Author Topic: A catechism on usury  (Read 4615 times)

Offline james03

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Re: A catechism on usury
« Reply #15 on: April 10, 2016, 06:11:19 PM »
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What is incorrect with that?
  If you ask people's opinions, then it is not objective, it is subjective.
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In what sense did he destroy it?

The catechism incorporates the "virtue" of solidarity in order to get around the requirement of subsidiarity.  Read the classic definition of subsidiarity vs. the one in the catechism, which is written as a Hegelian dialectic.

"Social Justice" evidently comes from him.  Note that using a proper definition of justice, social justice would literally mean that people who don't work starve to death.  What is meant is "social mercy", but those who use the term "social justice" don't like the idea of you having any say in the matter.  They are insecure people who want the government to take care of them.
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Offline Greg

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Re: A catechism on usury
« Reply #16 on: April 11, 2016, 08:55:54 AM »

From an economic perspective, usury creates moral hazard.  From a moral perspective, usury offends the cardinal virtue of prudence because it is asking for a return when there is zero production.


My colleague of 17 years has just died (within 1 week of going to hospital) from liver cancer.

She was a widow and lived in a small single story home in the Miraloma district of San Francisco worth at least $1m.  She purchased it in the late 1980s or 1990s and real estate values there have skyrocketed since.  She also had a smallholding in Greece probably worth another $200-300k which was a family legacy and needs development.  However, cash wise she probably only had $20,000 in the bank as she tended to give a lot of her money away and support her church and priests.  That cash is locked up until after probate.

Her sister is less well off and lives on the outskirts of Detroit, MI.  She now has to deal with probate lawyers, funeral directors and real-estate agents who are going to want some monies up front.  I doubt her credit is anywhere good enough to take out a low-interest unsecured loan.

Let's assume there was a service that would make a short term but reasonably high-interest loan to the sister under these circumstances so she could pay the necessary expenses to liquidate the assets.  On liquidation the loan is repaid.

Asking for collateral (asset backed loan) in such circumstances is a legal minefield, because the assets belong to a dead person at the point of origination and the assets are also large and illiquid compared to the loan size.  To make funds immediately available the lender would take on substantial credit risk and getting paid back would be potentially costly and complicated.

The borrower clearly benefits from the liquid funds to pay the necessary fees and costs associated with a person dying, but the loan is not productive in as much as the net amount of assets remains the same or is unaltered by the loan.

So, in the absence of rich family members who can trust the executor to pay them back, why would a non-productive loan of this type not be moral?
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Offline Mac_Benny

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Re: A catechism on usury
« Reply #17 on: April 11, 2016, 02:36:52 PM »

From an economic perspective, usury creates moral hazard.  From a moral perspective, usury offends the cardinal virtue of prudence because it is asking for a return when there is zero production.


My colleague of 17 years has just died (within 1 week of going to hospital) from liver cancer.

She was a widow and lived in a small single story home in the Miraloma district of San Francisco worth at least $1m.  She purchased it in the late 1980s or 1990s and real estate values there have skyrocketed since.  She also had a smallholding in Greece probably worth another $200-300k which was a family legacy and needs development.  However, cash wise she probably only had $20,000 in the bank as she tended to give a lot of her money away and support her church and priests.  That cash is locked up until after probate.

Her sister is less well off and lives on the outskirts of Detroit, MI.  She now has to deal with probate lawyers, funeral directors and real-estate agents who are going to want some monies up front.  I doubt her credit is anywhere good enough to take out a low-interest unsecured loan.

Let's assume there was a service that would make a short term but reasonably high-interest loan to the sister under these circumstances so she could pay the necessary expenses to liquidate the assets.  On liquidation the loan is repaid.

Asking for collateral (asset backed loan) in such circumstances is a legal minefield, because the assets belong to a dead person at the point of origination and the assets are also large and illiquid compared to the loan size.  To make funds immediately available the lender would take on substantial credit risk and getting paid back would be potentially costly and complicated.

The borrower clearly benefits from the liquid funds to pay the necessary fees and costs associated with a person dying, but the loan is not productive in as much as the net amount of assets remains the same or is unaltered by the loan.

So, in the absence of rich family members who can trust the executor to pay them back, why would a non-productive loan of this type not be moral?

The assets should of have been placed in a Trust Fund or LLC. Was there no Life Insurance pay out? That usually provides the liquidity during a probate process that often can go two years. Really the Probate process needs some serious revamping.

