Why riba is haram

Dear reader,
Here is an easy explanation why religions ban usury

  1. To satisfy demand for loans and market operations (purchasing financial assets), banks create money out-of-nothing. They do not need our savings.
  2. The money is lent as debt (claims on your assets and labour) at interest (which is not created along with the principal).
  3. Payment of interest exhausts the money supply* requiring ever more loans for money to transact in the economy.

Corporations are forced to keep growing (chewing up the planet) to pay interest. The single largest government expense (all governments) is interest payments.

Compound interest and exponential borrowing inevitably leads to bankruptcies, ie., transfer of wealth to the hands of the very few.

Business cycles (intentional credit contraction by banks) accelerates bankruptcies and dispossession of individuals, corporations, and governments.

The end of a currency cycle (Kondratieff) means that the system is bankrupt, and wealth transfer negotiations take place on a grand scale (comparable to grand theft from wars) before a new cycle of dispossession is started all over again.

The credit for this insight goes to Michael Rivero, Sarah Emery, Imran Hosein, and Richard Werner, (please view the links)

Here is a telling verse from the Torah (Deuteronomy 23:20)

Margrit Kennedy and Bernard Lietaer have demonstrated that almost half of retail prices are the accumulation of interest.

Solutions include debt jubilees explained by Prof’s Michael Hudson and David Graeber, while Islam mentions charity on excess wealth (Zakat), and insists on intrinsic money like the Austrian school. But for us to be free of the parasitic monetary system we need to develop interest-free (crypto) credit.**

Thank you

*Please note we are typing about the demand side (main street) money supply, not reserves not borrowed (the reason QE does not lead to CPI inflation) typically used to purchase financial assets and ownership (hypothetically throttled by CB reserve requirements (borrowed anyway) and insolvency (bail-outs and bail-ins)). Unlike the loan principal which is canceled on repayment, interest does not disappear but is income used to pay expenses and taxes, distributed to shareholders, and retained earnings, like any other company.

**Interest differs from profit (which may be participated in under Sharia and Halakhah) in that profit does not compound and bears risk to the investor, unlike interest which leads to indebtedness and servitude. Furthermore profit is on products and services rendered, while interest is on money which should simply be the unit-of-account (UoM for bookkeeping (how does one charge interest on metres or hours?)) and means-of-exchange (to facilitate trade). Money is only a store-of-value only due to its tradability for products or services (proxy for stuff). 

Compounding interest leads to exponential wealth disparity.