Usury
Having two college degrees cost me a lot of money. I had to take out several student loans to finance my education. College tuition (and the related costs and fees) are quite expensive, but coupled with interest on those loans compounded daily the amount owed at the end of a college education becomes exorbitant. I am no expert on the Church's teaching regarding usury (mainly due to the fact that no priests or bishops seem to preach on this matter any longer, and I have found it extremely hard to find good, definitive infomation regarding this matter), but I know in my heart that it is wrong to penalize responsible new college graduates with student loans bloated beyond reasonableness with interest.
After paying my student loan payments, rent, and utilities, I have almost no money left from my monthly salary. If it were not for the fact that my wife is a full-time college student receiving financial aid (some of which we will have to start paying back in a year's time), we would not have enough money to buy groceries or gas. What is the solution to my situation, a situation that millions of other new college graduates face? I don't think the solution can be found in a government program, tax breaks, public service breaks, etc. I truly believe the only solution can be found in creating a new society guided by the econimic principles of the Catholic Church, a society in which usury is illegal. The older I get the more convinced I am that a truly Catholic monarchy must be established or re-established in order for justice to reign in the world.
16 comments:
This is a very formidable topic. This one rocks. Hopefully, there will be a lot of input in this subject in the weeks to come. There is a definitive church teaching on this subject. It certainly is not in accordance with the modern practice of arbitrarily setting an interest rate around which everything else in the economy rotates. Time willing, it will be explained in outline form.
For now, go find online or wherever the writings of St. Antoninus. He is the one the church adapted in explaining interest rates. Aquinas wrote of interest charging also. In fact, that was the last subject of Aquinas that I read while in college. It definitely had its effect.
As they used to say in 1960s television .... TO BE CONTINUED
OT:
You may find the blog of the Kaisertreue Jugend interesting. Don't know if your language skills are sufficient, but you might like some of the videos.
Nick,
The church's teaching on the charging of interest is exceptionally simple. The operative phrase is known as OPPORTUNITY COST. Here is how it works:
The money that you lend Mr. X is money that could have been invested, thereby earning a return on the investment. However, you couldn't make a profit of 2%, 4%, 8%, or 12% with the money you lent, because Mr. X is now using it. Mr. X then owes you the amount of profit that you could have made, in addition to the amount you lent him. This is the "doctrine" of Opportunity Cost.
In lending $1,000, $10,000, or $100,000, you lost the OPPORTUNITY to invest that money for a profit. Mr. X COST you the OPPORTUNITY to invest the money. The amount of profit opportunity lost is the interest to be charged.
There is a fatal error in this logic. Not every investment gains a profit. The money you lent Mr. X might have been lost in a bad investment.
The problem with today is that the interest rate is arbitrarily being set. The actual interest rate should be the AVERAGE YEARLY RATE OF RETURN in business investments in the region where the lending occurred.
As far as I know, the church does NOT have a teaching that rationalizes or accepts the idea of charging extra percentage points for risk of failure of repayment. As you know, a person who does not have a billionaire co-signer and who borrows money has a higher interest rate to pay.
The idea of Opportunity Cost came from Saint Antoninus.
Your explanation sounds a little too modern, like it came from a modern business text book. Does anyone else have any imput on this subject?
Guess what? A homework assignment for someone somewhere has just been created. You'll see in a moment. Let's start this way:
Saint Antoninus Pierozzi lived from 1389 to 1459. He was the Archbishop of Florence who wrote the Summa Moralis. The teaching of Opportunity Cost and other elements of banking are in there. But remember, the writings of saints are not infallible statements in themselves.
None the less, Renaissance Florence is famous for, aside of art, the De Medici family and the beginning of the modern banking system. Today, Antoninus' treatise on interest charging is what has been presented as the current church teaching on the subject. Now, comes the problem.
There is a papal encyclical on the subject, published in 1745 by Benedict XIV. It's titled, Vix Pervenit. It does NOT mention opportunity cost, but it does allow for charging a rate for delays in repayment (late fee.) The web address to that encyclical's text is posted below, along with two other web addresses covering the topic at hand.
Another point: A 1912 edition of a Catholic Encyclopedia stated that "The Holy See admits practically the lawfulness of interest on loans, even for ecclesiastical property, though it has not promulgated any doctrinal decree on the subject."
In addition, the 1917 Code of Canon Law permitted churches to invest in interest bearing investment instruments. However, Rerum Novarum lamented over the practice of interest charging, and that was published in 1891.