In business what you suggest is called DIP Financing or bridge loan. Yet another financial tool available solely to companies, but not individuals (at least not to non-wealthy individuals). I'm sure there are lawyers that may do this on the sly if laws allow. I know bankruptcy law requires the individual to pay their attorney upfront or as in the attorney cannot float their client through the process.
 

Offline Greg

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Re: A catechism on usury
« Reply #18 on: April 11, 2016, 04:44:55 PM »
The solution is clearly a non-productive loan.  Which are immoral, apparently.

For most people a trust fund or LLC is too much hassle and cost.  She was 58 years old.  Are you suggesting she should have a LLC or trust fund with the associated admin costs from the age of 35 to 85 just in case she dies suddenly.

That's a heck of an expense and hassle.  An additional tax return every year etc plus the admin fees.

This is just one very real life example for the need for loans.
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Offline Mac_Benny

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Re: A catechism on usury
« Reply #19 on: April 11, 2016, 06:40:58 PM »
The solution is clearly a non-productive loan.  Which are immoral, apparently.

For most people a trust fund or LLC is too much hassle and cost.  She was 58 years old.  Are you suggesting she should have a LLC or trust fund with the associated admin costs from the age of 35 to 85 just in case she dies suddenly.

That's a heck of an expense and hassle.  An additional tax return every year etc plus the admin fees.

This is just one very real life example for the need for loans.

I'm not against the use of a bridge loan. My point is that part of proper financial planning is the use of a Life Insurance policy to provide liquidity to the heirs in part to fund the Probate process. People tend to not be aware that Probate can typically take up to two years, especially if there is real estate, back taxes, and other assets involved. It just sounds like your acquaintance did not plan properly. Most people don't or can't. Is the heir not able to pull up and move to Cali?

I'm willing to bet though, that a one time bridge loan would likely be cheaper than the years of insurance premiums. I'm often confused on all the harping on usury, but the expansion of insurance schemes goes untouched. I guess it is due to the fact that Trads tend to be economically cautious people who are the demographic likely to buy insurance.

Really the Probate process is in need of reform.

Yes, a Trust or LLC would have likely been over kill, but that is one of the problems in living in a high valued real estate market. If a person is going North of a million in assets, outside of retirement plans, then a Trust becomes helpful in the shielding and transfer of assets. It has just as much to do with Long Term Care as well with sudden death. Medicare/Medicaid has a something like a seven year rule of transfer of ownership. Any assets transferred during that time frame has to be clawed back and liquidated to fund a person's LTC to reduce the "burden of the State".
 


Offline Geremia

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Re: A catechism on usury
« Reply #21 on: April 19, 2016, 09:52:59 PM »
Basically the definition of usury boils down to this: Taking interest on a non-productive loan.

That's a great explanation; thanks. And what's more the "non-productive" qualification makes complete sense.
Actually, non-productive vs. productive loan is irrelevant to what usury is. Vix Pervenit says that distinction is irrelevant, too:
Quote from: Pope Benedict XIV, Vix Pervenit
One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle [i.e., a "non-productive loan"], but is spent usefully [i.e., "a productive loan"], either to increase oneís fortune, to purchase new estates, or to engage in business transactions.
Calvin was the first to argue that interest productive loans are morally licit and not usury.

The best, "boiled down" definition of usury is St. Thomas's (Summa II-II q. 78 a. 1): usury is "to sell what does not exist."
« Last Edit: April 19, 2016, 10:12:26 PM by Geremia »
 

Offline Gardener

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Re: A catechism on usury
« Reply #22 on: April 20, 2016, 12:01:31 AM »
Basically the definition of usury boils down to this: Taking interest on a non-productive loan.

That's a great explanation; thanks. And what's more the "non-productive" qualification makes complete sense.
Actually, non-productive vs. productive loan is irrelevant to what usury is. Vix Pervenit says that distinction is irrelevant, too:
Quote from: Pope Benedict XIV, Vix Pervenit
One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle [i.e., a "non-productive loan"], but is spent usefully [i.e., "a productive loan"], either to increase oneís fortune, to purchase new estates, or to engage in business transactions.
Calvin was the first to argue that interest productive loans are morally licit and not usury.

The best, "boiled down" definition of usury is St. Thomas's (Summa II-II q. 78 a. 1): usury is "to sell what does not exist."

