Guest Post: The Ethics Of Repudiation

Tyler Durden's picture

Submitted by John P. Cochran of the Ludwig von Mises Institute,

Do you ever get the feeling that no one in the Washington power elite is willing to seriously deal with the major economic threat to future prosperity facing the United States today: mounting government debt and the associated deficits? The problem, as pointed out by Murray Rothbard over 20 years ago:

Deficits and a mounting debt, therefore, are a growing and intolerable burden on the society and economy, both because they raise the tax burden and increasingly drain resources from the productive to the parasitic, counterproductive, “public” sector. Moreover, whenever deficits are financed by expanding bank credit—in other words, by creating new money—matters become still worse, since credit inflation creates permanent and rising price inflation as well as waves of boom-bust “business cycles.”

In 1992, when Rothbard wrote the above, the US debt was approaching $4 trillion (now nearing $17 trillion) and Federal Reserve policy was relatively benign compared to the current quantitative easing, which is effectively monetizing a significant portion of newly created government debt. The “peace dividend” from the end of the Cold War and the false prosperity from two Fed-created economic booms made the problem appear less urgent and allowed politicians to kick the can down the road. A solution is now urgent, but not likely. David Henderson’s “Must Default Be Avoided at All Costs?” is a great place to start in order to reinvigorate a serious discussion on a moral approach to shrinking the size of the federal government down to a less destructive level.

Henderson wrote,

Bruce Bartlett, in The Benefit and the Burden, his book about taxes, writes that default “would constitute a grossly immoral theft of trillions of dollars from those who loaned money to the federal government in good faith.” In my review of his book, I commented, “Really? It’s worse to default on creditors who took a risk than to forcibly take money from taxpayers who have no choice? [emphasis added]

Henderson sees default as likely to occur eventually and, given current trends and other alternatives, the more moral alternative. Jason J. Fichtner and Veronique de Rugy make a case that “Default must be avoided at all costs and should not be an option on the table” ("The Debt Ceiling: Assets Available to Prevent Default," January 25, 2013). But Henderson disagrees:

I’m unconvinced. The U.S. government has dug itself a deep hole. Commitments that it has made to various people must be broken. There is no plausible way, for example, that the U.S. government will be able, 20 years from now, to pay for all the Medicare, Medicaid, and Social Security benefits that it has committed to pay. One such commitment to consider breaking is the commitment to pay the debt. [emphasis added]

For a sustained case in favor of default, Henderson recommends Jeffrey R. Hummel’s “Some Possible Consequences of a U.S. Government Default.” As in many areas, Rothbard was a leader. Writing in the June 1992 issue of Chronicles (pp. 49–52), Rothbard made the case for “Repudiating the National Debt.” In this extended discussion, which I frequently used as a reading assignment for Principles of Macroeconomics during the 1990s, Rothbard clearly lays out the difference between public debt and private debt, as well as the moral case for public-debt repudiation or default.

First, there is no moral problem with private debt, and private debt repudiation is morally reprehensible. As Rothbard explains,

To think sensibly about the public debt, we first have to go back to first principles and consider debt in general. Put simply, a credit transaction occurs when C, the creditor, transfers a sum of money (say $1,000) to D, the debtor, in exchange for a promise that D will repay C in a year’s time the principal plus interest. If the agreed interest rate on the transaction is 10 percent, then the debtor obligates himself to pay in a year’s time $1,100 to the creditor. This repayment completes the transaction, which in contrast to a regular sale, takes place over time.

So far, it is clear that there is nothing “wrong” with private debt.

In essence: you borrowed it, you spent it, and you should be responsible for repayment.

Per Rothbard,

In a profound sense, the debtor who fails to repay the $1,100 owed to the creditor has stolen property that belongs to the creditor; we have here not simply a civil debt, but a tort, an aggression against another’s property.

What about public debt? Rothbard provides the answer:

If sanctity of contracts should rule in the world of private debt, shouldn’t they be equally as sacrosanct in public debt? Shouldn’t public debt be governed by the same principles as private? The answer is no, even though such an answer may shock the sensibilities of most people. [emphasis added]

The reason is that the two forms of debt-transaction are totally different.

Rothbard continues,

[W]hen government borrows money, it does not pledge its own money; its own resources are not liable. Government commits not its own life, fortune, and sacred honor to repay the debt, but ours. This is a horse, and a transaction, of a very different color.

How is it a different horse?

