Mother Pelican
A Journal of Solidarity and Sustainability

Vol. 15, No. 12, December 2019
Luis T. Gutiérrez, Editor
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The Lender Is Not A Hoarder. And What Is Interest?

Carmine Gorga

This article was originally published in
Econintersect, 8 November 2019


I am not a Jew.

How to staunch the rivers of opprobrium poured over the head of the lender during the last 5,000 years of recorded history?

The Lender Is Not a Hoarder

Even Shakespeare got into the act. Who can forget Shylock? To understand Shakespeare, we have to put him within two bookends: The near universal misquotation of the First Epistle of Paul to Timothy and the forgery of the Protocols of the Elders of Zion. The details are too well known and too painful to recite here.

The first obvious observation to make, and to stress, is that not all the lenders are Jews.


The second observation to stress is that neither Shakespeare nor those who misquote Paul are economists. They simply do not know what they are talking about. They know not what money is.

A silly point. I am not a Jew. I am not writing this long overdue re-evaluation of the lender because I am a Jew and somehow want desperately to put the record of antisemitism straight at least as the lending of money is concerned.

No. My evaluation of the lender is based on the study of Concordian economics. Through Concordian economics it becomes exceedingly clear that the lender is not a hoarder.

The long bill of particulars against the hoarder is not of concern here.

The long bill of particulars in favor of the lender can be shortened by asking: Would the world be better off if people with money, people with money who do not have an immediate use for it, were to hoard the money? The question answers itself.

What Can We Demand of the Lender?

No, I am not going to proffer an indiscriminate approval of the actions of the lender. Especially after witnessing the abuses of the lending power of large corporations committed before the last financial crash, when loans were approved for people who could clearly not sustain the load, but nonetheless offered a variety of immediate profits to the lender, it is evident that "society" must demand that the lender use judgment in the evaluation of the loan.

The lender has responsibilities.

Loans that have minimal chance of being repaid ought not to be issued at all. I wonder whether society will ever find adequate sanctions against irresponsible lending practices, but we can certainly summarily spotlight them and condemn them at will

The second condition through which society must evaluate lending practices is the amount and form of interest to be applied to a loan. To answer these questions appropriately, we need to know what interest is.

What Is Interest?

Interest, Keynes said, is "the reward of not-hoarding." Keynes, of course, is the supreme economist of the last century. The dead economist who controls our lives. All mainstream economics is based on his fundamental book titled the General Theory; all heterodox economics, in its various shapes and forms of "post-Keynesian" economics, as well as Austrian economics, is all economics written "against Keynes."

In the meantime, no one has paid attention to Keynes' definition of interest, because no modern economist understands what hoarding is.

Rather than demanding an effort to understand hoarding, I will be satisfied if the reader makes an effort to understand interest. Benjamin Franklin knew, he understood what interest is, and welcomed it. Did he not famously say something like:

"I'm glad to give the other fellow 5%, if I can earn 6%."

But notice that our Beloved Benjamin, if my love for him gives me permission to be so disrespectful, was talking of capital credit - not the abyss of consumer credit into which we have lately plunged. Consumer credit is only fruitful for the lender. Yet, the loan agreement is entered voluntarily; apart from advocating for education about economic affairs, there is nothing that economics can do to save the borrower and make the consumer loan productive ... unless one approaches the situation indirectly ... unless the "cash-back" movement becomes truly widespread, unless capitalism becomes truly responsive to the needs of consumers - and its own survival - and so responsible as to elect representative consumers to the Board of Directors of modern business corporations through the legal institution of Consumer Stock Ownership Plans (CSOPs).

That is it. With capital credit, interest is the fruit of the use of other peoples' money. With consumer credit, interest is giving to the lender the fruit of one's own future productivity: A totally destructive activity; how many enterprises are undertaken, how many trees are felled to pay interest on consumer credit? The principal in consumer credit is never likely to be paid back.

And yet, does not the consumer derive the benefit of immediate use of real goods and services? Don't we live in the moment? It might be vain to ask: What's the rush?

To summarize, apart from the abyss of consumer credit, with a loan agreement voluntarily entered into by the majority of the population, would society be better off if money remained in the pocket of a person who does not know, or does not want to go through the pain of making money bear fruit?

Let the lender be finally praised.