The official legitimizing of the charging of interest (in any theological teaching) is not a done deal. The subject is still up for judgment, then. That's pretty dishonest on the part of the modern Magisterium. Therefore, there is the possibility of developing a more creative banking system. Below are three web addresses which would be beneficial for us all to read.
The Encyclical:
http://www.papalencyclicals.net/Ben14/b14vixpe.htm
Wikipedia entry on the Encyclical:
http://en.wikipedia.org/wiki/Vix_Pervenit
Here is the web address to another informative article on interest. It even refers to Thomas Aquinas' Summa.
http://www.faith.org.uk/Publications/Magazines/Jul06/Jul06ChurchTeachingOnUsury.html
Apparently, the official moral theological teaching on the charging of interest is yet to come. That is really disturbing. That constitutes anarchy within the Magisterium.
Another proposal (theory) set forth in the quest to legitimize the charging of interest goes as follows:
The bank employees have to make a living somehow, so they are charging you interest on account of having made the effort to gather the money they eventually lend you. Well, if that's the case, then why not charge an Administrative Fee or a Finder's Fee?
What is the legitimacy in having an entire economy revolve around an interest rate that gets changed from time to time by a chairman? Such a thing makes the prime rate the steering wheel of the economy.
For decades, it has been the case that, whenever you buy a house, the first several years of the mortgage payment is little more than the payment of interest. In the initial year of a mortgage, very little goes to paying off the principle of the home loan. In the years that immediately follow Year 1, not that much of your mortgage payments go toward the actual loan, either. That's pretty oppressive.
And they call America the land of the free.
This is a huge issue that is apparently being ignored. Equally important is the issue of college tuition fees. Going by memory, in the 1990s, a dental student would finish college and internship at the tune of a $112,000 debt. Don't know what the price tag is now, though.
However, in France, during the 1980s, a student was regarded as a professional, and each student received a humble stipend. After all, these students were the people who would maintain a nation's infrastructure in the future. Don't know what the rules in France are now, though.
Universities charge what they charge and appropriate money for this research project and that program. Does some of the grant monies come from students' tuition these days? Are students paying more for the price of an education?
Something worth considering:
Setting aside discussions very worthwhile discussions on opportunity cost and time preference, Consider that Biblical and Church teaching on usury were a product of times where commodity money was in circulation, i.e. gold and silver.
Today we have fiat money, i.e. paper money, which is tied in value to nothing.
The manipulation in money supply that goes along with this means that to not charge interest would be some form of theft because it is practically certain that the amount of money you borrowed for college will have much less purchasing power in ten or twenty years.
It is also worth considering that during the Middle Ages prices were controlled by "just price" theory, which has long been abandoned.
Can anyone outline what this "just price" theory is? How does it work?
I have a good solution for you: don't make loans you can't afford.
That would mean the vast majority of us would never go to college, buy a house or a car. I guess your's is good advice if I want to work at Walmart or McDonalds for the rest of my life whist driving a piece of junk car or taking public transportation everywhere.
You might also find this useful:
The Distributist Review
I just posted a minute ago, but my post was eaten up by some invisible blog post eater.
Basically, it is a shame that such a thing can exist in society, but it is something that we have drawn up for ourselves as we have almost allowed protestant ideas to dominate our lives. As long as we keep living this way--side by side, we'll keep falling into such problems.
Am I nuts? The Amish--who are not Catholic and lack the full revelation given to the Church-- seem to be doing just well being secluded from society to the best of their abilities and turn to society to get the help that they need to sustain their lifestyle.
Whereas, we Catholics, having been endowed with many gifts--scientists, doctors, engineers, architects and farmers etc.-- fall prey to the society we live in and end up being worse than when we started because we dont take care of each other.
I don't know when change will come, but I stand with my head up high as I await the return of the King...until then, I'll take a Catholic Monarch, please?
Just price: basic criterium is usefulness.
A loaf of bread serves you a day. A pair of pants half a year to a year, and you need another pair to have them last as long as that (or dirt will destroy them).
A typical car serves four, for ten years, a house serves ten for a hundred years or more.
That determines their relative just prices.
Additional criteria: anywhere outside Persia and Russia fish eggs from sturgeon (caviare) is more costly than say fish eggs from cod. A plate of silver is more costly than a plate of pottery. A trowser of silk is not as cheap as jeans. You figure out why, but it is not contrary to justice.
Just price allows for a certain leeway of subjective estimation.
THere is a friend price you pay a friend whose starting business you want to favour, there is a pious price you ask of the poor, there is a mean price in between.
Today I bought a Sub worth 3€ (mean price) for 2:50€ (obviously a pious price). God bless the sandwich lady!
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