Historically there’s been a lot of suspicion regarding Interest. In ancient times people understood that if you let someone use your land to grow crops, then it was proper that you be payed rent. After all, the farmer couldn’t grow the crops without your land. And clearly something new was created by the cooperation between you and the farmer: food.
But if I give the farmer money today and he gives me the same money back next year, why should he pay rent on the MONEY? It’s the same money – nothing new has been created. Why should there be interest?
I related this to a class of 6th-graders last week and asked what was going on. Clearly something happened in renting the field, but something also happened in the case of lending money. It’s just not as obvious. What happened?
A boy over in the corner raised his hand and said, “Time happened.”
BINGO! Unseen and unheard, time happened. The function of interest is to indicate the time value of money: how much more is a dollar worth today than next year.
I’m proud of all the kids but I was especially proud of that one that day…