The public debt transaction, then, is very different from private debt. Instead of a low-time-preference creditor exchanging money for an IOU from a high-time-preference debtor, the government now receives money from creditors, both parties realizing that the money will be paid back not out of the pockets or the hides of the politicians and bureaucrats, but out of the looted wallets and purses of the hapless taxpayers, the subjects of the state.

Both parties [the politicians doing the borrowing and the members of the public loaning funds to the government] are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people’s property, and both deserve the back of our hand. The public credit transaction is not a genuine contract that need be considered sacrosanct, any more than robbers parceling out their shares of loot in advance should be treated as some sort of sanctified contract.

In summary, as a taxpayer, you did not borrow the funds, you did not spend the funds, and you have no moral obligation to repay the funds.

Rothbard’s recommendation: “I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: outright debt repudiation.” Repudiation is not only a sound economic solution to our fiscal crisis, but it is also the morally correct solution. Rothbard’s more detailed proposal, which was a “combination of repudiation and privatization,” should be considered a blueprint for an effective debt-reduction plan. As Rothbard argued, such a plan “would go a long way to reducing the tax burden, establishing fiscal soundness, and desocializing the United States.” As an added bonus, default would be as effective, if not more effective, than a balanced budget amendment, in reducing the likelihood of a future reoccurrence of the problem.

But “[i]n order to go this route, however, we first have to rid ourselves of the fallacious mindset that conflates public and private, and that treats government debt as if it were a productive contract between two legitimate property owners.” The commentary by Hummel and Henderson are evidence that some are seriously addressing this issue, alas, after over a 20 year lag.

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dadichris's picture

preemptive, phased default is the only viable option

Careless Whisper's picture

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MisterMousePotato's picture

Actually, some did benefit from the debt ... comes to mind politicians, government employees, and the ebt crowd, for example. I could see justice and morality in having them pay it, or at least relinquishing their illgotten gains; for example, the properties acquired with the stolen monies.

Papasmurf's picture

You left out the banks that were at the top of this pyramid scheme.

prains's picture

This article makes the mistake of confusing debt repudiation as some type of "signing off" the debt over lemonade at the country club. NO he's right there will be debt repudiation

but there will also be LIFE repudiation. Bloody, shitty, messy, evil bankster style give me your child to bash against the wall repudiation. Ain't no fucking lemonade gonna be shared at the club my friends

Boris Alatovkrap's picture

What is all talk about lemonade? Debt Repudiation must is require vodka or at least high alcoholic content of beer.

DoChenRollingBearing's picture

Actually the government could do what FOFOA has suggested they might do: Buy any and all gold for an arbitrary high number ($5000 or $10,000 per oz, for example).  Poof!  Our Treasury owned gold can almost pay off the whole debt at a stroke, AND there is a new worldwide price floor for gold.

Freegold soon follows...  $55,000 per oz if you are smart to buy and hold the physical...

ATM's picture

I'm missing where the debt is paid off in that example. Isn't the reprice of gold to save the Fed and thus the dollar from total destruction as the Fed balance sheet holds nothing of value except gold?

Sean7k's picture

Nice catch, plus the VALUE of those dollars would be what? You want to look for the last pie on the shelf: 19 trillion in retirement savings and investments.

caShOnlY's picture

19 trillion in retirement savings and investments.

.... and everyone wonders how the FED is going to "unwind" it's balance sheet?  muhahahaha..... muhahahahahahahahaaha

jonjon831983's picture

Technically yes - but an almost similar analogy would be to purchase some illiquid penny stock at $1000 /share and then trying to use those shares as collateral.  Sure you could artificially bump up your networth by a lot.  However, the point is will anybody else buy your penny stock at $1000?  Your bid/ask spread would be ginormous.  What matters is what someone else will accept it as collateral/buy it for from you at that price.


Now obviously gold would be a different matter compared to a penny stock.  But at that scale, the government artificially buying at a high price like $5,000, or $10,000, or $55,000USD would itself be creating a massive inflation and currency devaluation as more money must be created to purchase additional gold at that ever increasing prices.  In addition, anybody selling gold would smell this disconnect and might not even allow for the payment of gold in USD.  The US gov't would need to pull up almost Trillions of USD out of thin air in order to pay the sellers at escalating prices.  These sellers who receive USD then need to turn around and use the USD in some way.  This process of transmitting new gold prices would cause a shockwave of currency devaluations/inflation throughout the world as a flood of USD is unleashed.

