Usury?

[WillieWonka]

What do you suggest instead as an alternative investment, in order for Catholics to make an honest gain on their “life savings” so as to not lose its value to inflation so that they will be able to take care of themselves in their old age, since you believe that savings accounts in banks are evil?

Catholics would then need to keep their money under their mattresses or hidden someplace else in their homes even though it can and would be stolen from them because everyone would soon know that Catholics have money hidden in their homes (if the pope makes a decree that they could no longer use banks because they are evil). The pope will need to shut down the Vatican Bank, too.

Lives will be put in extreme danger because thugs will target our homes for break-ins for easy pickings. They can just follow us home from church in order to know who to “hit” next, and then rob us whether we are home or not since home invasions are becoming more popular now.

It is my opinion that banks serve good purposes when morally managed.

I don’t suggest any alternative investments. I think the pope was wrong.

 

[WillieWonka]

Hi,

I have not read the whole encyclical, but if you take into account the time value of money, then a lender who charges a reasonable rate of interest isn’t getting back more than he gave, while the lender who charges no interest is getting back less than he gave.

When someone else has the use of your money, you can’t use it yourself. For example, say you loan someone $20 in May at zero interest for six months. If you had that $20, you would have bought tomato seedlings, which would eventually have produced tomatoes worth, say, $25. In other words, at the end of six months you would have been richer (in tomatoes) if you had been able to put the $20 to work for yourself. But instead the borrower is using the $20, and at the end of six months, if he repays you, you still have only $20. By not charging interest, you’ve given the borrower $5 in value that you’re not getting back.

Respectfully submitted.

I am in total agreement with your ideas about the time value of money.

But, that’s not what the pope said in the encyclical. He said, *“any gain which exceeds the amount he gave is illicit and usurious.” *

 

[TMC]

Those may be principles, but they are not the ones the pope invoked in the encyclical. The pope very clearly stated, “any gain which exceeds the amount he gave is illicit and usurious.” He didn’t say an unfair gain was prohibited. He said **any **gain was usury and prohibited. There’s not much wiggle room there.

Had he said what you say, I would agree. But he didn’t. Nor did he limit his teaching to some particular time.

Exactly my point. At the time that he wrote it was understood that any gain was an unfair gain. That is not the current understanding. I agree that this represents a change in the Church’s moral teaching. My point is that the change stems from a change in the Church’s understanding of the world, not a change in the Church’s understanding of morality.

 

[tqualey]

Hi, WillieWonka,

The Pope was not speaking ex cathedra - he was writing a letter that addressed a particular issue at a particular time.

Both the savings accout and the bond fall squarely under the pope’s definition of unacceptable practices.

It appears Catholic teaching has changed on a matter of morality.

Matthew 16:13-19 May prove instructive at this point. I have highlighed the operative section.

When Jesus went into the region of Caesarea Philippi he asked his disciples, “Who do people say that the Son of Man is?”
14
They replied, “Some say John the Baptist, others Elijah, still others Jeremiah or one of the prophets.”
15
He said to them, “But who do you say that I am?”
16
Simon Peter said in reply, “You are the Messiah, the Son of the living God.”
17
Jesus said to him in reply, “Blessed are you, Simon son of Jonah. For flesh and blood has not revealed this to you, but my heavenly Father.
18
And so I say to you, you are Peter, and upon this rock I will build my church, and the gates of the netherworld shall not prevail against it.
19
I will give you the keys to the kingdom of heaven. **Whatever you bind on earth shall be bound in heaven; and whatever you loose on earth shall be loosed in heaven.” **

Christ founded a dynamic organization when He founed His Church (and that would be the Catholic Church) on Peter. The pope can change things.

God bless

Tom

 

[WillieWonka]

Exactly my point. At the time that he wrote it was understood that any gain was an unfair gain. That is not the current understanding. I agree that this represents a change in the Church’s moral teaching. My point is that the change stems from a change in the Church’s understanding of the world, not a change in the Church’s understanding of morality.

