Tuesday, February 13, 2007

A Review of Usury

by Dr. Peter Chojnowski

This booklet broaches an issue that has slipped out of the common mind, and yet is one which affects every aspect of our life. The point Belloc makes in his short essay is that usury, contrary to the now common understanding of the term, is not the charging of exorbitant interest on a money loan. Rather, it is the charging of any interest whatsoever on a loan which is not "productive" (i.e., on a loan which does not yield financial profits for the borrower). We have become so used to thinking of usury as the charging of high rates of interest, that we have forgotten that usury has nothing to do with the rate of interest charged at all.

What Belloc points out is that there are two types of loans which could be made. The first is a loan the money from which the borrower invests to make a profit for himself. In this case, whether it was Aristotle or St. Thomas or Roman Law, no one objected to the loaner reaping a certain percentage of the profit which was the direct result of his loan. This type of loan Belloc refers to as a "productive loan." The "unproductive" loan, however, is one in which no profit is made from the loan (e.g., mortgages). In this case, the borrower does not take money out of his profit to pay the lender more than he has borrowed, rather he must take money out of his basic livelihood to pay the lender "interest" on the money borrowed.

The extent of usury, rightly understood, is emphasized by the editors. At least 80% of the average family's income will go, directly or indirectly, to usurious payments (mortgages, credit cards, etc.). The problem with many predictions is that, educated as they may be and ultimately accurate as they may be, they often misjudge the exact timing of the events which they predict. It cannot be doubted, that in our own day, with credit card debt higher than ever, with the National Debt at 51/2 trillion dollars [If 51/2 trillion dollar bills were laid end-to­end they would stretch from earth to the moon and back 1,130 times.-Ed.], and with nations like Indonesia 150 billion dollars in debt to international banks, we are closer to the ultimate "meltdown" of the entire usurious system than Belloc was when he predicted such an imminent collapse in his own day. People must be made to understand what is wrong with taking interest on unproductive loans, how our entire economic system is based on usury, and how we have reached a point where the burden of "making" money to pay the few lenders their interest payments will ultimately lead to a financial collapse. We often see how the IMF has had to cover the usury crisis by giving billions of dollars in loans to Third World nations so that they can pay the interest on their other loans which they have from other banks. The economic "prosperity" which we have in our own day is merely the artificial "high" given to the average individual and business from bank loans which "create" money which actually doesn't exist.

The main problem with this book is that it ends on a melancholic and unhelpful note. Since usury is the backbone of our economic system, Belloc thinks that it would be irresponsible to challenge it in a forthright way now. He advises waiting for the right time when the economic system collapses because people can no longer pay the usurious claims. He is, of course, thinking on the macroeconomic level. He is right in that regard, although I think the issue must be raised now more than ever. However, we must consider how we can help ourselves and our fellow Catholic families shun the shackles of the usurer on a microeconomic level; this is where the idea among Catholics of "parallel economy" comes in [see The Angelus, "Why and How for a Parallel Economy," August 1998, pp.33-411].

©The Angelus
February 2001, Volume XXVI, Number 2

Interview with Thomas Storck

On Cooperative Ownership

John Médaille Interview in Romania

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