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xenophon
Starting Member

USA
7 Posts

Posted - 03/07/2010 :  23:25:53  Show Profile  Reply with Quote
I am curious to know the Orthodox teaching on lending money at interest. Judaism and Islam aside, there was a long tradition of prohibition on the practice in the West. Both Aristotle and St. Thomas Aquinas, for instance, were against it. And even in the mid-20th. Century, one finds C.S. Lewis deploring, "our civilization which is founded on usury." What do the Orthodox say?

parascheva1014
Moderator

USA
1412 Posts

Posted - 03/08/2010 :  12:40:33  Show Profile  Visit parascheva1014's Homepage  Send parascheva1014 an AOL message  Reply with Quote
I don't know that we have a practice. I bought a house from another Orthodox friend in which they held the mortgage and I was more than happy to pay them a reasonable interest rate. I have never heard anything against it. One can hardly survive without both borrowing and lending money is the current capitalistic climate. After all if you earn a rate of return on something, someone else is paying it. Often they are paying you the rate of return because somewhere someone else is paying interest. It's how our current money system works. It is a usery system however it's impossible not to participate in some way.

Example: If you rent your house, you are paying the landlords mortgage, property taxes and giving him a profit. He might put food on the table with that profit. The bank is likely paying someone else a rate of return on their investment which enabled them to lend the money in the first place. If you own you pay a mortgage and property taxes. If you manage to own without a mortgage than you pay property taxes. Many municipalities have taken on debt so that some portion of your property taxes goes to pay the interest on the debt the municipality has taken on to upgrade schools or whatever.

I look at it this way. If I lend money, inflation is going to cause me to loose value the longer the loan is unpaid so in order to get the same amount of spending power back when the debt is repaid I need to be paid at least the principle plus interest equal to the rate of inflation. If I borrow money I'm more than happy to repay the total value of what I borrowed which might include and interest equal to inflation or higher if the person I borrowed the money from could have invested it in some other source and made a better return. If I'm their friend and I'm greatful for borrowing the money I'll be willing to pay back whatever is necessary so my friend doesn't suffer a loss for lending to me.

I think at one time the world of money was completely different. It was possible to invest in things that would gain or retain value. At that time earning interest, esspecially exorbitant interest, was really just another way to enslave people. We have a currency system now which depends on the constant motion of that currency. Saving currency is not the same thing as saving gold for instance. Currancy fluctuates in value based on the decisions of the FED to turn on the money printing machine or not.

We just don't live in a world where people can both put food on the table and avoid carrying debt. I carry a lot of debt but it's attached to assetts which earn income that pay more than the debt. I'm happy to pay the debt because without it I wouldn't have the assetts aditional profit.

I don't think the Orthodox Church speaks on debt except that there is an understanding that we are to be fair within whatever system we live. I think charging a certain amount of interest is unreasonable, particularly if the person borrowing can't afford to ever pay off the debt because the interest is so high they will only ever pay the interest. Reverse ammoritizaton loans for instance... that's just criminal, or should be.
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xenophon
Starting Member

USA
7 Posts

Posted - 03/09/2010 :  08:26:18  Show Profile  Reply with Quote
That is just the point. There IS an alternative to debt. At the moment, I am fifty years old and debt-free. I have my own house and my wife has a car. I have a good income, but am far from wealthy. (I'm a teacher.) But, I reside outside the U.S. In the U.S., debt slavery is a fact of life.

There are a good many websites discussing Islamic finance which prohibits usury. Among these are www.islamic-finance.com and www.islamicfinancenews.com It is, I think, a shame that Christians cannot find any response to financial exploitation than passive surrender.The financial system is predicated on the denial that I am my brother's keeper. Its operative philosophy can be described as an unreflective mystical Darwinism whose dogma is "survival of the fittest"---as defined by those holding power.The great revolution of the past century was not that of the Communists. It was the intellectual revolution whereby Christianity was co-opted by finance capitalism.
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macacic
Administrator

USA
2434 Posts

Posted - 03/09/2010 :  10:03:38  Show Profile  Reply with Quote
quote:
Originally posted by xenophon

But, I reside outside the U.S.

