A Debate On Usury As A Rough-And-Tumble
One day, maybe a half-dozen weeks back, I was reading up on a group of people I was up till then unfamiliar with. I thought they had died out in the late 1880s. They are the Greenbackers. I was checking out some blogs, of their proponents and of their detractors. On one Greenbacker blog (and these guys were frigging nuts, downright slanderous, so I won’t give the specific site, here on WordPress, any extra publicity, by linking to it), they were getting all worked up on the subject of interest, which they like to refer to as “usury”. I just couldn’t help myself. I had to throw down the gauntlet:
Hey guys, interesting stuff.
Here you are talking about interest seemingly rejecting the notion (unless it never even crossed your minds) that it is no different than any other price paid to use someone else’s property.
Why is it not arbitrary to decry interest but ignore all other charges?
Why is it not arbitrary to consider money as somehow different than any other useful tool?
If you want to use my hammer I should be able to ask for something in return. If you want to use it indefinitely, I should be able to charge more or raise the price.
Why is it somehow different or immoral when you want to use my money?
I ask these rhetorically, but if there is some non-arbitrary reason why charging a fee for the use of money but not the use of a hammer, I would greatly appreciate it if someone gave it to me.
I am not saying that interest and fraud never overlap, but this is true with any economic transaction.
Sure enough, before I could make my escape, somebody took a swing at me:
Usury in the “scriptures” is considered stealing. It is considered unjust gain. And if you think about it, interest steals from a man’s future earnings. So not only is the usurer committing the crime, but you could say that a man steals from himself by compromising the profit from his future work.
If usury is unjust gain, then it is stealing. Stealing violates God’s commandments so it should never be a part of any economy. If we removed usury from all economic systems, things would work just fine.
And since most economic systems use interest, you can see the failure. You don’t need to analyze it too much, because it was the interest that brought upon the ruin. This is why we have so many boom and bust cycles. Interest destabilizes everything in an economy. It is evil, and it get evil results.
At this point, it would seem this guy had the upper hand. I mean, he’s going back to the scriptures! How could I, a man of faith myself, wriggle out of this choke-hold? Well, turns out he didn’t actually quote the Bible. And a good thing, too, because he would have had little to nothing to back him up. Knowing this, I came down hard on him:
How is it stealing if the person in debt entered the contract voluntarily?
Say I voluntarily decide to give all my food and money and shelter away. Then say I die of exposure and starvation. Are the people I gave my stuff to guilty of theft and murder?
Let’s look at Leviticus 25:35-37.
“If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.”
Seems like a there is caveat (he must be poor, unable to maintain himself, and a “brother”) on interest, not a prohibition on it.
But if I interpret it rather as a broad prohibition, I must interpret the rest of the passage in the same manner. Therefore, it must be criminal to sell food to not just poor people, but to anyone that is hungry.
How about Exodus 22:25-27?
“If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him. If ever you take your neighbor’s cloak in pledge, you shall return it to him before the sun goes down, for that is his only covering, and it is his cloak for his body; in what else shall he sleep? And if he cries to me, I will hear, for I am compassionate.”
More caveats. “My people” and “who is poor”. And how about the cloak. What if he has more than one?
And Deuteronomy 23:19-21
“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. You may charge a foreigner interest, but you may not charge your brother interest, that the Lord your God may bless you in all that you undertake in the land that you are entering to take possession of it.”
Interest sounds perfectly legal to me. And we could argue all day about who constitutes a brother, and who a foreigner in the modern era.
Nehemiah 5: 6-13
“Now there arose a great outcry of the people and of their wives against their Jewish brothers. For there were those who said, “With our sons and our daughters, we are many. So let us get grain, that we may eat and keep alive.” There were also those who said, “We are mortgaging our fields, our vineyards, and our houses to get grain because of the famine.” And there were those who said, “We have borrowed money for the king’s tax on our fields and our vineyards. Now our flesh is as the flesh of our brothers, our children are as their children. Yet we are forcing our sons and our daughters to be slaves, and some of our daughters have already been enslaved, but it is not in our power to help it, for other men have our fields and our vineyards.”
“I was very angry when I heard their outcry and these words. I took counsel with myself, and I brought charges against the nobles and the officials. I said to them, “You are exacting interest, each from his brother.” And I held a great assembly against them and said to them, “We, as far as we are able, have bought back our Jewish brothers who have been sold to the nations, but you even sell your brothers that they may be sold to us!” They were silent and could not find a word to say. So I said, “The thing that you are doing is not good. Ought you not to walk in the fear of our God to prevent the taunts of the nations our enemies? Moreover, I and my brothers and my servants are lending them money and grain. Let us abandon this exacting of interest. Return to them this very day their fields, their vineyards, their olive orchards, and their houses, and the percentage of money, grain, wine, and oil that you have been exacting from them.” Then they said, “We will restore these and require nothing from them. We will do as you say.” And I called the priests and made them swear to do as they had promised. I also shook out the fold[a] of my garment and said, “So may God shake out every man from his house and from his labor who does not keep this promise. So may he be shaken out and emptied.” And all the assembly said “Amen” and praised the Lord. And the people did as they had promised.”