While Vix Pervenit says that, it also says,
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III. By these remarks, however, We do not deny that at times together with the loan contract certain other titles-which are not at all intrinsic to the contract-may run parallel with it. From these other titles, entirely just and legitimate reasons arise to demand something over and above the amount due on the contract. Nor is it denied that it is very often possible for someone, by means of contracts differing entirely from loans, to spend and invest money legitimately either to provide oneself with an annual income or to engage in legitimate trade and business. From these types of contracts honest gain may be made.

As well the the Catholic Encyclopedia relaying,
Quote
Others justify the existing practice by a presumption of extrinsic circumstances, which is confirmed, according to some persons, by the permission of the civil law. This explanation appears to us to be unsatisfactory. The extrinsic circumstances do not always exist, while we can always lend at interest, without any scruple on the score of justice. And what is there to show that modern legislators pass laws merely to quiet men's consciences?

But we may correct this last opinion by the aid of the general principles of contractual justice; and we shall then more fully understand the strictness of the laws of earlier times, and the greater liberty allowed at the present day. The just price of a thing is based on the general estimate, which depends not in all cases on universal utility, but on general utility. Since the possession of an object is generally useful, I may require the price of that general utility, even when the object is of no use to me. There is much greater facility nowadays for making profitable investment of savings, and a true value, therefore, is always attached to the possession of money, as also to credit itself. A lender, during the whole time that the loan continues, deprives himself of a valuable thing, for the price of which he is compensated by the interest. It is right at the present day to permit interest on money lent, as it was not wrong to condemn the practice at a time when it was more difficult to find profitable investments for money. So long as no objection was made to the profitable investment of capital in industrial undertakings, discouragement of interest on loans acted as an encouragement of legitimate trade; it also led to the creation of new contractual associations, such as insurance companies, which give a reasonable hope of gain without risk.
http://www.newadvent.org/cathen/15235c.htm

I encourage you to read up on poena detentiori, damnum emergens, and lucrum cessans (or moratory, compensatory, and lucrative interest)

Simply put, if the Aristotelian idea that money has no value is true, or that it's sterile, the hard-line take would be right. However, Aristotle was wrong on this point. The Scholastics worked off the idea that there was no productive input of money. This is patently false, at least in our day. Further, as said before, money is a fungible proxy for something -- time, labor, etc. Those things have value. Ergo, by proxy, money has value. That value can be realized in greater ways. I can hold an estimation of my time-value or my labor-value or their congruence, which allows me to produce something I hold in greater value than my time and/or labor. Compensated for that by the proxy of money, that money has... tada, value.

Should I then give someone my time and/or labor for their time and/or labor? Not if I don't need their time and/or labor.

This is a much more complex thing than Zippy's approach (which is wrong because it misunderstands principles) and than some single paragraph by a pope can begin to explain.

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Offline Geremia

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Re: A catechism on usury
« Reply #23 on: April 20, 2016, 01:48:44 PM »
Quote from: Pope Benedict XIV, Vix Pervenit
One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle [i.e., a "non-productive loan"], but is spent usefully [i.e., "a productive loan"], either to increase oneís fortune, to purchase new estates, or to engage in business transactions.

While Vix Pervenit says that, it also says,
Quote
III. By these remarks, however, We do not deny that at times together with the loan contract certain other titles-which are not at all intrinsic to the contract-may run parallel with it. From these other titles, entirely just and legitimate reasons arise to demand something over and above the amount due on the contract. Nor is it denied that it is very often possible for someone, by means of contracts differing entirely from loans, to spend and invest money legitimately either to provide oneself with an annual income or to engage in legitimate trade and business. From these types of contracts honest gain may be made.
This is discussed and quoted in Question #47 (b). He is here speaking of "extrinsic titles" that are not part of the contract itself.[/quote]
As well the the Catholic Encyclopedia relaying,
Quote
Others justify the existing practice by a presumption of extrinsic circumstances, which is confirmed, according to some persons, by the permission of the civil law. This explanation appears to us to be unsatisfactory. The extrinsic circumstances do not always exist, while we can always lend at interest, without any scruple on the score of justice. And what is there to show that modern legislators pass laws merely to quiet men's consciences?

