Usury and Feneration

Perhaps one of the growing number of things that stale-dates me is my view of Usury. I do not view it as some mediaeval obsession of the Church, abandoned in our enlightened times, now that people understand the principles of banking and economics.

To start, I do not think these are enlightened times.

Conversely, I doubt that the Florentines, Genoans, Venetians, and others who invented the basic instruments of modern banking, trade, and investment finance – deep in those Middle Ages – were ignorant of supply and demand.

While I would not defend, say, double-entry bookkeeping as an article of faith, I would observe that it “evolved,” like modern natural science, in environments that were approximately 100 percent Catholic.

Usury itself – ribbit in Hebrew – has had bad press going back not only to Moses, but to the Vedas, and, so far as I can see, to time out of mind in every other religious tradition.

Consult, if you will, Summa Theologiae II-II, the four articles under question 78 on “The Sin of Usury.” I bother to give the reference because I think any reader interested (bad pun) in this question will find that St. Thomas has thought the matter through – to a depth where he anticipates modern defenses.

And here is what I find most wonderful. The Angelic Doctor realizes that, through interest charges, lender and borrower conspire in the creation of money out of nothing. He also distinguishes adeptly between what is an investment, in which the investor shares in the profit, or loss – and what is, in effect, a “consumer loan.”

I put that in quotes, for it will require qualification. There will always be people who borrow not in the way of business, but from real and desperate need, however it may have come about. They need help, and a loan could be an act of charity. We know deeply in our gut that it is wrong to profit from another man’s desperation.

Usury, considered as a sin, is not confined to such situations, but they should be carefully examined because “loan sharking” makes the evil very plain. The examination could be extended from there.

We know, for instance, what happened when a Coca-Cola executive proposed putting thermometers in the vending machines, to raise the price of cold soda on a hot day. The gut reaction to that – a godsend to Pepsi – tells us that we are dealing with something much broader than extreme cases.

“The Moneylender and his Wife” by Quentin Matsys (1514) [Musée du Louvre, Paris]
“The Moneylender and his Wife” by Quentin Matsys (1514) [Musée du Louvre, Paris]
The executive’s pompous muttering about “price elasticity” being a basic principle of economics did not help him. It rather pointed to one of innumerable examples wherein sound economics might also be unsound ethics; and reminded that unforeseen consequences come from them.

In a more contemporary Thomist account, which takes into view how things really are in this twenty-first century, it is no easier to parenthesize loan-sharking. While it might not seem that way to the people who live off the proceeds, it seems to me that the very idea of a credit card is not subtly, but obviously usurious.

Moreover, that those who use them from desperation are appreciably outnumbered by those who are tempted into greater and greater debt, to satisfy “wants” which extend to gluttony. Their very shortsightedness makes them ideal “punters,” from the loan shark’s point of view. (I recommend this colloquial British term for the easily gulled.)

In the longer term, these punters can be induced to pay for the same good or service several times over, and still owe the principal. Indeed, almost everything expensive is now sold on the installment plan; and our tax systems are designed to further exploit the punters, by tapping them along the way. (In its own ponzi schemes with “unfunded liabilities,” the State turns out to be the biggest punter of all.)

St. Thomas expounds this, though in terms likely to lose the attention of any hurried reader, for he must painfully think the matter through. Thomas, and more generally mediaeval insights into the moral dimension of economic transactions, provide a useful platform. They may help us get sight of our own world, in which the creation of money in exchange for nothing leads to an inflation not only of money itself, but of everything associated with it.

I mention this because it is topical. Those in the forex and all other financial markets are currently very alarmed by what the Swiss have done, by withdrawing from the game of manipulating their own currency (to keep it down to a peg with the Euro, thus encouraging Swiss exports, while discouraging capital flight to Swiss banks).

By doing so, they have exposed the vast policy of QE (“quantitative easing,” i.e. printing money) by which the whole world’s economy is now oiled, and nations compete in ever more squalid ways to underbid each other’s currencies, to keep their respective economies alive.

It is a policy by which the nominal assets of the world’s central banks have increased many times over in a few short years; by which unsound private banks have been floated in a rising tide of “fiat money” (created ex nihilo) – which in turn could any moment suddenly combust into hyperinflation.

My Jeremiad on this is a free bonus. My point is that we have built our economies on usury and feneration, with the help even of “classical” economists – laughing at the old, constraining, “mediaeval” idea there could be anything intrinsically wrong with lending money at interest.

To my mind, the illusion of free lunch has spread far beyond money per se, to the moral effect over all society of omnipresent “lifestyle” advertising that exalts the vice of gluttony, and all adjoining vices. It feeds upon an economic strategy that takes this for the essence of both “freedom” and “prosperity” – inducing people to buy what they don’t need with money they have not yet earned.

We begin to see, as they say in the markets, who is “the greater fool.”

David Warren is a former editor of the Idler magazine and columnist in Canadian newspapers. He has extensive experience in the Near and Far East. His blog, Essays in Idleness, is now to be found at: