Tarpley on Usury

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This is Chapter 8 from Webster Tarpley's book 'Surviving The Cataclysm'. Worth reading, like the rest of it.

CHAPTER VIII




USURY AND NATURAL LAW




Puossi far forza ne la Deitade,
Col cuor negando e bestemmiando quella,
E spregiando natura e sua bontade:
E però lo minor giron sugella
Del segno suo e Soddoma e Caorsa....
Dante, Inferno, XI.46 ff.




As we have suggested in earlier chapters, one aspect of the current breakdown crisis of civilization involves the greatest orgy of usury ever seen in human history. From the Versailles reparations to the yuppie quants of today, usury has been the scourge of the twentieth century. No attempt to salvage human civilization can succeed it is based on a clear perception of the dangers of usury.

Usury means the charging of interest for loans. In some cases it refers to exorbitant interest rates; in other cases it means taking any interest at all on loans. In pre-Volcker America, the legal definition of usury was often an interest rate higher than 10% on loans to a person or company. Before Volcker, more than 10% was thought a crime. Volcker raised interest rates to double that and well beyond for most borrowers, causing the virtual extinction of the United States as a modern industrial power. Derivatives represent the worst usury, on the largest scale, in history. Trying to float over $200 trillion of financial paper on the basis of a mere $10 trillion or less of commodity production is the most insane exercise in usury that humankind has ever attempted. As we have seen, this colossal folly is doomed to fail.

In the wake of Volcker, usury became embedded among the implicit mental axioms of the average American. What is the rate of return on my investment? What is my bottom line? These became the questions that Americans instinctively asked. Some states wrote into law that money managers are required to invest where they can get the highest rate of return, irrespective of the risk of default. Usury became an integral part of the legal system and the tax system as well. Credit card interest rates went to Volcker levels, and have never come down.

Modern American has forgotten that usury has been a key factor in the destruction of whole civilizations over the past millennia. Usury helped to undermine the Roman and Byzantine Empires. The usury practiced by Genoese bankers of St. George's bank was a cause of the repeated bankruptcies of the Spanish Empire. Usury sapped the economic power of the British Empire at its zenith during the nineteenth century. Venetian-directed usury was a cause of the crisis of the French monarchical state towards the end of the eighteenth century. Usury was a critical factor in the decline of the Ottoman Empire. Usury is the gravedigger of civilizations, even though it tends to be ignored by Paul Kennedy and the entire "collapse of empires" school of historiography.

The question of usury goes back thousands of years, and is worth some attention here. Many of the earliest and most powerful condemnations of usury contained in the holy books of the three monotheistic religions, and we should not remain indifferent to these documents. Those who are indifferent to the spiritual authority of Judaism, Christianity, and Islam as established religions, or who are skeptical about claims of divine inspiration, are invited to consider these writings from a cultural-historical rather than from a theological point of view: they represent the accumulated wisdom of centuries of human civilization. The monotheistic religions are seconded in their condemnation of usury by the Platonists, and to some by the Confucian school of philosophy.


THE BIBLE ON USURY

We read about usury in the Old Testament, where we find strong suggestions that usury is incompatible with the survival of a civilized community. The 15th Psalm had a clear-cut position on the immorality of usury:


Lord, who shall abide in thy tabernacle? who shall dwell in thy holy hill?....
He that putteth not out his money to usury, nor taketh reward against the innocent. He that doeth these things shall never be moved.


The prophet Ezekiel also had a clear conception of the evil of usury. In the middle of a list of sins and abominations of which men have been guilty, Ezekiel includes usury:

In thee have they taken gifts to shed blood; thou hast taken usury and increase, and thou hast greedily gained of thy neighbors by extortion, and hast forgotten me, saith the Lord God. [Ezekiel 22:12]

Then there is the famous passage from Deuteronomy 23:19-20, which appears to forbid usury among the Jews, although allowing it against other, usually hostile, peoples:

Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury:
Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord they God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.

This implies that usury is a destructive force which cannot be allowed within one's own community, although it may be admissible as a virtual war measure against external enemies. Anyone who perceives the world economy as a global unit cannot, according to this teaching, propose to base it one usury. For the survival of modern civilization, it will be important to follow the teachings of Ezekiel and of the Psalmist. This would allow us to conclude from Deuteronomy that, given today's global interdependency, we cannot inflict usury on any inhabitant of this small planet.

Plato specifies in his Laws that usury should normally be illegal:

Let there be. . . no lending on usury, the law permitting the borrower to withhold both interest and capital. [Laws, V.742c]

Even Aristotle, whose heart was never in the right place, could not afford openly to endorse usury. He limited himself to commenting that money per se "is barren," and that taking interest was "a gain against nature", with the implication that this was unjustified. But this is far from being an explicit condemnation of usury. Oligarchs have generally not allowed this quibble to lower their rates.

For Christians, there can be no doubt that usury is expressly condemned. Here are the words of Jesus Christ from Luke 6:35:

But love ye your enemies, and do good, and lend, hoping for nothing again; and your reward shall be great, and ye shall be the children of the Highest: for he is kind unto the unthankful and to the evil.

God has thus commanded us to repudiate usury. If you are a coherent fundamentalist Christian, you cannot be a monetarist. Based on this, St. Jerome (340-420) argued during the late Roman Empire that since Christ had made all men brothers and founded a universal church, the ban on usury had been extended to all persons of whatever nationality or faith.


THE ISLAMIC VIEW

The Holy Koran contains explicit and vehement condemnations of usury. Moslems are exhorted to abandon the practice of taking usury, which is portrayed with admirable clarity and in considerable detail. Usury is presented as the antithesis of charity, which is alone pleasing in the sight of Allah. The Prophet writes:

Those who swallow usury cannot rise up save as he ariseth whom the devil hath prostrated by (his) touch. That is because they say: Trade is just like usury; whereas Allah permitteth trading and forbiddeth usury. He unto whom an admonition from his Lord cometh, and (he) refraineth (in obedience thereto), he shall keep (the profits of) that which is past, and his affair (henceforth) is with Allah. As for him who returneth (to usury) -- Such are the rightful owners of the Fire. They will abide therein. [QS: 2:275-5]

Allah hath blighted usury and made almsgiving fruitful. Allah loveth not the impious and guilty. [QS: 2:276]

Lo! those who believe and do good works and establish worship and pay the poor-due, their reward is with their Lord and there shall no fear come upon them neither shall they grieve. [QS: 2:277]

O ye who believe! Observe your duty to Allah, and give up what remaineth (due to you) from usury, if ye are (in truth) believers. [QS: 2:278]

And if ye do not, then be warned of war (against you) from Allah and his messenger. And if ye repent, then ye have your principal (without interest). Wrong not, and ye shall not be wronged. [QS: 2:279]

And if the debtor is in straitened circumstances, then (let there be) postponement to (the time of) ease; and that ye remit the debt as almsgiving would be better for you if ye did but know. [QS: 2:280]

O ye who believe! Devour not usury, doubling and quadrupling (the sum lent). Observe your duty to Allah, that ye may be successful. [QS: 3:130]

And of their taking usury when they were forbidden it, and of their devouring people's wealth by false pretences, We have prepared for those of them who disbelieve a painful doom. [QS: 4:161]

That which ye give in usury in order that it may increase on (other) people's property hath no increase with Allah; but that which ye give in charity, seeking Allah's Countenance, hath increase manifold. [QS: 30:39]

The Holy Koran has the great merit of clearly distinguishing between merchandise trade on the one hand, and usury on the other. Trade brings goods where they are needed for production and consumption, while usury simply pyramids debt. Here is implicit one of the basic ideas of natural law, namely that the wealth of an entire society cannot be founded on usurious financial dealings, since these activities do not generate new net wealth. Notice also that debt forgiveness and debt moratoria are explicitly recommended.


ST. AMBROSE AND ST. THOMAS AQUINAS

St. Ambrose of Milan (340-397) one of the most influential fathers of the Latin Church and the person who converted St. Augustine to Christianity, furnished in his De Tobia a depiction of usury as a deadly weapon of fearful devastation. Starting from the lines in Deuteronomy quoted above, Ambrose writes:

From him, it says there, demand usury, whom you rightly desire to harm, against whom weapons are lawfully carried. Upon him usury is legally imposed. On him whom you cannot easily conquer in war, you can quickly take vengeance with the hundredth [i.e., high percentage rates of interest]. From him exact usury whom it would not be a crime to kill. He fights without a weapon who demands usury: he who revenges himself upon an enemy, who is an interest collector from his foe, fights without a sword. Therefore, where there is the right of war, there is also the right of usury. [Nelson 14]

Ambrose's starting point is clearly that under the New Law of Christ, we cannot treat any person in this way in peacetime.

When Charlemagne and his advisor Alcuin of York made their great effort to lift Europe out of the horrors of the Dark Ages, one of their great achievements was a general ban on usury among Charlemagne's Christian subjects. Some of the ideas that motivated this ban were expressed by the scholar Rabanus Maurus (784-856).

In the Middle Ages, William of Auxerre (1160-1229) expressed the idea that the usurer violates natural law by appropriating time, which is part of the world process that belongs to all creatures and to God. The usurer steals time and collects money for it. This is the celebrated argument against the monetization of time, which is taken over later by St. Thomas Aquinas (1225-1274), who comments: "...if those who accept money with usury wish to recover that usury by selling cloth at more than its worth on account of the aforesaid delay, there is no doubt that this is usury since time is clearly sold." [Padelford 6]

The usurer assumes that the money he has lent will bring in a return in the double digits, no matter what is done with the money. But in the real world of commodity production and social reproduction, only certain kinds of activities bring any return at all. These are the productive activities of industry, agriculture, mining, construction, scientific research, and others. And even productive activities of this sort can very seldom generate a real profit beyond 10%. This means that the debt service demanded by the usurer is a net detraction from the productive power of the entire society whenever it is collected from non-productive activity, and whenever it exceeds the real rate of profit earned in production.

St. Thomas Aquinas sums up the medieval Christian view of usury as a sin in and of itself:

The Jews were forbidden to take usury from their brethren, i.e., from other Jews. By this we are given to understand that to take usury from any man is simply evil, because we ought to treat every man as our neighbor and brother, especially in the state of the Gospel, whereto all are called. [Summa Theologica, II.78.1]


St. Thomas thought that it was unlawful to take payment for lending a material good like a bottle of wine. We may justly ask for the bottle of wine to be replaced, but anything more is sinful usury. Franklin D. Roosevelt was speaking in the same spirit when he developed the famous "garden hose" comparison in his late 1940 speech asking the Congress to approve what became the lend-lease program. If you have to lend your neighbor your garden hose so he can stop his own house from burning down, probably saving your own house in the process, you don't ask for payment. All you can reasonably ask for is to get your garden hose back. And if you let a dollar sign prevent or even delay this transaction, you are a fool.

