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Author Topic: Gold, oil, fiat money and the islamic law  (Read 8387 times)
Impaler
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December 28, 2013, 07:08:04 AM
 #21

Any force used to ban or limit usury will distort the market.  Time has value to people, which is essentially what an interest rate is a price on.  In a free market, I can't see a usury-free bank getting more investors than its interest-earning competition.

That why usury can only be prevented by softening money itself such that the cost of holding money is equal to the time-value of money which we call LIQUIDITY.  That would bring the natural rate of interest (the rate that a risk-free borrower pays) down to Zero.  Then a free market would be able to lend at any rate it liked as every borrower has some risk which needs to be accounted for, and Ironically risk and how it is shared is one of the factors that Islamic Banking understands very well.

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