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Comment by ars | Hacker News Reader

This was quite interesting.

One error (omission actually) I noticed. He talks about the checks and balances on debt caused by canceling debts every jubilee (7 years). But does not mention that in practice what actually happened is that people would refuse to lend money the closer it got to the jubilee.

And this refusal actually caused social ills, because people needed loans. So in the talmud they instituted something called a http://en.wikipedia.org/wiki/Pruzbul which allowed people to collect debts after the jubilee by turning the debt over to the court.

It's still quite interesting though, just thought I'd share some more info on the subject.

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Interesting. I've read that under the rules of Islamic finance, which forbid lending at interest, people have exploited similar loopholes. In the UK, HSBC (I think) offers an "Islamic mortgage" product, in which the bank purchases the house, the prospective homeowner rents it, and the bank agrees to give him the house if he's a good renter for thirty years. The loan market interprets lenience as damage and routes around it.

Yes, the house rental trick was big in the European middle ages: sometimes the lender would just pretend to "buy" the borrowers' house, and charge him "rent" for his own house until he "buys" it back.

  Still, the remarkable thing from the Medieval documents we have from the Middle East is that most people actually did follow the rules: they used to do profit-sharing instead of interest; lenders would become partners instead

  Still, the remarkable thing from the Medieval documents we have from the Middle East is that most people actually did follow the rules: they used to do profit-sharing instead of interest; lenders would become partners instead.

  As for the pruzbul I believe that was introduced by Rabbi Hillel around the time of King Herod, a much later period. The remarkable thing is that jubilees were institutionalized in one form or another in much of the Middle East for many thousand years before that and it didn't cause significant economic disruption.

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