Debt: The first five thousand years • Hacker News Board

Re: Debt: The first five thousand years

#11

Post by eru » Fri, Apr 23, 2010, 11:13 AM UTC

piguy314 wrote: post #5

This article had great perspective. We tend to believe our current fiat money is something "new" and "modern" when in reality metal/virtual currency seems to move in cycles (as the author points out). We also tend to believe this most recent economic crisis was a modern contrivance as well, when in reality it bears striking similarity to many crisis from previous centuries. Ken Rogoff and Carmen Reinhart wrote about…

See also "Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007" ( http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1401882) previously on HN.

Re: Debt: The first five thousand years

#12

Post by ab9 » Fri, Apr 23, 2010, 11:24 AM UTC

ars wrote: post #4

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 somethin…

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.

Re: Debt: The first five thousand years

#13

Post by gaius » Fri, Apr 23, 2010, 4:17 PM UTC

eru wrote: post #10

lionhearted wrote: post #6

These two lines seem somewhat obvious, but are actually quite insightful to me now that I think about: > This is not because [kings] are hostile to markets. On the contrary, they normally encourage them, for the simple reason that governments find it inconvenient to levy everything they need (silks, chariot wheels, flamingo tongues, lapis lazuli) directly from their subject population; it’s much easier to encourage m…

> This actually helps explain the rather puzzling behaviour on the part of royal courts: after all, since kings usually controlled the gold and silver mines, what exactly was the point of stamping bits of the stuff with your face on it, dumping it on the civilian population, and then demanding they give it back to you again as taxes? It only makes sense if levying taxes was really a way to force everyone to acquire c…

Yep, you can use anything you want as currency, but your government wants paying in the currency it prefers, and since you have to have some of that for them anyway, why not use it everywhere else too?

Another factor is that the world trades oil in USD. So you want to have some of your local currency and some USD around... That's why the dollar is the reserve currency of choice.

Re: Debt: The first five thousand years

#14

Post by ars » Fri, Apr 23, 2010, 7:54 PM UTC

ab9 wrote: post #9

"Biblical prophets instituted a similar custom, the Jubilee, whereby after seven years all debts were similarly cancelled.... As economist Michael Hudson has pointed out, it seems one of the misfortunes of world history that the institution of lending money at interest disseminated out of Mesopotamia without, for the most part, being accompanied by its original checks and balances." Seven years of slavery for you, yo…

This type of debt slavery is not like the slavery of the blacks. For example the owner was forbidden from any kind of corporal punishment, the slaves ate exactly the same food as the owner, and their beds had to be at least as good as those of the owner.

You couldn't leave, and the owner got to choose your wife for you (if you were not already married), so it was not the same as freedom, but it also was not the same type of slavery you are probably thinking about.

There was a whole procedure a slave had to go through if he voluntarily chose to stay after 7 years - not something you would expect if it was the severe punishment you are thinking of.

There was also a concept of war slaves, which was different from debt slavery.

Re: Debt: The first five thousand years

#15

Post by davidgraeber » Sat, Apr 24, 2010, 2:41 AM UTC

ab9 wrote: post #12

ars wrote: post #4

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 somethin…

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 aro…

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

Re: Debt: The first five thousand years

#16

Post by davidgraeber » Sat, Apr 24, 2010, 2:43 AM UTC

ab9 wrote: post #12

ars wrote: post #4

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 somethin…

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 aro…

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.

  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.