Conscionable Banking

[rogue06]

Sorry, I got you confused with elam. Oops.

Done that a couple times myself.

[siam]

LittleJoe & Siam thankyou for your clarifications. Seems people who can have an intelligent conversation are in short supply around here.

I've been reflecting on Equity Banking of late...back in the distant past, here in Oz, there were small "shadow bankers" who may have attempted to follow the principle. The ones I have in mind were absorbed by the big banks long ago. The one thing I do remember is that they were unregulated (not considered as being engaged in banking) and you had to buy at least one share in the company before you could open an account...

not considered as being engaged in banking---This is a dilemma in Modern conversations about Islamic economics. As mentioned, ethical economics (in the Islamic framework) was meant to be a wholistic system...but todays economic system is based on capitalism. So there are 2 choices for Modernity---one is to lay out the ethical principles and rules for an alternative systemic approach to capitalism, or to use the present (capitalist) institutions and systems and apply Islamic ethico-moral principles. (Islam emerged in a pre-modern environment where some of the financial institutions we have today did not exist in that form.) Modern Banking is essentially an interest based institution where savings are collected to loan out at interest....so some feel that Sharia Banking or Islamic Banking might be an oxymoron as interest is not the means of generating wealth in an Islamic economic system.....another financial tool, the sukook (stock market) also generates debate. Gambling/speculation is also not permissible in Islam and some of the Modern financial instruments (derivatives, futures,...etc) could fall into this category---yet returns on such instruments are lucrative.... https://en.wikipedia.org/wiki/Sukuk

As a system, Islamic economics was egalitarian (no barriers of gender or class) and so anyone could buy and sell. Institutionalized trade restricts free (democratic?) buying and selling. If an institution-such as a Bank is not a necessary part of a transaction, but optional....then there are more choices and thus more freedom. So any "owner", a bank, agent, individual or a company can buy or sell an asset.....

[elam]

Word!

If I lend an opening bakery 100 dollars and insist on getting all back whatever their fortunes, I should receive no more than 100 dollars. But if I am fine with losing 10 percent should they lose that much, I should also be able to earn 10 percent should they gain that much.

Simple Thomistics!

In a perfect world: if I borrowed $200k to open a bakery from a lender,.I'd anticipate progressively returning to the lender a proportion of the loan amount + an ongoing admin fee + a purchasing power of money adjustment + reimbursement of lost opportunity (eg: assume the lender had the choice of loaning me the money or buying a shipment of wheat for resale. In lending me the money the lender has forgone a potential profit that I should by conscience be bound to make good).

The idea "interest" has lost its original intention. For instance: prior to Jesus' day, in the middle east, imu, a property owner (the lender) would rent a parcel of land to a farmer. The rent would be expressed as a proportion of the crop. Thus the lender had an "interest" in the endevours of the farmer. This was an equity model. If there was a total crop failure, then the lender would forfeit the expected rent. Otherwise, the lender would receive whatever was their proportion of a harvest. The system had advantages: the lender makes an implicit profit from land utilisation = the land is made productive without any input cost from the lender (otherwise the land will lay fallow or the lender would incur labour costs to make the land productive). Profit could be gained by storing the "rent" and onselling it when the markets peaked (when there were seasonal product shortages).

As time progressed, lenders started insisting on their "rent" being defined in required bushels. This removed the risk to the lender, but increased the risk to the farmer. If the harvest was "rent" deficient then the farmer had to buy the shortfall from other farmers (which added to price inflation during bad seasons). This arrangement has operated for centuries and is basically how the modern commodities (future) markets function.

To this day we retain the farming terminology when talking finances. For instance: in the financial markets we talk of "yields" not "interest", given "interest" is merely an input to a "yield" (Consider the negotiable bond markets. Bonds are issued at a fixed interest rate but are traded on the basis of yield. The later fluctuates according to currency fluctuations, movements in the credit rating of the bond issuer, market demand, safe haven ranking etc).

