The Town With Ten People
Let's talk about interest / riba / tribute for a moment, shall we?
Consider you'd like to borrow my car. I don't like paper money because I get paper cuts every time I handle it... and it smells and so forth, so I say "go ahead and borrow my car, just bring back more car when you return my car." I don't want a full tank of gas or money for it, but I do want 'something' back for you using my car, so I want more car back. That's my charge of interest.
Q: Can you bring me back more car?
A: Yes you can! You'd either have to take parts off of a similar car / another person's car or go buy parts somewhere. Remember, gas is not part of the car and I don't need extra gas.
If you do come back with more car, you either had to come out of your pocket to fulfill my interest demand or somebody out in the real world would be missing some car parts. The same goes with the charging of interest for paper money.
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Here's another simple example made not so simple... but it will be simply seen to be simple at the end:
Imagine there is a sole banker of a town in which he doesn't live in, with a population of ten, consisting of all men. The year is 1813. This banker prints the towns money by legal right / according to law ( he has a contract / agreement with the town's government and other pillars of that community promising them an expectation that using his bank's type of money would ensure safe business practices and keep accurate accounts of the town's performance ).
The banker prints / creates / makes and lends $1,000 into existence and, as is his custom and as history would have it, demands 10% interest ( without exception of whom borrows it ) from whomever asks for a loan. Keep in mind, this 'lawful' money is the only accepted method to pay back all debts, both public and private and is the only form of 'payment' for any commercial / buying and selling activity in this town, so everyone is compelled to use it in order to buy or sell anything in this town.
Right now, pause and pull out some of that paper money you have in your pocket / wallet / purse and read what the terms of that contract says: This Note is Legal Tender for All Debts, Public and Private.
Keep in mind this is 200 years ago when $1.00 went a long way... where $0.10 cents could probably buy you a full meal or better.
Okay, are you following so far? ( I started out trying to make this simple, but I made it complicated for a reason and a purpose which I'll explain later 8^)
So the mayor comes along and asks to borrow $400 to pay two government employees ( himself and the city's secretary ) and facilitate several public works projects. The mayor hires the town's general contractor to build these projects and this contractor has two people in his employment. The mayor also purchases and leases some land from the major land owner with this money.
The banker is left with $600, $100 of which this general contractor, who owns the general store, asks to borrow in order to buy equipment, materials and tools in order to complete the public works projects he's been hired to do, perform future building opportunities and pay his two employees to do the jobs.
With $500 left in the bank, the local large land owner asks to borrow $200 so he can purchase certain building materials from the general store and to contract the builder to build some barns for him in order to increase productivity and to hire the three farm hands the town has.
If you're following me so far, that's nine people in the way of $700 lent into existence / commerce / circulation.
Lastly, a jack of all trades lives in this town. He's a lawyer, a doctor and a writer, among other things. This fellow, along with each of the nine other townspeople, borrows $20 to build a humble abode for themselves ( they've all been living in horse drawn carriages, small makeshift structures or tents since no one has any children or wives needing something more substancial ).
So, that's $1,000 lent into existence and ten people who are expected to pay back their proportioned debts at 10% interest. Each person owes the bank money; most only $20 and a few quite a bit more.
Doing the math, can you figure out how the interest gets paid back?
Each dollar, no matter where it comes from or how it is derived, needs to be returned to the bank with ten cents, right? The bank expects to receive back, after all debts are collected, $1,100 for the $1,000 it lent into circulation. Can you figure out how this would be possible? What are some of the scenarios that may need to take place for the debts to be paid back fully? Is it mathematically possible for the entire debt and interest to be paid back?
----
I made the story of The Town With Ten People a little bit convoluted and long, for life can be busy, confusing and it can sometimes be seemingly hard to keep up with all the information, numbers and equations, wouldn't you agree?
Simply put: The chances any one of the townspeople knows and fully understands what is going on with the money is fairly little, if any chance at all. In this simple scenario, the townspeople have ample money in circulation to buy and sell things, save up and / or invest, etc, yet because the charging of interest is widely accepted when borrowing money from a bank or anyone, will any of the townspeople realize that someone, in some way, is going to be short? Someone or some folks are going to be short a few dollars.. and when that happens, what happens to them or whatever they own? What will the bank do if someone is unable to pay their loan at interest?
Did you notice the math doesn't add up? In essence, the bank owner and printer of the 'legal' money is creating for himself 10% or $100 from the townspeople's work, effort, labor and energy, where no 10% or $100 previously existed. The bank lent out $1,000 and is asking for $1,100.
Where is that extra $100 going to come from?
---
How much better to get wisdom than gold, to choose understanding rather than silver.