Underlying these attacks on the monetization of time is the notion that the usurer is contributing nothing to society, but only looting something from social reproduction. The usurer thus steals from everybody. This is also the view of the Italian poet Dante Alighieri in his Divine Comedy, one of the world's great classics.

As Dante and Vergil descend into Hell, they pause for some moments to become accustomed to the noxious air of the underworld. Vergil, who is guiding Dante through the nether regions, uses the time to give a quick overview of the various categories of sinners who are being punished in the circles of Hell. Usury is presented as a sub-category of violence, and as a form of behavior that is abhorrent to God.

For Dante, usury is specifically violence against God, denial of God, and blasphemy against God. It is also contempt of nature and of the bounty of nature. According to Dante, usury and sodomy are related, and are punished together. To identify usury for his contemporaries, Dante refers to Cahors, a city in southern France which had been a hotbed of the Albigensian heresy of the so-called Cathars, who were also notorious sodomists. St. Thomas also refers in his writings to usurers as "people from Cahors" or "Caorsini" in Latin.

After listening to Vergil's exposition, Dante asks a couple of questions. One of them regards usury. Dante asks Vergil to go back to where he said that usury offends God's goodness, and to please explain that point again. Here is Vergil's answer:

Philosophy, to him who hears it, points out, not in one place alone, how Nature takes her course
from the Divine intellect, and from its art; and if you note well the Physics [of Aristotle], you will find, not many pages from the first,
that your art, as far as it can, follows her, as the scholar does his master; so that your art is, as it were, the grandchild of the Deity.
By these two, if you recall to your memory Genesis at the beginning, it behooves man to gain his bread and to prosper.
And because the usurer takes another way, he contemns Nature in herself and in her follower, placing elsewhere his hope. [Inferno, XI.94 ff., Carlyle-Okey-Wicksteed]

From Dante's point of view, the sin and crime of the usurer is to violate God's instruction to humanity contained in Genesis 1:28:


And God blessed them, and God said unto them, Be fruitful, and multiply, and replenish the earth, and subdue it: and have dominion over the fish of the sea, and over the fowl of the air, and over every living thing that moveth upon the earth.


This is the imperative of increased population and economic development, which the usurer does not accept.

When Dante and Vergil finally reach the seventh circle of the Inferno, they find a plain of burning sand on which eternally showers a rain of fire, suggesting the brimstone of God's vengeance upon the cities of Sodom and Gomorrah in Genesis 19:24. Upon this burning sand the blasphemers against God lie prostrate, while the sodomites are forced to run. The usurers sit crouching, tormented by the burning sand and the flakes of fire. Their human faces have been distorted beyond all recognition; they can only be known by the coats of arms on the purses they wear around their necks:

Thus also, on the utmost limit of the seventh circle, all alone I went to where the woeful folk are seated.
Through the eyes their grief was bursting forth; on this side, on that, they with their hands kept warding off, sometimes the flames, sometimes the burning soil.
Not otherwise the dogs in summer do, now with snout, now with paw, when they are bitten by fleas, or flies, or breezes.
After I had set my eyes upon the visages of several on whom the dolorous fire falls, I knew not any of them; but I observed
that from the neck of each there hung a pouch, which had a certain color and a certain impress, and thereon it seems their eye is feasting. [Inferno, XVII.43 ff., Carlyle-Okey-Wicksteed]

The usurers are compared to dogs, and then to oxen. Their brand of violence is the lowest and the worst, since they are located on the brink of the abyss, wherein fraud is punished.

Dante also considered misers and spendthrifts as mortal sinners. They are confined in the fourth circle of the Inferno, which is guarded by the monster Pluto, the god of riches. Misers are the worse of the two. In the fourth circle, the misers and spendthrifts are divided into two groups who are condemned to push heavy weights around the circle. When they meet, they exchange insults like "Why squander?" and "Why hoard?" Then they turn around, only to meet at the other extreme of the circle, where the ritual is repeated. Both misers and spendthrifts have blotted out their individuality through their incontinence, and none can be recognized as individuals. Vergil warns Dante that the misers will come out of their tombs on Judgment Day with clenched fists (the sign of avarice) and the high rollers with cropped hair (the medieval sign of lavishness and prodigality). Misers and spendthrifts together make up two of the largest groups of sinners in the entire Inferno.

As Vergil points out, these sinners have made themselves slaves to the pagan goddess Fortuna, much worshipped today in Las Vegas and Atlantic City, as well as in Wall Street and the Chicago pits. But all the gold beneath the moon could not buy a minute of rest for these rollers of the heavy weights. The Inferno is the abode of the damned, where sinners are eternally punished for specific acts of usury. In the Purgatory, sinners who have escaped damnation through repentance are purged of the tendency to commit evil acts. In the Purgatory, the punishment is made to fit the crime. The basis for usury and monetarism in the psychology of the human individual is of course greed, long known to western civilization as one of the seven deadly sins. A stay in Purgatory was designed to remove the temptation of these sins.

The greedy sinners are forced to lie face down in the dust, with their hands and feet securely tied up. They must weep and pray until greed has been distilled out of them through their own tears. Greed is considered the worst of the sins of the flesh, and the most widespread. Dante calls greed the "old wolf", and prays that God might put an end to its dominance among humans.

