This essay relates the origin of Interest Rates to economics based upon the founding principles revealed in the Bible. Interest rates are a key component of any economy, but more importantly they are extremely important to the way you live your life.
THE ORIGIN OF INTEREST
Let’s imagine that you are hungry for apples, and you are presented with two choices:
1) a delicious, juicy apple that you can have right now; or
2) a delicious, juicy apple that you can have next week.
The second apple is identical to the first in all aspects — flavor, juiciness, no worms, etc — except for one: time. You are hungry for an apple right now. One apple is available now. The other apple, identical in all aspects, is available next week.
Which will you buy today?
That gives way to another question: which of these two apples do you think is more valuable? The one that you can eat right now, or the one that is available for you to eat next week?
THE VALUE OF PRESENT GOODS VS. FUTURE GOODS
Generally, most people will agree that the apple they can have today is more valuable than the one they can have next week. The result is that the apple in the future is priced less than the one today. Perhaps if faced with the option, you would pay $1 for the apple you can have today, but if you had to buy it today you might only pay $0.35 for the apple that becomes available next week. That’s a price difference of 65 cents, or a discount of 65%.
If you want the apple right now, the one that you can buy right now is much more valuable than the one that you can buy next week. But if you are willing to defer your gratification by 1 week, you can save 65%!
As Mises wrote, this difference is what he called “originary interest.” This phenomenon is the manifestation of time preference.  This is what gives rise to what we refer to in everyday terms as the interest rate. In Mises’ words, the interest rate is “the discount of future goods as against present goods.” 
An apple is a consumer good. In contrast, consider the factory machinery that sorts freshly picked apples, washes them, separates out the bad ones, and ships the remaining delicious ones down a conveyor line into shipping containers. This machinery is a factor of production whose purpose is to produce future goods. Factors of production will be discussed in a future essay on Entrepreneurship.
Now, all of this is starting to sound a lot like economics, I imagine. The bottom line, and what you need to understand about interest rate is that it springs forth from the differences in peoples’ time preferences.
IF YOU WANT IT NOW, YOU WILL PAY THE HIGH PRICE
So what’s the practical lesson? This: people who want a thing NOW will tend to pay a high price to have it right now. People who are willing to defer gratification typically can typically get that same thing at a cheaper price later, in the future.
Does this sound familiar to you? It should. This goes all the way back to Adam and Eve in the garden. God told them they could not eat of the Tree of Knowledge, but they were permitted to eat of the Tree of Life. They would have to dress the garden (Genesis 2:15 KJV), and by doing so they would gain progressive knowledge through experience while enjoying periodic communion with God and eating the fruits from the Tree of Life.
Instead the serpent, Satan’s representative, showed up and convinced them to eat the forbidden fruit from the Tree of Knowledge that would give them knowledge NOW, and immediately, without wait or work. And they paid a high price for that desire to have it right now instead of delaying gratification. God asked them to be future-oriented with a low time preference, but they refused and gave in to temptation.
GOD’S PREFERENCE OF OUR TIME PREFERENCE
So, then, is it really any wonder what kind of time preference God wants us to have? For example:
A good man leaves an inheritance to his children’s children, but the sinner’s wealth is laid up for the righteous. (Proverbs 13:22 ESV)
Leaving an inheritance for your grandchildren means much hard work, sacrifice, and planning in advance. This is a low-time preference activity: you plan for the future, so you are willing to defer gratification today in order that you may build up a large inheritance. This means you can’t spend all of your inheritance so fast that, by the time you die, it’s all gone and there’s none left for your children. God calls us to make sure that when we die, there is enough left to pass on.
But consider this other aspect: what if, when you die, your children have not yet had children of their own? How do you fulfill the task demanded by God in the proverb in this situation?
You have to make sure that your children build upon what you have left them so that they also do not spend all of their inheritance. This means that you must raise your children up to be Godly children. This means that you must begin training them at an early age to seek the wisdom revealed to us in Proverbs:
The rod and reproof give wisdom, but a child left to himself brings shame to his mother. (Proverbs 29:15)
Discipline your son, and he will give you rest; he will give delight to your heart. (Proverbs 29:17)
As parents, we have to pay the price today: disciplining our children. Otherwise, we will pay a much higher price later: squandered inheritance and rebellious children.
