Economic- Juristic Analysis of Usury in Consumption and Investment Loans and Contemporary Jurisprudence Shortages in Exploring Legislator Commandments

In this article, by analyzing the deduction methodology of jurisprudence commandments, we try to touch the existing shortages in its methodological aspects. By discussing on different sources of Islamic jurisprudence like the Quran, Sunna (Tradition), consensus, intellect, fame, analogy, preference, public interest considering, blocking the means, we will explicates that the divine authority (person who is allowed by the messenger or by someone whom messenger has allowed him) has been ignored in religious deduction, and thus these different ideas have emerged in Islamic commandments. In this regards, juristic decrees may be compared, which are different and even conflict solutions to a unique problem or question. These conflicts enlighten two important propositions. By defining and analyzing usury and interest in an economic-juristic frame and specifically in the Quran and with respect to wisdom or theosophy principle in jurisprudence to distinguish usury and non-usury finance, we conclude: from the economy, we conclude that real economy will be more stable. from whether or not? from


Introduction
Interest rate is critical economic and juristic debates. Certainly, concrete results in this debate may improve the functioning of Islamic banking; because, non-usury banking is based on the juristic approach to defining usury. In this paper, we examine the interest and usury from the economic and juristic points of views. We try to examine this hypothesis: whether is the received interest from a loan for any purposes usury or not? On the other hand, we may distinguish consumption loans from investment loans. The former is usury, and the latter is not. To analyze this hypothesis, we try to investigate the methodology of deducting 3 Araaf: 179.  14 and in the other one: "For all nations there are messengers" 15 . Thus the obedience of this governor is lawful, and no one else may be adopted to be obeyed. This governor must be alive. That is, we are not allowed to obey those governors who have been assigned and died before. This pronouncement is accepted by all Shiite and Sunnite peoples. That is my Sunnite and Shiite brothers all believe and decree that the God's divine governor must be alive and obeying dead governor is not allowed. The conclusion of this debate may be summarized to the fact that the deductive reasoning to find religious commandments of religion in nowadays formed shape cannot be acceptable, and thus, the methodology should be revised.

Quran
The main juristic sources in jurisprudence principles are: Quran, tradition, consensus, and intellect. In prevailed juristic texts, these four items are cited as the main sources of jurisprudence. The main source, which is the divine governor of God has been forgotten or ignored! Quran is not a simple book for all human being to find out its description and prescription or explicitly meaning. Quran itself says: "nobody knows the meaning of the Quran except Allah". 16 So the absolute meaning of Quran is at the hands of Allah. Only those people who got the knowledge, only, may be asked for the relative (and not absolute) meaning of Quran and implication of commandments. It should be noted that knowledge, as cited before, is different from literacy. Knowledge comes from understanding/comprehending due to observing the light of Allah in all of things/objects, but the prevailed meaning of knowledge -literacy -is due to getting a presence at schools/universities. Therefore, without knowledge, our finding and understanding are some kind of doubt and presumptive opinion. Quran explicates: "They do not know the Quran except some doubting opinion". 17 There may be knowers who are illiterate versus literate people who have passed many religious schools or universities but are ignorant. Quran explicates: "If you do not know ask possessors of edifications, men who study and remember the name of Allah". 18 Despite this debate, in exploring the religious commandments, we see that the jurists refer to Quran less than the prophet's sayings, narrations, and stories.