In my understanding, the RCC prohibition doesn't concern itself with yiellds but unconscionable charges eg: the charges of loan sharks, credit card issuers, appliance rental firms etc that governments these days try to regulate...

[elam]

.... I seems to recall a number of articles detailing that Australia only survived the GFC because the mining industry was booming, and that since it stopped booming things are getting worse .... I recall a number of scathing editorials about it, especially compared with how well our [NZ] economy is going .....



ETA: random question..... Rabbitohs or Roosters?

Actually, we had a heap of money in reserve, saved during the mining boom (MB). Also known as the mining bomb.

During the MB we were close to becoming infected by the Dutch disease. But the reality is by the time of the GFC the first phase of the MB was fading if not over. The MB was all about prep work. The holes were dug and mining operations could now begin and are ongoing.

There is lots of talk about the MB being over, but the reality is, it has yet to start. Current commodity prices haven't curbed production but they have undermined govt revenue.

One important factor that is often missed is that at the time of the GFC unemployment was pegged to increase as mine prep work finalised. So if the govt hadn't kept the employment market open things could have headed to 1929 & beyond...

What the ALP govt decided to do was spend the reserves to keep people employed and the domestic market going. If people have money to buy things, businesses stay open. Simple rule, that worked. A modified implementation of Keynesian theory. If we hadn't the reserves to draw upon then the govt would have borrowed what they could.

The outlay continues to cause controversy in the political spectrum. Especially given Obama pointing out to the USA congress that Australia kept the USA employed!

Oz operates as a Commonwealth. Not socialist, not communalist, communist etc. Thus our politics are hard to explain. We talk of the hard left, left, middle, right & hard right, and all of our parties have a mix of factions. We have two main parties Labor & the Coalition Both tend to gravitate towards the middle of Oz politics. Many of the senate & house members of the main parties are extremely wealthy.

I'm guessing our politics are similiar to NZ, but because of our land size and distances between centres we have different challenges and therefore our own style/s...

Mr Rudd (a multi-millionaire), as leader of the ALP was PM at the beginning of the GFC. He took a practical business view to the problem...

As for Oz going bust. Not anytime soon. The RBA has been trying to deflate the currency but currently Oz is seen as a safe haven and overseas pension funds keep throwing money at us...

[elam]

....ETA: random question..... Rabbitohs or Roosters?

I grew up in the eastern suburbs (Coogee) so its a bob each way. Though Bondi Junction (Roosters) was easier to get to than Kensington (Rabbitohs Jnr) or Redfern (Rabbitohs Snr).

Coogee is home to Union. I lived on the corner of Hill & Bream which gave me site of center field...

[elam]

Done that a couple times myself.

You confused yourself with Elam? Hmm. A possible identity crises.

[elam]

not considered as being engaged in banking---This is a dilemma in Modern conversations about Islamic economics. As mentioned, ethical economics (in the Islamic framework) was meant to be a wholistic system...but todays economic system is based on capitalism. So there are 2 choices for Modernity---one is to lay out the ethical principles and rules for an alternative systemic approach to capitalism, or to use the present (capitalist) institutions and systems and apply Islamic ethico-moral principles. (Islam emerged in a pre-modern environment where some of the financial institutions we have today did not exist in that form.) Modern Banking is essentially an interest based institution where savings are collected to loan out at interest....so some feel that Sharia Banking or Islamic Banking might be an oxymoron as interest is not the means of generating wealth in an Islamic economic system.....another financial tool, the sukook (stock market) also generates debate. Gambling/speculation is also not permissible in Islam and some of the Modern financial instruments (derivatives, futures,...etc) could fall into this category---yet returns on such instruments are lucrative.... https://en.wikipedia.org/wiki/Sukuk

As a system, Islamic economics was egalitarian (no barriers of gender or class) and so anyone could buy and sell. Institutionalized trade restricts free (democratic?) buying and selling. If an institution-such as a Bank is not a necessary part of a transaction, but optional....then there are more choices and thus more freedom. So any "owner", a bank, agent, individual or a company can buy or sell an asset.....

