Monday, May 19, 2008

Why does the Torah prohibit lending money with interest?

In last week's parsha (בהר) we have the prohibition of lending money to a Jew with interest. The question is why? At first glance we can ask why should money be any different then anything else? After all, I can rent out a house, car, tools, etc. Any possession I have I can rent out for money so why not my money? Interest is really rent for the usage of money.

There are a number of different approaches.

1. In בהר we have many mitzvos that are socio-economic, shemitta and yovel for example. These mitzvos come to teach us that ultimately everything belongs to Hashem and therefore for example, land goes back to it's original owners during Yovel. The prohibition of interest is coming to emphasize this point. You can't rent out your money because it is not really yours, rather it is Hashem's on loan to you. Hashem only gave it to you to use to serve him. Therefore the Torah prohibits interest.
2. R' Hirsch explains in Parshas Mishpatim that the prohibition of interest makes for a more fair society. When capital can only be used for investment or to pay for labor and cannot be used to just make more money, the gap between rich and poor becomes smaller. This also aligns the interest of the capitalist and his workers as money is used to pay the laborer. R' Hirsch is clearly coming to answer Marx's Communist Manifesto which was written in his lifetime.
3. Money is fundamentally different then other things. When I rent out my car, house, etc. the use of the object causes a loss in value. Even if the renter returns the object in perfect condition, the object devaluates simply because it was used. In addition, the price of commodities fluctuates. If I rent out my house for a year, at the end of the rental it may be worth less simply because prices dropped. Because you have the possibility of loss (the use devaluates the object and the value can go down), the Torah allows you to take payment in return to compensate.

Money however, is different. Money does not lose value through use. In fact, when you lend money the borrower generally pays you back with different money. In addition, the Torah views money as never changing it's value. Money doesn't fluctuate only commodities change values. Therefore, when I lend you money there is no risk of loss. At the end of the loan you will pay me back the same amount that I lent you. It is worth the same amount. Therefore the Torah does not allow you to charge rent for your money.

It is fascinating how due to the exigencies of life this prohibition has been basically wiped off the books. The Heter Iska although technically not interest but rather an investment, basically allows us to borrow and lend money with interest. The Heter Iska is clearly a circumvention of what the Torah wanted.


Frum Heretic said...

Nahum Sarna explains that a loan in Biblical times was considered a matter of philanthropy and not one of a commercial transaction. Borrowers were usually poor, generally a peasant needing money to tide him over until the next harvest. Interest is thus exploitation of someone else's misfortune.

SpaceFalcon2001 said...

There also needs to be the consideration that in truth, money can be devaluated with time (think inflation, dollar value based on current economic confidence etc).

We are seeing this right now with the fact that the American Dollar is losing it's value in other places. If I lent some money to another Jew that lives in another country 12 months ago, and now they give me the same numerical value, in truth they didn't repay me the amount I gave them as my money has now lost over a quarter of it's value.

If I gave him 20 sheks then (4.44$) and he repays me 20 sheks (6.06$) now, am I charging interest against Torah? Which is the amount that he should be repaying me by Torah (when my money truly has lost/gained value)? Is this a Heter that is in recognition of a different economic situation that the Torah isn't addressing, or do we figure out the true value?

bluke said...

This depends on where you are. In Israel the shekel is the official currency and therefore is considered money and there is no issue of interest even though the Shekel appreciated vs the dollar.

However, lending dollars in Israel may be problematic and violate the issur d'rabbanan of סאה בסאה, as the dollar may be considered a commodity.

Garnel Ironheart said...

Lending across different currencies is a halachic problem due to fluctuations in value in the currency market. If I lend someone $100 000 today and he accepts it in his bank as NIS 400 000 and then by the time of repayment that 400 000 is now worth $110 000, there then is room for Avak Ribis to be a concern.

However, there is a another problem with currency which the post notes in the opposite way. In the times of the Talmud, currency did lose its value over time. A nice, shiny, new coin carried more value than a worn out, old one. The gemara deals with that concept several times including in the chapter in Bava Metzia in Ribis. So the argument that money is intrinsically different in that it doesn't lose value may be relevant today but wasn't back then

bluke said...

The Gemara at the beginning of Perek Hazahav states the principle that the value of money does not fluctuate. That applied in the time of the gemara and still applies. A worn out coin is a different story.

Regarding different currencies you are correct that there are halachic issues that need to be dealt with. I was discussing even in 1 currency there may be a problem if that currency is not legal tender in that country.

abiebaby said...

Money today has no real intrinsic value (except for coins like the krugerrand [1 ounce of gold] or Canadian "Loony"). It's value is dependent on the fact that the government says it is "legal tender." At the time of Matan Torah money (Kessef) had intrinsic value--thevalue of the weight of the precious metal. It was coined to certify (not create) the value. Thus, lending money, especially in an agricultural society where wealth was measured in land, was the same as lending a cup of flour--you got back a cup of flour or the same amount of money you lent.

Garnel Ironheart said...

Huh? The Looney has value?

Garnel Ironheart said...
This comment has been removed by the author.
jeremy said...

It always been valuable for them. Which is a good for them as businessman.

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