Tradition (Sunna)
The validity of tradition as a source of commandment deduction is doubtful. All types of tradition, including "practical tradition" and "assertional tradition" and "argumental tradition" suffer from validity.
In "practical tradition", the practice of prophet leads to its lawfulness (or unlawfulness). It is important to say that prophet action does not necessitate validity because the prophet special advice may meliorate someone, but the advice may be harmful to another person. Since his advice is similar to medicine which may recover someone to live or kill another.
The "assertional tradition" is based on disclaiming of the prophet against a witnessed action. This tradition does not necessitate validity because we may visualize prophet or impeccable in cases of precautionary dissimulation. That is, he should dissimulate the truth regarding dangers. This is also the case for homonymy, amphiboly, and paronomasia. 19 Thus their silence does not lead to the validity of the action.
The "argumental tradition" is based on sayings, stories, narrations and etc. This tradition has a wide discussion in jurisprudence, and all stories and narrations are classified according to their narrators or tellers. This tradition suffers from many doubts in stories and narrations. 20 Many narrators and storytellers have inserted wrong and pseudonym stories in religious literature. Distinguishing correct story from incorrect stories should be compared with the Quran, and if it was not in line with the Quran, The men whose works are thinking" refers to those people who try to survey and analyze and remember the name of God. This world and all of things are the names of God. In philosophical terms, name is anything who leads to its named. And the named of all existing thing is God. That is we say: In the name of God.
it is false. This tradition, as noted before, does not guarantee that prophet or speaker had exposed the proposition for all people. It may be particular for the audience of that session not for all people and all times. That is, their speech may not be used for other people who had not been there. It should be added that narration transmission is restricted to divine permission. That is, nobody has the right to transmit the speech of prophet or impeccable without their leaves or permission. As it prevails among jurists, every jurist must receive permission from the previous jurist, and this permission must back reach the prophet. In the opposite case -without permission-transmission of their speech may be encountered as some kind of impoliteness to the prophet. That is, some kind of eavesdropper might occur.
Therefore, the stories and narrations are all doubtful, and Quran explicates: "And most of them do not follow truth, and follow doubts and conjectures. Certainly, conjecture and doubts can not avail anything against the truth". 21 In the other side, the prophet and impeccable are human beings. In Quran, the prophet himself explicates: "I am human being similar to you". 22 This means that some of their speeches are regular human being speeches and do not relate to their divine duties and comes from their fancies or niceties or tastes. On the other hand, sophists believe that all religion's messengers/prophets/impeccables/leaders must be permitted by the previously allowed person, and this is an inevitable chained order and rule of leaves.
Consensus ‫(االجماع)‬ The third source of jurisprudence deduction is the consensus of jurists. According to our Sunnite brothers' opinions, this source is the first source of juristic deduction. Original (not pseudo) Shiites believe that consensus may not be valid. They believe that any religious pontification must be restricted to permission from the previous permitted person. However, this is not the case in Shiite societies, and only a few orders of Sufis believe and practice this rule.
Generally, the consensus of the majority should not validate a juristic commandment. Since the majority of people are not qualified, and the qualified persons are not accessible, because we do not know them. In the Quran there are lots of verses which expose: "But very few of my worshippers are (practically) grateful." 23 "Majority of peoples are (practically) not thankful." 24 "That, man is indeed in a grave loss." 25 "The majority of people are ignorant." 26 "Their majority do not know." 27 "Their majority do not think." 28 "Their majority is ignorant." 29 These verses clarify that majority is not a consolidated base for juristic deductions. Knowing qualified jurists is a difficult problem. Philosophically, the nominator should be superfine than nominative. That is lower jurists can not nominate higher jurist. The only logical solution to this rule is that higher jurist nominates lower one. This is the main debates that sophists insist. That is the jurist must be allowed by higher previous leave or permission. Otherwise, consensuses of majorities are due to wrong decisiveness, as Quran explicated. 21 Yunus: 36 and also see: Najm: 28.
Shiite more or less accepts intellectual/rational demonstration or proof as a source of juristic deduction. The Sunnite brothers restrict commandments sources to traditional verities. 30 Thus, the intellect locates in a wide range from acceptable and credible to unacceptable and incredible source to juristic reasoning. All different sects have special treatments for intellect. The discussion among their defenders more or less had been reached to anathematization and excommunication of the others.
Rational demonstration refers to any rational commandment that determines a juristic commandment. The rational demonstration is classified into two categories of rational independencies and dependencies. In the former category, intellect issues a commandment independently and the latter includes those realms of demonstrations that intellect issues a commandment following a juristic judgment.
Responding to this question that: is it possible to accept intellect as a deduction source, is not simple. But as a reservation, it should be noted that intellectual power is different in different people, and the criterion of intellect and ration is not absolute. This causes rational demonstration to be proved by one and to be negated by the other. By the way, this conclusion is to be raised that the intellect of who should be used as a juristic source. The response to this question is: intellect of the perfect man who has refined and purified himself and has reached transcendental mental characteristics would be the juristic source. Certainly, he will be quite different from a person who has passed the school/university courses about juristic deduction. His (perfect man) intellect is defined as: "instrument of Allah servitude and finder the secrets" 31 . This intellect is different from prevailed idiomatic intellect. This intellect classifies as prophetic intellect.
Thus the debate on this juristic source conveys us again to this claim that only the perfect man with prophetic ration is the main source of jurisprudence.
Fame ‫(شهرة)‬ Some partial sources of jurisprudence as fame or publicity suffer from their own deficiencies. Decreeing fame (lots of decrees of different jurists on the unique subject) and practical fame (based on the fame practices of jurists against unique subject) all defect from validity as we talked before in criticizing consensus. That is the fame opinion of the majority does not necessitate validity in juristic deductions.