Undoubtedly you'll end up thinking of me as a strange fellow. My interests are diverse.

What started my current contemplations was the Syrian (and Iraqi) refugee crises and the rebuild once the current conflicts are subdued. In my projections I envisaged constructing a new city. Having worked through all the infrastructure, construction & employment issues I was left with a major issue = via borrowings from the World Bank we can accommodate several hundred thousand families. Worldwide experience suggests we can't just forgive the debt but must get the families to take ownership of their allocated property = buy their home.

Because of the high cost of housing in Oz, for many years, there has been discussion concerning inter-generational loans. Various proposals have been put forward, but to date the idea remains in the too hard basket. I've envisaged a model but haven't fully worked through it...

In the next day or so I'll attempt to provide a coherent description of the basics of what I have in mind...bear with me...

[siam]

@ elam

I don't approve of WB or IMF---they cause more harm than good because they are dominated by a few powerful countries whose concern is their own national self-interest. During the Asian crisis Malaysia did not take an IMF loan and successfully recovered...
http://www.larouchepub.com/other/200...sia_v_imf.html

IMO, The best way to rebuild a society is from the bottom up---not top down. Especially since the "nation-states" are failing and these were artificial colonial constructs anyway---the whole concept of a nation-state should be thrown out the window....and communities should start from scratch to rebuild for their own priorities and needs. Instead of WB or IMF loans that come with destructive conditions and interest---the communities can rely on other means of raising capital---including the idea of public trusts (waqf). Before colonization---before the West destroyed the waqf system---much of the public welfare/public interest works were conducted by waqfs (trusts) such as free hospitals, schools, mosque buildings, taking care of travelers, and those in need....etc. Zakat funds are another way to provide for public works and rebuilding until the communities become self-sufficient. Such systems will ensure that any government or governing structures the communities come up with are less prone to corruption and that both the governing system and tax are kept small. Such a set-up will spur and energize entrepreneurship and commerce and this in turn will bring prosperity....while at the same time retaining power in the hands of the members/people of the community.

this guy explains what a waqf was:--
https://www.youtube.com/watch?v=MTaKiI5a6CQ

[elam]

@ elam

I don't approve of WB or IMF---they cause more harm than good because they are dominated by a few powerful countries whose concern is their own national self-interest. During the Asian crisis Malaysia did not take an IMF loan and successfully recovered...
http://www.larouchepub.com/other/200...sia_v_imf.html

IMO, The best way to rebuild a society is from the bottom up---not top down. Especially since the "nation-states" are failing and these were artificial colonial constructs anyway---the whole concept of a nation-state should be thrown out the window....and communities should start from scratch to rebuild for their own priorities and needs. Instead of WB or IMF loans that come with destructive conditions and interest---the communities can rely on other means of raising capital---including the idea of public trusts (waqf). Before colonization---before the West destroyed the waqf system---much of the public welfare/public interest works were conducted by waqfs (trusts) such as free hospitals, schools, mosque buildings, taking care of travelers, and those in need....etc. Zakat funds are another way to provide for public works and rebuilding until the communities become self-sufficient. Such systems will ensure that any government or governing structures the communities come up with are less prone to corruption and that both the governing system and tax are kept small. Such a set-up will spur and energize entrepreneurship and commerce and this in turn will bring prosperity....while at the same time retaining power in the hands of the members/people of the community.

this guy explains what a waqf was:--
https://www.youtube.com/watch?v=MTaKiI5a6CQ

In Oz much of our social infrastructure dates back to the 19th century colonial days and was instituted by the RCC eg:free schooling, free hospitals & health care, home care for the aged, residential care (retirement homes) for the aged, care of single mothers & the destitute and so on... So in many ways the RCC & Islam have much in common in terms of alms.

