Author Topic: Is modern banking usurious? (Read 6275 times)

Nishant · « **on:** June 24, 2012, 11:16:58 AM »

Does anyone have thoughts about this?

I know the traditional teaching of the Church on usury permits some extrinsic titles on loans under certain circuмstances, as well as on products whose use doesn't consist in their consumption, or for legitimate productive investment purposes.

What I don't see is how "fractional reserve banking" in particular doesn't precisely "sell that which does not exist", which is the exact Thomistic definition of usury.

I don't think the Church during the last century placed a blanket ban or condemned the practice by name, though Quadragesimo Anno does give an indication in that direction. Also, if true, what would it mean? Would only being a member of that profession be forbidden or would every single participant in the monetary system be more or less implicated?

SJB · « **Reply #1 on:** June 24, 2012, 12:29:06 PM »

Quote from: Nishant2011

Does anyone have thoughts about this?

I know the traditional teaching of the Church on usury permits some extrinsic titles on loans under certain circuмstances, as well as on products whose use doesn't consist in their consumption, or for legitimate productive investment purposes.

What I don't see is how "fractional reserve banking" in particular doesn't precisely "sell that which does not exist", which is the exact Thomistic definition of usury.

I don't think the Church during the last century placed a blanket ban or condemned the practice by name, though Quadragesimo Anno does give an indication in that direction. Also, if true, what would it mean? Would only being a member of that profession be forbidden or would every single participant in the monetary system be more or less implicated?

I believe fractional reserve banking is what Leo XIII referred to when he said usury had come back in a different form. In other words, the creation of money (the exchange medium) is not based on the real wealth created.

The false assumption almost everybody makes is that money is somehow implicitly tied to real wealth, which it isn't. It should be made to conform to reality, which means it should be made to reflect real wealth (i.e. goods and services and the capacity to produce and deliver these), but there is no implicit connection whatsoever. Money, after all, is merely a kind of ticket system for designating a claim on the productive capacity of the nation. There is an accidental connection – a kind of indirect causative relationship – in that to begin any new productive undertaking generally requires the creation of new credit as a debt to the banks, so that additional money (in the form of credit) is generally created at around the same time as additional productive capacity is added.

The capital input required in such cases bears little relationship to the productive output created by that investment, so the relationship of new money created to new goods and services available is not direct or in any sense scientific. Consumer credit acts to bridge this gap to some extent, and of course both are evil in their effects.

Jehanne · « **Reply #2 on:** June 24, 2012, 01:18:13 PM »

The Fourth Lateran Council (1215) states:

Quote

67. Jєωs and excessive Usury

The more the christian religion is restrained from usurious practices, so much the more does the perfidy of the Jєωs grow in these matters, so that within a short time they are exhausting the resources of Christians. Wishing therefore to see that Christians are not savagely oppressed by Jєωs in this matter, we ordain by this synodal decree that if Jєωs in future, on any pretext, extort oppressive and excessive interest from Christians, then they are to be removed from contact with Christians until they have made adequate satisfaction for the immoderate burden. Christians too, if need be, shall be compelled by ecclesiastical censure, without the possibility of an appeal, to abstain from commerce with them. We enjoin upon princes not to be hostile to Christians on this account, but rather to be zealous in restraining Jєωs from so great oppression. We decree, under the same penalty, that Jєωs shall be compelled to make satisfaction to churches for tithes and offerings due to the churches, which the churches were accustomed to receive from Christians for houses and other possessions, before they passed by whatever title to the Jєωs, so that the churches may thus be preserved from loss.

Traditional Guy 20 · « **Reply #3 on:** June 24, 2012, 02:31:28 PM »

With the interest and compund interest it is indeed ususry, something that the Jєωs excell at, but our society is completely Judiaized.

SeanJohnson · « **Reply #4 on:** June 24, 2012, 08:12:52 PM »

Usury is condemned.

Precisely what constitutes usury is an open question.

IMHO, fractional reserve banking is he most egregious form of usury, since it "originates" "money" into existence, then charges interest on it.

At least back in the pre-central banking era they were charging interest on money they already had.