Islamic intellectuals' way of life ‫(السيرة)‬
Intellectual way of life in jurisprudence means the continuous operational way of life of intellectuals and Moslems and may be of juristic source necessitating prophet or impeccable agreements. The validity of this source is defective.
The analogy is: to prove a commandment in a subject because of its proof in other subject based on their analogies. Sunnite's brothers insist on the validity of analogy in the juristic deduction. Shiite jurists introduce "rational analogy" as a source of jurisprudence. That is, they use a rational analogy based on appointed reason as a juristic source. In this kind of analogy, logical minor and major are defined, and the commandment is derived from. This analogy in all situations is not deterministic.
Another type of analogy is "aprioristic analogy". In logic, this analogy is named by reason connotation or signification. For example, if one has no right to get in the house using the door, he has no right getting in by climbing the wall too.
Deductive reason analogy (complexity reexamination) is the case that the reason for the commandment has not been explained by legislator and jurist simulates a similar reason by analogy. Since reasoning is based on the opinion of jurist and not legislator's, may be a source of probable errors. This is the famous case of : "The first who analogized was Satan. Considering public interest ‫المرسله)‬ ‫مصالح‬ ‫او‬ ‫(االستصالح‬ Considering of public interest (transmitting expedients) means the expedient that legislator has not talked about and can not be found in any partial or general commandment of legislator and jurist deems advisable or proper. Malekite and Hanbalite sects accept expediential reasoning in the case of no written text or consensus. But Shafeite sect validates an expediential deduction. Shiite jurisprudence does not validate public interest consideration same as preference.
Blocking the means ‫الزرايع)‬ ‫(سد‬ Blocking the means, implies: those actions causing destruction should be prevented. Shiite jurists refer to "Obligatory preliminary". It means an action antecede another action and by referring to legislator rule on the first action to prevent destruction from the second action explore the "blocking the means" rule. This rule may not be general to be performed in different subjects.
To summarize the juristic deduction, we should conclude that the rule and permission of legislator to deduce the divine commandments is neither tradition and nor intellect and consensus and analogy and preference and transmitting expedients and blocking the means. But the direct divine command of Allah by his representatives who are allowed to deliver the commandments is the main source of jurisprudence. Quran explicates: "Obey Allah and obey the prophet and obey those people among yourselves who are allowed." 32 The obedience of these people is lawful. Otherwise, we may assert a commandment erroneously and assuming that it is God's commandment. There is no guarantee that it is God's commandment.

Interest
There are lots of definitions for interest in an economic point of view. One of the old definitions defines interest as the price of money. Though this definition is public, analytically is defective, because, the price of one unit of a commodity is equal to the value of one unit of the same commodity. 33 This does not satisfy for money. Value of one unit of money in a period of time is equal to the value of one unit of money at the starting point of period plus interest value. Therefore interest is an excess that creates surplus value during the time period, and not the price of money. If interest were the price of money, it would be equal to the value of one unit of money. But in different time periods interest may be less than or equal or greater than the value of one money unit which does not conform to price implication.
Other different definitions of precedent economists often are related to capital essence of interest. On the other hand, the derived income resulting from different assets such as capital goods, financial resources, wealth, human capital, entrepreneurship has different definitional ambiguity. Since capital similar to interest has different meanings. Capital functioning also increases the vagueness of the problem. For example, in one problem, technology and land may be classified as factors of production and different from capital. In another problem may be classified as capital.
Neoclassical economists interpret interest as the surplus resulting from the postponement of consumption. On the other hand, the capital owner postpones his consumption and loan it till at the end of the period by his capital, and the derived interest will get more consumption. This may be defined as the supply of investment sources incentive. At the demand side, the investor demands financial sources to produce value added. Thus, whenever the interest rate is less than the capital rate of return, investor demand for receiving loan increases. This simple mechanism is the base of incentives for requesting and granting loans, which 32 Nesa: 59. have a sophisticated mathematical presentation in related literature.
Let us assign the term "interest" to financial capital. Financial assets are credible capitals and include valuable papers and notes and coins which are physically invaluable but possess high credible values. We assign productivity to all kind of capitals; this means that capital is a production factor and accompanying with other production factors produces value added. Financial asset/capital can be treated as a kind of capital -in general definition. Now, another element is defined as a monetary intermediary or bank. His duty is to intersect demand and supply schedules of financial resource at the market. Banks or financial intermediaries are responsible for collecting the financial resources of suppliers and sell them to investment demanders. 34 If bank operated as an intermediary, that is: receiving only a percentage of demander interest paid to supplier of resources from one side or both sides of the transaction, we would have a simple model of financial transaction, and many juristic problems would be removed. However, the bank operates as a profit-maximizing firm and does not work as a pure intermediary. This means that in the financial market instead of one supply and one demand, we have two supplies and two demands schedules. That is the bank is a supplier and demander. When the bank comes into account, we will have two markets naming saving market and loan market. In the former, bank demands and in the latter, supplies financial resources.
Bank's endeavor as a profit-maximizing firm is to widen the banking spread (difference of loan and saving interest rates). Widening banking spread causes the bank's revenue to be increased, and banking competition tightens the spread. Thus, the bank in the saving market is demander, and in the loan market is a supplier. In the first market, the saving interest rate, and in the second market, the loan interest rate are determined. Now we try to investigate the bank's behavior in these two markets by a juristic-economic approach. To analyze this, we are going to compare the concepts of interest, usury, and profit.