Then of course if the government is dumb enough to sell off all their gold at the new artificial price to pay off debts a) they won't have any gold left to back up their currency for real and use for FX transactions, b) there could be a smackdown on the price of gold as buyers would smell desperation and low bid for it (on open market at least. Private CB to CB I guess they could strike a private placement type of deal in order to avoid this), c) FX problems for international trade - good luck trying to buy oil and crap from elsewhere in the world because other currencies will be buying it up ahead of the US and cutting links to USD pricing.


Basically, to sum it up mayhem would ensue if the government went on an open-ended unlimited gold (or anything) purchasing mania JUST to get the price of their gold to be able to pay off their debts.  The end result of these actions would be worse.  They could just as easily declare the price of gold in current reserves worth many multiples higher instead of the current $42 (?) / oz... or even better just declare a default and renegotiate the US debt in an orderly fashion that would reduce the risk of being cut out from the global market.

Sean7k's picture

The comments are as good as the article. People are losing any respect for the police. This leads to a loss of acceptance for law in general and without that acceptance, the State cannot govern. 

Thanks CW.

philipat's picture

I guess that is why the vasy majority of new debt is now just printed by The Fed? Nobody else would take the risk of actually buying it, irrepsective of "Repudiation".

When do you actually project this default? Sorry, I mean Repudiation?

tango's picture

Actuallly, several Europeans have called for a debt repudiation.  I see two problems - separating the participants ( banks, companies, individuals, trusts, states) and secondly and far more important, what next?  I mean, if all European debt was repudiated but the social system (decreasing kids/workers, increasing pensioners/ increased spending) is not modified they will quickly find themselves in the same mess. 

jeebus's picture

I'll defer to Peter Schiff on this one:


The US will either default honestly or dishonestly. I think it will be dishonestly. The US will continue doing what it's doing until there's a crisis.



Henry Hub's picture

The only debt that's going to be defaulted is the Social Security "trust fund". The oligarchs will never allow the bonds and treasuries that they hold to be defaulted on.

Room 101's picture

Repudiation?  NOW we're talking!

Why should generations that are not even born be yoked to a debt that is simply unrepayable?  Because they were born within a specific geographical location?  

In private contracts, I have a right to demand a copy of the note showing that I agreed to pay a debt.  Where is that note?

Show Me The Paper, bitchez!

<edit: Fuck you bernanke>

Stoploss's picture

Always is a debt jubilee in there towards the end anyway.


I guess im fucked on that part.

Sean7k's picture

This article is a total mess. 

I am a great admirer of Murray Rothbard, but you cannot do his views justice is two paragraphs. There are chapters of material on this idea. Worse, the breaking of a contract is not a tort. Torts and contracts are two completely different actionable complaints.

Repudiation, then what? Do you really think the State, fully robed in all its' tyranny and fascism would allow or consider repudiation? If it did, then what? You could no longer finance bonds or print currency or trade with other economies. Without any funding, the State would require a remodel (to say the least). Who defines the parameters of this project?

Did we sign a contract? Do you really think contract law was discovered after the pen and paper? Established law does not require a signature (remember the oral contract). A contract requires the acceptance of a benefit. Bank account, SS, insurance, federal reserve notes, Roads, etc Did you use any of these? You entered into a legally binding contract with the State. 

Is the State limited in its' power to tax? Have you read English common law and the powers of the king? The courts have.

Do you really think the Rothschilds have spent hundreds of years creating the perfect slavery system, just to have it repudiated? 

Nothing less than total revolution and the destruction of the central banking concept as well as the rule of law would create the conditions favorable for the elimination of slavery.

davidsmith's picture

Well, you're right about this idiot ignorance of the difference between contract and tort law. But this is clearly wrong:


You could no longer finance bonds or print currency or trade with other economies.


States (including U.S. States!) have defaulted time and time again, quite successfully.  You could easily argue that the remedy is pricing into the debt, the probability of default.


The real point is that repudication becomes just as much a tool of corruption as anything else.  The result of THAT is that it rapidly becomes impossible to price the debt, and THAT is why no one will buy the debt.  There are many tools government has to force debt purchases even AFTER default (among other things, they can close their markets selectively or establish tariffs).


The problem is not that repudiation would be draconian, but instead, that repudiation would become commonplace, be factored in, and soon fail to accomplish the goals of those who promoted repudiation in the first place.  It's like every economic device: if you target it, it can work.  But if you use it as broad brush, it probably won't get rid of any of the problems you want to eliminate.