Any gain means any gain. Whether one thinks any gain is unfair doesn’t matter, because the pope didn’t say an unfair gain was prohibited. He said **any gain **was prohibited. He carefully made an absolute statement, not a statement relative to contemporary values.

This is clearly a change in moral teaching. Any gain is no longer immoral according to the Church.

He chose his words very carefully. He made an absolute statement with no room for interpretation. I see no reason why we should change his words.

I can understand the Church’s discomfort with this. Since it hasn’t been repudiated, I presume it still stands as Church teaching. Or does it?

 

[WillieWonka]

Hi, WillieWonka,

The Pope was not speaking ex cathedra - he was writing a letter that addressed a particular issue at a particular time.

Matthew 16:13-19 May prove instructive at this point. I have highlighed the operative section.

When Jesus went into the region of Caesarea Philippi he asked his disciples, “Who do people say that the Son of Man is?”
14
They replied, “Some say John the Baptist, others Elijah, still others Jeremiah or one of the prophets.”
15
He said to them, “But who do you say that I am?”
16
Simon Peter said in reply, “You are the Messiah, the Son of the living God.”
17
Jesus said to him in reply, “Blessed are you, Simon son of Jonah. For flesh and blood has not revealed this to you, but my heavenly Father.
18
And so I say to you, you are Peter, and upon this rock I will build my church, and the gates of the netherworld shall not prevail against it.
19
I will give you the keys to the kingdom of heaven. **Whatever you bind on earth shall be bound in heaven; and whatever you loose on earth shall be loosed in heaven.” **

Christ founded a dynamic organization when He founed His Church (and that would be the Catholic Church) on Peter. The pope can change things.

God bless

Tom

He didn’t say his teaching was limited to a particular time. He did not say it was limited to a particluar situation. In act, he explicitly declined to rule on the specific issue of the day. He made general and absolute statements about morality, basing them on Scripture.

“First of all, show your people with persuasive words that the sin and vice of usury is most emphatically condemned in the Sacred Scriptures;”

And what did he mean by usury? He tells us what he means.

“The sin rests on the fact that sometimes the creditor desires more than he has given. Therefore he contends some gain is owed him beyond that which he loaned, but any gain which exceeds the amount he gave is illicit and usurious.”

So, according to the teaching of the pope, scripture condemns any gain. Did Scripture written two thousand years earlier only apply to the year 1745?

 

[SHW]

I don’t suggest any alternative investments. I think the pope was wrong.

Or else you/we perhaps misunderstand. I can’t make heads nor tails of many of the popes’ writings. Too “deep” for me.

 

[WillieWonka]

Or else you/we perhaps misunderstand. I can’t make heads nor tails of many of the popes’ writings. Too “deep” for me.

No. I think both the Vatican Bank and I have the same understanding.

This encyclical is quite plain, and not at all deep. He’s a good writer.

 

[SHW]

No. I think both the Vatican Bank and I have the same understanding.

This encyclical is quite plain, and not at all deep. He’s a good writer.

Please explain this from the encyclical for me then:

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.

Thanks.

 

[WillieWonka]

Please explain this from the encyclical for me then:

Thanks.

He’s making a distinction between a loan and other forms of transactions.

Suppose Joe and I have a business idea. I give Joe $100 and he takes it to China, buys fire crackers, comes back, sells the fire crackers, and gives me back $200. I get back more than I gave.

This type of partnership is OK because I am also taking the risk Joe will sell the fire crackers for only $50, and I will only get $50 back for my $100.

Had I simply loaned the money to Joe, under the Pope’s idea he would owe me $100, and no more, regardless of the success of the venture. I would not be able to get $100 plus $5 interest.

The key here is the sharing of risk.

This is the same thing we find in Muslim law.

 

[Bluegoat]

He’s making a distinction between a loan and other forms of transactions.

Suppose Joe and I have a business idea. I give Joe $100 and he takes it to China, buys fire crackers, comes back, sells the fire crackers, and gives me back $200. I get back more than I gave.

This type of partnership is OK because I am also taking the risk Joe will sell the fire crackers for only $50, and I will only get $50 back for my $100.

