Interest is one of the main reasons the economic and financial system is in ruins. It is an exploitative, parasitic practice and we've known that for thousands of years. But some people only care about their pockets.
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We detached this subthread from https://news.ycombinator.com/item?id=23821546.
As evil as you may think interest rates are- without a price on the risk of loaning money- access to loans dry up and only the already wealthy will have access to capital.
Collateral.
Now the obvious and direct effect of this is that people will generally not loan their money. This is a good thing. The follow up is that they will invest their money in hopefully legitimate and moral ways.
What kind of investor are you referring to that doesn't expect returns? Even "social impact" investors expect returns in reputation, or in buttressing the foundation on which their primary profit driven business is built.
Fixing them ahead of time is an attempt to quantify risk. It doesn't eliminate risk - loan defaults happen. The riskier a loan, the higher the interest rate. As long as the lendee has the option of refinancing with another institution (i.e. there is a competitive market for loans), usury shouldn't be an issue. Usury is an issue when the lendee has no other resort due to being persona-non-grata in the credit system (i.e. people whose only option is payday loans)
Without loans, there would be no way for people without extraordinary amounts of capital to purchase such basic items of modern life as a home or a car. What other mechanism do you suggest for those? Also, a lot of businesses are not public investment like technology firms, i.e. a neighborhood deli. If they have multiple investors, they are just partnerships, often with the partners in the same family. Loans are how such businesses find "investors".
I'd like a world where housing (in the right place), transportation, and costs of small enterprise startup were cheap and good enough for everyone to pursue without loans, but we aren't in that world yet. Maybe some technology advancement (modular homes, self driving buses, 3d printers) will help to reduce the cost of these things such that people won't need to make such large purchases, but that's still to be seen.
> What other mechanism do you suggest for those?
Pay in installments with 0% interest, for a reasonable period of time, not like we see today that even for auto loans they're giving them out to people who can't afford them over insane periods of time. This is a symptom of a corrupt underlying cause.
The hyper capitalistic economy today is built on consumerism. Pushing people to buy things they don't need. Once we eliminate easy debt, consumerism will go down, prices will stabilize, and producers will be forced to give out 0% interest loans if they want to sell (or people can buy in cash).
For small businesses, they can get investors to pitch in money in exchange for ownership of a specific percentage of the business. This way, the risk is carried by all parties, and both parties expect to either gain or lose, unlike with usurious loans.
You keep stating this, but you have not proven it.
Why would one be exploitative and the other not?
That's crazy though. There are plenty of reasons that a company might prefer to issue debt instead of selling more equity.
By issuing debt, especially when not in dire need, the borrower is enabling others to engage in said parasitic practices.
Hopefully it made people think about the current corrupt system we live in. They put band aids on the problems they have, without addressing the actual underlying causes, which means that things won't get solved.
And if the loan shark weren’t there providing his service, his clients would be strictly worse off. He’s not forcing them to borrow money—he’s offering, and they’re free to say no.