Usury and the Sovereign

December 16, 2012 § 30 Comments

I’ve been having a discussion with Kristor in email about usury, and the subject of government-issued treasury bills has come up. With treasury bills the government borrows fiat dollars from an individual and then pays him back both principal and profitable interest later. There are no specific assets backing those treasury bills, so on its face it looks like usury.

The fact that companies and individuals can issue their own currencies, for example common stock, is part of the picture. It can be confusing though because some ‘tradable instruments’ are denominated in other currencies and some aren’t. When I sell a note to a third party, the principal and interest owed on that note is usually denominated in dollars or some other sovereign currency. But some tradable instruments like common stock are not denominated in another currency: its value is just whatever transactional value it has right now on whatever market trades in it.

If a company decides to issue more shares of stock, that debases the value of all existing shares. But it isn’t usury. The shares of stock are not denominated in some other currency: they are their own currency. In the case of stock you get voting rights and other rights; so it has value. But that value is not denominated in any other currency. If the company borrows its own shares from me and then returns them along with newly issued shares as “interest” on the loan, that isn’t usury. It isn’t that my stock in itself begat more stock: the company issued new stock.

If the sovereign decides to issue more fiat currency, that debases the value of all existing fiat currency. But it isn’t usury. The sovereign agrees to accept his currency as payment for taxes, so it has value. Its value is not denominated in any other currency. When the sovereign borrows fiat dollars from me and returns them later with interest, it isn’t that my dollars begat more dollars: the sovereign has issued new dollars as interest.

In a case of usury, though, no new currency is being created by the issuing entity to pay the “interest”. A usurious transaction is a mutuum (person recourse) loan between two third parties independent of the sovereign who issues the currency. Currency is not in itself capable of creating more currency. Therefore in a mutuum loan (where a borrowing person is on the hook to repay the principal amount in full, independent of a specific and limited recourse to specified contractual assets) the lender is really only entitled, in justice, to return of precisely what was lent and nothing more. On the other hand if a “lender” purchases shares in real assets for production or consumption he can contract for the investment or consumption of those recoverable real assets in an asset-recourse loan, which is not usury.

Interestingly it follows that it is possible for third parties to make usurious loans to each other of (say) company stock. Lending 100 shares to Bob and demanding that he repay me with 110 shares at a later date no matter what, independent of what he does with the shares, would be usury.

Now, it is certainly possible for company management to commit an injustice against shareholders by debasing its stock. It is possible that many government actions w.r.t. currency are unjust under this sort of rubric rather than a rubric of usury. But showing that would take more work.

With his permission, I’ve included the pertinent background exchange with Kristor below the break:

Kristor wrote:

So Treasuries and GO munis are usury, too, right? They are not secured by any real assets. They are secured only by a power, a capacity that now exists (but that might at some point in the future disappear for any number of reasons) to obtain such wealth as will be needed to repay the principal, by expropriating it from citizens (through taxes, eminent domain, what have you). So the government in its promise to make good on its debt is in the same formal relation to its bondholders as I am in my promise to make good on my debt to my credit card issuer. I now have the power to work, or to shunt around other assets to cover my debt, although these powers could disappear overnight. Likewise, the powers of a given government could disappear.

I responded:

I am reluctant to conclude that government-issued debt is usury, because in order to do so I have to assume that the Sovereign’s relationship to currency is the same as everyone else’s. But that is not the case. As a subject of the sovereign I cannot create currency; but currency exists precisely as a creation of the sovereign. It isn’t that the sovereign’s sterile cash produces more cash: it is that the sovereign himself produces more cash.

This is bolstered somewhat by the tradition: the medievals treated sovereign debt as different from ordinary mutuum.

Despite all that I am still somewhat uneasy with the conclusion. But that may be some of my own residual liberalism resisting any ontological difference between subject and sovereign.