The sinners in Purgatory also repeat examples of greed and rapacity. One of the most memorably of these is Marcus Licinius Crassus, one of the greediest and richest men of the ancient world. Crassus divided the world with Julius Caesar and Pompey the Great in 60 BC, with Crassus taking the east because he thought that was where the money was. But Crassus was killed in a battle with the forces of the Parthian Empire. Since the Parthians hated Crassus because of his opulence, they poured molten gold down the throat of his corpse. Therefore in Dante's Purgatory the sinners chant: "Tell us, Crassus, since you know, what is the taste of gold?" Here again Dante is pointing toward the basic fact that gold and money cannot be eaten, and are not wealth in and of themselves.

Dante was convinced that economic factors had been very important in the corruption of his native city, Florence. His verdict on Florence was that "the nouveaux riches and the fast buck have created pride and excess." Not a bad summary for the social effects of globaloney today.


CONFUCIUS ON ECONOMICS

Chinese civilization broadly shares the view of natural law and the emphasis on broad-based real economic production and prosperity which has been seen in the other world cultures. Here the most important figure is of course Confucius (551-479 BC). The Analects of Confucius contain the following important dialogue, which establishes the overall framework for Confucian economics:

When Confucius visited the Kingdom of Wei, Jang Yiu drove for him. "What a teeming population," said Confucius. "What do you think that the government should do for such a teeming population?" asked Jang Yiu. "Enrich them," answered Confucius. "What then should be done after its people become rich?" asked Jang Yiu. "Give them education," replied Confucius." [Analects, Chapter 13]

It is evident that a Confucian state will be dirigistic, and pursue the general welfare by enhancing the level of moral and material culture of its population. This theme is developed in the Confucian classic called The Great Learning:

The head of state who seeks personal wealth will hire greedy persons to serve him because greedy persons are experts in collecting unjust profits. As soon as greedy persons are hired, abuse of power and economic disaster will become the order of the day. When such a day comes, the availability of capable and virtuous persons will not help it at all. This means that a government must act for the public good instead of collecting unjust profits. [The Great Learning, Book X]

Particularly significant is the fact that Confucianism establishes the category of unjust profits. "Unjust profits" refer here primarily to exactions by government, but it is also clear that exorbitant and exploitative practices by private persons would also come under this heading. Confucius himself specifically addressed the problem of excessive taxation, repudiating a former student who had taken part in tax gouging:

Chi Shih, one of the officials of the Kingdom of Loo, was richer than the Duke of Chou. As one of the ministers to Chi Shih, Jang Chiu assisted Chi Shih in collecting wealth by unjustifiable means, in order that Chi Shih might become richer. Jang Chiu does not seem to be like a disciple of mine. You may denounce him. [Analects, Chapter II)

The later Chinese philosopher Mencius, who was also of the Confucian school, commented on this episode in the following terms:

Confucius felt repugnance towards a state ruler who, instead of executing decent public policies, tried in every way to dig for private profit. (Book of Mencius, Chapter IV-A)

Mencius was adamant in his condemnation of such extortion by government officials:

Nowadays it is generally believed that a servant to a king will be deemed an excellent servant so long as he can help expand the territorial confines of his state or amass a greater fortune for the national treasury. In fact, servants of this kind were held as public embezzlers in the old days. Anyone who conceives ways and means to collect wealth for a king who has neither public interests nor sensible public policies in mind is actually pursuing personal wealth for a tyrannical ruler. (Mencius, Chapter VI-B)

Most contemporary governments, including the American one, are wanting from this point of view. American law and government practice increasingly assume that usury is the order of the day, and engage in it. Tax arrears, for example, accrue interest at the exorbitant market rate. William Bennett, the resident pontificator of the Reagan-Bush faction, has strangely neglected this moral dimension.


THE PROTESTANT VIEW

The Protestant Reformation unfortunately tended to rehabilitate usury. The decisive figure in this regard is John Calvin, the theocratic dictator of Geneva. Calvin broke with the entire tradition of European civilization and Latin Christianity by endorsing usury. His views are expressed very plainly in one of his letters. Calvin is a draconian moralist, insisting on ideas like the absolute depravity of humankind and God's total and eternal predestination of most people to damnation for reasons that have nothing to do with their own conduct. But when he comes to usury, Calvin's heart softens. "If all usury is condemned," he wrote, "tighter fetters are imposed on the conscience that the Lord himself would wish.... I am certain that by no testimony of Scripture is usury wholly condemned." Calvin is usually contemptuous of history, since for him everything depends on Scripture. But when it comes to usury, he is willing to throw out the Bible in the name of a very vague historical analysis. After getting into deep trouble with the Biblical texts given above, Calvin writes:

...when it is said that since [our situation] is the same [as in the Bible] the same prohibition of usury should be retained, that there is some difference in what pertains to the civil state. Because the surroundings of the place in which the Lord placed the Jews, as well as other circumstances, tended to this, that it might be easy for them to deal among themselves without usury, while our situation today is a very difference one in many respects. Therefore usury is not wholly forbidden among us....

This is one of Calvin's very few appeals to history. If we needed murder or fraud more than the people of Biblical times, would it be any less a sin? But it is clear that the legalization of usury was one of the great imperatives of the Protestant reformation.

Calvin also attempted to blur the distinction between the production of tangible physical wealth on the one hand and the circulation of paper promises to pay on the other. He mocks those who say that "money does not...beget money." For Calvin, money production is just as good as food production: "If therefore more profit can be derived from trading through the employment of money, than from the produce of a farm, the purpose of which is subsistence, should one who lets some barren farm to a farmer, receiving in return a price, or part of the produce, be approved, and one who loans money to be used for producing profit, be condemned?" [Usury Laws, 33-35] Part of the answer has to do with what kind of profit is produced: is it merely monetary, or has commodity production been increased?

