On minding your own business and the unpersoning of contract counterparties

March 17, 2017 § 22 Comments

In Question 49 of the Usury FAQ I discuss whether a merchant may licitly charge an individual[1] penalties for late payment on unsecured merchant credit, distinguishing between two cases.

In one case the individual mutuum debtor has the resources to pay the merchant on time and refuses to do so. This is a form of theft or fraud, and thus is (under the natural law) a criminal act subject to the extrinsic titles and criminal penalties which arise from criminal acts.

In the other case the debtor has suffered misfortune and is unable to pay on time.  By extending unsecured credit the merchant took the risk of this occurring upon himself, and is not entitled to late payment penalties.

Notice that this means that the merchant who extends unsecured credit, and the enforcing sovereign, have to understand the individual holistically and charitably as a human being, in order to make this distinction.  It means – and I’m sorry to break this to you – that the dehumanizing incantation “it is just business” doesn’t actually turn contract counterparties into unpersons.

Treating others like the human beings they are in reality is a lot of work, and doesn’t always make for the most efficient business operations.  The other horn of the dilemma is that failure to extend unsecured credit will almost certainly limit a merchant’s available market.  With those moral constraints in place, it is almost as though extending unsecured personal credit should only be an act of charity, not a business decision.  It is almost as though we are to expect nothing in return when we lend money in exchange for a personal IOU.

But efficiency isn’t everything.


[1] As usual, the prohibition of usury applies to debt qua personal IOUs not to debt qua impairment of specified property.  The balance sheets of institutions are inventories of property and the various claims against that property, so “debt” which impairs the balance sheet of an institution is not the kind of “debt” implicated in usury.

Paper wealth, or, we’re going to Disneyland

November 12, 2015 § 23 Comments

People find paper or electronically recorded securities counterintuitive.  Why the heck does anyone value pieces of paper with ink on them, or numbers in computer memory?  Why the heck is anyone willing to trade a real working car in exchange for numeric balances stored by software in a data center somewhere?

In the Zombie Apocalypse legal title isn’t worth the paper upon which it is written, or the bits in which it is recorded. But short of the Zombie Apocalypse, securities have value because under the laws of the sovereign they entitle you – the owner or bearer of the security – to something other than the security itself.

The title to your car entitles you to your car.

The title to your house entitles you to your house.

Bank deposits entitle you to cash on demand up to the deposit amount through liquidation of some of the property on the bank’s balance sheet.

Exxon stock entitles you to proportional profits and residual liquidation value in Exxon.

A non-usurious note or interest-bearing bond entitles you to census payments against property and liquidation value of that property up to the principal amount of the note.

A usurious note entitles[1] you to the enslavement of the person making the personal guarantee until the principal and interest demands of the note are satisfied.

Self-referential securities entitle you to run around in circles looking for the thing of value to which you think you are entitled.  It must be somewhere!

And a sovereign dollar entitles you to make a transaction, in the sovereign’s marketplaces, for which the tax is one sovereign dollar.

It is manifest (whether folks like it or not, because nature doesn’t reconfigure itself based on what people don’t like) that the sovereign ‘owns’ various marketplaces, because he makes and enforces the rules for transacting – for bartering property and labor – in those marketplaces which fall under his sovereignty. Just as Exxon owns its capital infrastructure, the sovereign owns the outer capital infrastructure in which Exxon operates and transacts.  Economic reality is not reducible to nothing but private property.

If you go to Disneyland, you have to follow the rules of Disneyland.  If the rules say you have to pay ten Mouse Groats for every transaction in Disneyland, you’ll need Mouse Groats if you want to transact in Disneyland.  If the tax rules are more complicated than that you’ll still need Mouse Groats based on the transacting you want to do, the tax rules, and the supply of Mouse Groats. Mouse Groats are a securitization of Disney’s ownership of the marketplace in which you are transacting.

And it is all fun and games until the zombies come.


[1] Of course, as an intrinsically immoral case of usury this entitlement may be enforced by the positive law, but it is not a genuine moral entitlement.

