Usury and the Catholic Hierarchy

All popes, cardinals, bishops, abbots, priors and so on are sinners.  They will be the first to tell you that.  In what way do they sin?  Probably in the most mundane ways.

Is it possible they sin in remarkably similar ways?  Probably.  For example, the selling of indulgences was a widespread and lamentable practice.  It motivated Luther to divide the Church, and Pope Adrian confirmed the error of the Churchmen in a letter to Luther.

Is it possible that the Churchmen today are engaged in a similarly widespread odious practice?  Yes, we can see plainly they do in regards to usury.  Although the church professes explicit rejection of usury, the practice is widespread.

With remarkably little sophistry, the practice is given a pass.

Usury, the taking of interest on a loan, is strictly forbidden because it does harm.  It is expressly how the powers that be, the ones devoted to doing evil, aggregate the power they need to literally call the shots, advance the greedy agenda of accumulation, theft, misallocation, war and so on.

A loan, properly understood, is a charitable act if given outside of commerce, and a mutually beneficial act if given inside commerce.  Under no circumstances can any fee be attached to a loan.  One can argue that it is not a fee, or it is not a loan, or the world is different now, and such arguments offer widespread comfort.  So did the arguments for selling indulgences.

You make a loan to someone who is in a jam, and will be helped.  (You do not loan money to people who will not be helped). The charitable part may get intense if the party to whom you made the loan in fact cannot pay it back.  It becomes alms.  If you demand interest, you are exploiting someone in jam.  Numerically, most loans carry no usury, although the IRS will penalize the practice of no usury.

As a kid my parents would send me to the corner store to get “one pound ground round” and the proprietor would ring it up, write my family name on the receipt, and throw it in the till.  I never paid anything at the store.  Same at the drug store a block away. My father got paid once a month, and went in to pay his tab where he ran them up.  My dad gave his employer credit ( a loan - the time my dad waited to be paid), the grocer gave my dad credit, the wholesalers gave the grocer credit, the manufacturers gave the wholesalers credit and so on.  No one charged anyone interest (usury).

In 1971 the last vestiges of a gold standard were wiped out in USA, and this world disappeared into a system that shifted from human relationships to corporate relationships. All such transactions went through banks (credit cards) where interest could be applied and taxes mulcted.  We did this to win the Vietnam War, and to finance the great war on those in poverty.

Now you could take on debt unto the 3rd and 4th generation and pay only interest (with a tax deduction!) E Z.  Rare is the Bishop who could pass up a new cathedral made possible by the promise of interest on a loan based on collection basket projections.  This is just the modern version of an appallingly widespread abuse.

The Council of Trent was convened in part  to address the widespread selling of indulgences.  Selling indulgences was expressly prohibited already at that time, as usury is today.

But desiring that the abuses which have become connected with them, and by any reason of which this excellent name of indulgences is blasphemed by the heretics, be amended and corrected, it ordains in a general way by the present decree that all evil traffic in them, which has been a most prolific source of abuses among the Christian people, be absolutely abolished. Other abuses, however, of this kind which have sprung from superstition, ignorance, irreverence, or from whatever other sources, since by reason of the manifold corruptions in places and provinces where they are committed, they cannot conveniently be prohibited individually, it commands all bishops diligently to make note of, each in his own church, and report them to the next provincial synod. (Sess. 25, Decree on Indulgences)

Perhaps some day the church will issue something similar in regards to interest (usury).  “Dear Lord, give me chastity, just not right away.”

Sin makes one dull, and this sin has obscured a parallel that needs highlighting.

We all know the church teaching on contraceptives, which forbids the use thereof, for contraceptive violate the creative and unitive aspect of sex within marriage.

This teaching is lost on very many people.  What is the difference between NFP and ABC when the goal is the same?  While the subtlety is too fine for many minds, without culpability, no Bishop could possibly claim to be obtuse on this point.

Usury likewise destroys the creative and unitive aspect of commerce.  Investment in enterprise is to participate in some way, bringing together time and talent and treasure, to the benefit of all.  What mistakes are made redound to the people immediately involved.  What success they have is directly related to fine tuning their offer to the customers immediately at hand.  The outcome is creative, the process is unitive.  New and better is created, the new and better bring people together.

