The World Economic Crisis

It has been taught by wise philosophers for millennia that an economic system based on usury is sinful and bound to fail.

"Usury" in the Old Testament generally seems to refer to lending money on interest. the developed Catholic philosophy, as enunciated e.g. by Fr. Fahey and Hilaire Belloc, would distinguish between a "productive" loan and an "unproductive" loan. This is apart from the question of whether interest is nominal, reasonable, or excessive. It is useful to restrict the word "usury" for "interest charged on an unproductive loan".

The Catholic Church always taught that usury is a sin because contrary to the Natural Order: it amounts to buying money, yet money in itself is nothing but the unit of value of something else that is real.

Nevertheless, once one moves away from subsistence farming and barter, there can be a real value in having a supply of capital when it is needed – generally, at the start of a venture. Give the example of a farm developed from virgin wilderness. The farm will not produce wealth until the land is cleared and the first harvest is brought in. But who will clear the land, and what will they eat? It would seem reasonable for a money-lender to expect some share in the prosperity of the farm once his loan is repaid, and maybe a compensation for the loss of his disposable income in the meantime. The problem comes if the farm is a failure – perhaps a dose of violent weather, or a disease, destroys the crops. In justice, the lender took a risk just as much as the borrower. Neither could be certain of the outcome. If the farm fails: under current practice, the borrower still has to pay back all the loan, with interest. The borrower takes all the punishment, while the lender goes scott free. Why?

It has been argued, from the standpoint of Catholic theology, that to charge a mortgage on a house is a mortal sin against justice (although to take out such a mortgage, from necessity, is not). A house, unlike a farm, does not generate income; on the contrary, it requires constant maintenance. If a loan is advanced to the buyer to purchase the house, it is simple theft to demand vast sums of interest, not to mention the re-possessing of the house if the buyer cannot keep up the repayments. the ancients do not seem always to have grasped all the implications of lending on interest, but they instinctively knew one thing: it makes the rich richer and the poor poorer.

In the current world economic system, currencies are based on the American dollar, which is perceived as the most stable currency. Until about 30 years ago, the currency was based on an actual object: gold. This led to the lamentable practice of locking up nearly all the gold in the world in huge burglar-proof vaults (and they complain about the gold ornaments in a church) .... but now it is based on nothing but a "general consensus" of what the currency is worth. At the same time, paper and electronic "money" is recklessly created, with no corresponding tie-in to actual material goods. More seriously, the actual issuing and control of the currency has been allowed to slip out of the hands of governments and into the control of multinational organisations, which are now far more powerful, for this reason if no other, than the governments themselves. At the same time, individuals, companies and entire nations are saddled with huge interest repayments on loans, irrespective of whether they are productive or not. This cannot do other than crash one day.

See a perceptive article (although laden with economic jargon) at

http://www.economicpolicyjournal.com/2011/01/global-insiders-warned-us-debt-crisis.html

Tuesday, January 25, 2011

Global Insiders Warned: U.S. Debt Crisis Could Explode at Any Time