What if charging interest was illegal?

Very silly thought, but seriously worth imagining a little perhaps.

This isn't about feared communism - redistributing wealth. It is just about offering a little restriction against the use of wealth for generating wealth.

What's the harm? What's the consequences? Can it be done?

Well, let me start on the "can" question. There'd be no general restriction on "giving" money away.

Let's say I borrow $1000 from you, we can sign a contract that I'll pay you back exactly $1000 after 1 year.

Well, after that year I don't have the $1000 to repay. What do we do? Well, the contract can say "Penalty of $100 to be added after 1 year." That's fair, right? But that is an effective 10% interest rate.

The only way to avoid this "side-step" is to also disallow "fees" as well.

So then what incentive do you have to loan money to me? Absolutely none. Less than an incentive, you have the disincentive that IF I eventually pay you back, inflation will make my money worth less than it was when we started!

Well, what else could I do with my money? I can buy things. Heck, I could by "stock". Stock isn't a loan because there's no guaranteed returns. Still a stock seller has to convince the buyer that good returns will LIKELY exist, using past history and a little bit of charm.

A stock in itself has no innate value. It is only worth something because someone else will buy it from me. Well, the company that created the stock could "buy it back" at any price they want.

So that defines the terms of a hidden loan. I'll buy "stock" from you worth $1000. In one year I'll offer to buy it back from you for $1100. That's a 10% return. It's just not a legal contract guarantee. I mean I can tell you that's my plan, but you can't make me follow through.

In some ways this is a more honest relation. I mean honest by no guarantees. You're taking a chance on me, and WHY should the law be able to enforce an agreement between us? The only basis for trust is my word and intention - supported from past history.

So even credit cards as known could continue to exist. I mean you allow me to "borrow" up to a maximum amount - actually "selling" you a "stock" which I layer buy back for something more.

Well, my original thoughts are how I dislike the "wealth-focus" of people with lots of money - EXPECTING profits - even as I accept so many people are foolish and borrow money on promises that hurt them and eventually they can't pay it back. I had thought "ending interest" as ending "easy money" for borrowing, but knowing it was impossible.

I've no real solutions, but mainly I'm left with questions of power. Once you have loaned me money, DO YOU HAVE RIGHTS to threaten me to get the money back with interest?

My conclusion is in the long past all agreements were made between individuals with no legal power of enforcement. A modern economy can't function with private agreements alone because we deal with too many people. A modern government makes laws that protect money lenders because it serves the interest of the government to increase commerse.

I suppose this is related to the bill for new federal laws which further restrict declaration of bankruptsy.

On the point of view of "goodness" I can't accept this. However much I BLAME people for taking on too much debt, I more BLAME money lenders who encourage people to borrow too much.

I'm sure restrictions on bankruptsy will INCREASE irresponsible lending practices. The "reason" given is that reduced bankruptsy will decrease costs for "honest borrowers", but I don't believe it. I mean I think ultimately bankruptsy won't be decreased - it'll just encourage further debt that won't get repaid.

Okay, I'm not sure of anything. I'm only sure I don't like capitalism. I can mostly protect myself, but it hurts me to see exploitation and do nothing.