No, enough tricks.  I say, overthrow the U.S. Government.  That opens up every option.  Repudiation is a narrow solution which produces widespread failure.

Sean7k's picture

Sorry, repudiation of all debt when you are the reserve currency for the global economy is nothing like hungary, argentina or zimbabwe. 

When the global community harbors trillions in debt as well as the banking cabal, repudiation takes on a whole other meaning.

Matt's picture

And on top of that, just how well are Argentina and Zimbabwe doing these days, anyways?

Zimbabwe, people are still using flecks of gold to buy bread. Argentina is going into high inflation, leading up to its next hyperinflation.

Room 101's picture

An even more interesting post. I think I'll skip right to your conclusion:

"I say, overthrow the U.S. Government.  That opens up every option. Repudiation is a narrow solution which produces widespread failure."  

No narrow solutions for you, eh?  Just sedition and treason instead.  I think I'll take a pass on following you in your keyboard revolution as well. 

Isn't this fascinating? The posters tonite seem to want to avoid any rational discussion of the merits or drawbacks of repudiation and instead want to talk about things like overthrowing the U.S. government and revolution. It's almost as if there were a few agent provocateurs about.

In any case, let's address a few of the points you made before going fishing.

"You could no longer finance bonds or print currency or trade with other economies." 

And being able to finance bonds is a good thing?  If you look at countries that have defaulted, they are left out of the capital markets. For a few years.  Trade continues as does the ability to coin a currency.  

"The real point is that repudiation becomes just as much a tool of corruption as anything else."  

Maybe you have to look deeper.  Like at whether the loaning of money at interest is itself corrupt.  And whether there might be a good reason why major religions (e.g. Islam, Christianity) have viewed usury as a sin.

sun tzu's picture

Overthrow of the government is not treason. Overthrow of the consitution is treason. Who has subverted the Constitution? Is it the people or the government?

aka Gil's picture

Points taken. First point, let us not be distracted from the issue of public debt repudiation. It will be necessary for the survival of our nation and it is morally correct. As an example, just look at the debt (100% shit) that the Fed has purchased from the banks and added to their balance sheet. Does anyone believe that the US taxpayer won't eventually get stuck with that shit? Second point, debt repudiation without dispatching with the entire lot of criminal fucks masquerading as politicians and leaders would be a wasted effort. If we're going to right the ship the dead weight must be jettisoned, and it should be jettisoned with extreme prejudice imo.

putaipan's picture

odeious! i tells you .... odeious!


btw- 1871 seems to be at the heart of what really needs to be repudiated, much less 1913.

ItchyBeard's picture



you speak the troof brother!

nofluer's picture

And whether there might be a good reason why major religions (e.g. Islam, Christianity) have viewed usury as a sin.

Having looked into Sharia Banking, if the rules of it were separated from religion, I'd consider it a viable alternative.

Harbanger's picture

How does that work, who would lend anyone money without charging some form of interest?  It sounds illogical.   Maybe there's no lending of money allowed at all.

nofluer's picture

No one borrows, no one lends.

What would be the "borrower" and the bank ("lender") actually become "partners" with the "borrower" having control of the subject of the un-loan (a business, a car, a house) and the bank puts up the money for it. An agreement is reached going forward as to the cost up front of the "partnership" to what would have been the "borrower."

YOU want to buy a car. The car costs $10,000. You go to the bank and present your proposal. The bank then offers to put up the money (amounts are subject to up-front negotiation), and you agree to buy the bank's ownership interest in the car at a specified rate making payments until after a specified period you are the sole owner.The total amount you pay is predetermined and does not go up as it would in an interest/loan situation if the bank raised the interest rate. Your total "indebtedness" is known in full from the first day of the partnership relationship.

YOU want to start a business. You go to the bank and demonstrate your competence in the industry (ie you can actually run the business at a profit.) The bank provides "start-up" money and you and the bank are partners in the enterprise. You and the bank agree on a fixed amount for the banks' interest and you pay the bank out of profits until you've bought the bank out and it's your business.

In neither case does the amount owed to the bank go up over time. (That would be interest which is defined as the time value of money.)

If you cannot make your payments on the bank's ownership interest, I'd presume that you and the bank would re-negotiate the amount that said ownership interest is worth.

So it's all buying and selling. No lending.