This has a bit more detail. It definitely comes down a lot harder on interest and mortgages. But it is still within the context of “brotherhood” not only in lineage but in faith. It also speaks literally of slavery. Are debtors enslaved today? Surely in a sense they are, but not in a truly “biblical sense”. Also notice the purpose of these mortgages. They were taken out to pay the king’s tax. So is the root of the evil in question interest or taxation (which is real theft)?
And Ezekiel 18:5-9.
“If a man is righteous and does what is just and right—if he does not eat upon the mountains or lift up his eyes to the idols of the house of Israel, does not defile his neighbor’s wife or approach a woman in her time of menstrual impurity, does not oppress anyone, but restores to the debtor his pledge, commits no robbery, gives his bread to the hungry and covers the naked with a garment, does not lend at interest or take any profit, withholds his hand from injustice, executes true justice between man and man, walks in my statutes, and keeps my rules by acting faithfully—he is righteous; he shall surely live, declares the Lord God.”
This may be ideal. But it is still a tall order. The command to feed the hungry and clothe the naked comes before the prohibition against charging interest. If it should be illegal to charge interest, should it not also be illegal to NOT share every spare piece of bread and article of clothing you have with every hungry and naked person one comes across?
But then another one came at me from behind:
Your argument makes sense if money is one commodity among all other commodities. But if money is a convention to mediate the exchange of favors, IOUs for favors owed – then to allow a banking authority to monopolize it (either by tying it to a monopolized metal or by monopolizing the issue of special paper money or electronic data entry of number magnitude creating deposits of certain numerical amount) is inefficient and unreasonable. No one should charge for the simple recording of a tally of favors owed, of favor units owed. Rather than a commodity I believe society benefits when money is viewed as an exchange mediation token — rather worthless in and of itself — that should be supplied to facilitate the most mutually beneficial exchanges that are possible. Deflation is harmful and keeping exchange mediation tokens too scarce so one can exact rent from the private arranging of an artificial scarcity is wrong. That said, I favor banks lending money, as long as there is someones unspent money backing the loan — interest to the savings depositor and greater interest paid by the borrower from the bank — as long as fractional reserve banking is not going on. But lenders should not be the suppliers of new money. They should only lend what they have saved, not what they pull out of thin air. The “thin air trick” should be a public utility delivered at cost.
Luckily, I was ready for him. So I gave him the old one-two:
If the exchange of money is nothing more than a tally, isn’t there a simpler way to do it? Like actually using a pen and ledger?
I agree with you that monopolization is harmful. Can we accept that premise and have you address what I said again? Why is money a convention? Who gets to decide whether it is or not and then enforce that decision without monopoly powers? Why is convention any different than the arbitrariness I mentioned earlier?
Is all deflation harmful? You seem to be talking about deflation originating from removing money from the economy, but what about deflation associated with increased productive capacity within the economy?
Why is the scarcity you mention artificial? Why are other levels of scarcity or abundance, whether they deflate, inflate, or cause stability not artificial?
As of yet, there is no counterpunch. I really didn’t think I hit them that hard. Perhaps they are unable to answer my last questions. Or perhaps they just prefer to agree to disagree. Either way, they are down for the count.
Okay. For this next one, I’ll dispense with the cheesy fight metaphors. I have this online friend that I met through our mutual support for Ron Paul’s candidacy. He’s all for ending the police state, repealing big government, and altering/abolishing the Federal Reserve. But he approaches things from a more progressive-populist stance. He’s always on about the big banks, and would like to see what they are doing over in Iceland be done here. (This goes back to the whole Socialist versus Neoliberal versus Free Market debate I touched on about two weeks ago) This time, his target was the charging of interest (AKA usury, to him). In an attempt (which was well received, despite his lack of a thorough response) to set him straight, I wrote:
Usury is charging your “brother”, who is in need, interest for a loan. It has nothing to do with loaning money to people who are not in need but just want to consume more or build up their productive capacity. The one is charity, and should not be done for profit. The other is sound business practice that increases both production and efficiency. Read the texts carefully. I oppose usury by this more narrow definition, but I do not oppose the concept of interest. Cheap credit (engendered by fiat currencies) is a separate issue that in my book is even worse than usury. The Bible also addresses this. I wouldn’t be surprised if the Koran did as well.
Please understand that just because I am a man of faith and that the scriptures define usury, however narrowly defined, as a sin, it does not mean I think that banks should be prevented from loaning money to the poor. I think Banks should only look at the risk/reward ratio when loaning money. If they were truly allowed to do this, without the perverse incentives and moral hazard present as they are in todays financial system, there is no reason to believe that they would make loans to people that can’t pay them back, i.e., the poor, in the first place. Even though loaning money to those that can’t pay back could conceivably give you power over them, it is also an incredibly risky venture to embark on while trying to stay solvent and thus attractive to other customers, be they depositors, borrowers, or investors.
On the other hand, I think that “brothers”, be they co-religionists, friends, neighbors, or simply like minded persons should be all too willing to make a loan to someone in need, interest free. Perhaps without ever getting paid back. Not that there should be some sort of law regulating it one way or the other. And guess what we call this?