Kristor replied:

I suppose it depends on how we construe the sovereign’s relation to the economy. If the economy is the sovereign’s simple (or, indeed, effectual) possession, so that he is entitled to reap from it such goods as he might wish, then the subject’s relation to the currency is essentially different than that of the sovereign (this difference flowing from the essential ontological asymmetry of causal power obtaining between sovereign and subject). But if we construe the sovereign as the mere agent or angel of the subject (the subject per se), then the sovereign’s power is circumscribed by such limits as appertain to the powers proper to his subjects. The subjects cannot devolve to the sovereign any powers they do not in fact possess; and so the sovereign cannot possess any powers not already possessed by his subjects. In that case, a sovereign assertion of sole power to coin currency would seem to be a usurpation.

There is then also the fact that private actors can, as a matter of simple fact, create instruments that are amenable to trading for real goods and services. I can (in a non-usurious way) loan you money and then sell my note to Citibank. Thus the sovereign is not *naturally* endowed with the sole power of creating tradable instruments. If he were, then it would simply be impossible in our system of nature for me to loan you money and then trade the note. Thus nature simpliciter does not uniquely endow the sovereign with this power. It would seem then that in simple fact he does not have it uniquely (if we said that he did, would this not be tantamount to saying that the sovereign was the only actor with actual economic power? How perverse would that be, and contrary to fact as we find it?).

It all boils down to whether we view the sovereign’s power as natural – as, i.e., deriving from the natural (and, presumably, Providential) order of things – or as merely conventional, as deriving e.g. from the consent of the governed, or from the adventitious fact of his having succeeded over them in military terms.

If the sovereign’s power over his subjects is natural (i.e., essential, given our order of nature) or adventitious (so that it could never have occurred, except given our order of nature, in which case, having occurred, it is then to that extent validated by the order of nature), then it would seem that Treasuries and GO munis are not usury; for their security depends upon a real power really obtaining right now: i.e., upon a real economic asset of the sovereign. But if the sovereign’s power is derived or devolved from the powers of his subjects, à la Hobbes or Locke, then not – for in that case, sovereign power is vulnerable to revocation at any time, depending only upon the popular will (however expressed) – so that then Treasuries and GO munis are indeed usury.

If we are Lockeans, then, Treasuries would seem to be usury. But if we are traditionalists – which is to say, essentialists – then, not.

My response is integrated into the above blog post.

UPDATE: Kristor expands on the discussion background here.

§ 30 Responses to Usury and the Sovereign

  • tz2026 says:

    If it is a fiat currency, issuing more is theft from all existing holders. They don’t merely demand payment of taxes, they typically call the apparent appreciation of specie a taxable “capital gain”. I can think of no instance of a fiat currency that is inflation and not accompanied by some laws forcing its use as a medium of exchange.

    But assume that the debt is issued in terms of specie (commodity money) or a foreign currency. It either cannot be paid or the promise is in essence to tax or otherwise confiscate the property of the citizens in repayment. Or the contract is simply fraudulent.

    You can see some of this with the GREs like Fannie and Freddie. They aren’t officially government guaranteed, but they will be bailed out. Or worse, all the loans (derivatives) made by the banksters that were bailed out by the taxpayers against their democratically expressed will.

    In a society where there is slavery, if you promise your slave as collateral, is it a person-recourse loan or not?

  • Zippy says:

    If it is a fiat currency, issuing more is theft from all existing holders.

    I don’t think so. When a corporation issues more stock that dilutes current shareholders; but dilution isn’t per se theft from current shareholders.

    Mind you, there are cases where I think dilution of existing shareholders is fraudulent or unjust for some other reason. But the fact that X debases the currency is not sufficient in itself to establish that X is unjust. As I said in the post, establishing that requires more work.

    I can think of no instance of a fiat currency that is … not accompanied by some laws forcing its use as a medium of exchange.

    But we aren’t forced to use dollars for exchange. I have personally orchestrated very large transactions involving no cash at all.

    The only thing we are literally required to do in cash is pay taxes. And usually (there are exceptions like the AMT, which is probably an unjust tax but is also quite avoidable) taxes are not triggered until assets are converted into cash.

    As a practical matter there is a lot more that we need to do with cash; but that is just because cash is so much more convenient than bartering stocks or whatever when all you are trying to do is buy bread.