Usury
Usury in Arabic terminology 35 means "excess". There are lots of discussions about this term in the literature and all of them more or less imply usury as: an excess of property over the capital regarding a timed repayment. 36 Ragheb Isfahani 37 means usury in Islamic legislation as: "excess of the property with no acceptable reason". 38 In Quran, the following verses are about usury: "That which ye give in usury in order that it may increase (other) people's property hath no increase with Allah; but that which ye give in charity, seeking Allah's countenance, hath increased manifold" 39 .
"And of their taking usury when they were forbidden it, and of their devouring people's wealth by false pretenses. We have prepared for those of them who disbelieve a painful doom" 40 .
"O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful". 41 "Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say: trade is just like usury; whereas Allah permitteth trading and forbiddeth usury. He unto whom an admonition from his Lord cometh, and (he) refraineth (in obedience thereto), he shall keep (the profits of) The second group is called "subjective exit". That is to act in a way that the subject of usury does not conform to the action. This category includes; transaction on credit; conditional transaction; currency exchange; annexing non-kind annex; replaced gift; saving in a manner that interest payment is according to borrower's option. Some jurists believe that subjective exit also can be encountered in the restriction of usury in double usury and being lawful in productive lending. There are also lots of explanations to legalize usury in the rate of inflation and paying the excess in debt transmission (repayment) delay. However, the former is more doubtful, but the latter is less erectable.

