I cannot think of a comment to make on the piece better than the piece itself.
My latest blogpost: Move Over Fabian Gradualism. Enter Sharia Gradualism..Tweet this!
The difference is Sharia's attitude to homosexuality and women's rights which brings it into conflict with various "progressive" groups in society. And the most extreme version of sharia even bans pop music, which will piss off the majority of the population.I saw a group outside the train station yesterday with a sign that said "Some Muslims are Gay, Get Over It". I wondered who this statement was actually aimed at because the group that is most opposed to homosexuality in our society is, well, other Muslims.
Rather than the usual reflex defence of the wonders of the Western system, some reading round might be in order e.g. The Economist Oct 4 th 2014 "Why Islamic financial products are catching on outside the Muslim world" also " Vatican paper supports Islamic Finance " March 2009. It is not obvious to everybody that demanding .
Continued from above : that demanding interest payments on money thathas not been borrowed is ethical.
@DBC ReedBut how does any financial system work without interest? I'm not going to lend my money to you if there's nothing in it for me. The interest payment is the reward for taking the risk of losing my money.Islamic finance can't operate without being supported by the Western financial system. It can't ever be more than a niche product outside Islamic countries.
I'm not that fazed by strange, superstitious covenants on land, for me the real WTF is why the government is paying rent to anyone. Also, why are the elite of medieval regimes allowed to even visit the UK, never mind buy any of our assets?
@DBCR It wasn't the method of collecting interest that caught my eye. It was the restrictions placed on the property occupiers. It is clearly not acceptable for government to accept restrictions on useage by public employees and the public at large of public buildings set according to the prejudices of a faith group that is not indigenous to the UK.And sharia law still collects 'interest', they just dress it up in some sematic gymnastics.
@DBCR Oh, and clearly, the Islamic nations are buying this land / lending the finance for the 'rent'.
@RT"How does any financial system work without interest?". That's the problem for the West.The "system" has had near zero interest rates for 7 years ,longer than the First World War which our rulers base their invariant financial strategy on, but people have taken on maximum debt in the private sector and cannot stand any more.On here we generally agree that this debt is largely accounted for by inflation of an inelastic supply of useful land, so logically, this is the place to start cutting private debt.@L It doen't seem unreasonable that the lease on an office building contains restrictive covenants on bars.
@DBCR It is entirely unreasonable for the reasons I set out. If our government wants to make such rules, fine (or not fine IMHO) but to have those rules imposed by an alien tradition is not acceptable. Clearly he who pays the piper calls the tune. But if that is the case don't borrow the money from that particular piper. End of.And I am not sure that restrictive covenants are reasonable anyway.
@L It is not an alien tradition. Temperance is a virtue in all the Abrahamic traditions (Jewish Christian, Muslim) and usury was, in the case of all three religions, defined as charging any interest at all.All I see in Sharia compliant banking is a system that works with zero interest rates whereas ours fails to and has run out of alternatives and excuses (hence IMO the widespread disillusionment with experts and elites).
"imposed by an alien tradition"Such as Quakerism, for example? Plenty of Christian landlords did, and still do impose restrictions on the uses to which their buildings can be put, things to do with alcohol being one of them.You don't expect to be paid interest when buying shares, do you, so why do you consider this an indispensable part of our financial system?@DBCR, here we go again.
B. Quakerism isn't exactly alien in the same sense as Islam. And the Quakers generally were banned from public service because of their beliefs and requirements.Here he we have a public building enduring restrictions placed by the financier, who are 'foreign. am quite content to accept the, our, government placing its restrictions on useage (actually generally I am not).
@DBCR Usury has come to mean 'excessive interest'. Wiki is pretty good on this: https://en.wikipedia.org/wiki/UsuryAnd you have wilfully ignored my comment about the semantic gymnastics employed by Islam. They do charge interest, but they mask it with 'rents'.And you know full well I hold no candle for the current banking settlement, which is I agree entirely usurious, and encouraged to be so by the State.
L: "They do charge interest, but they mask it with 'rents'."Exactly. How anybody can pretend or believe otherwise baffles me. And it is the rent/interest which sucks the life out of the economy, not some bloke buying a car on HP or a young couple taking out a personal loan to buy a new kitchen. (Wonga loans are a separate topic at the other end of the scale).
@Bayard: "You don't expect to be paid interest when buying shares, do you, so why do you consider this an indispensable part of our financial system?"I think that comment is aimed at me. I expect shares to pay a dividend, or to rise in price over time so I make a profit when I sell them.There has to be an incentive to part with your money, whether it is interest, dividends, capital gain or rent.
@MWThe Islamic system of mortgages appears to depend on a £200,000 house being bought for cash by the relevant Islamic organisation who then lets the family live in it paying back £240,000 over the term. (I believe it is often the case that because the organisation owns the house ,it is the organisation that gets stuck with repair bills and any untoward expenses).In the First World War Generals system (better, because its what we've always done: for proof look at all the bodies), the Poor Bloody Infantry of mortgage holders might pay £350,000 to the bank over the term and that's for money that the bank has created at the stroke of the pen.Heresy! squeal the strictly rationalist defenders of the indefensible.BTW Have you ever tried to pay off a Brit mortgage early ? I cannot see, if what I have said in brackets is correct, why the Islamic organisation/ owners shouldn't pay the LVT.
