I kept trying to read this natural money site but it is so ignorant of economic history it makes my head hurt. Interest on loans is (mostly) the level of risk that has to be covered for credit to be offered. One cannot abolish risk, one can merely degrade the ability to price it and so deal with it more effectively.
If I was to nominate a single reason why the Western economic take-off occurred, I would nominate capital markets. Capital markets meant ideas could be operationalised. To take one example that made so much of a difference (we live in the Renaissance that never ended because of it), the printing press operated very differently in Europe than it did in China because of capital markets.
To be sure, those capital markets were embedded in property rights and competitive jurisdictions that allowed them to operate, but their operation then had effects back on the operation of property rights and competitive jurisdictions. And yes, debt was misused. Sovereign monarchs could be even worse than the duly elected representatives of sovereign peoples at mishandling the taxpayer-guarantee – Philip II of Spain was paying amazingly high interest rates at one stage due to previous Habsburg bankruptcies. But, even given all that, the operation of capital markets was an incredible advantage to Europe and its offshoots. Some financial instability has been a small price to pay, just as the business cycle pales compared to the long run trend of higher incomes and higher life expectancies.
The Aristotelian argument, in all its offshoots, against interest rates is natural law bunkum. Risk is a real factor in economic affairs: a central factor, as assessment of risk is so central to economic actions in so many ways. Being able to price it properly, and in diverse ways, is an enormous advantage. The problem in recent times is not interest rates, it is action which badly distorts risk assessments and incentives. The economy will not work better if one closes down such a basic information channel: that is massively magnifying the problem, not creating any sort of solution.
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