- Proverbs 16:16
Consider you'd like to borrow my car. I don't like paper money because I get paper cuts every time I handle it... and it smells and so forth, so I say "go ahead and borrow my car, just bring back more car when you return my car." I don't want a full tank of gas or money for it, but I do want 'something' back for you using my car, so I want more car back. That's my charge of interest.
Q: Can you bring me back more car?
A: Yes you can! You'd either have to take parts off of a similar car / another person's car or go buy parts somewhere. Remember, gas is not part of the car and I don't need extra gas.
If you do come back with more car, you either had to come out of your pocket to fulfill my interest demand or somebody out in the real world would be missing some car parts. The same goes with the charging of interest for paper money.
----
Here's another simple example made not so simple... but it will be simply seen to be simple at the end:
Imagine there is a sole banker of a town in which he doesn't live in, with a population of ten, consisting of all men. The year is 1813. This banker prints the towns money by legal right / according to law ( he has a contract / agreement with the town's government and other pillars of that community promising them an expectation that using his bank's type of money would ensure safe business practices and keep accurate accounts of the town's performance ).
The banker prints / creates / makes and lends $1,000 into existence and, as is his custom and as history would have it, demands 10% interest ( without exception of whom borrows it ) from whomever asks for a loan. Keep in mind, this 'lawful' money is the only accepted method to pay back all debts, both public and private and is the only form of 'payment' for any commercial / buying and selling activity in this town, so everyone is compelled to use it in order to buy or sell anything in this town.
Right now, pause and pull out some of that paper money you have in your pocket / wallet / purse and read what the terms of that contract says: This Note is Legal Tender for All Debts, Public and Private.
Keep in mind this is 200 years ago when $1.00 went a long way... where $0.10 cents could probably buy you a full meal or better.
Okay, are you following so far? ( I started out trying to make this simple, but I made it complicated for a reason and a purpose which I'll explain later 8^)
So the mayor comes along and asks to borrow $400 to pay two government employees ( himself and the city's secretary ) and facilitate several public works projects. The mayor hires the town's general contractor to build these projects and this contractor has two people in his employment. The mayor also purchases and leases some land from the major land owner with this money.
The banker is left with $600, $100 of which this general contractor, who owns the general store, asks to borrow in order to buy equipment, materials and tools in order to complete the public works projects he's been hired to do, perform future building opportunities and pay his two employees to do the jobs.
With $500 left in the bank, the local large land owner asks to borrow $200 so he can purchase certain building materials from the general store and to contract the builder to build some barns for him in order to increase productivity and to hire the three farm hands the town has.
If you're following me so far, that's nine people in the way of $700 lent into existence / commerce / circulation.
Lastly, a jack of all trades lives in this town. He's a lawyer, a doctor and a writer, among other things. This fellow, along with each of the nine other townspeople, borrows $20 to build a humble abode for themselves ( they've all been living in horse drawn carriages, small makeshift structures or tents since no one has any children or wives needing something more substancial ).
So, that's $1,000 lent into existence and ten people who are expected to pay back their proportioned debts at 10% interest. Each person owes the bank money; most only $20 and a few quite a bit more.
Doing the math, can you figure out how the interest gets paid back?
Each dollar, no matter where it comes from or how it is derived, needs to be returned to the bank with ten cents, right? The bank expects to receive back, after all debts are collected, $1,100 for the $1,000 it lent into circulation. Can you figure out how this would be possible? What are some of the scenarios that may need to take place for the debts to be paid back fully? Is it mathematically possible for the entire debt and interest to be paid back?
----
I made the story of The Town With Ten People a little bit convoluted and long, for life can be busy, confusing and it can sometimes be seemingly hard to keep up with all the information, numbers and equations, wouldn't you agree?
Simply put: The chances any one of the townspeople knows and fully understands what is going on with the money is fairly little, if any chance at all. In this simple scenario, the townspeople have ample money in circulation to buy and sell things, save up and / or invest, etc, yet because the charging of interest is widely accepted when borrowing money from a bank or anyone, will any of the townspeople realize that someone, in some way, is going to be short? Someone or some folks are going to be short a few dollars.. and when that happens, what happens to them or whatever they own? What will the bank do if someone is unable to pay their loan at interest?
Did you notice the math doesn't add up? In essence, the bank owner and printer of the 'legal' money is creating for himself 10% or $100 from the townspeople's work, effort, labor and energy, where no 10% or $100 previously existed. The bank lent out $1,000 and is asking for $1,100.
Where is that extra $100 going to come from?
---
How much better to get wisdom than gold, to choose understanding rather than silver.
- Proverbs 16:16
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