Had I simply loaned the money to Joe, under the Pope’s idea he would owe me $100, and no more, regardless of the success of the venture. I would not be able to get $100 plus $5 interest.

The key here is the sharing of risk.

This is the same thing we find in Muslim law.

To take this another way - some Catholics are choosing to use those Muslim investment vehicles to avoid investing in ways they find immoral. It’s not a perfect fit - Catholics don’t care about not investing in pork, for example, but they are fairly available and are strict about avoiding usury. (Mind, not all Muslim teachers agree they are ok.) Do Catholics or Christians need something similar?

 

[SHW]

He’s making a distinction between a loan and other forms of transactions.

Suppose Joe and I have a business idea. I give Joe $100 and he takes it to China, buys fire crackers, comes back, sells the fire crackers, and gives me back $200. I get back more than I gave.

This type of partnership is OK because I am also taking the risk Joe will sell the fire crackers for only $50, and I will only get $50 back for my $100.

Had I simply loaned the money to Joe, under the Pope’s idea he would owe me $100, and no more, regardless of the success of the venture. I would not be able to get $100 plus $5 interest.

The key here is the sharing of risk.

This is the same thing we find in Muslim law.

I see. Thanks.

Now, what is a “moral amount of profit” that can be earned on an investment without it being considered “greed” or “taking advantage?”

 

[WillieWonka]

I see. Thanks.

Now, what is a “moral amount of profit” that can be earned on an investment without it being considered “greed” or “taking advantage?”

I don’t know. Where does that phrase come from? As it stands, it doesn’t provide any parameters on which one could measure morality.

 

[SHW]

I don’t know. Where does that phrase come from? As it stands, it doesn’t provide any parameters on which one could measure morality.

What percentage of profit (selling price above cost of product) is moral to make on products? Does it depend on the type of product sold?

For example: It seems that many health dietary supplements cost at least a dollar a day each. They may only cost $.20 total to produce, yet they know that ill people will pay the $1 each per day price in order to get relief from their illnesses so they charge $1 or more for each capsule.

A shampoo substitute is marketed for about $40 per month. Cost of natural ingredients is probably less than $5.00.

A heat pump is $7000. Some think that it is moral to make a larger amount of profit on heat pumps because there are fewer sales of these due to the longevity of these products and because the people who sell them and install them need to “make a living,” so they charge what the market will bear because we are a capitalistic economy.

When does “capitalism” collide with “morality?”

 

[tqualey]

Hi, SHW,

This is an area of interest for me … mainly because I think it is so misunderstood. Let me explain:

What percentage of profit (selling price above cost of product) is moral to make on products? Does it depend on the type of product sold? “Selling the product” is probably what most folks see… but, there is a lot of work and expense that goes into a product prior to the consumer reaching for the item from the shelf.

For example: It seems that many health dietary supplements cost at least a dollar a day each. They may only cost $.20 total to produce, yet they know that ill people will pay the $1 each per day price in order to get relief from their illnesses so they charge $1 or more for each capsule. Ah, the dietary supplement… well before the item goes on the shelf for sale, it has to be stocked after it has been received from the shipper and prior to that it had to be manufactured under FDA quality control conditions (you remember that peanut scare a couple of months ago where their product was making people sick?) and prior to that the actual formula had to be established and put together correctly and then approved by the Food and Drug Administration. All of these handlers add a certain intermediate cost to the product prior to the customer paying for it.

All of this has been about a physical item (dietary supplement) - but, at one time it was an idea - and today we call that intellectual property. How are the idea generators to be compensated? But, you know, many an idea dies aborning - if no one is willing to risk their own money to see this product off of the ground … it will just stay on the ground. Venture capitalists are the guys who truly run the risk of the product NOT SELLIING and them having to say good-bye to their investment. How should these folks be compensated.

