Reply To: Usury


I believe you are correct to say, “an implication of FRB is inflation”. I do not however agree that profiting from usury is the motive for FRB. Rather, profiting from usury is the motive behind any banking. I am considering usury as any interest on loans, instead of the more modern definition of excessively high interest. A bank is like any other business. In order to get money to loan, it needs people to give them money. It does this by offering to pay interest on deposits and other “free” services, without which there would be no incentive to save money in a bank. As Professor Casey mentions De Soto, I do not see how this follows in regards to usury. The loan is a desired service. A service already provided in conventional banking, along with security and disbursements. So why pay to save when you can be paid to save. Usury or interest in the case of loans is no different than any other price for a good. If you knew that future money would be worth more than present money I think you could argue for a negative interest rate. Such as if you borrowed $10, in the course of the loan you would only pay back $9 instead of say $11.

To a foreigner you may charge interest, but to your brother you shall not charge interest, that the LORD your God may bless you in all to which you set your hand in the land which you are entering to possess. (Deuteronomy 23:19,20)

As to the sinful nature of usury, I have no clue what the bible is trying to get across but it seems to have missed the mark on this issue. I think Professor Jewell might be able to explain this.

Fractional reserve banking on the other hand, amounts to fraud. As you say the risk of FRB could be voluntarily agreed upon but that means everyone is agreeing to massive price inflation, bond defaults or oppressive taxation. Admittedly I don’t fully understand this but I find it hard to believe that such a practice will not have a consequence. Those are my thoughts anyway.