Marcelino · « **Reply #5 on:** June 24, 2012, 09:49:24 PM »

If i deposited 100k in a savings account, paying 5% interest, compounded annually, in 100 years, my account balance would be over 13 million dollars or 131.5xs what i put in. That means i was paid more than my initial deposit every single year my money was in the bank! :dancing-banana: :rahrah: :alcohol: :cheers:

If my grandkids waited another 100 years, they would leave a balance of over 1.7 billion dollars to their grandkids. Now my 100k deposit is paying a return of around 17 million dollars a year. Wow!

If my descendants left it in for another 200 years, it would be worth more than the current GDP of the world's only superpower, The U.S.A.

In another hundred years, the balance would be around 2 zillion dollars. There ain't that much money in the world today!

Money is supposed to represent real wealth and all wealth is created by human labor, applied to creation. What did i do to make over 13 million dollars for my grandkids? Nothing. So, why am i entitled to all that money? Because i engaged in usury.

People who try to turn worthless metal into gold are called alchemists and they are said to be engaged in magic. Usury seems like a form of alchemy or magic.

ggreg · « **Reply #6 on:** June 25, 2012, 05:04:08 AM »

Not taking into account that 100 years is a very long time, inflation and taxes over that period plus 5 per cent on savings at the moment is hard to achieve I would agree with you.

If you had bought stock in Cola Cola, GE, and Ford you would be much richer. 13 million won't buy you a decent house in Manhattan or Central London today.

For 100,000 in 1902 you could have had the pick of any of them.

Diego · « **Reply #7 on:** June 25, 2012, 08:07:51 AM »

This is an excellent article on usury by Catholic Law Prof. Brian McCall:
Unprofitable Lending: Modern Credit Regulation and the Lost Theory of Usury
http://works.bepress.com/cgi/viewcontent.cgi?article=1005&context=brian_mccall

I have also attached a scan of Fr. Lewis Watts' 1945 Usury in Catholic Theology.

JohnGrey · « **Reply #8 on:** June 25, 2012, 09:44:55 AM »

Worse than being usurious, it inevitably leads to the commission of one of those sins that cries out to Heaven for justice, that is the defrauding of the work regarding his wage. As the issuance of debt-backed fiat currency, lacking the requirement of having a tangible reserve prior to its issuance, leads without exception to the leveraging of politically-connected entities to the point of insolvency and beyond. To cover those insolvencies, the issuer of the fiat currency emits in ever greater amounts. The reason for this is simultaneous provide those institutions with sufficient nominal capital to appear solvent and thus attract investors on whom the bad debt can be foisted, and so that the institutions will in turn use some of that capital to purchase the government-issued bonds that supposedly back the original issuance, providing the illusion that there is sufficient investor appetite to make the issuance sustainable going forward.

In effect, the issuance so noted above results in a debasement of currency, as the inherent value per unit has been reduced. For instance, since the start of the depression in 2007, the effective purchasing power of the dollar has decreased 30%. If that's not defrauding the worker, I don't know what is.

Marcelino · « **Reply #9 on:** June 25, 2012, 06:16:36 PM »

Quote from: ggreg

Not taking into account that 100 years is a very long time, inflation and taxes over that period plus 5 per cent on savings at the moment is hard to achieve I would agree with you.

If you had bought stock in Cola Cola, GE, and Ford you would be much richer. 13 million won't buy you a decent house in Manhattan or Central London today.

For 100,000 in 1902 you could have had the pick of any of them.

Fine. In 2007 you could have paid 150k for a house on my street. 5 years later you can buy it for around 120k. You could have bought gold not long ago for 250 an ounce, today it is 6xs that. However, i doubt gold will sustain that price for the next 20 years. So, what's your point? That supply and demand should dictate what interest rate bankers charge on loans and pay on savings accounts and bonds? Fine, i might agree with that, if i thought usury was reasonable, but i don't.

If i loaned you a gallon of gas and told you or your descendants to pay me or my descendants back one gallon of gas, one year from now or 1000 years from now, that would seem reasonable. However, to insist that your ancestors pay me back with all the oil in the world, plus all the cheese on the moon, seems fantastic!

theology101 · « **Reply #10 on:** June 25, 2012, 08:35:04 PM »

"The Jєωs should not be allowed to keep what they have obtained from others by usury; it were best that they were compelled to worked so that they could earn their living instead of doing nothing but becoming avaricious." -St. Thomas Aquinas

"There is already something like a Jєωιѕн monopoly in high finance... here is the same element of Jєωιѕн monopoly in the silver trade, and in the control of various other metals, notably lead, nickel, quicksilver. What is most disquieting of all, this tendency to monopoly is spreading like a disease." - Hilaiare Belloc