Consumption and Investment Loans
We focus on non-usury lending in production loans. Intellectual reasons for usury prohibition have been discussed by Islamic economist, and many of them are conceivable. The reasons such as fairness and equality establishment financing, full employment, and optimal growth of the economy, fair redistribution of wealth; economic stability and similar reasons are cited as intellectual causes of usury prohibition. Quran expositors cite other reasons as payment without replacement, prevention of commerce and borrowing and unfair wealth distribution, increasing social class differences, losing human benevolence; profiteering, and increasing social crises, oppression, moral losses, and many similar reasons.
Economically, by considering different opinions, we can conclude that the main theosophy of usury prohibition is excess receiving without producing value added. As it cited before in barter usury; the transaction is done for a commodity by the same kind of commodity with some excess in weight/measure. Barter usury, simply by annexing non-kind annex, becomes lawful. That is one may lend 1 ton wheat and receive 10 ton wheat with 1 gram of something else let's say salt at the end of the period. This is completely obvious that the intent of legislator had not been to increase the transaction formalities. The theosophy principle in jurisprudence affirmates that legislation of this law has been done for more important causes and not an incremental barter exchange. On the other hand, Islam legislator is wise and theosophist. His approach to usury prohibition is that: if a person does not share in profit or loss of value-added production, what would be his share of the produced value added? The answer can be: nothing. This exposition is verified by other verses of the Quran as: "And that man hath only that for which he maketh effort". 46 This theosophy is also true for the loan usury. Since one lends money to the other and at the end of period receives some excess, and this is not lawful. The lawfulness can be exposited in this way that he has not been directly impressed in the process of value-added production. If borrower gains or losses, the lender receives his excess. This excess is unlawful. This is the elegant difference between usury and other legal Islamic financial contracts as a financial partnership ("Mozaribah") and other Islamic financial contracts. In Islamic financial contracts, the share of profit or loss is determined to be paid to the lender. But in usury contract, the rate of excess repayment (usury) is conditioned a priori. In the former, the lender participates in profit/loss of investment, and in the usury contract, he does not.
Both contracts are the same if the planned profit is equal to the actual profit of investments, and this occurs seldom because the non-zero risk rates and market changes and planning deviations are inherent characteristics of an investment. This reasoning is also deducible from this verse: "O ye who believe! Devour not usury, doubling and quadrupling. Observe your duty to Allah, that ye may be successful." 47 That is, the Quran prohibits usury receipt over usury (or compound interest), and this is the case when a borrower cannot fulfill or repay his debt and fall in debt compounding inevitably. This is the case in which first: the lender is not an investment partner and does not participate in profit or loss of investment project; and second: loan has been expended to purchase unproductive goods, or investment was unproductive; on the other hand, the loan has been expended for consumption and not for investment. This is the difference between investment and consumption loans.
For this reason in the verse: "And if the debtor is in straitened circumstances, then (let there be) postponement to (the time of) ease; and that ye permit the debt as almsgiving would be better for you if ye did but know" 48 , emphasizes that would be better to not receive the loan principal and interest whenever the borrower is in straitens. And to confirm this almsgiving says: "Allah hath blighted usury and made almsgiving fruitful". 49 And based on these reasons swallowing this property has been negated by the verse: "And of their taking usury when they were forbidden it, and of their devouring people's wealth by false pretenses". 50 The reasoning in Quran explanation of Soltan Mohammad Gonabadi 51 about the verse: "They say: trade is just like usury whereas Allah permitteth trading and forbiddeth usury" 52 is referring to this point that usury (Reba) in Arab words was not used by the meaning in jurisprudence, and usury had been being used for some kind of debt repayment delay penalty which makes usury unlawful. He says 53 : "They said the trade by increasing the price is the same as usury in excess. Thus usury is ok as trade is ok. Therefore the similarity of these two is in excess of repayment and this excess is Reba (usury), and comparison between trade and usury is not a matter of their correctness, and this objection to the correctness of trade is not the case. Thus it deserved to be said: usury is the same as trade and not: trade is the same as usury. Thus this objection is not right. And by this point that they resemble trade to usury in excess of price refers to the similarity of trade to usury because of the permitted situation of trade and they used this resembling to espress their intents more explicit. Thus, Allah broke their analogy and said: "Allah permitteth trading". This expression is a response to their proposition. And continued: "and forbiddeth usury". This means that: correctness and incorrectness are not because of the similarity of trade and usury but, is because of normative and negation of God. Some other said: whenever in maturity (due) date ower requested his owe, debtor demanded increasing repayment period and excess and agreed to postpone the repayment. Whenever it was said to them that this is usury, they respond both are the same. Their intents were that: increasing the price of a commodity at the time of sale and increasing the loan by lengthening its period are equal. In the age of ignorance (paganism) they traded in this way and loaned a property for a due date with a determined/conditioned profit -as it prevails in our age. Then they said this profit that we receive is compensation of the time period that our commodity has not been used in commerce and had been idle. Or loaned a commodity like wheat and barley up to harvesting time and receive more than they had loaned and said cash price is for example 10 drachmas and it is right to credit sale by 15 drachmas, and it is right to loan to 15 drachmas. Since this action completely relies on profit/gain and reliance on God is left and body members and powers in searching livelihood which is of the most important worship and adoration had been stopped and left idle and the soul has stopped from supplication and praying God and the debtor has been harmed by receiving his property without compensation/replacement and the good work of "good loan" (loan without excess repayment) is left and all these affairs which are opposite to the God's will for his bondmen caused the God to prohibit usury and clash to usurer." 54 By this explanation about the theosophy of unlawfulness of usury, we can summarize that: if the debt resources are to be expended in consumption is encountered as usury and is prohibited. And if is expended in investment, then the excess receipt is profit and lawful. The above reasoning leads us to the theosophies of the legislator in forming production activities. By the name production, we mean value added as a system of national and product accounts of United Nations encounters in production and transaction of goods and services in all sectors of the economy. In summary: 1.
The loaner must share in profit and loss of the economic activity of the loan receiver.

2.
The rate of interest -because of the inability to determine the capital productivity rate a priori-should not be determined and conditioned in advance.