    I’ve stated elsewhere and elsewhen that I suspect that property taxes – as opposed to income and transaction taxes – might be a form of theft. I tend toward the position that the sovereign really only has the right to levy taxes when his own currency or other assets are used: certainly it is imprudent to tax outside of those criteria in most cases, and what is imprudent is also morally wrong. So I have some pretty radical ideas about these things. For that matter, my understanding of usury – which I believe to be simply Aquinas’ understanding framed in modern language – is pretty radical.

    But I can’t endorse conceptions of economic justice that I think are wrong, and that includes the idea that dilution of the value of a currency by the issuer of that currency under the terms of its issuance is intrinsically unjust. It isn’t.

    But assume that the debt is issued in terms of specie (commodity money) or a foreign currency.

    Those assumptions address entirely different subjects from the post. US treasuries are issued – and US taxes are levied – in US fiat dollars, not in foreign currencies or commodity contracts.

    Trading commodities or commodity contracts is a different scenario from lending or investing currency. Commodities aren’t currency, though the two have often been entangled with each other for historical reasons. Even Aquinas understood that commodities aren’t currency: commodities have intrinsic value, and Aquinas recognized that the essence of currency is as a medium of exchange. We have the responsibility to understand that too: if we are going to use currency, it is our responsibility to understand what we are doing so that we can act justly.

    Trading in foreign currencies is basically a third-party situation, so when King Bob and King Fred transact in King Dave’s currency they are constrained by the same limitations as the rest of us: any person-recourse mutuum between Bob and Fred in Davebucks must not include usury, that is, a charge of profitable interest. Only King Dave can actually create new Davebucks.

  • […] Zippy Catholic has been interested in usury for some time now, and I have learned a lot about it from talking to him about it over the last few years. We’ve been having a colloquy over the last few days about whether government bonds constitute usury, which he has put up over at his site (here). […]

  • Kristor says:

    Your argument seems to be that the sovereign does now have the power to issue currency that he can use to pay interest on his note. So he is not selling something that is not actual.

    How is this different from his power to tax, that he likewise does now actually have? I’m pretty sure there is no moral difference between these two powers. Whether the sovereign taxes or coins to obtain the currency with which to pay interest, seems to me to make no difference.
    In my message to you just prior to your posting of this entry, I raised the question of whether the sovereign exercises these powers naturally and in himself, or as the steward (angel, agent, executive, what have you) of the people. That question is, to whom do these powers properly belong: the sovereign directly, or to the people, and thus to the sovereign indirectly, by delegation?

    But while this question is interesting, I do not now think it relevant to the question whether the issuance of Treasury obligations is usury. The powers to tax and to coin do actually exist, inhere in human social existence, and do not expire. A people may tax itself. Banks or individuals or corporations may issue currency, so that this power is actually quite dispersed (de facto, if not de jure). Whether a sovereign gets into the loop of transactions or not seems to me to make no difference to the moral structure of the case.

    The only such sovereign debt that I can now construe as possibly usurious would be notes sold by one people to another. The selling nation might possibly vanish, and with it, all its powers to tax or coin. This sort of thing does in fact happen, and there is in finance even a special term for the risk of it: country risk. If the Lenape nation had borrowed from the Dutch instead of selling Manhattan to them, the note would in retrospect appear to have been usurious.

  • Zippy says:

    How is this different from his power to tax, that he likewise does now actually have? I’m pretty sure there is no moral difference between these two powers.

    I don’t know what I think of the differences. It is true that the issuance of new currency is kind of like a “tax” on everyone holding existing currency. But there is a difference between issuing new stock and forcing shareholders to relinquish existing shares.

    The government has the power to issue new currency at any time[*]. I’m not sure the power to tax has quite the same immediacy: security against it is more like a security against future earnings, which is fine if it is an equity but is not licit as a mutuum with guaranteed return of principal in addition to profitable interest.

    It is definitely possible to do injustice to an existing shareholder by issuing more shares. Cram downs are not intrinsically just, such that there is some moral license to do them willy-nilly for any reason whatsoever. I strongly suspect that a lot of what present-day governments do which causes dilution of currency is morally wrong. But it is important not to confuse categories, and I don’t think that things like cram downs fall under the species usury. Burning down someone’s house destroys value unjustly, but it isn’t usury.

