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Friday, 19 April 2013

Usury



Usury – The Root of All Evil?
By Peter Russell
The love of money is the root of all evil. — 1 Timothy 6:10

Why do people value money so much? There is, after all, nothing very attractive about grubby pieces of paper, dirty metal discs, or digital records in a database. Money gives us the ability to obtain the things or situations we desire. With money we can buy the security, power, recognition, stimulus, or whatever else we think we need in order to find fulfillment.
But money also has more pernicious effect upon society. It takes no great mind to see that financial expediency lies behind much of our inhumanity to each other and our callous treatment of other creatures. Some more radical thinkers have argued that money should be eliminated—and with it the notions of possession and property. It is certainly true that some of the less material cultures have no notion of property, possession or money; and have survived very well, and in greater harmony with the rest of life. But in the more-developed societies some means of symbolic exchange is essential—we may not always want to receive chickens in return for our solar panels.
Furthermore, eliminating money would only eliminate the symptom of the problem. It is not ‘money’ that is the root of all evil (as is sometimes misquoted) but ‘the love of money’.
Usury:  Our love of money not only causes us to make decisions that are not in our own best interests, it also leads to usury—the charging of interest on a loan.
Nothing wrong with that, one might think (particularly if you are the lender), everyone does it. Why should others not pay for the use of one’s money? At the very least we should receive a sufficient return on our investments to keep up with inflation —and if we can make a bit more, why not? But it turns out that the lending of money at interest is one of the principle causes of inflation in the first place. And, as we shall see, fuels many of humanity’s other crises.
It is only in relatively recent times that usury has become a widely accepted practice. Though not that widely accepted. It is forbidden by the Koran, and today there are still many Islamic countries in which banks are not allowed to charge interest.
It was also originally outlawed in Judaism—and still is in some quarters. The Old Testament Book of Leviticus declares that ‘Thou shalt not give him money upon usury nor exact of him any increase of fruits’. And in Ezekiel it is advised that the just man does not ‘lend upon usury’. Yet, as happens with most religious traditions, the teachings gradually became diluted, distorted or ignored. By the time of Jesus the making of money on the lending and changing of money had become such an acceptable practice that it was even permitted within the precincts of temples. The upholders the Law, the ‘good’, were condoning the root of all evil. And so he threw the money-changers out.
The cultures of ancient Greece and Rome likewise denounced usury. Aristotle called it the most unnatural and unjust of all trades. Money, he said, was to be used for exchange, not the breeding of money from money. Plato condemned it on the grounds that it set one class against another and was therefore destructive to the state. In Rome Cicero, Cato and Seneca made similar censures.
Usury was outlawed by the Church of Rome’s Canon Law, but people got around it by various means. One was to claim that it was impractical to lend money completely free. There were, after all, various small costs involved—the time and paperwork, and sometimes the shipment—and some borrowers failed to repay their loans.Why should the lender lose money? So the Church allowed lenders to charge an interisse—the Latin word for ‘a loss’—to cover these costs. Soon this ‘loss charge’ became a fixed percentage, and as greed reared its ugly head the percentage grew, turning the loss into a profit. Usury was back, but under a new name—interest.
The Reformation saw the full legitimization of usury. Calvin, one of the fathers of the Reformation dismissed Biblical references to the evils of making money out of money, arguing that they were irrelevant to his times, and that charging interest was as reasonable as charging rent for land. (Although American Indians and other cultures might wish to replace ‘as reasonable’ with ‘as unreasonable’.) And when Henry VIII broke from Rome to set up ‘The Church of England’, he not only legitimized divorce he also gave the official seal of approval to usury.
The debate on the rights and wrongs of charging interest continued through the seventeenth and eighteenth centuries, but in the end the lure of easy money won the day. Today its hardly questioned; except perhaps by the person whose life is made a misery by the interest payments he cannot keep up. But certainly not by the governments and banks who make themselves so much money out of it. Nor by all the people who lend their money to these money-lenders on deposit.
The impact of usury on our world runs far deeper than making the rich richer and the poor poorer—with all the social tensions that engenders. It exacerbates some of the most critical problems of our time.