A shampoo substitute is marketed for about $40 per month. Cost of natural ingredients is probably less than $5.00. I think I addressed this in the previous paragraph. But, you know, other folks see a good product that is selling well and think - I can make a similar product and sell it cheaper. The ‘Invisible Hand of the Market’ that Adam Smith spoke about is still alive and well. Now, some of these new guys on the market who are trying to carve out a slice of the pie for themselves may cut corners, may have less quality control, may have a product that does not work as well. Guess what, people will stop using the inferior product! And, if the product is really THAT bad - there may be litigation against the group putting this stuff out to the general public. There are usually self-correcting forces in the market … and, if allowed to work, tend to make believers out of most folks.

Look at the financial meltdown that began several months ago … and appears to still be with us. Well, actual market forces would have taken Bank of America, Wells Fargo and CitiBank to the cleaners - but, that didn’t happen. The government made a conscious decision to spare these folks from their folly - at tax-payer expense - because they saw a bigger problem (there is still a debate over Roosevelt having ended the Great Depression … or WW II doing it!) No one knows what would have happened if the Government did nothing - and the Bush Adm. and Congress (and, I think the majority of Americans) did not want to find out.

A heat pump is $7000. Some think that it is moral to make a larger amount of profit on heat pumps because there are fewer sales of these due to the longevity of these products and because the people who sell them and install them need to “make a living,” so they charge what the market will bear because we are a capitalistic economy.

When does “capitalism” collide with “morality?”

This is not a simple subject. And, in a lot of ways we are struggling to find an answer that address everyone concern - and still live the life we want to live with electricity at the flip of a switch, safe drinking water from the tap, in-door plumbing, etc.

God bless

 

[WillieWonka]

What percentage of profit (selling price above cost of product) is moral to make on products? Does it depend on the type of product sold?

For example: It seems that many health dietary supplements cost at least a dollar a day each. They may only cost $.20 total to produce, yet they know that ill people will pay the $1 each per day price in order to get relief from their illnesses so they charge $1 or more for each capsule.

A shampoo substitute is marketed for about $40 per month. Cost of natural ingredients is probably less than $5.00.

A heat pump is $7000. Some think that it is moral to make a larger amount of profit on heat pumps because there are fewer sales of these due to the longevity of these products and because the people who sell them and install them need to “make a living,” so they charge what the market will bear because we are a capitalistic economy.

When does “capitalism” collide with “morality?”

The seller of the products you mentioned really doesn’t set the price. He is what we call a price taker. He accepts the market price of the item.

Since there are various sellers of supplements and shampoo, he has to sell right around where the competition sells. He certainly can set his price much lower, and buyers will clear the shelves. But it is unlikely the difference between his cost (what he pays the wholesaler) and his price (what he sells to the public) will allow that much flexibility.

The seller also has to cover his overhead, which is the store, employees, insurance, etc.

Suppose he decided to sell much hgher than the competition? Well, who would buy from him?

Note the direct production cost of an item is only one factor in its cost. The manufacturer has overhead, research, salaries, etc. Direct production cost is often used to mislead people about real costs.

Heat pumps are no different. If the seller doesn’t charge the market price, he will soon find he is out of business.

And everything tqualey said…

 

[SHW]

Thanks WillieWonka and tqualey. Interesting discussion.

 

[tqualey]

Hi, WillieWonka,

Admittedly, capitalism is not the only economic model to follow. But (and, I do not feel all that comfortable saying this…) neither Christ nor the Church gave us a specific economic model to follow. They did, however, give us principles to follow and, I think that is where the action is: justice first, and then charity.

I think the basic assumption is that Christ worked as an apprentice and then master carpenter when He took over his foster-father’s business. He worked at this skilled trade for an unknown amount of time and my assumption is that He sold items He made to customers for more then His direct, indirect or fixed and variable costs - He did have His widowed Mother to support. Now, I do not want to get too far afield here - because all of this is straight out of my head … but, my guess is that He worked hard, saved His money so that He could finance His Public Ministry and support His Mother. Now, I have nothing to back this up - really - but, ruling out a miracle to economicall support Himself and His Mother (which would not be seetting much of an example for us to follow) what else is left? Yes, there were several people who made contributions to the Public Ministry, and since Judas held the purse, there were those who obviously made donations… but, all of this is just guess work.