    Still, I don’t think people realize how naturally constrained the government’s powers with respect to currency would be if it wasn’t in the business of actively enforcing usurious contracts.

    The selling nation might possibly vanish, and with it, all its powers to tax or coin.

    True, but in that case the ‘asset’ securing the loan is simply the nation’s capacity to create its own currency. The fact that it may disappear, with no recourse even to recover principal, means that it isn’t usury (I suggest, with not necessarily the firmest of conviction).

    So on this line of thinking it is only usury when the institution which creates the currency is not the institution paying profitable interest denominated in its own currency. If the institution which creates the currency is paying profitable interest denominated in that currency, which it has the power to create more of at will, it is not usury.

    [*] There are really three levels here: actualities, potentialities, and opportunity costs. Potentialities[**] are real in a sense, and I need to flesh that out, in connection to usury, in another post. Opportunity costs – the usual knee-jerk “time value of money” justification for usury – are not real at all, even as a potentiality: a foregone opportunity is just an imaginary story about an alternate reality which does not exist and which definitely never will exist, precisely because it has been foregone. To demand payment for the “value” in a foregone opportunity is to demand payment for literally nothing: for non-being.

    [**] I think future revenues produced by the power to tax are a potentiality, not an actuality, but T-bills are also not “person recourse”: like corporate equity they cease to exist if the institution which issues them ceases to exist, and are therefore ultimately secured by assets not persons.

  • Zippy says:

    If the above is right, maybe we can coin the term “sovereign usury”. Sovereign usury is what happens when foreign money is lent, contractually full-recourse, to some sovereign with guaranteed return of principal and profitable interest. Foreign money means money that the borrowing sovereign does not issue himself: it is currency issued by some other entity. A sovereign-usury mutuum is not person recourse, it is sovereign recourse: recourse for return of principal and profitable interest is to the borrowing sovereign existentially, with no specific assets as the limited security.

    On that understanding the Greek debt denominated in Euros (for example) is sovereign usury. Really the unified currency scheme of the EU has created a whole network of sovereign usury.

  • Kristor says:

    It would seem then that GO municipals are sovereign usury, while Treasuries are not.

  • Zippy says:

    It would seem then that GO municipals are sovereign usury, while Treasuries are not.

    Yes, that’s right. To be fair, whether sovereign usury is intrinsically unjust or not remains an open question I guess; but my gut says it is, thus the name I chose for that particular species of contract.

  • Kristor says:

    So here’s a basic question: is usury blamewothy to the seller (i.e., the borrower), or the buyer (lender), or both?

  • Zippy says:

    My understanding is that the medieval magisterium pretty clearly exonerated the borrower and blamed the usurer in cases of necessity. So borrowing from a userer cannot be intrinsically evil. It is clearly cooperation with evil though, so I expect it has to be analysed as such under the principle of double effect.

  • Kristor says:

    So it is the buyer of the GO muni who is chiefly to blame for lending the city money usuriously, while the city that sells it is blameworthy only derivatively, as cooperating in evil?

    I’m not challenging you, just trying to follow the bouncing ball.

  • Zippy says:

    The interest-charging lender is the userer, yes. Whether sovereign usury is in fact usury is an unanswered question though.

  • Zippy says:

    Part of what this does mean is that the folks claiming that the government engages in usury when it borrows just don’t know what they are talking about. Usury is an injustice perpetrated by the lender, not the borrower.

  • Cane Caldo says:

    Part of what this does mean is that the folks claiming that the government engages in usury when it borrows just don’t know what they are talking about. Usury is an injustice perpetrated by the lender, not the borrower.

    Okay, but so what? Who can know these things? I can follow what you write on usury when I put my mind’s back into it. Otherwise, it is really too much work to be worth it. It seems to me that the cleverer a person is in skirting the line of usury, the more likely he is, in fact, usurious. The compiling of laws–whether state or personal–become the gears of a demonic machine whether we like it or not.

    The the best advice is still, “Neither a borrower nor a lender be.”

