Usury, interest and the free market

1 As strange as it may seem, loans and borrowings are just a form of buying and selling.

2 The thing sold in a loan is time.

3 If it would take you six months to save enough money to take a vacation trip to Japan, and if you borrowed enough money to enable you to take the trip now, you might say you borrowed or bought six month’s of time.

4 And much as in trading other things, lenders vary their prices, their interest rates and collateral requirements, according to prevailing market conditions.

5 In prosperous times, when their risk of loss is relatively low, lenders usually charge lower interest rates and require less collateral. In bad times, the reverse is true.

6 Of course, in good and bad times, competition helps keep interest rates and collateral requirements at their lowest possible levels.

7 Lenders may experience major losses if they make loans to individuals who, for whatever reason, fail to perform their part of the agreement.

8 Hence, lenders further adjust their interest rates and collateral requirements according to their perception of the unique risk characteristics of each loan.

9 Nonetheless, one blessing of a free market is that if the terms of one lender are unsatisfactory, a potential borrower may take his business elsewhere, if he is not dealing with a Cartel.

10 Crooks may attempt to obtain loans so they can run off with the money.

11 Sometimes they try to talk the lender out of his demand for collateral, therefore lenders soon learn that if they are to survive, they must be un-emotional in their evaluation of prospective customers.

12 Their level-headed approach to evaluating prospective borrowers has resulted in lenders sometimes being branded as cruel and insensitive to the needs of others.

13 The truth is, however, that lenders simply control their emotions better than some of the rest of us, out of necessity.

14 Self-control is essential to lender’s survival because if they allowed themselves to be manipulated by emotion, they’d soon go broke.

15 That’s because it takes the interest from many good loans to recover the loss of the principal of just one bad one.

16 So now let’s look at a puzzling question.

17 Since it is only decent to want to compensate someone for the using up of his property, and since decent behavior is highly esteemed among civilized people, how do you suppose usury came to be regarded as something bad, something sinful?

18 May the grace of our Lord Jesus Christ be with you all. Amen.