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

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On Usury

by Hilaire Belloc

As long as Usury was forbidden by the moral law and its immorality admitted, even though it took place widely, it took place under protest. It was always checked by the public disrepute in which it was held and by the fact that unless it were disguised, the interest could not be recovered by law. Disguises were indeed often used, as for instance, the promise to repay on a certain date a certain sum of money as having been lent, when as a fact a small sum had been lent. But though such subterfuges were continual, the evil could not spread until the taking of interest upon money alone became an admitted practice of which no man was ashamed, which no one thought evil, which was taken for granted.

By the third generation great central banks had arisen, notably in Amsterdam and London. Shortly afterwards, during the 18th century, men had everywhere begun to think (later in Catholic nations than in Protestant, but everywhere at last) as though interest on money were part of the nature of things: as though money had indeed, merely as money, a right to breed. The false doctrine was bound to lead to a deadlock at last, and in our own time that deadlock has been reached. The recovery of the vast usurious loans is impossible. Recourse has had to be made to repudiation on all sides, and the whole system is breaking down.

But remember that the worst of its effects is not its own self-destruction, but the way in which it has gathered into a few centers the power of controlling lives of the community and particularly of the proletariat, whose employment, and therefore existence, depends upon the great advance of credit by the holders of financial power. For all our great enterprises today are possible only through the favor of the lenders of money or credit.

We may sum up then and say that the unrestricted admittance of Usury as a normal economic function about a lifetime after the Reformation advanced the destruction of economic freedom, the swallowing up of the small man by the greater man, and the ultimate production of a large destitute Proletariat in the following fashions:

1. By the eating up of small property by Usury, falling as it did habitually upon men already embarrassed, and achieving their ruin;

2. By transferring real wealth in goods and land to those who directly used their mere money power, often enormous and impersonal, through mortgage and foreclosure.

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