Interest

 

God Bless The Child

Them that's got shall have
Them that's shall not lose
So the Bible said, and it still is news
Mama may have, Papa may have
But God bless the child that's got his own, that's got his own

If the Bible is news, what does it say about interest?

“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest.” Deuteronomy 23:19

So the Bible says, but this does NOT say that the future is worth the same as the present. It only says that charging in excess of that difference is wrong. Passages like this are often used to justify forbidding the charging of any interest. This includes even the discount rate, which is the difference between the present and the future, also known to economists as the opportunity cost.

 Charging more than the difference between the present and the future, the discount rate, seems also to be forbidden, by the Old Testament of the Bible, to your brothers. Similar language also appears in the Koran. If you then define your brothers as those only in your faith, then those who are not in your faith seem to be able to charge or receive interest.

So what should the discount rate be? If that rate is defined in terms of our life, the interest rate should be higher as we get closer to the end of our life. If we are immortal, then the interest rate should be as close to zero as possible. But this ignores the fact that the future is obviously different than the present, by the discount rate. Let us assume that the discount rate is the related to life expectancy. The period before you can contribute to a group is proposed to be divided by the total period where you could contribute to the group. If your life is 80 years (Psalms 90:10), and the period before you contribute to the group is 13 years (at around 13 years you become a man, are bar mitzvahed), then the Old Testament's discount rate is 13/80, 16.25%. Jesus’s public ministry was 3 years, while His life was 33 years, so His discount rate seems to be 3/33, 9%. If the interest rate is less than the discount rate, then it makes sense to invest in the future. If the interest rate is greater than the discount rate, then it does NOT make sense to invest in the future.