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EXPLORING THE POTENTIAL OF NON -PROFIT …

TOWARDS EXPLORING THE POTENTIAL OF MARKET LUCA OWARDS A MORAL BANKING SYSTEMOTENTIAL OF NON -PROFIT FINANCIAL INSTITUTIONS IN A ARKET ORIENTED ECONOMY UCA L. HICKMAN YSTEM: NSTITUTIONS IN A Luca L. Hickman TOWARDS EXPLORING THE POTENTIAL OF MARKET MISES OCTOBER Submitted By: Contact Information:Date of Submission:Key Words:Presentation Date: 2 OWARDS A MORAL BANKING SYSTEMOTENTIAL OF NON -PROFIT FINANCIAL INSTITUTIONS IN A ARKET ORIENTED ECONOMY ISTITUTO BRUNO LEONI ISES SEMINAR, SIXTH EDITION CTOBER 9-11, 2009 SESTRI LEVANTE, ITALY Submitted By: Luca L. Hickman Contact Information: 926 E. Auer Ave., Milwaukee, WI 53212 United States of America Institution: Milwaukee School of Engineering Date of Submission: August 10, 2009 JEL Codes: G21, G28, G32, L30, E51, E31,E41, E42, E43, E44 Key Words: Non&Profit Finance, Interest&Based Banking, Moral Banking, Currency Debasing, Islamic Banking, Fractional Reserve Banking Presentation Date: October 11, 2009 Discussant: Kevin Dowd, University of Nottingham YSTEM: NSTITUTIONS IN A 926 E.

towards exploring the potential of market luca a moral banking system non-profit financial institutions in a oriented economy l. hickman

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Transcription of EXPLORING THE POTENTIAL OF NON -PROFIT …

1 TOWARDS EXPLORING THE POTENTIAL OF MARKET LUCA OWARDS A MORAL BANKING SYSTEMOTENTIAL OF NON -PROFIT FINANCIAL INSTITUTIONS IN A ARKET ORIENTED ECONOMY UCA L. HICKMAN YSTEM: NSTITUTIONS IN A Luca L. Hickman TOWARDS EXPLORING THE POTENTIAL OF MARKET MISES OCTOBER Submitted By: Contact Information:Date of Submission:Key Words:Presentation Date: 2 OWARDS A MORAL BANKING SYSTEMOTENTIAL OF NON -PROFIT FINANCIAL INSTITUTIONS IN A ARKET ORIENTED ECONOMY ISTITUTO BRUNO LEONI ISES SEMINAR, SIXTH EDITION CTOBER 9-11, 2009 SESTRI LEVANTE, ITALY Submitted By: Luca L. Hickman Contact Information: 926 E. Auer Ave., Milwaukee, WI 53212 United States of America Institution: Milwaukee School of Engineering Date of Submission: August 10, 2009 JEL Codes: G21, G28, G32, L30, E51, E31,E41, E42, E43, E44 Key Words: Non&Profit Finance, Interest&Based Banking, Moral Banking, Currency Debasing, Islamic Banking, Fractional Reserve Banking Presentation Date: October 11, 2009 Discussant: Kevin Dowd, University of Nottingham YSTEM: NSTITUTIONS IN A 926 E.

2 Auer Ave., Milwaukee, WI 53212 303&9088 G21, G28, G32, L30, E51, E31,E41, E42, E43, E44 Based Banking, Moral Banking, Currency Debasing, Islamic Banking, Kevin Dowd, University of Nottingham Towards a Moral Banking System Copyright 2009 Luca L. HickmanAll rights reserved, including the right of reproduction in whole or in part in any forof this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or any information storage or retrieval system now known or to be invented, without written permission of the autbrief quotations in a review. 3 Copyright 2009 Luca L. Hickman All rights reserved, including the right of reproduction in whole or in part in any forof this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or any information storage or retrieval system now known or to be invented, without written permission of the author, except for the inclusion All rights reserved, including the right of reproduction in whole or in part in any form.

3 No part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or any information storage or retrieval system now hor, except for the inclusion of Towards a Moral Banking System 4 ad maiorem Dei gloriam Towards a Moral Banking System Upon the outermostHead of that seventh sat the melancholy folk (the usurers)Out of their eyes Dante(Divine Comedy 5 Upon the outermost Head of that seventh Where sat the melancholy folk (the usurers) Out of their eyes was gushing forth their woe. Dante Alighieri (Divine Comedy, Inferno: Canto V Luca L. Hickman INTRODUCTION ..Financial Foundations ..Interest, Inflation and Fractional Reserve LendingTopical Preview.))