Due to practical circumstance, as Oz was built it became impractical to sustain the idea of the extended family. As people sought work, the tyranny of distance separated families. Later generations of immigrants were displaced persons from war ravaged nations who were severely traumatised by the events they had experienced. Many had no families to turn to for help. Likewise with the multitudes of orphans we took in...

Ultimately, traditional social structures simply could not cope with the scale of the necessary development. And that is where the establishment of the UN and its associated institutions became necessary. After WW2 the world was in turmoil... So analyse the intended function of the World Bank and IMF and you'll discover that in the context of global economics they are a social necessity to mitigate the excesses of those that want something for nothing (eg: Greece).

The reality is, the village system just doesn't work economically in a modern society. The ideal simply entrenches corruption and impoverishment. The reported controversies in Malaysia are a good example as is the recent minimum wage decision...

The world has witnessed the failure of Utopianism, Socialism & Communism (Lenin, Stalin, Mao & other varieties) and Kabutz type arrangements. Academic opinion suggests that while each of these systems had merits, their direct demise was the failure to allow personal possession = individual ownership. Communal ownership just doesn't work!

Here I've only skimmed over some of the issues that I've considered in building my city. In my fantasization I have borrowed the things that have worked in a range of models.

The two biggest issues interrupting my thoughts are raising funds for the build and property ownership...

At first I thought of the Saudi & like for funding but came to the conclusion because of the diversity of the Syrian & Iraqi refugees, the existing Islamic world cannot be relied upon for finances. Imo, the construction loan by necessity must be secular with no religious prohibitions...

There lies the problem with finances. In my limited knowledge, because of the scale of my envisaged endevour only the World Bank has the resources to raise the billions of USA$ required, and more importantly, has the resources to defer repayment of the loan, and implement intergenerational phased repayments.

Crowd funding or appeal for donations just hasn't worked when the scale of need is excessive...

The afore are just some random thoughts for you to consider.

I'll leave you with n interesting conundrum: Was Marx a Marxist?

[siam]

In Oz much of our social infrastructure dates back to the 19th century colonial days and was instituted by the RCC eg:free schooling, free hospitals & health care, home care for the aged, residential care (retirement homes) for the aged, care of single mothers & the destitute and so on... So in many ways the RCC & Islam have much in common in terms of alms.

Due to practical circumstance, as Oz was built it became impractical to sustain the idea of the extended family. As people sought work, the tyranny of distance separated families. Later generations of immigrants were displaced persons from war ravaged nations who were severely traumatised by the events they had experienced. Many had no families to turn to for help. Likewise with the multitudes of orphans we took in...

Ultimately, traditional social structures simply could not cope with the scale of the necessary development. And that is where the establishment of the UN and its associated institutions became necessary. After WW2 the world was in turmoil... So analyse the intended function of the World Bank and IMF and you'll discover that in the context of global economics they are a social necessity to mitigate the excesses of those that want something for nothing (eg: Greece).

The reality is, the village system just doesn't work economically in a modern society. The ideal simply entrenches corruption and impoverishment. The reported controversies in Malaysia are a good example as is the recent minimum wage decision...

The world has witnessed the failure of Utopianism, Socialism & Communism (Lenin, Stalin, Mao & other varieties) and Kabutz type arrangements. Academic opinion suggests that while each of these systems had merits, their direct demise was the failure to allow personal possession = individual ownership. Communal ownership just doesn't work!

Here I've only skimmed over some of the issues that I've considered in building my city. In my fantasization I have borrowed the things that have worked in a range of models.

The two biggest issues interrupting my thoughts are raising funds for the build and property ownership...

At first I thought of the Saudi & like for funding but came to the conclusion because of the diversity of the Syrian & Iraqi refugees, the existing Islamic world cannot be relied upon for finances. Imo, the construction loan by necessity must be secular with no religious prohibitions...

There lies the problem with finances. In my limited knowledge, because of the scale of my envisaged endevour only the World Bank has the resources to raise the billions of USA$ required, and more importantly, has the resources to defer repayment of the loan, and implement intergenerational phased repayments.

