February 6, 2016 § 27 Comments
Suppose your best friend needs wheat and can’t afford to buy any. He doesn’t need paper: he needs wheat. You’ve got some excess wheat you could lend him, but you like the way paper futures look better, and you want a guarantee that you won’t lose any buying power when you are doing your best friend a favor.
So you lend him paper (even though he needs wheat, and is just going to exchange the paper for wheat) just so that, as a formality, the kind of thing he owes you back is paper. Or you tell him that you know he needs wheat and you have plenty to lend, but you like paper futures better. So you’ll give him wheat, but you want him to repay the wheat you gave him by doing imaginary wheat-to-paper exchanges (they will be imaginary to avoid transaction fees and taxes) at the point of borrowing and repayment. Because of the excursion into the land of imaginary paper he ends up owing you back more wheat than you lent him on this mutuum loan – usury.
It seems to me that your friendship is as imaginary as the wheat-to-paper exchanges. That is no way to treat a friend in need.
And mutuum lending is only morally licit as an act of friendship or charity. It is not morally licit in pursuit of gain. Preservation of market buying power as something guaranteed by someone else is a kind of gain.
If your best friend decides to pay you back more wheat than you loaned him out of gratitude, that is a gift from him to you. There isn’t anything wrong with that. It is even true that he owes you gratitude in a sense. But gratitude between friends is not convertible into a specific dollar amount which he can be said to owe you as a financial matter. No true friend is going to quibble, in dollar terms, as to whether his best friend has been grateful enough in the natural exchange of favors which occurs among friends.
It is possible for friends to do each other injustice in mutuum lending; even to have a falling out and to no longer be friends. Suppose you lent your best friend the wheat, he now has enough to repay you the amount that he borrowed, but he refuses to do so. In that case he is not being a good friend; and he really does owe you back the amount of wheat that he borrowed, as a matter of justice. His refusal to pay it back now that he can is a kind of theft or fraud. You truly are entitled to return of the principal amount, and the falling out of your friendship does not remove that entitlement in justice.
But this does not make mutuum lending morally licit as a wealth preservation investment strategy. There are plenty of ways to look after your own property financially: many different kinds of contracts for preserving and growing wealth are morally permissible.
But the security on those contracts must be property, not personal IOU’s. Otherwise you are unjustly profiting financially from arbitrage over friendship.