The Interest Free Road to Hell

It’s amusing how religious edicts have had an impact on the banking sector through the ages. Both Christianity and Islam forbade the charging of interest on loans. This was done with good intentions: to prevent excessive interest charging by the likes of moneylenders and loan sharks.

But they seem to have forgotten to consider the practical impact of not charging interest. First, there’s inflation that eats away the purchasing power of money as time passes. Charging interest had been a way to compensate for inflation while issuing loans. Second, there’s always a risk of someone being unable to pay back the loan, willfully or otherwise. Charging interest was and is a way to compensate for that risk.

So when Christianity and Islam forbade their flocks from charging interest, they effectively killed the entire lending industry in their communities. Enter the Jews to fill the vacuum. Judaism only prevented Jews from charging interest from fellow Jews, so apparently the Jewish God was OK with charging interest from the Muslims and Christians.

So the Occident ended up with the Jews as the sole moneylenders, who charged interest, possibly even exorbitant rates. Plus, they were from a different religion. A volatile cocktail to evoke dislike and hatred, if ever there was one. That perception can be seen in plays like The Merchant of Venice and later when Hitler fanned the hatred towards Jews even further to unimaginable slaughter.

The butterfly that flapped its wings to abolish the charging of interest had sown the seeds for the whirlwind centuries later. The road to hell is indeed paved with good intentions!

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