Then why does your location in your profile show you as being within the US?
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parascheva1014
Moderator

USA
1412 Posts

Posted - 03/09/2010 :  14:28:29  Show Profile  Visit parascheva1014's Homepage  Send parascheva1014 an AOL message  Reply with Quote
In the US there would be no way for you to get all those things without debt Unless you saved until you where 50 and them bought all of them. Debt allows people to have what they need when it's most useful in their lives. For some things the debt it worth it. I don't necessarily think all debt is bad.

Edited by - parascheva1014 on 03/09/2010 14:29:44
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Yiorgos75
Average Member

Australia
615 Posts

Posted - 03/09/2010 :  18:02:39  Show Profile  Reply with Quote
quote:
Originally posted by xenophon

...In the U.S., debt slavery is a fact of life....

I'd say that in the majority of developed countries debt is a way of life, so I broadly agree with this statement. However, debt is there to be taken up only if you want to do use it. Somehow, people have tended to abrogate their own fiscal responsibility. No one is pushing a credit card into your hand, no one is forcing you to buy that brand new car and no one is forcing you to buy a brand new house.

In the West, most of us have forgotten how to live within our means. The market is a function of our spending habits. Supply vs demand. If more people saved and were more canny with their money, then the market would be slower and slightly smaller. Things in fact would be more affordable and credit would be less prevalent. It seems today that with easy credit and a "must have this now" attitude, a lot of people have gotten themselves into economic problems.

Do we really need a new Plasma screen TV, or to go on holiday to Disneyland, or the 40 square house with only 4 occupants or do we really need to have 4 cars (one for each member of a 4 person family?) We used to make do with a lot less, yet today it seems like we don't have enough.

The answer, in my own opinion, is not an Islamic finance type of arrangement. To say that the Islamic finance arrangement is more equitable is clearly false. The only real difference between Islamic finance and western finance, is that whilst western finance charges interest, Islamic finance charges "up front fees" or an inbuilt component on top of the amount to be lent which gets rolled into the total amount owing. In other words, they get their interest capitalised and upfront, so that interest is not charged over the life of the loan. There are alternate methods of Islamic finance, but from what I have read that is the main gist of the matter. (I have an interest in all things "finance" given that I am a banking & finance lawyer).

The answer to the debt/greed/economic problem is to be found in education. Also, we need to realise that there is a falling level in the spirituality of the western person. The absence of God from the hearts of man has driven us to worship "mammon" (i.e. money). This is something which we were clearly warned against by our Lord.

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dopp
Starting Member

Canada
24 Posts

Posted - 03/25/2010 :  15:19:08  Show Profile  Reply with Quote
Yiorgos,

I certainly agree with what you've said. I think it's remarkable to hear it, though, coming from a finance lawyer. Can you say anything about how you navigate the world of capitalistic finance as an Orthodox Christian? I think this issue goes to the real root of the question. Like it or not, we live in a world that charges interest all the time. For instance, for most of us, any stewardship given to our parish probably goes in part to a mortgage. Giving money to the church is a far cry from buying a plasma screen on a credit card - but it's still wrapped up in the problem. Do you have any practical/personal advice about how you've navigated in your life through these rough waters, especially since your work life keeps you so close to them?
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Yiorgos75
Average Member

Australia
615 Posts

Posted - 03/25/2010 :  20:01:04  Show Profile  Reply with Quote
quote:
Originally posted by dopp

Can you say anything about how you navigate the world of capitalistic finance as an Orthodox Christian?
I am not ethically or morally conflicted when I deal with financing issues as my clients tend to be large banks who lend to corporations for investment and working capital arrangements. The deals that I tend to see done actually assist in ensuring that corporations are able to make their investments (i.e property acquisition and construction) and as result the "smaller" people get a chance to be employed. For example, a corporation borrows $60M in order to build a residential tower, and as result a lot of people are employed in the construction of that tower. I can sleep easy at night knowing that the community sees some benefit.