Another powerful voice in favor of usury in the Anglo-American world was the poet John Milton. Milton was the son of what was called a scrivener. Scriveners were the seventeenth-century equivalent of a finance company. According to all of Milton's writings, he was a staunch defender of usury. In Milton's pamphlet The Doctrine and Discipline of Divorce we find: "...usury, so much as is permitted by the Magistrate, and demanded with common equity, is neither against the word of God, nor the rule of charity, as hath been often discussed by men of eminent learning and judgement." [Milton, Complete Prose Works, V.322]

In Milton's theological treatise On Christian Doctrine we read: "Most people agree that usury is not always illicit, and that in judging it we should take into account the usurer's motives, the rate of interest, and the borrower.... As for the borrower, they agree that it is legitimate to take interest from anyone who is well enough off to pay it.... Given these conditions, no fault can be found with usury.... Usury, then, is no more reprehensible in itself than any other kind of lawful commerce... if we may make a profit out of cattle, land, houses, and the like, why should we not out of money ?" [Milton, Christian Doctrine in CPW VI.776-777]

The most ruthless endorsement of usury comes from Jeremy Bentham, the official philosopher of the British Empire. Bentham was an agent of Lord Shelburne and one of the founders of the modern British intelligence services. He developed the slogan of the greatest good for the greatest number in an attempt to justify his doctrine of utilitarianism. His argument for the total unleashing of deregulated usury is contained in his "Usury Laws: or, An Exposition of the Impolicy of Legal Restraints on the Terms of Pecuniary Bargains," often known simply as "Bentham's Defense of Usury." [Usury Laws 7 ff.]

For Bentham, there is no law of God or natural law to prohibit usury. Everything is left up to the two parties to the contract, and the public be damned, so to speak. Bentham takes his stand for the individual liberty of "making one's own terms in money bargains." In Bentham's opinion, this means that "no man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit; nor (what is a necessary consequence), anybody hindered from supplying him, upon any terms he thinks proper to accede to." This is extreme legal positivism, an important component of British liberalism.

Bentham disposes of Aristotle's comments on usury in the following mocking fashion: "...that great philosopher ... notwithstanding the great number of pieces of money that had passed through his hands (more perhaps than ever passed through the hands of a philosopher before or since)...had never been able to discover, in any one piece of money, any organs for generating any other such piece. Emboldened by so strong a body of negative proof, he ventured at last to usher into the world the result of his observations, in the form of a universal proposition, that all money is in its nature barren." But none of that prevents us from taking as much as the traffic will bear, concludes Bentham. Here we are not far from Michael Milken's paean to greed, which reportedly furnished the basis for the speech put into the mouth of insider speculator and stockjobber Gordon Gekko in Oliver Stone's 1987 movie Wall Street: "Greed is good. Greed works."

Bentham discusses at length how the general public sympathizes with bankrupts and spendthrifts, while resenting those provident persons who practice thrift, thus prompting politicians to interfere with the freedom of contracts. So anything goes. And for Bentham, usury is a good thing, which expresses the superiority of usurers "who have the resolution to sacrifice the present to the future," to prodigals "who have sacrificed the future to the present." But what if usury is destructive to the society as a whole? What if usury threatens to cripple world civilization as a whole?

Although it is unknown to most people today, Franklin D. Roosevelt developed an excellent attack on usury which he delivered in his First Inaugural Address, on Saturday, March 4, 1933, in the midst of the worst banking panic this country had known up to that time. These were not simply the throw-away lines of the modern politician; this statement is in line with the wisdom which has sustained western civilization. Roosevelt said on that occasion:

...the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men...

Faced by the failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work must be forgotten no longer in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.


Compare that now with St. Thomas Aquinas, the pre-eminent medieval philosopher:

The desire for natural wealth is not infinite because at a certain point the needs of nature are satisfied. But the desire for artificial wealth is infinite because it is subject to disordered concupiscence which observes no measure, as the Philosopher shows. There is a difference, however, between the infinite desire for wealth and the infinite desire for the ultimate good, since the more perfectly the ultimate good is possessed the more it is loved and other things despised, for the more it is possessed the more it is known." [Commentary on the Nichomachean Ethics, I.2.1]

The values of natural law, and not greed and usury, represent the values on which a viable civilization can be based.


MONETARISM

The pro-usury and oligarchical view has flourished during the second half of the twentieth century in the form of monetarism, be it the snobbish Viennese monetarism of Friedrich von Hayek or the vulgar monetarism of Milton Friedman and his infamous Chicago school of economics. Thatcher preferred von Hayek, while Nixon and Carter (through Volcker) made the fatal mistake of following Friedman. Both variants are united in the Mount Pelerin society, a group of oligarchs and related power-brokers founded on the mountain of the same name in Switzerland in 1947. Mount Pelerin is located above Lake Geneva, near the town of Vevey, the headquarters of the sinister Nestlé international food cartel.

Milton Friedman's version of monetarism stands out for its crudeness and stupidity. It is an extreme version of the man-in-the-street's illusion that money is the very essence of wealth. Money is all that matters, is what Friedman literally proclaims:

We have always tried to qualify our statements about the importance of changes in M [the money supply] by referring to their effect on nominal income. But this qualification appeared meaningless to economists who implicitly identified nominal and real magnitudes. Hence they have misunderstood our conclusions.