Harbanger's picture

There must be a time frame in which to pay back the loan, it may be a long timeframe, but it's something agreed upon at the negotiation. Otherwise there's no reason to pay it back. If they don't pay it back within a time frame or they die, then they take back the car or business.  Same as banks here, they're not just a lender but your partner until you pay back the loan.  Then the only difference is that you agree on the amount of interest up front, which is predetermined at the negotiation. Which isn't a differrence really because that's just a fixed rate loan.  What you owe doesn't go up over time, what you owe in interest is spelled out in the loan documents, you can pay it all back at any time before it's due.   So maybe the problem we have is the open-ended variable rate credit like you find in credit cards and low qualification loans.  They probably don't give those out under sharia banking. That's how they can milk you with interest forever. 

tango's picture

Sharia banking is a myth.   Until recently no Muslim took it seriously.   Muslims have ALWAYS paid and charged interest - sometimes under other guises (percent of profits, "gift", property, marriage contract, etc)  Besides almost all Islamic loans were PERSONAL - not business - and this allowed these pseudo contracts to be performed.  No one in their right mind will give their money to another without assurances or payments.  

Believe me, Kuwait, Dubai, Saudi Arabia, Oman - all lend and pay interest,  Without lending we have no great enterprises and the goodies - medicines, food for the masses, electronic toys, bridges, roads, water plants.   The end of lending would mean the state would effectively control all monetary exchanges through bonds and other legalistic means.    

nofluer's picture

As I understand it, it is not permissible to charge interest to another believer (Muslim). I believe that it IS permissible to charge interest to a non-believer... and as you indicate it is done all the time.

shovelhead's picture


Sharia banking is calling a pig a dog. It still oinks instead of barks but it's dog to Mohammed.

A dog that makes bacon.

Mohammed is pleased.

Room 101's picture

My, my, how the talk of repudiation brings out the best. 

"Did we sign a contract? Do you really think contract law was discovered after the pen and paper? Established law does not require a signature (remember the oral contract)."

So?  Where are the basic elements of any contract - oral or written?  Where is the mutual consideration?  Where is the agreement of the parties? In the case of a new born babe, are you arguing that there is competence to engage in a contract?

 "Nothing less than total revolution and the destruction of the central banking concept as well as the rule of law would create the conditions favorable for the elimination of slavery."

Now isn't that interesting?  Pooh-poohing the relatively benign idea of debt repudiation and jumping straight into "total revolution" and "destruction...of the rule of law."

Thanks, I think I'll take a pass on following your keyboard revolution.    


Sean7k's picture

The basic element of a contract is receiving a benefit. When you receive it, you acknowledge the contract exists and reciprocity is a part of every contractual agreement. Just because you are ignorant of contract law doesn't change how a court will rule.(or do you even pay attention to tax law rulings). Do you have an insurance policy? Does it contain elements of limited liability? Where do you think the benefit of limited liability comes from? The State. Did you even read your contract that notices that banks and insurance agencies act as agents of the State? Therefore, when you accepted the benefit of the reduced insurance cost, in a legal contract, you indentured yourself to the State. 

I realize this is difficult to digest, but it would be to your benefit to study the law and its' consequences in this area.

A child cannot enter into contracts until they are 18. Do you even think before you open your mouth? 

I was "poo pooing" nothing but your absurd construct. If you have no idea the level of slavery you have entered, how can you begin to comprehend the amount of action necessary to eliminate it? 


Anusocracy's picture

Law is just another weapon of government.

Look at how well the Constitution has been destroyed.


Totentänzerlied's picture

I prefer the Articles of Confederation, but the Founders had as little problem nullifying the Articles as they did creating the Constitution, or as their heirs had in ignoring it/repurposing it into White House toilet paper.

Sean7k's picture

There are arguments in favor of the idea that the Artilcles were NEVER nullified, but became part of the State contract. To accept them as nullified would require us to recognize the acceptance of the Constitution as a coup d'tat. Both documents were voted into being by those allowed to vote at the time and accepted by the colonies.

nofluer's picture

Both documents were voted into being by those allowed to vote at the time and accepted by the colonies.

Sorry Sean. Not true. The requirements of changing the Articles of Confederation required that agreement to change them must be unanimous. It was not. So it can be said that, accademically, the articles are still the law of the land, and the US Constitution was never lawfully ratified... which doesn't make much difference today as the Constitution has been raped, stabbed and left bleeding in an alley by the US Federal government and the banking system.

Sean7k's picture

Excuse me, what is not true? Voting was restricted by land and wealth requirements, meaning between 3 and 13% of the population voted on either document. Most people would say the articles were nullified when the Constitution was ratified, but there was never a vote taken to nullify the articles. 