Crowd funding or appeal for donations just hasn't worked when the scale of need is excessive...

The afore are just some random thoughts for you to consider.

I'll leave you with n interesting conundrum: Was Marx a Marxist?

To encourage towards charity promotes compassion and mercy in human hearts and this builds strong ethical communities which can promote ethical systems for their group organization structures. So I am against "secularization"---the idea that ethics must be confined to the "private" only. Secularization only promotes greed and self-interest and it unbalances society.

RCC may not have been successful--I would have to research why---but the Waqf system was highly successful and it worked even in conditions of industrialization, global trade, and development of mega cities....which all happened in the Islamic civilization from around 8th/9th century onwards (way before Europe). Therefore, Islamic economics may be a better foundational system even in a global, cosmopolitan context than todays vulture capitalism that sucks the wealth out of everyone for the benefit of the elite few mega-corporations and their shareholders.....

I am not a fan of the Saudis myself---but I see no difference between them and "Western Secularization"---both want to impose their "values" and practices onto others because they feel it is "superior". I agree with you about Communal ownership---but aren't Banks and mega corporations like communal ownership?---except its a community of the rich...the elites...?.....

"the World Bank has the resources to raise the billions of USA$ required, and more importantly, has the resources to defer repayment of the loan, and implement intergenerational phased repayments."....!!!!....and so you want generations of people to be enslaved to debt...!!!!....and this seems a "good idea" to you?----and all that profit from those loans goes to enrich a few fat cats (mega corporations who gain from the conditions imposed) who just sit around and enjoy the money that comes pouring in like a flood???!!! ---I don't think so......In your opinion---it is ok if the rich want "something for nothing" but not ok only when the "poor want something for nothing"?

here is an article:--
http://www.globalization101.org/why-...controversial/Here I've only skimmed over some of the issues that I've considered in building my city. In my fantasization I have borrowed the things that have worked in a range of models."----seems very interesting---would like to know more and would be interested in discussing further....

[elam]

not considered as being engaged in banking---This is a dilemma in Modern conversations about Islamic economics. As mentioned, ethical economics (in the Islamic framework) was meant to be a wholistic system...but todays economic system is based on capitalism. So there are 2 choices for Modernity---one is to lay out the ethical principles and rules for an alternative systemic approach to capitalism, or to use the present (capitalist) institutions and systems and apply Islamic ethico-moral principles...

The dilemma is not unique to Islam!

In the RCC there are three guiding principles drawn from our sacred texts = Acts 4:31-32 "filled with the Holy Spirit...all the believersunwilling1. The International Bank for Reconstruction and Development (IBRD) lends to governments of middle-income and creditworthy low-income countries.

2. The International Development Association3. The International Finance Corporation (IFC) is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments.

4. The Multilateral Investment Guarantee Agency5. The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes.

http://www.worldbank.org/

As I suggested in an earlier post, because of the partisan politics within Islam , sourcing finances for the reconstruction of Syria and/or Iraq, and/or the resettlemnt of refugees, will need to be based on a secular construct. I only know of one organisation that has the resources to facilitate a project that has such an enormous scale = The World Bank!

In my dreamtime, I have assumed that the finances for my "refugee permanent housing" project have been procured, and expended, and the refugees have been allocated the properties of their choosing. As I suggested elsewhere the issue is how to give them ownership, and thus, how are they going to "pay off" the community debt incurred. I've envisioned an Inter-generational Loan model, which I presume would be most practically implemented via an Equity Banking model.

I'll expand in the next day or so, once I've consolidated my thoughts...

[elam]

....!!!!....and so you want generations of people to be enslaved to debt...!!!!....and this seems a "good idea" to you?

Private property ownership seems a good idea to me! It is like the old saying "feed a man for one day, he is fed for one day. Teach him to fish (or grow stuff) and he will always be fed". In my view, house ownership gives a family/community security of tenure. There is an ancient ideal that seeks land ownership, because in bad times it is the land that can house and feed you. Here in Sydney there is an aversion to high rise units, old timers like me maintain the older perspective, modern generations just want a compound in which they can retreat from society.