    ~Cane “Odious Fundie” Caldo

  • Zippy says:

    It isn’t that complicated.

    Never borrow unless you are borrowing against something you already own or which is purchased or created by the proceeds, and is the only security on the loan.

    Never lend unless you know precisely what assets you will recover – and nothing more – in default.

  • Zippy says:

    All (legalized) usury could be eliminated with a very simple rule. Call this Zippy’s Constitutional Amendment Abolishing Usury. It reads:

    No government or arbiter shall enforce deficiency judgements in any contract.

    Then watch all the userers squirm.

  • Cane Caldo says:

    Never borrow unless you are borrowing against something you already own or which is purchased or created by the proceeds, and is the only security on the loan.

    Never lend unless you know precisely what assets you will recover – and nothing more – in default.

    I think you are overestimating the abilities of common folks. The fact is that financiers can utterly snow even a well-meaning fool like myself into believing that we are following your simple-sounding rule.

    Your multitude of posts (very appreciated, by the way) gives the lie to the notion that sussing our usury is simple. No one goes to a financial institution and says, “I’d like to participate in usury.” We’re all assured that such-and-such collateral and profits and whatnot are completely appropriate and decent; we’re assured that this is how good business is done, and that such collateral and such profits really–when you think about it–belong to us anyways.

  • Kristor says:

    “No government or arbiter shall enforce deficiency judgements in any contract.

    Then watch all the userers squirm.”

    And they so would, no? This would translate due diligence into an altogether different and more rigorous realm, and prevent a lot of diseconomic deals.

  • […] complex discussion.  At bottom though I think it is a simple enough concept.  In fact in the comments below I drafted a proposed Constitutional amendment that would wipe out legally sanctioned usury.  It […]

  • […] the sovereign’s currency has credibility as a medium of exchange precisely because it is the currency that he will accept as payment for taxes.  We engage in all sorts of […]

  • […] few days about whether government bonds constitute usury, which he has put up over at his site (here). The basic thing to understand about usury, at least as St. Thomas approaches it, is that usury is […]

  • Kristor says:

    Zip, I have concluded that sovereign debt is not usury. The sovereign’s power to tax is an asset, analogous to a call option, that does not expire so long as the sovereign reigns. In fact, his reign could be construed as coterminous with his power to tax (or otherwise reap economic benefit to himself, as with laws or regulations or mandates).

    Thus Treasury obligations – including fiat currency – represent calls on a real asset – the option to tax – rather than on persons.

    Whether the sovereign exercises his option to tax in a just manner, or not, is a different question.

  • Zippy says:


    The sovereign’s power to tax is an asset, analogous to a call option …

    Agreed, though it is a rather strange call option because of the sovereign’s relationship to currency. I think the MMT insight that currency gets its ‘value’ from the fact that people have to have it to settle their tax liabilities has quite a bit of validity. (That they go off the rails elsewhere is neither here nor there: nobody is absolutely wrong about everything).

    The sovereign doesn’t need tax revenues in order to fill his balance sheet with proceeds: he has the legitimate power to issue as much currency as he chooses (though of course doing so has consequences, as is true of every act). In a sense all of the ‘proceeds’ are ‘already there’ derivatively in the form of the put/call options – the tax power combined with the power to issue currency. The Treasury is at least somewhat analogous to a company owning some of its own stock: it isn’t a ‘savings account’ for the government from which the government spends, it just removes currency from circulation (very specifically of course: it drains currency through specific spigots in the economy, not ‘in general’).

    Other persons and societas’ have to acquire sovereign currency in order to settle their own tax liabilities, which are (the liabilities) measured in terms of sovereign currency under rules established by the sovereign. That is what makes sovereign currency useful for exchange in the first place, even though there are many other things-usable-as-currencies to choose from. You have to have some of it to pay your taxes, and you have to measure taxable transactions using it as the metric, so it is nicely fungible like a commodity but even less tangible (tangibility being a major confounding factor in anything used as currency); and much of the tax accounting is ‘automatic’ when transactions are in sovereign currency.