We have accepted the quantity-theory presumption, and have found it supported by the evidence we examined, that changes in the quantity of money as such in the long run have a negligible effect on real income, so that non-monetary forces are 'all that matter' for changes in real income over the decades and money 'does not matter'.... I regard the description of our position as 'money is all that matters for changes in nominal income and for short-run changes in real income' as an exaggeration but one that gives the right flavor of our conclusions." [Friedman's Framework, 27]

"Money is all that matters," rant the monetarists at the IMF, the Fed, and the Treasury. "World history shows that inflation is a monetary phenomenon," said a Treasury official to this writer one day in 1993. Back in the 1950s, even schoolboys used to know that the nature of inflation is to have too much money chasing too few goods. In a modern economy, this cannot be solved by reducing the quantity of money, since that will lead straight to depression -- although even this folly has been tried recently by ultra-monetarists in Latin America. The answer to inflation is always to increase industrial and agricultural production. This can be done by way of low-interest government lending to companies and other agencies that propose to produce the commodities which we know will promote an economic recovery. Milton Friedman has no idea of the ABCs of real economics.

Money is not what matters. What matters is the long-term increase in the cognitive and productive powers of human labor, an increase that is always mediated by improvements in production technology and in the general level of infrastructure in a society. As Alexander Hamilton knew very well, "mental capital" is what ultimately counts in the productive potential of any nation. Money is simply our best available means for circulating and distributing the products that the society is able to produce.

Friedman is also an admirer of Nazi austerity measures for the purpose of controlling inflation. The following is a passage from Friedman's Studies in the Quantity Theory of Money:

Germany [under Hitler] did not choose to pay for its increased expenditures by taxation. Nor did it urge individuals to invest in government securities. It did, however, borrow heavily from the German banking system. To avoid a price boom, and simultaneously to have ready access to the credit market, the German government imposed economic controls. First wage, price and credit controls and then rationing. Eventually Germany became a directed economy.

The objective of such controls is the restriction of spending on the part of individuals, so that individual spending will increase less rapidly than the quantity of money. Such a policy, if rigorously enforced, should restrain a rise in the price level. As indicated earlier, this policy appears to have been successful in Nazi Germany. [137]

But notice that in Nazi Germany the inflation was still there. It was simply being gouged out of the hides of workers, pensioners, and the victims of the concentration camps.

In late April 1997, the Mount Pelerin Society celebrated its fiftieth anniversary. In a commentary on this occasion, columnist Walter Williams claimed that the ideas of the Mont Pelerin Society have taken over not just the economics profession, but also politics around the world. In 1947, Williams said, there was a "growing love affair with socialism in Western nations, including the United States," which included a denial that government regulation was inherently totalitarian. Today, wrote Williams, it doesn't take much courage to criticize government growth and control, high taxes, and government infringement on private property. "But back in 1947, it was a different matter." "The entire intellectual climate was in favor of government micro-management of the economy, through fiscal and monetary policy, regulatory agencies, and price controls." At that time, he adds, arguing for transportation deregulation, free trade, school choice, or the balanced budget "were seen as ideas bordering on lunacy." The late New Deal was indeed a much better and saner time.

"Except for a few skirmishes here and there, the ideas of human liberty have triumphed over those of government coercion," Williams concluded. "Much of that victory is a result of a half century's work by my distinguished colleagues of the Mont Pelerin Society." The worldwide membership of the Mont Pelerin Society is about 500, of whom six have won Nobel prizes in economics. "Several have earned titles of nobility," enthuses Williams, who loves "lords, knights and dames." [Washington Times, April 28, 1997] The real target of Mount Pelerin was not communism or socialism, but rather the triumphant US model of dirigistic, regulated, New Deal industrial capitalism which had emerged in the US with the Federal Reserve's submission to Roosevelt. Hayek's 1944 Road to Serfdom did not dare to attack President Roosevelt in wartime, but does mount an assault on the Tennessee Valley Authority. Hayek wanted above all to prevent an application of TVA principles to his ancestral homeland in the Danube Valley. "One cannot," argued Hayek, "create a kind of Tennessee Valley Authority for the Danube Basin without thereby determining beforehand for many years to come the relative rate of progress of the different races inhabiting this area or without subordinating all their individual aspirations and wishes to this task." [Hayek 247-8] A TVA for the Danube was a proposal raised by FDR personally during the wartime conferences with Churchill and Stalin. Hayek argued that, since not TVA plan would please everybody, nothing could be done. And since Hayek talks so much about serfdom, we must recall that Austro-Hungarian feudal aristocrats like the von Hayeks had actually held serfs until 1781-82, and had only given them up when they were forced to by the reforming Emperor Joseph II. . Hayek's book became a best seller not because of spontaneous public demand, but rather because groups of reactionary, anti-New Deal businessmen placed bulk orders and then handed out copies. Later, these same businessmen would fund endowed chairs at colleges and universities, and set up think tanks, to spew out monetarism, bringing this fringe doctrine into the mainstream parlor.

Hayek was the disciple of another Viennese monetarist ideologue, Ludwig von Mises, who had made his name defending the Newtonian (or Ortesian) timeless objectivity of economic laws against the German school of historical economics. These two Viennese eccentrics loom large as founders of the self-styled conservative intellectual movement after World War II. Their prominence has gone hand in hand with the increased scientific and moral imbecility, as well as the increased cruelty, of western culture.

The Mount Pelerin Society is the ideological headquarters for today's legions of greed. Well, says the modern reader, what does all that mean today? The point is that usury and the monetarism which it inspires are prime causes of the collapse and disintegration of the world economy looming today.