Personally, I wouldn't mind establishing a commune. I perceive it as an ideal life style. The ones I am aware of operate on the basis that the land is in common, the abode is your own. The construction of which you have to finance.

In the real world there is always some form of expenditure in life...nothing is free...these days even the air you breath & the water you drink has a tangible and intangible costs...

[elam]

I am against "secularization"

Secularism has its place in the realm of rationality. This necessary detachment was recognised by Muslims scholars during Islam's 300 year golden age (from the rise of Muhammad thru to the mid 13th century). Secular thought prevents "the flat earth" type ideology of the unscientific religious cleric... The golden age is said to have been brought to a conclusion by closed minded clerics such as Abu Hamid Muhammad ibn Muhammad al-Ghazali who advocated that nothing could be known apart from Allah and Islam.

I am against "secularization"---the idea that ethics must be confined to the "private" only.

Taking your definition, I too would be gainst secularization. Another view is that secularization of non-religious institutions removes barriers between resident groups. That is: in secular evironments no distinction is recognised between Sunnis, Shi'as or Kharijites and their offshoots, or for that matter, no distinction is recognised between these Islamic groups, Christians, Jews etc. The person is the subject not their introspection...

Secularisation therefore requires universalism in ethics.

Secularization only promotes greed and self-interest and it unbalances society.

By definition Sscularization doesn't promote self-interest, the exact opposite. Its aim is to promote a balanced society = the removal of any prejudices that would alienate one person from another. The ethos is simple and found in the sacred texts of multiple cultures = "Do unto others what you would have them do unto you!".

Are you against peace, love & understanding? Is it your proposition that worldwide conflict should be perpetuated? Is it your proposition that destruction of people's lives, enforced poverty, inflicted suffering and murderous chaos caused by religious conflict be perpetuated? Is it your proposition that people should be unwilling forced to convert to your mindset?

I hope that your answers are: No. No. No. No.

Wiki has it that "Secularization refers to the historical process in which religion loses social and cultural significance. As a result of secularization the role of religion in modern societies becomes restricted. In secularized societies faith lacks cultural authority, and religious organizations have little social power".

Wiki notes that "Secularization has many levels of meaning". The bit I've underlined is where I depart from their definition. Ostensibly, Oz is a secular state, before the courts, in employment & in the provision of services all people are equal! Our constitution prohibits govt from establishing a national religion and so on. But that said, our lawmakers are guided by Christian ethics...many of our politicians are RCC...

[elam]

RCC may not have been successful

Actually, it was very successful! To this day Oz has a two party system of social services. Befor the late 1960s (or was it the early 1970s) the RCC was totally independent of government. Governments exploited the situation to balance the national budget. After WW2, Oz had a huge influx of immigrants and the RCC struggled along absorbing the costs through voluntary parishioner contributions.

I forget what happened, but it was the straw that broke the camels back!

The RCC threatened to close all its institutions in Oz unless they received financial support from the Federal government. After a lot of negotiation the funding came through but with conditions...

--I would have to research why---

In short: the RCC institutions though remaining independent administratively became entrapped by govt financing. Well thats my view and I'll stick to it!

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When I was a kid, as need arose, RCC mums, dads & kids would get together and construct buildings (my enormous school at Randwick was mainly built by mums, dads & kids over time). RCC tradesmen would supervise & participate. Admittedly, building on a part time basis took a while longer than usual and extended disruption but heh! We had pride in the achievement!!!

[elam]

IMO, The best way to rebuild a society is from the bottom up---not top down.

I agree 100%, which is why I consider it important to provide a foundation to construct the society. Remember, my paradigm involves displaced persons. The society they had had ceased to exist. So, where to start? Imo, establish roots from which growth can ensue. In my perspective provide the persons with a basis for self determination = property ownership.