In the middle ages commercial arithmetics seldom discussed compound interest. This was because under canon law it was illegal to charge for the use of money.
Geoffrey Poitras of Simon Fraser University describes the situation in his "From Commercial Arithmetic to Life Annuities:
The Early History of Financial Economics, 1478-1776."
While partnerships could be used to disguise the payment of simple interest, the explicit recognition of a ' profit on profit' payment could bring the sanctions of canon law upon those requiring the receipt of such a payment. For flagrant violation, these sanctions could include ex-communication and even banishment. If such payments were made, and there is some evidence that payment of compound interest was a regular business practice at the time of the Treviso, such payments were made in silence.
It is obvious from the resurrected documents of Chuquet's "Triparty" that compound interest was known, and used, but never openly until later.
It was this church proscription against payment for the use of money, usury, that created the term. Once more in the words of Poitras, "More precisely, under canon law interisse (from the Latin verb "to be lost")
was acceptable while usura (from the Latin noun "use") was not. Compensation could be charged for a loan (mutuum) only if it was a reimbursement for a loss or expense, no net gains were permitted."
5 comments:
That last sentence struck a chord with me. When I've loaned money for more than a few months, I've charged interest equal to my 'loss' - equal to what my mortgage company is charging me. (I figured if I hadn't lent my sibling or friend, I would have paid ahead on the mortgage.) I don't want to profit from the situation, nor do I want to lose something by doing it.
I don't normally invest, because the whole framework of capitalism feels icky to me. I have invested in one very cool local business. They were offering 10% return if we took our money back in food, and my home equity line of credit was charging me less than 6%. So I took out $5K there, and gave it to the new business. Win-win situation.
Have you ever read The Knights Templars, Pat? They were the first European bankers, based on what they learned during the Crusades, and were quite sucessful at it.
So successful in fact, that King Philip IV of France burned them at the stake, rather than, you know .... pay back his debts.
Between the natural logarithm and the exponential function there is much mathematics here. Currently, and one of the things that got us in this pickle of an economy we're in, is the business concept of "leverage", of paying off your debts by borrowing more money.
Eventually, though, the piper must be paid. it would be cool if you could comment on how long this "strategy" works until, well, it all goes to hell.
Thomas Jefferson, for example, died deeply in debt, meaning he spent more than he made in life.
How do you describe such a person?
Oh, I don't know, how about ... a Winner ?! lol
Bankers aren't laughing.
Jct: Ezekiel 18 denounced "he who exacts usury or excessive interest." So there is a difference between interest is on cows that have babies and usury on money that does not which creates a mort-gage death-gamble musical chairs game where not all can survive borrowing 10 and having to pay back 11.
John,
I'm honored that a guy with your activist credentials reads my blog.
I do wonder if both terms showed up in very early versions of the bible, or if they are an artifact of translations trying to explain the meaning of usury.
Thanks for your comments.
Steven,
I've read a few things about the K.T.... Not sure I ever tied their politcal conflict to money lending. Guess I need to do a little more reading. Thanks for the tip.
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