Also, the fiscal rules in Australia are are little different to the US. Banks are quite regulated by the government regulator and thus why, when all the rest of the world's banking system was collapsing, the Australian banking system still powered on such that 4 of the world's top 10 banks are now Australian (believe it or not).

From a consumer point of view (and I know that our American brothers will think of this as being quite "socialist" if not "communist"), Banks and credit providers are legally prohibited from entering into abusive/manipulative loan contracts with consumer/retail borrowers (i.e mums and dads). For example, there is a limit on the interest that can be charged, unfair debt contracts can be re-opened or struck down by the courts, borrowers who become unemployed or have health problems during their loan contracts can apply to a credit tribunal (similar to a court) to have the repayment terms of their contracts re-written (for example, extending the term of the loan, postponing repayment or reducing the repayment amount until people are able to get back on their feet).

Also, the greatest incentive for bank or a credit provider to comply with the law is that the government regulator can remove the bank's banking licence (!) and/or fine the bank (in some cases minimum $200,000 per breach of the Credit Code). Most banks, credit providers and financial services providers find it easier to comply with the government regulation rather than face the wrath of the government functionaries who have the power to literally tear up your licence to trade. Also, the directors and decision makers of these corporations get hauled through the Courts.

And before you say this is government intervening into private business let me just say this, that with the global financial crisis, not one Australian bank or financial institution had to be bailed out by the government whereas our US and UK counterparts did. So the proof is in the pudding! Regulate your markets (intelligently by making them more honest) and you will have a stronger economic system. Australia was the only OECD country that did not have a recession due to the "GFC".

quote:
For instance, for most of us, any stewardship given to our parish probably goes in part to a mortgage. Giving money to the church is a far cry from buying a plasma screen on a credit card - but it's still wrapped up in the problem.
Yes but this is credit and money working for a purpose. Pay the Church off and you end up having an institution which lasts for quite a while. In other words, it's a sure and solid investment.

quote:
Do you have any practical/personal advice about how you've navigated in your life through these rough waters, especially since your work life keeps you so close to them?
Ok here are some tips:

1. Stay humble and live within your means. Credit should be a last option for purchases which really mean something, i.e the family home.

2. save save save. Be careful with how you spend your money and make sure that if you are going to buy something with credit, that you have a sizable enough deposit before you buy it so that you own a greater part in the equity of what ever you are about to buy. For example, if you want to buy a family home, make sure that you have at least a 20% deposit plus all the government costs, expenses and taxes for the transfer of the home upon purchase.

3. wherever possible, make extra repayments to stay ahead of credit so that if something unforeseen happens you are well ahead in payments and have some "breathing space".

4. shop around for the best deal when looking for credit. In short, get educated and make sure you check the fine print. Look at the termination clauses, default clauses, charging clauses and interest clauses. For example, what "hidden" charges are there? When can the bank call in the loan? What happens if I do not repay? If I repay the loan early, will the bank slap me with a repayment/prepayment fee/charge? Is the interest fixed, variable (floating) or a combination? Does the bank have a mortgage off-set type arrangement so that if I can save money and I keep that money in a deposit account with the bank which has lent me the money to buy my home, that the interest accumulated in my deposit account in off set against the interest charged on my home loan.

5. Get educated about your consumer rights. Does the State you live in grant protection to consumers of retail credit? If so, what are they?

6. Don't buy in to the Western "must have now" view of the world. Run your own race without looking left or right and don't care what other people say. Who cares if your car is a little older and worn out, if you have almost paid of your home and can provide for your family? A lot of people who have flash new cars are paying them off on finance and living on canned beans in the meantime. Don't get jealous or envious. Stay humble and God will multiply all that you have.

7. Avoid credit cards like the plague. Or if you do have one for "emergency purposes", make sure that you have the minimum limit. For example, you might be approved for a $10,000 limit but tell the bank you want that limit reduced to say $1,000 and not one cent more! Then make sure that you only use the credit card sparingly. Better still, don't keep it in your wallet! Leave it at home!

Banks are wily and will send you letters saying "You've been approved for an increase. Sign on the dotted line and we'll increase your limit". When they do this, tear up the letter and bin it!

Sorry for waffling!
George
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