In essence usury is wanting something for nothing. Lending money involves no input of human labor—apart perhaps from signing of an agreement and entering some data in a computer. Nor does the act of lending in itself produce anything. The borrower may well use the money to do something useful, but the lender has done nothing. Yet he or she still expects to receive something in return.
But where does this extra something come form? Most money-lenders are so concerned with their own gains they do not consider this question—or turn a blind-eye to it. Yet it is the ultimate source of this additional money that makes usury such an undesirable practice.
Let me explain a little further. Most of the money in circulation consists not of notes and coins, but credit—the money the banks have loaned out to individuals and corporations, and which ‘circulates’ as it gets transferred from one bank account to another. The banks, of course, demand their interest on all this money out on loan, and in order that this interest can be paid the amount of money in circulation must increase. This extra money does not grow on trees; nor, except in the case of gold, can it be dug out of the ground. It is the banks who supply the additional money, and they do this by making more loans.
These additional loans are, of course, made at an interest, with the result that the money supply must be increased yet further to accommodate them. And so on…
Having continually to increase the money supply in order that the interest be paid has two undesirable consequences. First, it promotes inflation. This occurs because the increase in money supply does not in itself increase a nation’s wealth. Increase in wealth comes from increased income from products and services. But seldom is this anything like as high as the increase in money supply. The difference is absorbed by inflation.
Let us take a very simple example—economists would make it a little more complex, but similar principles would apply. Suppose that the banks increase the money supply at the rate of 10% per year but the increase in economic growth is only 4%—quite an optimistic figure for most countries. For every $100 worth of real wealth a year ago there is now $104 worth, but the amount of money representing this new wealth has grown to $110. The net effect is that value of the money in circulation has been diluted by 6%. In other words, it takes more dollars to buy the same thing, This we call inflation.
Nobody likes inflation, particularly the money-lenders. If all the extra money supply is soaked up by inflation they make no net profit. Much better is to compensate for as much as possible of the extra money by increasing the real wealth. This results in a second undesirable consequence of continually increasing money supply—endless economic growth.
It is true that in our current system growth is deemed necessary for a ‘healthy economy’ and the maintenance of decent standard of living. But it is only necessary because of usury in the first place. And when we consider the wider impact of endless economic growth we are forced to question the real health of such an economy.
Nothing else in nature indulges in endless growth—except a malignant cancer, and from the perspective of its host that is far from healthy.
Since the rate of interest charged on a loan is a compound rate, the growth in the money supply and the consequent need for economic ‘growth’ increase exponentially. A dollar invested at 10% compound interest would be ‘worth’ $1.1 after one year; $1.21 after two years; $2.59 after ten years; $117.39 after fifty years; $13,780.65 after a hundred years; and around $2.473,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 after a thousand years—which is about ten trillion times the weight of the Earth in gold (at its current value). Imagine trying to collect the interest on that. It is little wonder then economies based on usury eventually collapse.
We are trying to apply similar accelerating growth to the global economy. For a while the effects were absorbed by the growing size of the population and increasing industrialization. But now that population growth and industrialization are reaching their limits, the environment is beginning to pay the cost.
Meanwhile the banks, ever in search of new borrowers, entice the less-developed countries to take out enormous loans. ‘You need not remain peasants, with our money you can grow cash crops, trade with other countries, set up new industries, manufacture things you need, create new wealth. Why not become a ‘developing nation’ and enjoy the advantages and comforts of economic growth? Then you can live as we do and buy lots of the nice things we produce (which you don’t really need, but which we need to sell).
 ‘Like anyone else, you’ll of course have to pay interest on this loan (but in our money, please; not the worthless stuff you print). If at first you can’t manage to pay us back, don’t worry, we’ll lend you some more to tide you over. And if, as the interest mounts, you still can’t pay, we’ll help you out by buying some of those nice resources you have—but at a knock-down price.
The net result of usury? Rain forests are consumed even faster. Species become extinct more rapidly than we can classify them as endangered. More and more Earth is torn up to meet our ever-growing demand for minerals. And the extra waste generated by all this additional activity fouls the air, pollutes the water and poisons the land.
Meanwhile we continue to preach that endless economic growth is healthy.
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