After the Resurrection, the Apostles lived in such a way that all things were held in common. I am guessing that this type of economic (as opposed to atheistic) communism can work for small groups but really can not be translated onto the national scene. The only other example I am aware of is of the Oneida Community in New York which was founded in 1848 and dissolved in 1881, had a communal way of sharing property and never had more then 500 members.

I am not entirely sure I am on the same page with everyone else here… but, I think that money has value - and, from that stand point is no different from a horse and plow having value, or a loom having value, etc. One would borrow a person’s horse and plow so that their land can be made ready for farming - and that the crops that grow will be of value to the farmer. The horse needs to be fed and watered, the plow sharpened and requesting compensation (or rent) for their use seems both reasonable and just. How is it different with the ‘renting’ out of money?

The issue of usury, as I appreciate it, is the UNreasonable amount of rent charged (loan sharking) this was once defined in law making such activities illegal.

The seller of the products you mentioned really doesn’t set the price. He is what we call a price taker. He accepts the market price of the item.

Since there are various sellers of supplements and shampoo, he has to sell right around where the competition sells. He certainly can set his price much lower, and buyers will clear the shelves. But it is unlikely the difference between his cost (what he pays the wholesaler) and his price (what he sells to the public) will allow that much flexibility.

The seller also has to cover his overhead, which is the store, employees, insurance, etc.

Suppose he decided to sell much hgher than the competition? Well, who would buy from him?

Note the direct production cost of an item is only one factor in its cost. The manufacturer has overhead, research, salaries, etc. Direct production cost is often used to mislead people about real costs.

Heat pumps are no different. If the seller doesn’t charge the market price, he will soon find he is out of business.

And everything tqualey said…

I really do not know where to go with this as a concept. Previous posts have complained about any interest being charged on a loan - but, this simply fails to acknowledge that the lender has sustained costs by lendig out his own money to another person. Admittedly, there could be a person who is just sitting around with money in a sock and lending it out to another at no interest would mean nothing to this person - but, this is not the usual experience. In the parable of the lazy servent, the Master, at a minimum, expected him to have earned interest on the funds rather then just bury this until it was time for the final accounting event.

After re-reading other posts… I am confused on where we really want to go with this. So, any guidance would be dearly appreciated.

God bless

 

[WillieWonka]

Hi, WillieWonka,

Admittedly, capitalism is not the only economic model to follow. But (and, I do not feel all that comfortable saying this…) neither Christ nor the Church gave us a specific economic model to follow. They did, however, give us principles to follow and, I think that is where the action is: justice first, and then charity.

I think the basic assumption is that Christ worked as an apprentice and then master carpenter when He took over his foster-father’s business. He worked at this skilled trade for an unknown amount of time and my assumption is that He sold items He made to customers for more then His direct, indirect or fixed and variable costs - He did have His widowed Mother to support. Now, I do not want to get too far afield here - because all of this is straight out of my head … but, my guess is that He worked hard, saved His money so that He could finance His Public Ministry and support His Mother. Now, I have nothing to back this up - really - but, ruling out a miracle to economicall support Himself and His Mother (which would not be seetting much of an example for us to follow) what else is left? Yes, there were several people who made contributions to the Public Ministry, and since Judas held the purse, there were those who obviously made donations… but, all of this is just guess work.

After the Resurrection, the Apostles lived in such a way that all things were held in common. I am guessing that this type of economic (as opposed to atheistic) communism can work for small groups but really can not be translated onto the national scene. The only other example I am aware of is of the Oneida Community in New York which was founded in 1848 and dissolved in 1881, had a communal way of sharing property and never had more then 500 members.

I am not entirely sure I am on the same page with everyone else here… but, I think that money has value - and, from that stand point is no different from a horse and plow having value, or a loom having value, etc. One would borrow a person’s horse and plow so that their land can be made ready for farming - and that the crops that grow will be of value to the farmer. The horse needs to be fed and watered, the plow sharpened and requesting compensation (or rent) for their use seems both reasonable and just. How is it different with the ‘renting’ out of money?

The issue of usury, as I appreciate it, is the UNreasonable amount of rent charged (loan sharking) this was once defined in law making such activities illegal.

