Doing usury backwards

One wonders, sometimes, if a full exposition of the crime of Usury could be composed, in which it is shown that holding interest rates artificially low is the equal though opposite evil to keeping them artificially high. I am not the economic genius who could pull this off, but I descry a little light through the other side of that door — the loose hinge side, as it were.

At the moment, state-authorized central banks throughout the developed world are holding interest rates at or near zero. In Japan, they’ve been doing this for about a quarter of a century now, and have achieved something like economic stasis, as the population ages. This might be called the policy of, “steady as she sinks.”

The principles of economics are, like the principles of physics, so profoundly simple that we feel some need to complicate them. Supply and demand tend to equilibrium; we see the operation of this in “price signals” — on the black markets, even when the white ones have been closed. It is the law of the jungle — a sort of justice in its kind, but having little to do with human nature and morality. (Indeed, those Nominalist economists tend to go badly wrong, from the moment they attribute reason to human nature.)

Good and evil are, for us, to be considered on another plane; and at the intersection with the plane of natural cause and effect, we do not always let the market have its way. We do not always let gravity have its way, either, but the sane will acknowledge that it is constantly in play, and thus must come into every prudential calculation. They think it best to keep it on our side.

Demagogic politicians try to confuse our understanding by mixing terms. Even our pope does this, when he holds humans morally accountable for the operation of supply and demand; one might more reasonably hold God responsible. This leads to conspiracy theories, and the demonization of behaviour that is merely self-defensive, as when we see the missile coming, and duck. Fortunately, he may be safely ignored, when discussing topics on which he is, shall we say, not well informed.

But presidents and prime ministers cannot be ignored, having as they do the material power to direct government intervention on a huge scale, without the slightest understanding of the consequences of their actions — often on the principle that, “because I am virtuous there shall be no more cakes and ale.”

Or perhaps it would be more accurate to say, in this instance, “because I have borrowed a lot of money, there shall be no more lending above prime,” when they have pinned prime at zero.

As everyone should immediately see, this is good news for borrowers, bad news for lenders. It is especially bad for mere savers — that large proportion of the population with little skill or ambition as investors, who only want to keep for themselves and their families what they have earned. For the value of what they’ve earned trickles away, while the value of debts including those they never contracted rises before them, like an impassable mountain range, trillions of dollars high. The very fact they have savings makes them, furthermore, a target for governments that are essentially bankrupt — in both the fiscal and the moral dimensions.

Keynes couldn’t explain this — a remarkable economist, in the sense that everything he taught has proved false — but there is still inflation, albeit presently low by the standards of the century since the Great War began. With the current steep fall not only of oil, but of other commodity prices, the inflation rate may also decline, briefly below zero; but if we are to continue eating and driving cars, this will eventually be “corrected.” (The puddling of fiat currency guarantees that.)

And curiously, it is only the fear of what will come next, in a quickly deteriorating economic and social environment, that discourages some, while encouraging others, to spend everything they have, on the reasoning, “Let us eat and drink, for tomorrow we die.” Reckless consumer spending would at least restore the GDP growth rates, through the short interval before the whole system collapses. And that is what the savvier politicians tell us to do — to spend and spend, to borrow more and spend, while worshipping at the shrine of a Money God they long ago nationalized.

Partly as a consequence of this, but more from their “natural” low-class incontinence, half the population lives paycheque to paycheque, and take no thought of the morrow, in an area where Prudence (which is a virtue, even though like Justice it is “merely” a cardinal and not a theological virtue) requires them to take thought and behave like fully-grown men. But the childless, especially, have no cause to serve, beyond their own pleasure, and having no serious belief in the afterlife, either, will get their jollies while they can. They now constitute a huge voting block for every progressive party.

And lo, our economy has been systematically rebuilt around the interests of just such people: the borrowers and not the lenders; the speculators and not the investors; the childless and not the child burdened; the self-serving and not the self-sufficient. I do not see any coincidence in this.

We are told, in the standard encyclopaedic sources, that the crime of Usury originally pertained only to the charging of interest, and that the word today refers specifically to interest charges so far above “prime” as to merit the terms “excessive” or “abusive.” In other words, Usury is presented as a judgement call on the numbers; as a technicality of the whimsical sort that lets you fine or gaol whomever you want should you take a dislike to Wall Street.

I am not scholar enough to challenge this simplistic view, but from the little I’ve read in the mediaeval sources, I believe the teaching was more knowing than that. The suggestion often made, that our mediaeval ancestors had no notion of supply and demand, and therefore of investment and return, seems to me a palpable, shrieking lie. It is like saying they were unaware of gravity, because they lived before Newton. And yet even the rudest peasants — outside Christendom as well as within — were aware they could not flutter their arms and lift, like the birds.

All religious traditions of which I am aware inveigh against Usury, and the image of the loan shark exists in all cultures, taking advantage of those in real need. I do mean to include not only Muslims and Jews, but Jains, Buddhists, Hindus, Taoists and Confucians; possibly Animists, too.

It would take time and learning I do not have, to review the innumerable decisions in everything from Byzantine councils to Scholastic academies, touching on interest charges. Yet I’ve seen none specifically aimed at discouraging trade and investment. Rather, all assume personal loans, and what we would now call “consumer financing.” They were anyway written long before the Florentines had invented double-entry ledgers, modern trade finance, and merchant banking.

Should we go the distance back to famous passages in Matthew and Luke, wherein Jesus speaks of usurious behaviour, we find that He took investment and return for granted. In the Parable of the Talents, He seems even to wink at moderate bank interest, while implying that as an investment strategy, it is pretty lame. What He condemns instead is something closer to, “reaping what you did not sow.”

And this can be achieved also at rates of interest held unnaturally low.