3.
Receiving interest in consumption loans is usury and not allowed.
According to these theosophies of usury prohibition, some of Shiites and Sunnites jurists consider non-usury of investment loans. 55 Though, some others encounter this as a trick to exit usury. Summing up different reasoning and scrutinizing the Quran indications and narratives, consolidates the conclusion that it is not a trick to exit usury and reveals the wisdom of God's decree. Of course, the theosophy of forbidding usury has also been cited from the social viewpoints which we do not touch them in this paper. 56 This group believes that in the age of the prophet and legislation of usury, in Arabia, usury was applicable in consumption loans, and the majority of loans were financed for consumption needs and Islam prohibited these loans. Thus, loans with interest in production affairs were excluded from usury realm. 57 That is, for example, one who borrows to construct or to buy a house will . benefit from this investment and is fully rational to pay some share of this profit to lender. This share may be as some percents of profit or be in different forms of Islamic contracts. Juristic opinion and decrees of Shiite and Sunnite jurists about sale and purchase of note strengthen this proposition. The decrees about the lawfulness or unlawfulness of purchasing note have a wide range of fully lawful to completely unlawful. Many jurists believe that notes are numerable and not weighable and measurable. Thus its transaction is lawful. They encounter note as a commodity. Another group believes that purchasing/sale of note is unlawful because it is debt usury. This group believes that note is an instrument to purchase and sale commodity and is representative of enumerating the commodity value and has no propertyship by itself. Comparison of various conflict decrees leads to an important conclusion. Since some decree that note lending is legal and some other decree as illegal. That is, some decree that notes lending-which is another expression of the loan-to lawful and some decree to unlawful. On the other hand, some say usury is legal, and some other says it is illegal. These conflicts enlighten two important propositions.
1. The juristic deduction methodology needs revision. 2. Ignorance to theosophy principle of jurisprudence is the main source of conflicts. 58 Regarding the first paradigm, if we ask this question (usury definition) from "this age divine legislator", we would receive a unique response that passes over the conflicting decrees and rules them out. Thus, the methods to find out the legislator opinion should be different from the prevailed methodology. As mentioned in the first part of the paper, the methodology of juristic deduction has many shortages and necessitates revision. The permitted person who has divine authority is the solution to this problem. On the other side, the juristic deduction methodology is not a scientific methodology. If it were, its answer to the unique particular problem should be unique. But in juristic deduction, we find different decrees and solutions to a specific (unique) problem. That is, it does not possess a scientific methodology 59 .

Usury initiates real sector fluctuations
By the second paradigm, we try to analyze the economic theosophy of usury prohibition. Generally, many economic fluctuations in the real economy come from money market oscillations. There is huge literature about this proposition in economic literature. If the money market fluctuation of the economy dampens, then the real economy will become much stable. The main effect of usury deletion from the economy is to make a direct link from the economy's real sector (investment at first) to the saving sector. As it cited before whenever banks are profit maximizer, financial intermediaries will operate as an independent sector, and the created differences in demand and supply sides of money resources will be the main sources of oscillation in the economy. On the other side, since, loans contracts are time period contracts; there should be a delay for the market agents to adjust themselves with new interest rate and market conditions. This delay is the source of continuous oscillations in financial markets. This phenomenon is displayed at the following figure: Bank's loan supply And also at the saving markets, at equilibrium, we have the equality of the amount of saving and bank's demand for resources and depositors' supply of saving deposits. That is: By generalizing this phenomenon, we will observe that any shock in supply of saving resources or demand for loans because of time-dependent contracts and consequently their inflexibility to adjust-will transfer to other market and oscillations will be transferred from saving to investment market and then from investment to saving market. The real economy will suffer from this oscillation, and the business cycle occurs.
By examining sign of the three equations of (1) and (5) and (7), it is obvious that the behavior of B R in different periods is oscillatory. The behavior of saving and loan markets can be modeled as a cobweb model that will have different time oscillations relating to the slopes of the demand and supply schedules in both markets.
The interest rates at the two markets will be: On the other hand, the interest rate in the saving market is a function of the interest rate in the credit market in the previous period. This adjustment will complete by the return path in the next periods. That is the interest rate of the credit market is a function of saving interest rate at the previous period. That is: By replacing (10) in (12), we will have: This equation is a second order difference equation. This equation type can oscillate simply during the time. This will be also true for interest rates. By replacing (12) in (10) we have: This equation, similar to the previous one, can be oscillatory. By replacing (12) in (9), we will have: Equation (15) and (11)   and these two variables can be oscillatory according to (13) and (14). Thus, interest rates similar to saving and loans resources in both markets can be oscillatory.