a businessmen in manufacturing I'm making a product so it seems like there's some benefit to humanity he's providing he can hide behind that so I think that financiers in general perceive this it's easier to perceive them as selfish versus the manufacturers I think they should be proud of that and exalt in that world that they are selfish but of course they have been and will be persecuted for that fact I think we're out of time so thank you all material in this program is protected by copyright and may not be reproduced in 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