    On the other side of the equation, the sovereign’s taxing authority is not without limits. All human authority has inherent limits. Thus my arguments that property taxes are intrinsically unjust (which remain in a kind of ‘experimental’ state — I am not strongly committed to them, but I don’t yet see anything which would legitimately gainsay them).

  • Kristor says:

    Re limits to the sovereign’s proper authority – to, i.e., his property – I’m not sure, but it may be that issues of fiat currency that have the effect of inflating the currency noisily are usurious, because they are selling something that is not real: i.e., true signs of real economic value.

    There is real inflation, caused by real changes in the overall quantity of economic goods demanded or supplied, and then there is fake inflation, caused by issuing currency that increases the previous ratio of issued currency to the value of the real economy.

    Parsing real from fake inflation is of course next to impossible, which is why gold bugs are so hot about pegging the dollar to a commodity, so that the only sorts of changes in the price of the dollar are due to real changes in the quantity of all goods demanded and supplied. When the currency is pegged to gold or any other real, no parsing of real inflation from fake inflation is needful, or even interesting.

    Of course, the dollar is in fact still pegged to gold, at least insofar as it is priced in gold. It’s just that the price of gold in dollars is no longer fixed, as it was before Nixon closed the gold window.

    The sovereign does really have the power to inflate the currency, so that this power is indeed an asset. But then, banks, do really have the power to issue full-recourse notes, so that this power, too, is indeed an asset. The power to do evil is itself a real good.

    But in selling more dollars into the economy, the Fed is not selling the power to issue dollars, but rather only the dollars themselves – i.e., true signs of real economic value (which, remember, is not subjective, but may in principle be measured in joules). If the dollars sold are not true signs of real economic value, then their sale is usurious.

    Does this pan out, do you think?

  • Zippy says:


    As you know, this is not an area where I have fixed views — my only adamantly fixed view at this point is that talk of the due limits on the sovereign’s power is an entirely distinct subject from usury strictly speaking. Loans to the sovereign (qua sovereign) are not full recourse, cannot possibly be mutuum loans, because the sovereign (qua sovereign) is an institution not a person and does not make personal guarantees to return in kind: as a non-person, the sovereign-qua-sovereign is literally incapable of making personal guarantees. Unless there is some person making a personal guarantee to return something in kind, there is no mutuum (‘hidden’ or otherwise) and there is no usury strictly speaking. (‘Not usury’, of course, does not mean anything more than that the transaction/contract is not usury: it doesn’t imply anything else about the morality/immorality, prudence/imprudence, or sanity/insanity of the transaction/contract).

    Analogously companies can defraud bond buyers and other investors in myriad ways, many of which involve lies (pretense that things are as they are not); but only a personal guarantee to return in kind by some person can turn a corporate bond into a mutuum. Non recourse contracts cannot possibly be usury, strictly speaking: whatever it is, it is not usury.

    Moving on to more generic concerns, I really can’t muster much sympathy for the idea that inflation (or deflation) – even when done on purpose – involves ‘transactions’ in nonexistent things, any more than dilution or devaluation of company stock. I think that to the extent the sovereign exercises intrinsically unjust powers under (unjust) positive law (akin to a bank’s power under the positive law to issue full recourse loans for interest) these most likely arise on the tax side not on the currency side. Frankly, just as a company has pretty much perfectly legitimate plenary power to do as it will with its own stock under its own established rules, including engaging in radical recapitalizations, the sovereign has similar legitimate plenary power with respect to currency. It is when he starts making demands on the actual property of others – through the taxing power – that the limits of intrinsic morality come into play. Otherwise, give unto Caesar that which is Caesar’s.

    The main reason inflation is a currency problem is because people stupidly think of currency as some sort of ‘special’ store of value. The error is in how people who own sovereign currency understand and think about the thing that they own. There is an amusing passage in Aquinas’ De Malo where he says “… the borrower ought not incur loss regarding the lender’s stupidity”. I see devaluation of currency in a similar way: holding on to currency as a ‘store of value’ and expecting it to be something it is not is fundamentally a matter of the stupidity of the person holding the currency. Blaming the sovereign (in a moral sense as having done something morally wrong) for the stupidity of people who use currency as a store of value is like blaming a company (again in a moral sense) for the stupidity of investors when the value of existing company stock goes down in a (transparent, fully disclosed) recapitalization.

