New Discourses Bullets, Ep. 187
On both Left and Right, our young people are turning against the concept of interest, like money making money for being loaned out. This is an emergency, frankly. Not only does interest make total and absolute sense when you understand what it pays for, it is also an economic and moral good in society. Given current trends, it seems imperative to share the real foundations of monetary interest and how it produces moral and economic goods we should be happy about. In this episode of New Discourses Bullets, host James Lindsay goes through the basic economics and makes the case. Like most of his economically oriented podcasts, this one was recorded and shared particularly with younger listeners in mind, so join him and share the message with those people who need it most.
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2 comments
Good summary of why interest makes sense.
But one thing you got wrong. If you have a 30 year mortgage (or any other loan) the interest earned the first month is paid for by the payment for that month. None of it carries over to earn its own interest. If the payments do not cover the interest then the loan’s principle just goes up and it will never be paid off. (Some student loan “relief” schemes are kind of like this.) You do end up paying a lot of interest over 30 years because at first most of your payment goes to pay the interest accrued that month and only a little bit goes to pay off the original loan, the principle.
Interest payments can compound for the lender if they keep loaning out the interest they receive.
I don’t see rent takers as on the highest moral ground.
What we are saying about rent takers (“investors” or lenders) is that they somehow managed to acquire assets that they don’t themselves need in their daily lives. They can then charge someone else rent to use those assets which the borrowers do need in their daily lives.
The question becomes: How did the lender acquire their excess assets? And how did the borrower come to not be able to own outright assets they need to carry out their daily activities?
And the big answer that comes up, which some take as a full answer but isn’t is: crime.
In other words, you can lose assets that were once yours by having someone steal them from you. And you can acquire assets that once belonged to someone else by stealing them from them. Or maybe your ancestors committed the theft and left you the benefits of that theft as an inheritance. Or maybe your ancestors suffered the theft and left the resulting poverty as your “inheritance.”
In my last job, I was being paid a “fair” wage, but it was more than I needed for daily life. So I saved several thousands in my credit union. That should have made me a lender. However, though the credit union for sure used that money to make loans, I never got back any more than the tiniest interest payment, because the credit union could not afford to pay more. I essentially loaned my excess cash to the credit union, but it did not pay me for that loan. Was that stealing? Well, it was a consensual agreement. I gave the money to the credit union because I thought it would be better used than if I invested it some other way. And eventually I donated most of that money to my church, for similar reasons.
So it is possible to become a lender with no visible crime involved. And it could be that most lenders become lenders in this way. I don’t really know. You would have to analyze society on the basis of what exchanges are fair and which are criminal to come up with some idea of how much of modern activities are supported by criminality versus how much by honest exchange. But we know for sure that ciminality existed in our past. And it haunts us. We have yet to discover a decent way to remedy those past crimes. But that their effects continue to this day is without doubt. So my focus is not on trying to justify activities that may not be that justifiable, but to deal with the problem of crime on this planet until, perhaps some day in the future, it is no longer a major problem.