by R B Yehezkael
Here in brief
are some ideas from my paper:
This article describes
a dream, which is inspired by the words: If thou lend
money to My people, even to the poor with thee, thou shalt
not be to him as a creditor; neither shall ye lay upon him
interest. (Exodus 22:24). This dream is a response to
an economic nightmare we experienced in Israel, not so long
ago, and from which we must learn.
There were years
in which prices increased by 25% every month or two, and penalty
interest rates reached about 1760% per annum. I clearly remember
seeing a sign on a shop selling car accessories warning
deferred payments bear interest of 4% a day.
During those years,
three zeroes were removed from the currency remember
the lira and the shekel before the new shekel. Sadly, there
was a state of economic collapse, and tragically, some committed
suicide because of escalating debts.
This dream is
also a reaction to an old nightmare in which the Jew, and
in particular the Jewish moneylender has been portrayed as
a villain, and persecuted. Let us hope, that with Gods
help, these nightmares never return.
In spite of all
this there were things to be proud of during those years of
high inflation. The Gemach for example, continued
to give interest-free loans. Also, I remember a radio programme
where people phoned in to make contributions. Instead of money,
some gave a day, a week whilst a friend
even contributed a month. Contributing time had
become more meaningful than contributing money, which was
These events somehow
gave me the idea of interest-free linkage to the average wage
or income, which will be explained in the following.
Linkage not interest
We are forbidden
to take interest on loans. On the other hand it is unfair
to the lender if inflation erodes the value of his money.
In order to deal with this problem, debts can be linked. By
linkage we mean that the debt and debt repayments
rise and fall in proportion to some index, e.g. prices, wages,
foreign currency, etc. It is proper to ask which formulae
for calculating indices and which methods of linkage are reasonable
from both a Torah and scientific viewpoint.
Wages not Prices
An index formula
should be both accurate and stable. Stable means
that unrealistic prices, which do not result in a significant
amount of sales, should have little or no effect on the value
of the formula. These matters are particularly important when
debts are linked to an index formula. The issue of accuracy
is both a scientific and Halachic requirement. Stability of
the index formula is important for economic stability.
We have used a
computer to simulate test situations where the true average
index value is known. We observed that the formula for measuring
wages was accurate in all our tests, whereas the formula used
for measuring prices was accurate only when there was no correlation
between price and quantity.
We also noted
that the formula used for measuring wages has good stability
characteristics, whereas the formula used for measuring prices
has poor stability characteristics.
For these and
other reasons, linkage to prices is not a good choice. Linkage
to wages seems a good choice but under what conditions would
this be halachically acceptable?
When lending to
the needy, it is correct in my opinion, not to use linkage;
neither to take interest.
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