    It is perfectly reasonable for folks to want inflation/dillution hedges, etc; but it is also perfectly reasonable to expect them to take care of that themselves by purchasing appropriate portfolios of actual property, securing appropriate private contracts, etc and not blame their own hedging failures on the nature of currency. (More generically still, a fundamental problem in modern economies is folks attempting to force other people contractually to cover for their own ignorance and stupidity: to make others pay the consequences for our own freely made choices with respect to our own property).

    Currency is for exchange and for settling tax liabilities. It is no better or worse ‘store of value’ than any other reasonably durable good or capital stock, and moral outrage about ‘currency debasement’ and the like represents an attempt by ignorant people to blame the consequences of their own ignorance on the sovereign because the sovereign happens to be the source of money. In fact the main reason currency debasement matters at all is because of usurious debt: because of the ‘slavery shares’ in persons which usurious debt represents and which is denominated in that currency.

    (Again, I am discussing the intrinsic nature of these things and in no way am endorsing any particular policies w.r.t. money, sovereign debt, etc).

    I strongly suspect that this subject is quite similar to usury in the following sense: that because people do not understand the nature of things, and especially the nature of currency, labor, and property, almost all discussion of the subject is noise and misdirection.

  • Kristor says:

    Ah; of course: usury is selling what does not exist, but not all cases of selling what does not exist – such as selling signs or tokens of real economic value that are partly false – are usury. The sale of inflated dollars is not transacted by means of a mutuum. And that makes all the difference.

  • Zippy says:


    usury is selling what does not exist, but not all cases of selling what does not exist … are usury.

    Yep. Contraception is an unchaste act, but not all unchaste acts are contraception.

  • Mark Citadel says:

    “All (legalized) usury could be eliminated with a very simple rule. Call this Zippy’s Constitutional Amendment Abolishing Usury. It reads:

    No government or arbiter shall enforce deficiency judgements in any contract.”

    This would seem to be a good ‘absolute must’ rule for any Traditional society. It would also eliminate a lot of the economic problems we face. It is often said that we now have enough money on earth for EVERYONE to live well (this is a common argument for global wealth redistribution)

    This is wrong. We now have way too many people for how little ACTUAL MONEY we have. 80% of all the money in the world seems to just appear from thin air because of usury, it has no real value in its origin.I can’t help but feel we’re in a rowboat towards a great cataclysm…

  • Zippy says:

    Mark Citadel:

    I’ve made the point numerous times over the years that we in fact do not know the financial condition of our government, because the kind of management accounting required for us to know is simply not done. It is entirely possible that the level of sovereign debt carried by the government is perfectly reasonable or even too low. It is also possible that it is batshit crazy and out of control. Anyone who claims to know is either lying or ignorant, because we don’t do the kind of accounting which would be required in order to know. There is no government balance sheet connected to actual reality of actual assets to examine, and no reality-based P&L: they simply do not exist. All we have is cash flow, which by itself cannot tell us our financial condition at all (in part because cash flow does not mean the same thing for the sovereign, who issues currency, as it does for private parties who transact in that currency).

    The situation is similar with usury specifically and the more general category of false wealth which terminates in nothing actual: it is simply impossible to know its extent. The data we would require in order to know is not there. We can’t see in the dark, and there is no light.

    But folks are always conflating their economic theories with usury. There is no need for any particular economic theory, or any theory of economic value whatsoever, or any theory of money whatsoever, in order to understand usury specifically and why it is an execrable mortal sin. It is merely necessary to be capable of distinguishing between actual things (actual work, actual property) and non-actual things (hypothetical profits from non-actual transactions which did not actually occur, future things which have not happened, etc); and of course between persons and non-persons.

    And as recent discussions have demonstrated rather conclusively, many modern people are not even capable of that (or at least they claim for rhetorical purposes to be incapable of distinguishing between what is actual and what is not actual).

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You are currently reading Usury and the Sovereign at Zippy Catholic.



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