But we may correct this last opinion by the aid of the general principles of contractual justice; and we shall then more fully understand the strictness of the laws of earlier times, and the greater liberty allowed at the present day. The just price of a thing is based on the general estimate, which depends not in all cases on universal utility, but on general utility. Since the possession of an object is generally useful, I may require the price of that general utility, even when the object is of no use to me. There is much greater facility nowadays for making profitable investment of savings, and a true value, therefore, is always attached to the possession of money, as also to credit itself. A lender, during the whole time that the loan continues, deprives himself of a valuable thing, for the price of which he is compensated by the interest. It is right at the present day to permit interest on money lent, as it was not wrong to condemn the practice at a time when it was more difficult to find profitable investments for money. So long as no objection was made to the profitable investment of capital in industrial undertakings, discouragement of interest on loans acted as an encouragement of legitimate trade; it also led to the creation of new contractual associations, such as insurance companies, which give a reasonable hope of gain without risk.
http://www.newadvent.org/cathen/15235c.htm
The problems with the Catholic Encyclopedia article are discussed in Question #41 and passim. Basically, the article doesn't distinguish between full-recourse (mutuum) and non-recourse (societas) loans.
I encourage you to read up on poena detentiori, damnum emergens, and lucrum cessans (or moratory, compensatory, and lucrative interest)
Damnum emergens is also discussed in Question #47 (b) and lucrum cessans in Question #14.
Simply put, if the Aristotelian idea that money has no value is true, or that it's sterile, the hard-line take would be right. However, Aristotle was wrong on this point. The Scholastics worked off the idea that there was no productive input of money. This is patently false, at least in our day. Further, as said before, money is a fungible proxy for something -- time, labor, etc. Those things have value. Ergo, by proxy, money has value.
It has value when used to facilitate exchange, yes.
That value can be realized in greater ways. I can hold an estimation of my time-value or my labor-value or their congruence, which allows me to produce something I hold in greater value than my time and/or labor. Compensated for that by the proxy of money, that money has... tada, value.
Yes, but how does that relate to the usury question?

Offline Baldrick

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Re: A catechism on usury
« Reply #24 on: April 20, 2016, 04:12:52 PM »
It has value when used to facilitate exchange, yes.

Actually, no.  Money is a store of value in addition to being a fungible unit of exchange.
 
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Offline Geremia

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Re: A catechism on usury
« Reply #25 on: April 20, 2016, 05:01:02 PM »
It has value when used to facilitate exchange, yes.

Actually, no.  Money is a store of value in addition to being a fungible unit of exchange.
How does this relate to the question of usury?

Offline Gardener

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Re: A catechism on usury
« Reply #26 on: April 20, 2016, 07:40:06 PM »
It has value when used to facilitate exchange, yes.

Actually, no.  Money is a store of value in addition to being a fungible unit of exchange.
How does this relate to the question of usury?

Because the Aristotelian definition of money as sterile is what is the foundation of later understandings of the anti-interest argument. If one recognizes inherent storage of value, or productive input considered simply, the argument against usury in its simplistic definition, etc., crumbles.

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Providence is a present mystery by which our hope is confirmed and our faith solidified, if we give not into despair or disbelief.

Woe is me, because I have held my peace. Isaiah 6
 
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Offline Geremia

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Re: A catechism on usury
« Reply #27 on: April 21, 2016, 09:29:45 PM »
Because the Aristotelian definition of money as sterile is what is the foundation of later understandings of the anti-interest argument. If one recognizes inherent storage of value, or productive input considered simply, the argument against usury in its simplistic definition, etc., crumbles.
Anti-interest argument ≠ anti-usury argument.

Besides, money is sterile and only has actual value when used to facilitate exchange. It has potential value otherwise.

The 20th century economist Knut Wicksell, author of Interest & Prices which laid the foundations for business cycle theory, argues that money ≠ capital (i.e., money is not productive):
(cf. p. 8 of Fr. Bernard W. Dempsey, S.J.'s Interest & Usury)
Quote from: Wicksell, Lectures, II, p. 190.
Money does not enter into the processes of production; it is in itself, as Aristotle showed [in Politics bk. 1 ß 10, 1258a-b], quite sterile.⁷
(cf. these related quotes)

It seems the whole usury question stems from modern philosophy's anti-realism (failure to distinguish actual from potential, existent from non-existent). Thus, usury as "selling what does not exist" has little meaning for the modern mind, it seems.

Offline james03

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Re: A catechism on usury
« Reply #28 on: April 24, 2016, 11:31:55 PM »
Quote from: St. Thomas
On the other hand he that entrusts his money to a merchant or craftsman so as to form a kind of society, does not transfer the ownership of his money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand as something belonging to him, part of the profits derived from his money.
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