INVESTING AND EARNING A RETURN
Consider the parable of the talents (Matthew 25:14-30). Two of the servants invested the money their master left them. When he returned, they paid him the original sum he had entrusted to them and the interest they had earned. For this, he rewarded them.
The third servant who buried his capital and chose not to invest it was cast into the darkness, and all that he was originally given was taken from him and given to a responsible servant.
Jesus affirms that making interest is good: “Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest.” (v.27) Making interest on your money is a worthy goal that builds inheritance which will hopefully be used to expand God’s Kingdom of Heaven on Earth.
But investing your money to make a return requires a low time preference also: you must be willing to give up the use of that money today — and for some amount of time — so that you can have more returned to you in the future.
[Note: it is not legitimate to charge a fellow brother in the faith interest on a charitable loan.  That is evil. (Exodus 22:25, Leviticus 25:35-37) But business loans that charge interest are legitimate.]
THE KINGDOM OF SATAN
High time preference, meaning that you must have something NOW instead of waiting patiently for it, is an ungodly character trait. This is the preference preached in Satan’s kingdom.
“Spend your money today, get all of the great things you’ve always wanted!”
This encourages materialism and distracts our focus on serving God diligently. Someone with heavy consumer debt is someone who is probably serving the wrong master. They have sold their future in order to stock up on material goods today. They value their future so little that they have deep-discounted it. They are unable to connect the fact that their lifestyles will be much lower in the future because they have paid so dearly today with very high interest rates.
They are the borrower who has been made slave to the lender (Deuteronomy 28:44). They don’t like saving. They would rather borrow money and pay high interest rates on their loans than defer gratification today by saving up and buying the thing they want in cash at a later date.
Present-oriented people pay high interest rates on material goods that they can consume today. They place no value on the future. They effectively mortgage the fruits of their future productivity for instant gratification today. This is Satan’s mindset. He knows what the future brings: his final defeat and an eternity spent in torment after he is cast into the Lake of Fire (Revelation 20:10). His goal is to thwart God’s people and delay the building of His Kingdom.
Satan values the Here and the Now much more than he values the future. He knows the bleak future that awaits him.
He and his representatives practice delay tactics. They want to take our minds off of the future and refocus them instead on the material pleasures of today.
In this essay you learned that the interest rate is related to the difference one would pay for present goods over future goods. In the modern, complex economy, the value of goods and services is manifested in their prices compared to one another. The prices are transmitted through the economy via money.
The interest rate is expressed in terms of money because that is how we account for goods and services today.
God wants us to be future-oriented: this means that we have a low time preference and tend to delay gratification (sacrifice) for a greater gain in the future. Satan prefers that those who serve in his kingdom be present-oriented: this means they have a high time preference and are willing to exchange their future productivity so that they can buy the material things that they want today that they can’t really afford instead of saving for them and buying them later.
[High time preference — high rates of interest — can manifest themselves in other ways as well, particularly in moral situations. For example, consider the young couple who doesn’t want to obey God and wait until they are married to consummate their relationship. Instead, they want to have sex right now, they don’t have a condom, and they decide to “risk it” and end up getting pregnant. They will pay a high price in the future for the immediate gratification they got during that fleeting moment.]
That’s not to say that all loans are bad, and that it is never good to take out a loan. Loans for consumer goods are bad: borrowing money at high interest rates to pay for things like cars that depreciate and lose their value over time. Taking out loans for houses can be good: the productivity and security that you gain by having permanent housing today encourages capital and family growth. You can also turn it your mortgage into an investment by renting out your house (hopefully at a profit).
Fixed-rate mortgages are also one of the best hedges against mass inflation that middle-class families can purchase.
As God’s people, we should structure our personal finances to rid ourselves of consumer debt. We should save for the future and plan on leaving an inheritance to our children’s children.
Nationally, we should exude these same qualities. This means no national debt.
In the next essay I’ll discuss entrepreneurship in the economy and the role interest rates play. We’ll explore why entrepreneurship is vital to fostering a great economy and how capitalism fosters entrepreneurship compared to rival philosophies (communism).
Click here to read Part 5 about Entrepreneurship.