I googled when the system of loans and interests started and different sites are showing different results. I didn’t find the answer to my question so I made my own theory.
Barter system was invented before money existed. It involved trading items in exchange of other items. E.g.- a weaver may trade his creation to the shoemaker for a pair. The system continues till date, even at international level.
Now here comes my theory. During this time also, loans must have existed. People could rent their belongings to others and later get something else as payback. E.g.- A farmer gave a poor shepherd milk for free for some time as loan. The poor shepherd took it and once he made enough money, he gave the farmer enough wool to empty his balance. This system would work for things that have an expiry date.
The second system would be to get the item back along with something else as gratitude. This system will work for things that don’t have an expiry date. E.g.- A farmer may put his cart up for loan. A shepherd may take it for 6 months and return it in the same conditions he got the cart in. He shall also give a little wool as gratitude and humble compensation to the farmer for any inconvenience caused due to the missing cart. This extra stuff (wool) is what we call interest.
Now, a person thought why not combine the two systems and make a new system. Rent the required stuff, get either the belonging back or something else (depends on whether it will deplete/ deteriorate on use) + something else as a payment for use of the stuff rented.
E.g.- A farmer may put his cow up for loan. A shepherd may take it for 1 year. During this time, the farmer may need the cow’s milk for business but the shepherd is using it. Even if the farmer knew the conditions very well, he could say that it’s because of the shepherd that he is facing inconvenience. He would demand some sheep wool as compensation. The shepherd, being a nice guy, wouldn’t retaliate. 1 year later, he will return the cow in good condition along with some sheep wool. This was the start of the loan and interest system.
Now, when money got introduced, people treated it like normal trading object. They would lend money as loan, the people taking it would return it later, and since it didn’t have an expiry date, they gave more money as gratitude.
Businesses started expanding and money became the real deal. Paying interest wasn’t gratitude anymore. It became the norm. You take money, you gotta pay more than what you took because the lender may have faced problems. Even if he didn’t you have to pay because that’s how it goes now. Capitalism rules.
I don’t know how I created such an elaborated scenario but yeah I did, and I enjoyed it a lot. I have no clue how the system came into being so please don’t take this blog seriously. Thank you so much for reading.
Song of the day!!
I am so tired right now. School is tiring af, writing this blog has squeezed my brain and I still have to complete my assignments due to tomorrow. I want to sleep😭😭
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