Dr. Mousa Ghaninejad, Senior Economist

Time is the scarcest and, therefore, the most valuable asset of mankind. Time is the sole non-renewable asset of human beings. The countdown for consumption of this most valuable asset begins right at the time that a human being is born.

The value of time is one of the most obvious realities of human life so that no wise person can deny it.

When it comes to economic activities, the value of time is determined according to the natural profit rate.

This concept indicates temporal preference for taking advantage of the amenities of life. Somebody who delays immediate consumption of time and gives the privilege to another person has, in fact, transferred part of his limited assets to that person and has helped him take advantage of the amenities of life before he does.

The value of time is evident in all angles of social life of human beings. In trade activities, the difference between cash sales and credit sales is obvious and recognized in all societies and cultures. The ratio of surplus money paid in return for delay in payment to the sum of cash sales, in fact, determines commercial value of time and is known as profit rate.

Of course, that rate may differ from one society to another according to cultural, social and historical conditions, but the value of time in any society is considered according to customs.

People’s deposits with banks constitute a major feature of economic value of time. Depositors give up the right to make immediate use of their money which they have given to another entity (in this example, bank) and expect to receive temporal value of their deposits in the form of profit rate, just as is the case with credit sales and in line with economic and trade customs of the society. Here, we are faced with a money market, one side being the ones who present their cash assets, and the other being those willing to use those assets, on the other side. Price is determined by market conditions (supply and demand) and this is true meaning of economic and trade customs. The value of money (profit rate) is low in modern Japan because people of Japan are more willing to deposit their money (less immediate use) and, therefore, supply of monetary assets in Japan’s money market is high.

On the other hand, those willing to take advantage of monetary assets are relatively fewer due to saturation of investment opportunities. Americans are more willing to make immediate use of their money and, therefore, value of money in that country is higher than Japan. In developing countries, the value of money is much higher because people’s income is low and, therefore, deposits (in the sense of supply of monetary asset) are also low.

On the other hand, demand for money is high because people are poor and are more willing to purchase on credit and, perhaps more importantly, there are more opportunities for lucrative investment due to vacant production capacities. Therefore, it would be totally nonsense to say that profit rate in our country should be equal to that of industrialized, developed nations, especially taking into account that inflationary conditions in our society will inevitably put nominal profit rate at a higher level than other countries, where inflation rate is lower.

Some people erroneously think that profit rate or value of money is tantamount to usury under any condition. It should be noted that the usury that is prohibited by divine religions and denounced in all cultures, denotes unjust conditions imposed on taker of a loan by giver of that loan in a monopolized and unorganized money market. Commercial value of time, as said before, conforms to common sense, customs and religious teachings and it is for this reason that Islam, like other religions, has confirmed credit sales. In organized and competitive monetary markets, the commercial value of time (profit rate) at usual customary level of society is determined like credit sales and there is no place for unjust conditions to be imposed. The history of trade in various countries shows that as organized and competitive money markets expand through modern banking system, the ominous phenomenon of usury (that is, giving loan under unjust conditions) has been practically vanished.

If we accepted the obvious reality of value of time and subsequently the right of people to avail of their time asset as a moral as well as legal principle, how we could explain decisions taken by Majlis and the government to order profit rate of deposits to be lowered despite the fact that most economic experts were against it? Many things have been said about this, but we only suffice to posing a number of questions and we hope that proponents of forceful reduction of profit rate would come up with satisfactory answers to those questions.

1. Is the government or any other state authority such as Majlis entitled to determine customary price of assets which belong to people. That is, are they authorized to interfere in determination of a price, which has been voluntarily agreed upon by suppliers and demanders and change it through an order in favor of one side and against the interests of the other side? Will this measure not be construed as inattention to people’s ownership right and a breach of the principle of justice?

2. Is the state authority entitled to seize the most valuable asset of every citizen; that is, the asset of time, in its own interest or in favor of other persons? Bank resources are mainly made up of people’s assets (timed deposit). Banks are trustees (proxy) of depositors and according to market customs are committed to use their assets in the best possible manner and at the best price. Is government entitled to strip the proxy (banks) from its powers and impose its own will on it to transfer value of the principal’s (people) assets to a third party (governmental and other companies)?

3. Most current bank contracts in the Iranian banks are carried out within frame of sales through installments (credit contract). Is the government entitled to require banks, against the customary rate of credit sales in other economic sectors, to sell the assets of their principals (people) at a lower price? What is rational and moral explanation for the existing considerable difference between credit sales price of automobiles, home appliances and so on in commodity market and installment sales price of banks? Will such a difference not lead to rent seeking and the resultant economic corruption in the banking system?

4. Is the government entitled to deprive people of the right to voluntarily trade their cash assets and conduct transactions in the absence of rational, customary or religious barrier to them? What moral or legal principle would uphold government’s intervention in transactions between people and private banks and imposing special conditions which are not controllable by parties to those transactions?

5. What is government’s duty: to protect and safeguard citizenship rights and freedoms or to restrict them? What kind of freedom can be protected or what right can be realized or what concept of justice can be materialized through imposing low bank profit rates to a money market, which will finally lead to rent seeking and corruption in the banking system due to much higher rates in unorganized markets?

6. If we really believe in people’s discretion, rights and freedoms, why we do not give them the freedom to decide how to use their assets? According to common sense, every human being is in a better position than others to realize his/her own benefits. Why when people can decide about sources and uses of their monetary assets, a third person (in this case, government) should be allowed to make decisions in their place?