I really do not know where to go with this as a concept. Previous posts have complained about any interest being charged on a loan - but, this simply fails to acknowledge that the lender has sustained costs by lendig out his own money to another person. Admittedly, there could be a person who is just sitting around with money in a sock and lending it out to another at no interest would mean nothing to this person - but, this is not the usual experience. In the parable of the lazy servent, the Master, at a minimum, expected him to have earned interest on the funds rather then just bury this until it was time for the final accounting event.

After re-reading other posts… I am confused on where we really want to go with this. So, any guidance would be dearly appreciated.

God bless

The word “usury” has carried different meanings at different times. We can see from the encyclical that in 1745 the pope thought any interest of any amount was usury. But we can also see our present use of the word refers to relatively large rates of interest. So, the term is really somewhat useless. People get confused when they apply today’s meaning to past prohibitions.

We should note that while both Islam and Christianity prohibited lending at interest for most of history, both societies relied on the practice. This is where the Jews provided a valuable economic service. Being neither Chirctian nor Muslim, they were free to loan money at interest.

The following is from Canon 67 of the Fourth Lateran Council in 1215AD. Truth is stranger than fiction.

“Text. The more the Christians are restrained from the practice of usury, the more are they oppressed in this matter by the treachery of the Jews, so that in a short time they exhaust the resources of the Christians. Wishing, therefore, in this matter to protect the Christians against cruel oppression by the Jews, we ordain in this decree that if in the future under any pretext Jews extort from Christians oppressive and immoderate interest, the partnership of the Christians shall be denied them till they have made suitable satisfaction for their excesses. The Christians also, every appeal being set aside, shall, if necessary, be compelled by ecclesiastical censure to abstain from all commercial intercourse with them. We command the princes not to be hostile to the Christians on this account, but rather to strive to hinder the Jews from practicing such excesses. Lastly, we decree that the Jews be compelled by the same punishment (avoidance of commercial intercourse) to make satisfaction for the tithes and offerings due to the churches, which the Christians were accustomed to supply from their houses and other possessions before these properties, under whatever title, fell into the hands of the Jews, that thus the churches may be safeguarded against loss.”

ccjr.us/index.php/dialogika-resources/primary-texts-from-the-history-of-the-relationship/264-lateran4.html

 

[SHW]

The word “usury” has carried different meanings at different times. We can see from the encyclical that in 1745 the pope thought any interest of any amount was usury. But we can also see our present use of the word refers to relatively large rates of interest. So, the term is really somewhat useless. People get confused when they apply today’s meaning to past prohibitions.

We should note that while both Islam and Christianity prohibited lending at interest for most of history, both societies relied on the practice. This is where the Jews provided a valuable economic service. Being neither Chirctian nor Muslim, they were free to loan money at interest.

The following is from Canon 67 of the Fourth Lateran Council in 1215AD. Truth is stranger than fiction.

“Text. The more the Christians are restrained from the practice of usury, the more are they oppressed in this matter by the treachery of the Jews, so that in a short time they exhaust the resources of the Christians. Wishing, therefore, in this matter to protect the Christians against cruel oppression by the Jews, we ordain in this decree that if in the future under any pretext Jews extort from Christians oppressive and immoderate interest, the partnership of the Christians shall be denied them till they have made suitable satisfaction for their excesses. The Christians also, every appeal being set aside, shall, if necessary, be compelled by ecclesiastical censure to abstain from all commercial intercourse with them. We command the princes not to be hostile to the Christians on this account, but rather to strive to hinder the Jews from practicing such excesses. Lastly, we decree that the Jews be compelled by the same punishment (avoidance of commercial intercourse) to make satisfaction for the tithes and offerings due to the churches, which the Christians were accustomed to supply from their houses and other possessions before these properties, under whatever title, fell into the hands of the Jews, that thus the churches may be safeguarded against loss.”

ccjr.us/index.php/dialogika-resources/primary-texts-from-the-history-of-the-relationship/264-lateran4.html

Looks like the Church changed its rules in order to protect its own members from losing “everything” to the Jews as a result of their oppressive usury practices.