"All the world suffers from the usury of the Jєωs, their monopolies and deceit. They have brought many unfortunate people into a state of poverty, especially the farmers, working class people and the very poor. Then as now Jєωs have to be reminded intermittently anew that they were enjoying rights in any country since they left Palestine and the Arabian desert, and subsequently their ethical and moral doctrines as well as their deeds rightly deserve to be exposed to criticism in whatever country they happen to live." Pope Clement VIII

"But the Jєωs are so hardened that they listen to nothing; though overcome by testimonies they yield not an inch. It is a pernicious race, oppressing all men by their usury and rapine. If they give a prince or magistrate a thousand florins, they extort twenty thousand from the subjects in payment. We must ever keep on guard against them." - Martin Luther

"Ye (Jєωs) are of your father the devil, and the lust of your father ye will do. He was a murderer from the beginning, and abode not in the truth, because there is not truth in him. When he speaketh a lie, he speaketh of his own: for he is a liar and the father of it." - Jesus Christ

"Therefore know, my dear Christians, that next to the Devil, you have no more bitter, more poisonous, more vehement an enemy than a real Jєω who earnestly desires to be a Jєω. There may be some among them who believe what the cow or the goose believes. But all of them are surrounded with their blood and circuмcision. In history, therefore, they are often accused of poisoning wells, stealing children and mutilating them; as in Trent, Weszensee and the like. Of course they deny this. Be it so or not, however, I know full well that the ready will is not lacking with them if they could only transform it into deeds, in secret or openly." - Martin Luther

"They (the Jєωs) work more effectively against us, than the enemy's armies. They are a hundred times more dangerous to our liberties and the great cause we are engaged in... It is much to be lamented that each state, long ago, has not hunted them down as pest to society and the greatest enemies we have to the happiness of America." - President George Washington

theology101 · « **Reply #11 on:** June 25, 2012, 08:38:43 PM »

Quote from: theology101

"The Jєωs should not be allowed to keep what they have obtained from others by usury; it were best that they were compelled to worked so that they could earn their living instead of doing nothing but becoming avaricious." -St. Thomas Aquinas

"There is already something like a Jєωιѕн monopoly in high finance... here is the same element of Jєωιѕн monopoly in the silver trade, and in the control of various other metals, notably lead, nickel, quicksilver. What is most disquieting of all, this tendency to monopoly is spreading like a disease." - Hilaiare Belloc

"All the world suffers from the usury of the Jєωs, their monopolies and deceit. They have brought many unfortunate people into a state of poverty, especially the farmers, working class people and the very poor. Then as now Jєωs have to be reminded intermittently anew that they were enjoying rights in any country since they left Palestine and the Arabian desert, and subsequently their ethical and moral doctrines as well as their deeds rightly deserve to be exposed to criticism in whatever country they happen to live." Pope Clement VIII

"But the Jєωs are so hardened that they listen to nothing; though overcome by testimonies they yield not an inch. It is a pernicious race, oppressing all men by their usury and rapine. If they give a prince or magistrate a thousand florins, they extort twenty thousand from the subjects in payment. We must ever keep on guard against them." - Martin Luther

"Ye (Jєωs) are of your father the devil, and the lust of your father ye will do. He was a murderer from the beginning, and abode not in the truth, because there is not truth in him. When he speaketh a lie, he speaketh of his own: for he is a liar and the father of it." - Jesus Christ

"Therefore know, my dear Christians, that next to the Devil, you have no more bitter, more poisonous, more vehement an enemy than a real Jєω who earnestly desires to be a Jєω. There may be some among them who believe what the cow or the goose believes. But all of them are surrounded with their blood and circuмcision. In history, therefore, they are often accused of poisoning wells, stealing children and mutilating them; as in Trent, Weszensee and the like. Of course they deny this. Be it so or not, however, I know full well that the ready will is not lacking with them if they could only transform it into deeds, in secret or openly." - Martin Luther

"They (the Jєωs) work more effectively against us, than the enemy's armies. They are a hundred times more dangerous to our liberties and the great cause we are engaged in... It is much to be lamented that each state, long ago, has not hunted them down as pest to society and the greatest enemies we have to the happiness of America." - President George Washington

I guess my point is that if Jєωs are involved, then yes, it is usurious. So the question becomes, are there any Jєωs involved in modern banking?