In a market free of usury, people with innovative offers find participants with time talent and treasure to share in the introduction.  Naturally these are small businesses who introduce a marginally attractive product or service, and over time, by means of customer feedback, ever improve their offer and thus widen the market.  They spawn imitators and at some point come to the attention of large firms that take the idea and apply large scale economies of scale in manufacturing, finance and distribution, among others, to lower the price to the point where virtually everyone has access to the good or service, with their own money.

This is the proper understanding of wealth, not how many billionaires we have, but how many people can access how wide a range of goods and services with their own money.  The market described above is necessary and sufficient to create a world in which that range is widest.  A world in which one can afford his own range of needful things is one of peace and prosperity.  No better guarantee of justice.

Usury is contrary to that creative process, that unitive process.    Usurers hate this process, and proscribe it with such policies as "get big or get out!"  

To loan money at interest is to asymmetrically advantage the lender.  He is able to accrue money and thus power that is exceptional.  Whether loaning at interest to someone in a jam, which is exploitative, or loaning easy money to someone with a winning proposition, the result is contrary to creativity and unity.

It is contrary to creativity because the easy money proposition collects time and talent that would be otherwise available in the market for projects closer to what customers want. It misallocates resources.

It is contrary to unity because the result is the rich get richer and the poor get poorer, denying a natural distribution of goods and services.  The have-nots rightfully resent the haves, even if unaware of their own contribution to the problem, by paying usury.

The solution is not to outlaw usury, only to make it unenforceable, like a gambling debt.  Then the practice would wither away.  No sanctions for failing to pay interest, no debtor's prison for failure to pay a loan.

We will in time see a reinforced statement against usury like we did against selling indulgences at the Council of Trent.  This must occur, for the only alternative is the Church disappears.  There are no other options.  But since the gates of hell will not prevail against the Church, it is only a matter of time before there is a Trent-like emphatic condemnation of the practice.

Let’s just hope the bishops get around to it before there is another split in the church.

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Shift in Judgment

It's no accident in my youth, when Nixon closed the gold window (and we went off what gold standard we had) that credit card companies flourished.  By the time I was 25, I had some 30 cards.  (Now I am down to one debit card).  Inflation was baked into the cake, and I was in on the game.

Inflation is the printing of more currency than you have backed by money (usually gold).  Those who first get the new money spend it into the economy, before its appearance as more money chasing the same amount of goods causes prices to rise.  The insiders win automatically.  The time element is crucial in this game.  Not timing, but where are you in the time continuum after the excess currency is introduced.  Almost everyone is on the losing end of this policy.

Once you go off the gold standard, which is a policy decision, then it is just a matter of playing one side or the other of the policy.

There is naturally a gold standard, absent the State.  Any banker who prints more currency than he has assets finds himself in a run, and out of business.  The people are the central reserve.

But we have a Central Bank, and here is a professor with an opinion:

A prolonged and sustained central-bank policy of purchasing ever-increasing quantities of long-term assets is essential to get a financial sector with diminished appetite for risk to use some of its risk-bearing capacity for its proper purpose of reducing the risk burden on entrepreneurship and enterprise.

You see what is happening here, in the professor's mind business is about which policies have what outcomes.  Right now the policies are bad, based on the damage done by bad policies, following bad policies, ad nauseum.  When the state intervenes, there is a shift from judgment about customer needs to judgment about possible government policy changes.  The effects are devastation, war, poverty and so on.  Get the State out of money and credit.

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When Usury is a Crime, a Renaissance Can Flourish

I am reading a book on life in Florence, Italy in the renaissance.  In essence the author, Gene Brucker has translated legal archives to paint a picture of life in those times.  In the introduction he outlines the money system, and notes "Independent of the florin was a monetary system based on the silver pound or lire, a money of account and not a real coin in Florence."

Just so.  An economy does not really need much money if it is free, it works on cross asset-backed credit. Yes, there were usurers present, but at the same time there were loans aplenty with no usury (interest) attached.  If people had money, they would participate in business, not lend it out at usury.

The legal records necessarily detail what events came to the attention of the authorities, or when failure required application for charity.  Yet they do explicate how this relative anarchy works in practice.

The book also has some enlightening renaissance essays on investing and finance.




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Algeria Was Number One Wine Exporter In the World

In 1962.  There is a fascinating study to read on the growth and failure of the Algerian wine industry.  In essence, there was a sequence of Colonize Algeria, steal lands, give your soldiers the lands, promote wine production with usury, build export business on false economy, too much wine, economic downturn, terrorism, and poverty and instability to follow.  Today there is virtually no wine exported from Algeria.

As I believe violence makes the situation worse, I'd argue the troubles in Algeria today are based on the violence used to bring the current group into power, sort of socialist Moslems, which is beset by fundamentalist Muslims.  

We have a habit of taking a snapshot of a land, say Algeria, and decide that such is the natural state of Islam.  That would ignore about 750 years of history.  And ignore the fact that the Moslems were originally welcomed by the locals, anything to get out from under the horrors of heretical and apostasied Christian rulers.  Who can say why conditions are now what they are, but we cannot say it is for lack of ability or something inherent in the religion.

As usual, policy can make life very good for a few while denying the majority their hopes and dreams.  The Christian West derived invaluable insights from Islam coming out of the "dark ages" and perhaps the favor could be returned.  The Roman Church has put out a document that where it proposes solutions to matters of politics and economics, A devote Muslim can read to advantage.

I think it is a dangerous thing to cripple a country with policies and then criticize that country for being crippled.  What goes around comes around.   Better to say let's make this good and unilaterally offer free trade.  The Church recommends it.

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Shostak On Free Markets

Frank Shostak is an Austrian-school banker who understands banking from a practical point of view.  If you read him, he gets to Shariah-compliant banking requirements.

Once the bust emerges this will affect a large percentage of bubble activities and hence banks that provided loans to these activities will discover that they hold a large amount of non-performing assets.
A likely further decline in lending is going to curtail lending out of “thin air” further and this will put a further pressure on the growth momentum of money supply.
In fractional reserve banking, when money is repaid and the bank doesn’t renew the loan, money evaporates. Because the loan was originated out of nothing, it obviously couldn’t have had an owner.
In a free market, in contrast, when money i.e. gold is repaid, it is passed back to the original lender; the money stock stays intact.
Since the present monetary system is fundamentally unstable it is not possible to fix it. The central bank can keep the present paper standard going as long as the pool of real wealth is still expanding.
Once the pool begins to stagnate – or worse, shrinks – then no monetary pumping will be able to prevent the plunge of the system.
A better solution is of course to have a true free market and allow the gold to assert its monetary role. As opposed to the present monetary system in the framework of a gold standard money cannot disappear and set in motion the menace of the boom-bust cycles.

Now, these are also Christian banking requirements.  These threads need to be pulled together into a coherent whole.  So much work, so little time.

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Business Profits

The Encyclopedia of the Catholic Church has an impimatur but it is not a teaching document of the Church.  Therefore, the fact that it is positively snarky on usury really is neither here nor there.

Plato (Laws, v. 742) and Aristotle (Politics, I, x, xi) considered interest as contrary to the nature of things; Aristophanes expressed his disapproval of it, in the "Clouds" (1283 sqq.); Cato condemned it (see Cicero, "De officiis, II, xxv), comparing it to homicide, as also did Seneca (De beneficiis, VII, x) and Plutarch in his treatise against incurring debts. So much for Greek and Roman writers, who, it is true, knew little ofeconomic science. Aristotle disapproved of the money trader's profit; and the ruinous rates at which money was lent explain his severity.

It condescending attributes ignorance to Aristotle, but perhaps Aristotle knew something about the world he live in not apparent to those removed by 2500 years time.

Money was used to settle debts when a tally based on relationship would not serve.  What we know as vendor financing today was perhaps, and new evidence suggests, far more widespread then than now.  In a free market, people extend very local and very timely "credit," always backed by hard assets and payable upon performance (I'll pay you when  I get paid).

Perhaps this was practiced far wider than we, or the Catholic Encyclopedia writers, know.  Perhaps Aristotle was just commenting on a greedy and disruptive practice of demanding cash when the world revolved on private credit.  And no doubt about it, deals conducted in cash excite the powers that be to take some of the proceeds, so such activity precipitates the general decline of society.

Maybe Aristotle knew better that he is given credit.

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