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  • Is Interest Analogous To Rent?

    Posted by $ohail T@hir on June 25, 2020 at 3:58 pm

    There are people who justify the charging of interest by saying that it is money charged for the amount lent and in this way is like the rent of a commodity. In other words, they contend that just as a person pays rent for using a house, he pays rent for using money borrowed and this rent for money borrowed is interest. Thus if charging rent is allowed, then interest should also be allowed.

    An analysis of this argument shows that the analogy drawn is not correct. Rent is the money charged on commodities which are “used” and not “used up”. These commodities remain intact and do not have to be recreated when they are required back; they only need to be handed back to their owner. Thus while a house which is rented is used it remains intact, money which is borrowed is used up and it does not remain intact; it is consumed on whatever it was borrowed for. In order to return the borrowed money, it needs to be recreated or reproduced and some more money over and above the borrowed amount too needs to be produced to be paid back as interest.

    Technically, it can be said that interest is charged on circulating capital whereas rent is charged on fixed capital.

    $ohail T@hir replied 4 years ago 1 Member · 0 Replies
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