USURY AND THE FOURTEENTH-CENTURY DISINTEGRATION OF EUROPE

During the thirteenth century, the center of world usury was unquestionably Venice. Between 1250 and 1350, the Venetians controlled the gold and silver markets, and thus controlled the currency trade of the entire world. That included the currency dealings of the entire Mongol Empire of Gengis Khan, which dominated China and parts of India. Marco Polo and his family had sealed a close alliance between the Great Khan and the Venetian Republic. Frederic C. Lane pointed out some years ago that "Venice's rulers were less concerned with profits from industries than with profits from trade between regions that valued gold and silver differently." In other words, arbitrage. The Venetian racket was similar to Montagu Norman's concept for the City of London, or to today's $1.5 trillion per day market in currency arbitrage and derivatives. And the result may well turn out to be similar.

At this time there sat on the English throne a series of Plantagenet kings who are best seen as bankrupt wards of northern Italian bankers in the Venetian orbit like the Bardi, Peruzzi, and Frescobaldi. These bankrupt borrowers included Henry III (1216-1272), Edward I (1272-1307), Edward II (1307-1327), and Edward III (1327-1377). During this time the power of Italian financiers in England was very great. The Genoese galley fleet began visiting England in 1278, and the Venetian state galleys first appeared off the English coast in 1319. British historians like to write about King Edward I as "the English Justinian"; the Italian banker Amerigo dei Frescobaldi called King Edward I "my yeoman."

The main source of wealth for England at this time was wool production. Miriam Beard tells what happened next: "Many Italian firms joined in the great shearing of England. The Frescobaldi, for instance, advanced a few thousand pounds and won the right to collect dues at English and Irish ports. They also supplied wines at fancy prices to the inordinately thristy English Court. But the chief exploiters remained the Bardi and the Peruzzi. The latter, in return for helping Henry III with running expenses, asked 120% interest and charged 60% more when he was not prompt. They took a lien on the state income and set two merchants as guards to supervise his household accounts...Soon the bankers loaned to the English abbeys and took the sheep as well as the wool for security. Before long, the bankers took the pastures, too." [Beard, 139]

King Edward III, was the madman who in 1338-9 started the Hundred Years' War against France, partly in order to secure loot and booty to stabilize his own financial situation. But sufficient booty proved hard to come by, and total English default became official in 1345. The Bardi and Peruzzi banking houses went bankrupt and closed their doors. According to a chronicler of the age, "all credit vanished together." The backdrop to these events was the arrival of the bubonic plague in Europe. The plague was itself the by-product of a century of Venetian-led speculative loans, which had driven down the standards of living, nutrition levels, and sanitary conditions of peasants and townspeople from England to China. Then came Edward III's Hunded Years' War, and the overall financial crash. The final outcome of the 1345 usury crisis was a decline in the European population over the next century by about a third, from 90 million to about 60 million. This is a prime example of a collapse into financial disintegration. And that is how European civilization had learned that usury was very dangerous indeed.

A recent study has examined the social and political as well as economic effects of the growing debt burden borne by the United States in the late twentieth century. The authors conclude that we are now an "Indebted Society." One of their findings is that, as the power of lenders has grown, the policies of the society as a whole have shifted in favor of the interests of lenders, often to the detriment of other groups. As this study comments, "People who make their living by lending money have, in principle, two overriding concerns. First, they want to receive the highest interest rates they can. Second, they want to make sure that their money retains its purchasing power -- which is to say, they want inflation to be as low as possible. To the extent that public policy fosters these two objectives, it is working to the benefit of lenders... the lender's two objectives can be consolidated into one objective: to obtain the highest possible real interest rate." [Medoff and Harless 68]

Among the results of this state of affairs is the shocking prejudice against full employment which dominates the Federal Reserve and Wall Street. Professional economists, generally serving the interests of the lenders, talk of "NAIRU", the "non-accelerating inflation rate of employment" or the "natural rate of employment." The consensus of the academic economists is that 6% constitutes the "natural" jobless rate. Anything less than that is inflationary and bad for bondholders. Today's ruling humbug is thus a paraphrase Eisenhower's Secretary of Defense Charles Wilson: "What's bad for the bondholders is bad for America." If the jobless rate threatens to fall below 6%, the anti-inflation phobia of the Federal Reserve dictates an immediate increase in interest rates to strangle nascent inflation before it becomes irreversible. Unless, of course, the banking system is about to blow. More precisely, we can state that Fed policy aims at a general climate of deflation, so as to permit periodic central bank financial bailouts and rescue operations for speculators which otherwise might have hyperinflationary implications. Producers and working families are squeezed out of existence so that hedge fund bandits and incompetent bankers may be saved.

Medoff and Harless show how many cultural and social characteristics of modern America -- summarized under the heading of the "debt culture" -- owe their prominence to the coming of the "Indebted Society." These authors see the rising rate of unemployment among middle-aged men as the result of preferential firing of older, better-paid industrial workers to save money for debt service. The same goes for the preference for bringing in temps instead of hiring permanent personnel. With deteriorating jobs offering substandard earnings, we observe the rise of the two-income or multiple-income family. The government tends, as it becomes more and more indebted, to spend less and less on scientific research and development. This has an adverse impact on industrial productivity.

