Foreign Currency and Interest
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Foreign Currency
- Rashba respona 4:287 forbids lending money of one currency for another currency since the coins change fixed with respect one to another.
Expired or Altered Currency
The system of coins used in the days of the Gemara and Shulchan Aruch were intrinsically valuable commodities, such as silver or gold. In that system the size and weight of the money and the value of that metal determined the value of the coins.[1] This is known as commodity money and is associated with the theory of economics metallism. Another system used is representative money which could be used to redeem a commodity; this is also known as the gold standard. In 1971, America replaced this system with fiat money, theoretically understood by chartalism, which has no intrinsic value and no representative value but has a value based on the government.
Fiat Money (Chartalism)
- Today most money is paper or digital money, which has no intrinsic value and not representative of a commodity value. It is evaluated according to the assigned value according to the government and world markets.
- It is forbidden to lend money and charge for inflation.[2]
- If a coin is invalidated and replaced with a new coin in a fiat money system the new coins need to be repaid since the size and weight of the old or new coins are irrelevant to the value of the coin. If the new coins has a different purchasing power compared to the old coins, if someone lent money in an old coin one must return the new coins according to the value the new coins have in relation to the old coins.[3]
Commodity Money (Metallism)
- If the new currency is the same size and weight as the old currency but its purchasing power is different one can simply repay the loan with the new currency.[4]
- If a person lent someone money in a currency and then that currency become invalidated and was replaced with a new coin, if the new coin is thicker or weightier than the old one, whether or not one can simply repay the loan with the new currency depends on the following factors:
- If the prices of the marketplace reflects the new coin's thickness or weight then one can't repay the loan with the new currency, rather one should pay the amount of the new coins so that the sum total equates to the amount of silver of the old coins borrowed.[5]
- If the prices of the marketplace do not reflect the new coin's thickness or weight and simply changed prices because of changes in supply and demand, one can repay with the new currency unless the new coin is more than 25% larger, in which case one needs to repay the amount of silver borrowed with the old coins.[6]
- If one should have paid the new coins up to the quantity of silver that was borrowed and instead one repaid the loan with the new currency some say that it was a violation of Biblical interest and some say rabbinic.[7]
- We rely on non-Jewish experts to tell us that the coins are more or less than 25% larger than the old coins. If you are asking a hired professional economist they are trusted and if you're asking someone else you should ask two non-Jews one not in front of the other.[8]
- If the government establishes how the old loans should be repaid then one can follow that standard based on dina dmalchuta dina.[9]
Sources
- ↑ Gemara Bava Metsia 44a-b
- ↑ Igrot Moshe YD 2:114 explains that since halacha views coins as stable and not changing charging for the inflation of the purchasing power of the coins is interest. The only time coins are reevaluated in Shulchan Aruch Y.D. 165:1 is if the coins changed sizes, however, the Rama there writes that if the purchasing power changed but not the size of the coin then one must return the new coins irrelevant of the inflation. Chazon Ish YD 74:5, Minchat Yitzchak 1:70, 6:161, and Laws of Ribbis p. 52 agree. Note that Rav Moshe is discussing fiat money in 1971 and the Chazon Ish representative money as is evident in their words.
- Gemara Bava Kama 97a discusses whether a person who borrowed coins and the coins expired under the monarch they were minted under can return those same coins now that they are expired. Shmuel holds that you are supposed to return the old coins since the coins expiring isn't like they broke.
- ↑ Chazon Ish YD 74:5
- ↑ Rama 165:1
- ↑ Shulchan Aruch 165:1
- ↑ Shulchan Aruch 165:1
- ↑ Shach 165:2
- ↑ Rama 165:1, Shach 165:7
- ↑ Rama 165:1, Shach 165:8
