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When lending money, Jews are not allowed to charge other Jews interest. However, due to inflation, the value of money decreases with time, such that the money that is repaid is worth less than that which was lent. How does Halakha deal with this issue?

Follow-up: What about deflation, where the money repaid is worth more than what was loaned?

I have no idea if inflation existed in the time of Rishonim or Talmud (both in concept and reality.) Would be cool to find out.

Related: What happens if you borrowed money and the currency became worthless?

Related: ribis and foreign currency conversion

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  • According to some economic models, inflation is more or less caused by usury. At any rate, the halakha remains that we don't charge interest and don't concern ourselves with changing values-- I think because it would open the door too wide.
    – Tatpurusha
    Commented Apr 30, 2014 at 3:27
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    Inflation is caused by the supply of money. I've never seen a model that claimed it was caused by usury or interest-payments in general. Could you provide a source?
    – Shmuel
    Commented Apr 30, 2014 at 3:42
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    This is the wrong SE for this, but basically, supply of money is determined in no small part by interest rates because money supply is mostly created by various elements of fractional-reserve banking. Higher interest rates create "more money" and lower create less. Conversely, without inflation, there's less incentive to charge higher interest rates. I should say that inflation and interest rates are correlated.
    – Tatpurusha
    Commented Apr 30, 2014 at 5:11
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    jlaw.com/Articles/inflation_issues1.html
    – הנער הזה
    Commented Apr 30, 2014 at 5:22

3 Answers 3

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The local currency is always considered to have a constant value. Any price changes are attributed to fluctuations in the value of the merchandise, and not to changes in the value of the currency. This is true even where economic conditions are clearly the reason for the price change (e.g., where the price of a foreign-made car increases due to changes in the exchange rate of the country's currency).

See later where he quotes from Chasam Sofer (YD 134) and Igros Moshe (YD 2:114) that our bills and coins are considered currency, as in Talmudic times. Chazon Ish (YD 72:2) concurs.

Thus, inflation or deflation have no affect on the requirement to pay back the exact amount that was borrowed.

source: The Laws of Ribbis: The Laws of Interest and Their Application to Everyday Life By Yisroel Reisman, page 267, footnote 4 google books link

Inflation and deflation clearly occurred in Biblical and Talmudic times, see Melachim II 7:16ff and Yoma 83a top line Shabtai Atzar Peiri and Rashi, ibid.

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    I upvoted but would just add that Chazal definately recognized the existance of inflation and deflation - see Bava Kama 98 for example where there's a whole story about it (but there are lots of other discussions throughout shas on the topic). In fact, currency fluctuated much more widely in their times because the economy was so much more dependent on seasonal and other factors.
    – הנער הזה
    Commented Apr 30, 2014 at 5:21
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    I noticed that R' Moshe wrote that t'shuva in March 1971, mere months before the Nixon Shock. I didn't read the t'shuva yet so I don't know the rationale, but I wonder if R' Moshe would take the same position regarding our modern system of currency (post-August 1971).
    – Fred
    Commented Jul 18, 2014 at 4:52
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Rabbi Reisman pg 267 This is the best answer I have found. The Laws Of Ribbis p267

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All the abovementioned sources are examples of supply and demand not inflation. When the prices for good increase or decrease as a result of demand that is not inflation. Inflation has to do with the system of fractal banking where the currency itself is devalued as a result of increased money supply. Also, the currency, being that it is paper or digital, has no inherent value. Currency that was printed on either gold, silver, copper, bronze had inherent value because of the metal used. Today, the prices are not necessarily going up, rather the money's buying power is decreasing as a result of increased money supply - this is inflation. This system of fractal banking is a new concept invented that started being used in the 1800's and then became institutionalized in 1910 with the creation of the FRB. I don't think there was anything like this in the times of chazal

As to how this relates to the words of chazal regarding ribbit and money, I'd like to know if there is a modern posek that addresses the issue of ribbit in the context of modern banking and inflation.

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  • Welcome to MI Yodeya! What do you think of the book "The Laws of Ribbis"? artscrollisrael.co.il/en/product/the-laws-of-ribbis
    – Y DJ
    Commented Dec 4 at 21:08
  • Looks like an excellent source.
    – GotQuestions
    Commented Dec 6 at 0:27
  • p. 120 in that book discusses protection for inflation. Could you please read it and update your answer with that reference? Thank you.
    – Y DJ
    Commented Dec 6 at 0:47
  • I currently don't have the sefer; could you please send/post a copy of the page?
    – GotQuestions
    Commented Dec 9 at 5:54

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