Taken together, Medoff and Harless argue, all this leads to that increasing "alienation" of the increasingly unemployed population which they call "the Paranoid Society:" "The alienation found in a society in which the power of debt has come to exceed the power of humanity leads to another vicious circle -- the circle of mistrust. When people feel they have no power, when people see the expectations they had taken for granted dashed to the ground, they are apt to begin viewing most institutions with suspicion.... Outside the government, the circle of mistrust operates as well. Cooperation among workers, and between workers and management, becomes difficult or impossible. Management and stockholders find themselves at odds. Everyone expects the worst from everyone else. As government becomes ineffective, civil lawsuits abound." [Medoff and Harless, 159]


IN THE CLUTCHES OF THE BOND MARKET

After the orgy of debt that characterized the Reagan-Bush era, it could not be surprising that the balance of political power in America had shifted in favor of Treasury bond and junk bond holders, and in favor of their sanctum sanctorum, the Federal Reserve. The supremacy of bondholders and borrowers was a new political fact that Bill Clinton, in particular, was forced to deal with. Domestic and international hot-money lenders now had the ability to bring down the government if they did not get their way.

A stunning recent example of the power of lenders is President Clinton's first year in office in 1993. Clinton had pledged to make substantial investments ($231 billion in 4 years) in the future of the United States, including investments in education, job training, and infrastructure. Clinton had also promised a middle-class tax cut. But as soon as he entered the White House, he found himself surrounded by advisers who demanded that he give first priority to the conflicting program of deficit reduction. The pro-debt advisers included Vice President Gore, Treasury Secretary Bentsen, OMB director Leon Panetta, Alice Rivlin, and others. Clinton was also influenced by Greenspan of the Federal Reserve, the chief ideologue and enforcer for the lenders. In December 1992 Greenspan visited President-elect Clinton in Little Rock, Arkansas, and argued for an economic policy guided by usury:

So Greenspan gave his economics lesson. . . The long-term interest rates for 10-year, 20-year, and 30-year securities, Greenspan said, were an unusual 3 to 4 percent higher than the short-term rates. Historically, the rates had been closer. The large current gap was basically an inflation premium. Bondholders and traders were sophisticated and anticipated that the federal budget deficit would continue to explode for many years. The anticipated cumulative growth of the deficit over those years was so large that it was perceived to be unstable. History showed, Greenspan said, that with such vast federal expenditures, inflation would inevitably soar at some point.... Investors were now wary and demanding a higher long-term return because of the expectations on the federal deficit.... Greenspan added that if the new administration removed or altered that expectation by exerting some control on the deficit, the market expectations would change. Bond traders would have more faith that inflation would stay under control. Long-term rates would drop, galvanizing demand for new mortgages.... Addressing the long-term deficit was essential.... it was impossible to jump-start the economy with a short-term stimulus package." [Woodward, 67-68]

The Greenspan "economics lesson" of December 1992 is a condensed catechism of the lenders' creed in an economy in which lenders have triumphed over owners and producers. When Greenspan was put on display between Hillary Clinton and Tipper Gore during Clinton's February 1993 initial State of the Union address, it was a signal that the lenders' lobby was increasing its influence over the new administration. It was Greenspan's thinking that led Clinton to adopt a deficit reduction plan that the President himself repeatedly called "a turkey." And once Clinton had followed his advice, Greenspan turned around and applied his Chinese water-torture of interest rate hikes, leading to the worst bond-market crisis since the Great Depression, with interest rates much higher than they had been in 1993.

Clinton was not immediately converted to the cult of the bond market. On one occasion, Clinton was informed by his advisers during a White House meeting of the skepticism with which he was likely to be viewed by the bond market. Clinton replied with anger and disbelief, "You mean to tell me that the success of the program and my re-election hinges on the Federal Reserve and a bunch of f**king bond traders?" Clinton's advisers were unanimous that this was exactly his predicament. [Woodward, 84]

In another instance, Clinton rejected an attempt by Gore to compare him to Franklin D. Roosevelt, saying: "Roosevelt was trying to help people. Here we help the bond market and we hurt the people who voted us in."[Woodward, 93] A more turbulent moment in Clinton's first term came in April-May, 1993, when the President's investment program had been defeated by the GOP's Dole-led filibuster in the Senate, and he was falling back on deficit reduction. This is an extraordinary document of the forces that are shaping modern American history: "Where are all the Democrats?" Clinton bellowed. "I hope you're all aware we're all Eisenhower Republicans," he said, his voice dripping with sarcasm. "We're Eisenhower Republicans here, and we're fighting the Reagan Republicans. We stand for lower deficits and free trade and the bond market. Isn't that great?" [Woodward, 185] These insights imbue Clinton with a quality of tragic humanity, even in defeat.

In the first Clinton administration, the dominant group of officials were pleased that Treasury bond yields were at their lowest level in 6 years, and then in 16 years. Others thought that the bond market thrived on bad news for the middle class, and that deficit reduction was synonymous with looting the middle class. There was a long debate over whether $140 billion in deficit reduction (the figure specified by Greenspan) would convince "the bond market" that Clinton was serious about austerity. At one point during those early months Clinton admonished reporters who were asking him about a dip in the stock market, that the bond market was actually a much more reliable guide to the state of economy. The Federal Reserve serves the bondholders, the Congress serves the bondholders, and the President is also forced to serve the bondholders. The Supreme Court also serves the bondholders. If the spirit of usury prevails and dominates the regime, who can be astonished if depression is the result?

To sum up, usury is a violation of natural law, and of the most fundamental imperatives of the human condition. The medieval and early modern attacks on usury cited above are not obsolete; they are more accurate than most editorial comments published in newspapers and newsmagazines today. Whatever the economic ideologues of today might imagine, no society based on the rule of usury can long endure. Indeed, history is strewn with the wrecks of civilizations that attempted to build their house on usury. Nobody but nobody can consistently violate natural law with impunity.

[Thermate911]