I have been at a book presentation of David Graeber (5,000 years of Debt) in May at Dussmann Berlin and he reminded me of something I have long forgotten: profit-sharing is an alternative for an interest rate. The incentives the two mechanisms create are quite distinct. With an interest rate, the creditor is supposed to get his money (back) whatever occurs. With a profit-sharing agreement, this looks quite differently. Only when the debtor books positive profits does the debtor get his or her share.econoblog101
Profit sharing as alternative for interest rate
Dirk Ehnts
The muslim bankers have talked about profit sharing instead of interest. Do you think the west can get on board?
ReplyDeleteThe muslim bankers have talked about profit sharing instead of interest. Do you think the west can get on board?
ReplyDeleteEventually, but that requires getting a leash on finance and limiting the rent-seeking behavior. Lots of resistance to that, and I think that it will take a crisis event or situation. I think that realization of global warming may be that. It presents an either-or choice — clean up the act or face a whole lot of pain.
Looks like a typo by Ehnts. Should be "Only when the debtor books positive profits does the creditor get his or her share...
ReplyDelete