4 Personal Motives and Bias ..WHAT IS USURY? ..From Usury to Interest A Slow RevolutioIslamic Definitions ..Author s Definition ..USURY AND MORALITY ..Logical Investigation ..Jewish Teachings ..Christianity and Usury ..Traditional Positions ..Islam and Usury ..Inter-Religious Agreement ..FRACTIONAL RESERVE BANKING Logical Investigation ..Money Creation and Morality TOWARDS A MORAL BANKING SAn Alternative System ..Financial Reform Goals ..Moral Justification for a ValueReconciliation with Mises ..CAVEAT AND CONCLUSION ..Reform ..Urgency of Reform ..One Final Thought ..ABOUT THE AUTHOR ..Work and Personal Interests ..BIBLIOGRAPHY ..ENDNOTES .. 6 TABLE OF CONTENTS ..nal Reserve Lending ..A Slow Revolution ..ANKING AND MORALITY ..SYSTEM ..Moral Justification for a Value-Based System.

5 8 .. 8 .. 9 .. 10 .. 10 .. 11 .. 11 .. 12 .. 12 .. 14 .. 14 .. 15 .. 17 .. 17 .. 18 .. 19 .. 20 .. 20 .. 20 .. 22 .. 22 .. 22 .. 23 .. 24 .. 26 .. 26 .. 26 .. 26 .. 28 .. 28 .. 29 .. 31 Luca L. Hickman 7 Luca L. Hickman Often the masses are plundered and do not know Foundations In Matthew 7: 24-27, Jesus gave this parable: Everyone then who hears these words of mine and does them will be like a wise man who built his house on the rock. And the rain fell, and the floods came, and the winds blew and beat on that house, but it did not fall, because it had been founded on the rock. And everyone who hears these words of mine and does not do them will be like a foolish man who built his house on the sand. And the rain fell, and the floods came, and the winds blew and beat against that house, and it fell, and great was the fall of it.

6 This passage teaches the importance of building one s life upon a proper foundation. The foolish man built his home without first selecting the right base; losing everything once the trials and storms of life blew in. The wise man, however, founded his home upon solid ground. When troubles attacked, he survived, drawing strength from the unshak The financial and popular press is awash in stories decrying the current economic situation as a growing disaster, an economic storm , a financial tsunami . How then can one expect the superstructure of the global economy to respond to squestion, one must first examine not the superstructure itself, but the very foundations upon which it is built. One, if not the chief, foundation of the modern financial system is the ubiquitous use of debtbased financial instruments.

7 Chief amongst such instruments is the pervasive practice of lending money at interest. This practice, all but universally adopted in the West and the Orient, was not so universal only centuries ago. In fact, a great debate once Christendom about the morality of lending money at interest. Though this debate has largely been de facto resolved throughout the West, small pockets of resistant thought have persevered with varying influence of the centuries. In order to fully appreciate the depth of the current crisissubprime mortgages, a sort of stepexamining this deepest of foundations. Doing so can both deepen insights and gideas. 8 INTRODUCTION Often the masses are plundered and do not know it. 27, Jesus gave this parable: Everyone then who hears these words of mine and does them will be like a wise man on the rock.

8 And the rain fell, and the floods came, and the winds blew and beat on that house, but it did not fall, because it had been founded on the rock. And everyone who hears these words of mine and does not do them will be like a foolish built his house on the sand. And the rain fell, and the floods came, and the winds blew and beat against that house, and it fell, and great was the fall of This passage teaches the importance of building one s life upon a proper foundation. The lish man built his home without first selecting the right base; losing everything once the trials and storms of life blew in. The wise man, however, founded his home upon solid ground. When troubles attacked, he survived, drawing strength from the unshaken financial and popular press is awash in stories decrying the current economic situation as a growing disaster, an economic storm , a financial tsunami.

9 How then can one expect the superstructure of the global economy to respond to such rain, floods and wind? To answer that question, one must first examine not the superstructure itself, but the very foundations upon One, if not the chief, foundation of the modern financial system is the ubiquitous use of debtd financial instruments. Chief amongst such instruments is the pervasive practice of lending money at interest. This practice, all but universally adopted in the West and the Orient, was not so universal only centuries ago. In fact, a great debate once raged throughout Christendom about the morality of lending money at interest. Though this debate has largely resolved throughout the West, small pockets of resistant thought have with varying influence of the centuries.

10 R to fully appreciate the depth of the current crisis a crisis that owes its start to a subprime mortgages, a sort of step-child of interest-based finance one ought to begin by examining this deepest of foundations. Doing so can both deepen insights and g Frederic Bastiat Everyone then who hears these words of mine and does them will be like a wise man on the rock. And the rain fell, and the floods came, and the winds blew and beat on that house, but it did not fall, because it had been founded on the rock. And everyone who hears these words of mine and does not do them will be like a foolish built his house on the sand. And the rain fell, and the floods came, and the This passage teaches the importance of building one s life upon a proper foundation.


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