Each breath will cost you a nickel
November 14, 2017 § 49 Comments
The basic principles behind the prohibition of usury are simple. Financially, usury is any contractual profit for the lender stemming from making a “loan for consumption“: a loan which authorizes the borrower to consume or alienate the actual property lent, while personally guaranteeing that he will restore to the lender the amount lent. Morally, personally guaranteed loans are only licit as acts of charity or friendship made to a borrower in need: they are never licit under any circumstances as acts of financial self-interest on the part of the lender.
Intuitively, charging rent for the use of collateral property owned by the lender – actual alienable property which is later returned to the lender intact or ultimately bought out by the borrower – is not intrinsically uncharitable.
Intuitively, charging a man rent for the use of his own person, for each breath he takes from his own lungs, is intrinsically uncharitable. Interest on a personal IOU is a charge of rent against a man for the use of his own person, since his obligation to repay simply is personal.
It is also intrinsically uncharitable to make a mutuum borrower responsible for the lender’s changing circumstances. In general with a mutuum loan the borrower is not responsible – cannot be made responsible – for all of the circumstantial changes which occur in the universe during the duration of the loan.
People use terms like “inflation” in economic theory to refer to aggregate indexes of relative price changes over time. An index is just a representative sample of statistically aggregated spot prices of particular goods and services, measured in some particular unit (US dollars, McDonalds Big Macs, etc). There are as many possible relative price indices as there are discrete combinations of goods, services, transactions, and time periods. But folks tend to treat “inflation” as if it were a basic feature of reality as opposed to a particular heuristic/statistical guesstimate about certain historical circumstantial changes in relative prices (measures of who in fact bartered what in exchange for what) for certain goods and services (and only those goods and services, etc).
I once bought a house by selling some stock, paying for the house with the proceeds. When I sold the house it had “lost value” in terms of US dollars but had “gained value” in terms of the stock I sold. Whether the house had inflated or deflated in price over the period I owned it depends on what measure we use for price. If I had sold the stock, rented a place to live, and made an interest free mutuum loan of the remainder of the proceeds I would have been financially better off still, assuming the mutuum was repaid. If I had rented and not sold the stock at all I would be worst off of all, in terms of financial outcome.
This all would have been the result of changing circumstances. In general it is not the responsibility of mutuum borrowers – it cannot be a mutuum borrower’s responsibility in justice – to compensate lenders for changes in the lender’s circumstances.
Inflation is a heuristic measure of aggregated circumstances in the economy, crafted and reported by the Bureau of Labor Statistics. Even if inflation were a measure of the actual concrete and personal changing circumstances of the actual lender, which it isn’t, it remains intrinsically unjust to charge mutuum borrowers rent for the use of their own persons simply because of the changing circumstances of a lender.