That is what I said, what is not true in light of your comment? The Constitution WAS lawfully ratified by the requirements set forth by the Convention. All thirteen colonies ratified the Constitution as well (even if Rhode Island and South Caroline had to be economically blackmailed). 


nofluer's picture

Two things -

1. "Commitments that it has made to various people must be broken."

The US government never signed a treaty or agreement that it couldn't (and didn't) break. So why should the US Government Debt ba different than any other agreement, written or implied?

2. Repudiation, then what?

The answer to that is amazingly easy to find... just look at the US Continental Congress and the default on the "Continental" dollar - which was a repudiation/default in fact. The US government at the time simply issued new money, and "redeemed" the old at pennies to the dollar (and the only reason they redeemed it at all was because the honorable members of Congress had been running around buying up the old script at really low prices and looked to make a killing on the redemption of the worthless script.)

What? Our wonderful Founding Fathers and the Congress were CORRUPT? You bet they were. Study some of the things they did back then and you'll see that today's bankster crooks could maybe pick up a new trick or three when it comes to stealing from the people.


bank guy in Brussels's picture

A lot of both government debt and private debt is immoral and based on fraud, and should be repudiated

Any public debt of any nation, that is not in the best interests of the people of that nation, is 'odious debt' and not binding on the people after the oligarchs or dictators who contracted the debt have been pushed aside ...

Only the oligarchs or dictators are obliged to such debt ...

As creditors learn this, and to hesitate about playing 'Economic Hit Man', the world would be a better place

Any private debt based on a significant fraud and deception of the borrower, such as being an excessive burden on the life of a person who does not understand that burden, is likewise something that should always be able to be repudiated

Such as American student loans for worthless 'educations' by lying 'colleges' ... And mortgage loans to simple Eastern European citizens, binding them to repay in Swiss francs ...

Bankruptcy and jubilee ...Yes !

Maybe the religious Muslims, and many Christians and Jews of the past, and the Greek philosopher Aristotle, were all correct, in the idea that interest-payment obligations are immoral ...

It actually does work, and is being implemented in communities in Sweden, for example. Consumer finance is done by leasing and rent-to-own, and business finance is done by shared risk and shared profit or loss.

Interest-free finance would be better than the world of shite we are in now ... 150 trillion in world 'debt' which can never be repaid

Room 101's picture

Usury is a sin. 

Just one more reason to say: fuck you bernanke. Not that you really need one.    

Sean7k's picture

Unfortunately, interest free financing ignores history and economics. Time preference comes with a cost, whether it is built into the product cost or as an interest rate. The Catholic church did not allow christians to practuce usury, but since jews were going to hell and ship captains needed credit- guess what happened? 

Why would you lend money or product for payment in the future unless you receive an incentive? You won't unless you have no hope of selling the product otherwise- inwhich case it is priced too high and the interest payment is built in.

The problem is not interest, it is central banking, fractional reserve banking and control of currency  through legal tender laws. Debt has always existed, because some people can't wait to spend money they haven't earned and others save so much, it behooves them to put it to work. 

Why do you think debt jubilees were PERIODIC? 

nofluer's picture

Study Sharia banking and see how it works. Banks can make a profit without charging "interest". The borrower partners with the bank to purchase something or start a business, and the bank puts up the money....

Sean7k's picture

Sharia law allows muslims to charge interest on infidels. Yes, banks can make a profit without charging interest,( see the first Dutch and Venician banks), however, you still fail to grasp the concept of time preference. Why loan money to be paid back in the future without receiving a benefit?

What makes you think I don't understand Sharia law? Are you always this arrogant and ignorant? 

Totentänzerlied's picture

Well, maybe, maybe not. You cannot run an advanced economy, or, therefore, support an advanced modern society, without lots of loans, they are as much the core of capitalism as labor, entrepreneurship, and investment. Without interest there is very little or no incentive to loan. Without these loans, the economy goes back to the Dark Ages.

You can't have it both ways. If your aim is a simpler economy and lower standard of living, outlawing of interest is a surefire way to get there.

Spaceman Spiff's picture

It just seems a bit too easy.  It also seems like it will be the final way for those that were reckless but remain in charge to try and eschew this problem.   Consequences will be paid one way or another.   


One problem with the future generation argument is that how many future/present kids owe their existence to the overspending entitlement state perverting the consequences of squeezing out too many kids and then demanding too many resources for their care...  Not only the politicians deserve blame.


Fuck Bernanke