DBCR1. In my - limited - experience of sharia mortgages, it is the occupier that picks up the tab for maintenance and repair.2. The 'rate of interest/return implicit in Sharia mortgages is roughly the same as the int/ret on 'normal' mortgages.3. Yes. Pretty well all my clients are urged to pay off mortgages ASAP and most lenders today do not penalise for this. Overpayment is common.4. Of course they should. To be consistent. The LVT paid by the 'owner' will be reflected in the rent/interest.BTW o/t I heard you on the Today programme on R4 this morning. At about 2.48.12. It's on catch up here http://www.bbc.co.uk/programmes/b07n3c43 :-)
@L Some of the confusion about these aspects of Islamic finance , apart from my own scant knowledge of the subject, may be down to disagreement by Muslim scholars on the areas concerned .From a paper like The Ruling of the Permissibility of Financing Properties using Ijara Islamic mortgages (on Net), it is fairly clear that one school of thought believes that the Islamic Bank that owns the property should pay for insuring and repairing it,when it is occupied by the customer, while the banks take a more western view. This paper suggests that these mortgages are a mash-up of incompatible notions of property finance with a great deal of Western influence.
DBCR. This paper suggests that these mortgages are a mash-up of incompatible notions of property finance with a great deal of Western influence Yup. That's my view.Did you listen to yourself?
L, I don;t think he does, he doesn't listen to other people either. Once he has it in his mind that Mark Wadsworth's Blog believes in X Y or Z, he will not be shaken from that belief, however many times I tell him that neither I nor you nor any other poster does, and in fact we have said the opposite gf X Y or Z on many occasions.
"And sharia law still collects 'interest', they just dress it up in some sematic gymnastics."No they don't. There appears to be an important difference, which I am surprised you haven't spotted. AFAIU, under a Sharia mortgage, the bank buys the property and rents it to you. You buy it back off the bank bit by bit and pay rent on the bit that doesn't belong to you. The difference from a conventional mortgage is that, if the property increases or decreases in value, this affects the bank as well as you. This doesn't make much different to most people since nearly everyone in the UK has forgotten that property can decrease in value, but it is an important difference when it comes to business loans, because the lander now owns part of your business and has some skin in the game, unlike a conventional loan where the lender doesn't care whether you go bust, so long as he gets his money back with interest."I expect shares to pay a dividend, or to rise in price over time so I make a profit when I sell them."Yes, but that's not interest, is it? Of course the Sharia banks are expecting to make money on their zero-interest loans, otherwise they wouldn't do it."2. The 'rate of interest/return implicit in Sharia mortgages is roughly the same as the int/ret on 'normal' mortgages"Well, since the Sharia banks are charging you rent and since what you pay in rent is broadly similar to what you'd pay in interest on a mortgage (you either rent the house or rent the money), isn't that what you'd expect?
B. I am fully aware of the way Sharia mortgages work, Your last paragraph makes my point for me. It's interest or rent. Same thing.MW I meant had he listened to the R4 Today prog I linked to. They played a recording of DBCR. It might have been Trotsky, of course.
B. Apologies. I ignored the second bit. Yes the skin in the game bit is important, like equity as opposed to debt financing of a business. However my point still stands rent = interest.
L, don;t let people bog you down in semantics. "Islamic finance" ends up costing the borrower exactly the same as normal mortgage interest. However they dress it up, it is interest (which in turn is disguised rent etc).
L, I mean. what about "discounts for cash"? That's a common and sensible business practice, but logic says that the cash price is the true price and payment after 30 days (or whatever) without the cash discount is the true price plus x% interest.
"I am fully aware of the way Sharia mortgages work, Your last paragraph makes my point for me. It's interest or rent. Same thing."But it's only "semantic gymnastics", if you happen to believe that rent=interest and that the "skin in the game" difference is unimportant, which may be a stance that only you, personally, take whilst there are other readers of this blog. "I am fully aware of the way Sharia mortgages work"Apologies, your lack of mention of the differences with traditional mortgages that I highlighted suggested otherwise (hence my use of the word "surprised")."However my point still stands rent = interest."AFAICS, it is entirely the lack of any "skin in the game" that led the Abrahamic religions to condemn the lending of money at interest, so Sharia loans are not just a sort of religious "tax avoidance measure". It's the psychological difference between being simply a creditor and being a part owner. By the time Christianity and Islam came along, societies had worked out a pretty good idea of the sort of damage done by lending money at interest, such as the sort of debt slavery we still see in India today. Not just in India, either, I am convinced that TPTB here in the UK prefer to have an indebted workforce, because it is easier to control an employee when the sack would result in them losing their home.Mark, I tend to think that a "discount for cash" means that there is a tax fiddle in the offing. Did you mean a discount for prompt payment?"but logic says that the cash price is the true price and payment after 30 days (or whatever) without the cash discount is the true price plus x% interest."I think that it's a bit of a stretch of logic to say that, if you have 100 customers, all on 30 days, you aren't charging interest, but the moment you offer a discount for prompt payment to one of them you are. How the mullahs view this I wouldn't know, you'd have to ask one. There must be a website somewhere that gives you answers on such thorny religious problems.
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