:scratchchin:

JohnGrey · « **Reply #12 on:** June 25, 2012, 08:49:24 PM »

Quote from: Marcelino

Fine. In 2007 you could have paid 150k for a house on my street. 5 years later you can buy it for around 120k.

The meteoric rise in housing prices was a case of spurious asset inflation, not unlike the historical tulip mania, via the mistaken belief that homes were an investment-grade asset by themselves. This is ludicrous, as an asset must retain the store of its value without maintenance. Anyone who has owned a house knows that you never stop spending money on it.

Quote from: Marcelino

You could have bought gold not long ago for 250 an ounce, today it is 6xs that. However, i doubt gold will sustain that price for the next 20 years.

That's a function of fiat currency hindering gold from being a fungible asset, and consequently the pricing of gold in a purely floating currency. Gold has not gained in value, as it has little intrinsic value beyond a store of wealth, so much as the effective purchasing power of the dollar per unit has decreased so dramatically over the same period

Quote from: Marcelino

So, what's your point? That supply and demand should dictate what interest rate bankers charge on loans and pay on savings accounts and bonds? Fine, i might agree with that, if i thought usury was reasonable, but i don't.

The transfer of surplus capital for any purpose as a business is predicated on the idea that, as an offset for the duration of the loan and the risk that the principle will not be paid in full, the creditor is due a certain percentage greater than the principle itself, which is the sum of the presumptive inflation rate over the duration plus the actuarial likelihood of default. I have no problem with this in practice. If the borrower finds the terms of the loan too onerous, he can simply save longer so that he has a greater portion of the principle and can negotiate a better loan, or prevail upon whatever charity he kind find.

Quote from: Marcelino

If i loaned you a gallon of gas and told you or your descendants to pay me or my descendants back one gallon of gas, one year from now or 1000 years from now, that would seem reasonable. However, to insist that your ancestors pay me back with all the oil in the world, plus all the cheese on the moon, seems fantastic!

That's your prerogative and a credit to the notion of Christian charity. Creditors are not, however, in the business of charity. They have a certain surplus of assets, usually in the form of cash, which they have the opportunity to invest. They may do so more safely and see a small return, or take a larger risk for greater returns. In either case the expectation for transferring the immediate access to the purchasing power of the capital is that they will, upon meeting the duration of the note, have a percentage above the principle which they and the debtor have mutually agreed upon. That's business, and saying that someone may be lawfully prevailed upon to have their own property or assets redistributed to others without consent or gain (which is what the abolition of interest would be) is tantamount to communism, and I want no part of it.

Marcelino · « **Reply #13 on:** June 25, 2012, 11:29:05 PM »

Quote from: JohnGrey

Quote from: Marcelino

Quote from: Marcelino

Quote from: Marcelino

Quote from: Marcelino

If i loaned you a gallon of gas and told you or your descendants to pay me or my descendants back one gallon of gas, one year from now or 1000 years from now, that would seem reasonable. However, to insist that your ancestors pay me back with all the oil in the world, plus all the cheese on the moon, seems fantastic!

That's your prerogative and a credit to the notion of Christian charity. Creditors are not, however, in the business of charity. They have a certain surplus of assets, usually in the form of cash, which they have the opportunity to invest. They may do so more safely and see a small return, or take a larger risk for greater returns. In either case the expectation for transferring the immediate access to the purchasing power of the capital is that they will, upon meeting the duration of the note, have a percentage above the principle which they and the debtor have mutually agreed upon...

You seem to know a lot about it, but you also seem to have forgotten one very important point, not all contracts are decent. Hence, they should not all be deemed lawful, at least not by a moral government.

If i loan someone something, i am entitled to be "made whole." If i have reasonable business expenses, then they could be part of my lending fee.

Jehanne · « **Reply #14 on:** June 26, 2012, 09:22:01 AM »

Is "charging interest" an intrinsically evil act? Consider,

Quote

"You shall not lend upon interest to your brother, interest on money, interest on victuals, interest on anything that is lent for interest. To a foreigner you may lend upon interest, but to your brother you shall not lend upon interest; that the LORD your God may bless you in all that you undertake in the land which you are entering to take possession of it." (Deuteronomy 23:19-20)

"Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest." (Matthew 25:27)