Empire of sin loan sharks full#

The Roman Empire had eventually allowed loans with carefully restricted interest rates, but the Christian church in medieval Europe had since banned the charging of interest at any rate. Those business, as noted above, benefited greatly from all types of banking including currency exchange, deposit, loans, futures trading, insurance, etc. The hard-line, but common, stance against usury was hampering the grain and farming business of the Italian merchants and farmers. Quidquid sorti accedit, usura est (“ Whatever exceeds the principal is usury”) – God’s word (as interpreted in Europe at the time) The Problem of the Italian Grain Industry and the Re-Birth of Discounting At the time usury was defined strictly as, “ anything beyond the principle is usury,” and that wasn’t going to propel trading-Republics into the future. Still, logic aside, in practice in and around the 1,100’s Europeans were dealing with strict anti-usury laws and church doctrine that fully banned interest of all types. Meanwhile, extortion in any area of life is always a bad thing, but banning interest isn’t any more a solution in banking than banning prostitution is a solution for eliminating sexually transmitted disease. Reasonable interest rates are an integral part of modern economics and the free-market, and it’s a little prejudice to insinuate that banking isn’t labor or that a loan has no value worth charging a fee over. Meanwhile, reasonable interest rates are rates designed to incentivize the moneylender and the borrower to take on a relationship of debt and credit that is beneficial to both parties and helps grow the economy (Capitalism). The ethical difference between charging high interest and any charging interest has not always been made. Today I would define usury as very high loanshark-like rates designed to extort the borrower like loans that compound at such high rates in short amounts of time as that make paying off the principal nearly impossible.

Empire of sin loan sharks full#

Those are valid points, and not many would disagree with those basics, but a full ban on charging interest is a harder position to justify. We can rightly point out that loan shark-like abusive interest rates are unethical and immoral. Sure, we can, like Dante, who places Blasphemers and those who charge usury in Ring 3 of the Seventh Circle of Hell, John Locke (father of liberalism), or Adam Smith (the father of modern economics) point out that only labor and raw materials can create value. Charity and other virtues aside, why would a private lender lend money to a grain farmer who needs to the money to grow a crop, but won’t harvest to sell for a season? Why lend to a grain merchant who buys lots of grain upfront after the harvest for the year or season if not for a cut of the grain, a fee, or some benefit? Why take a risk for no reward? The effect of banning usury and charging interest is that it makes most types of banking (especially commercial banking) impossible. While this may seem good at first, especially when we conjure up images of shifty loan sharks and greedy bankers, there are some serious problems to outlawing all interest charging. Second, that making money by lending it had long been viewed harshly. First, that charging interest is as old as minted currency and trade itself. Not only that, but Islam still essentially outlaws usury today. Solon removed all debts and credits when Athens had become “enslaved to debt,” and Rome, which had some of the first notable non-Temple banks and early forms of interest, even outlawed it at a point. Plato, Aristotle, the two Catos, Cicero, Seneca, and Plutarch criticize it.

These included Indian cultures, those that practiced Buddhism, Judaism, Christianity, and Islam, and, at points, by the Chinese, Greeks, and Romans.Įarly Vedic texts of Ancient India ban usury (2,000-1,400 BC). Sometimes interest rates were set by the state. Although small-time moneylenders might act as loan sharks despite usury bans, usury was outlawed and treated as a sin by most cultures in history. Banking was practiced in temples in Ancient Greece, Rome, Egypt, and Babylon. The History of Usury BansĪlthough early forms of banking (like depository banking and currency exchange) had been practiced since 5,000 BC if not earlier. Usury (charging interest in moneylending, especially at high rates) used to be viewed as a sin by many religions and was banned by many cultures.