Two Caveats

This is not an idiosyncratic blessing of interest. There are two important caveats that I should attach to the unjustly vituperated 5,000-years-old practice of lending money at interest. The first caveat is that society should forever be on the alert against exorbitant interest. My brain is too small to define what an exorbitant rate of interest is. But my heart knows it when it sees it. Yes, my heart bleeds a bit at that sight.

Where blood gushes out of my heart is at the mention of compound interest. I cannot find any justification for compound interest, except in the power of the lender and the power of mathematics. To elaborate on the power of the lender, especially the political power of the lender is fruitless. It will forever be exercised, whether openly or through the subterfuge of clever lawyers and accountants - and legislators, should I whisper?

What must be open to discussion is the justification for compound interest. I find none. Let us run a small thought experiment, an experiment whose conclusions can be easily tested through the inordinate intellectual and financial power of the modern University. Let us pose this alternative to a "perfect" representative sample of lenders: What is fairer, Simple Interest - with its linear growth pattern - or Compound Interest, with its exponential growth pattern?

My suspicion is that most people, to repeat, most lenders, will agree that the linear growth rate is fairer than the exponential growth rate.

Will this exercise become the seed to set loan agreements on a just and sustainable basis? Let us shortly find time to give some undivided attention to the issue. Let us not sheepishly accept diktats from the past.

If this solution is not chosen, especially because its implementation is surely going to be a slow process, rather than advocating a vainglorious attempt to curb the power of individual lenders, let us see what can be done, systematically - as a society.

A Fruitful Curb of the Power of the Lender

Yes, the modern world - ah, Progress, Enlightenment, Reason, and all that - is bereft of defenses against the power of the lender. We have no intellectually solid, no morally valid defense against the power of the lender.

It is scouring the past that I have unearthed "the" solution: The Jubilee Solution. The Jubilee Solution is a systematic cancellation of all debts on the eve of the Jubilee Year. The Jubilee Year starts at the end of the seventh year.

There are various forms of jubilee. There is the Seven Day Jubilee regarding Time; the Seven Year Jubilee regarding the tillage of the Land; and the end of the 7x7 = 49 Year Jubilee regarding Stewardship of the Land. These are all extremely important manifestations of Jubilee, jubilation of the heart. This encompassing vision is too much for one lazy morning. Let us concentrate our attention on the Seven Year Jubilee regarding debt.

Much to say. Compressed, it is this: It is only money, people; it is only money that, remaining in the pocket of the lender, would most likely be hoarded; it is only money that is keeping the debtor in knots; it is only a set of zeros that, once cancelled from the accounting books, make everyone free to start a new life as a productive agent again. (Have not modern venture capitalists learned not to shy away from first, and second, and even third failure? If the borrower has used the painful experience to learn how to succeed, why waste all that learning?)

It was Moses who legislated the Debt Jubilee. It was Jewish society that had the intellectual talent to see the wisdom of the Debt Jubilee and the moral stamina to practice it every seven years. Cynics doubt the debt Jubilee was ever practiced. I personally do not care whether it was practiced even once and Michael Hudson has provided an unobjectionable wealth of evidence of the soundness of this solution in the number and quality of copycats: Every Emperor, every King - well, most Emperors, most Kings; many Emperors, many Kings ? - upon installation has declared a Debt Jubilee.

Moses was a Jew. And Jesus did not ever contradict Moses, but he asserted his readiness to fulfill the mission of Moses and the Prophets. In the words of Paul, Jesus did not say that money is the root of all evil. The correct quotation is

"Love of money is the root of all evil."

Love of money is the root of hoarding and, in the Parable of the Talents, Jesus, uncharacteristically, sends the hoarder straight to Hell: No trial; no appeal.

Yes, I am not a Jew, but I am very proud to acknowledge my intellectual debt to Moses, and to Jesus.


Carmine Gorga is a former Fulbright scholar and the recipient of a Council of Europe Scholarship for his dissertation on "The Political Thought of Louis D. Brandeis." With a book titled The Economic Process and a series of papers, Dr. Gorga has transformed the linear world of economics into a relational discipline in which everything is related to everything else, This characteristic of Concordian economics has been recognized by JEL in December 2017 (p. 1642). He was assisted for 27 years by Professor Franco Modigliani, a Nobel laureate in economics at MIT. For a full understanding of Concordian economics, Gorga has gradually realized that we need to go beyond Individualism and Collectivism, toward Somism (men and women in the social context)—see—and then we need to pass from Rationalism to Relationalism: see See also Wikipedia and Google Scholar.

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