It isn’t extrinsic to the contract if you agreed to it in the contract

October 26, 2015 § 12 Comments

Two of the areas which the Usury FAQ / ebook (in its present revision) may not cover adequately for some readers are the concepts of ‘just prices’ and ‘extrinsic titles’.  The reason it does not cover them in any depth is because, once you adequately grasp what usury is and is not, neither subject is directly relevant.  They have however been historically conflated, casting an at least rhetorical pall of ambiguity over the subject for folks lacking an adequate grasp of the concepts involved; so it is worthwhile to at least show why ‘just prices’ and ‘extrinsic titles’ don’t in fact cast any shadow of ambiguity whatsoever over the absolute prohibition of usury.

I recently discussed the ‘just price’ head fake here, and I think that post adequately shows why various theories about ‘just pricing’ don’t introduce ambiguity into the absolute prohibition of charging interest on mutuum loans (mutuum loans of anything whatsoever — fiat money, ‘hard currency’, gold, sugar, cars, lawn mowers, glass beads, beanie babies, or anything else).

Extrinsic titles I haven’t covered in too much depth.  In this post I talked about different senses of ‘owing’, and grasping the multivocity of ‘owing’ is helpful background for understanding extrinsic titles.  That a thief owes the return of stolen money or other goods, even if he already spent that money or consumed those goods, seems pretty clear to well formed moral intuitions.  Furthermore, the thief may have damaged his victim’s estate in ways which go beyond loss of the ‘principal’ amount stolen, in which case he may be justly found by the magistrate to owe more than the ‘principal’.

Notice, though, that what the thief owes back to his victim is extrinsic to any agreements that thief and victim may otherwise have had. A thief does not mutually agree with his victim to steal the victim’s money and then pay it back with damages. Any damages that the thief owes qua thief, again, are extrinsic to any agreements that victim and thief may have apart from the theft.  Damages owed because of theft are by definition extrinsic to agreements between the parties.

It is in this extrinsic sense – and only this extrinsic sense – that just titles to something beyond the principal may arise when mutuum loans are made.  Here is Vix Pervenit:

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. [Emphasis mine]

Recall that mutuum loans are only morally licit in the first place as acts of charity or friendship.  As a matter of justice the borrower and lender may mutually agree that the borrower owes back the principal if and when he is able to pay it.

However, any agreement between the parties for the mutuum borrower to pay interest – for whatever reason – is by definition intrinsic to the contract: usury.  If the mutuum borrower refuses to repay when he is able, that may well give rise to damages in excess of the principal, in the same way that when a thief steals that may well give rise to damages in excess of the principal amount stolen.  When a borrower is able to repay a mutuum loan, has agreed to do so when able, and yet refuses to do so, he has engaged in a kind of theft.

But any damages a thief owes above the principal can not be pre-negotiated and made intrinsic to a contract. The very fact of making it a mutual agreement means that it cannot, by definition, be theft.  Just titles to something above the principal in a mutuum loan cannot, by definition, be part of the contract.

Therefore any mutually agreed entitlement to something above the principal, under any circumstances, in a mutuum loan, is always morally wrong.

The tin man astride a mountain of piety

January 11, 2015 § 9 Comments

The weakest members of society should be helped to defend themselves against usury, just as poor peoples should be helped to derive real benefit from micro-credit, in order to discourage the exploitation that is possible in these two areas. – Pope Benedict XVI, Caritas in Veritate, Jun 29, 2009

A straw man is a weakened form of an argument which is attacked and defeated as a polemical gambit.  A steel man is the strongest form or version of an argument.  In this post I will give the strongest argument of which I am aware (in a Catholic context) that charging “reasonable” profitable interest on a mutuum loan is not intrinsically immoral but can sometimes be morally licit.  This post builds on the background of the Usury FAQ and presumes the reader’s familiarity with the subject matter.

The entire modern Catholic usury apologia depends on what are called extrinsic titles (sometimes “just titles”) in the context of mutuum loans. It is from the concept of extrinsic titles, combined with some fairy tale about how much the world has changed or how dumb the Magisterium used to be, that it is argued that “reasonable” profit can be licitly made from a mutuum loan.

Recall that earning income from non-mutuum contracts can be morally licit.  Vix Pervenit: “Nor is it denied that it is very often possible for someone, by means of contracts differing entirely from [mutuum] 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.”  It is only income from mutuum contracts – usury – which is prohibited.

A great deal could be written about the subject in the abstract, but in order to understand the situation you have to grasp the concrete pastoral priorities and difficulties of the medieval Church.  They were human beings in a society like us, as it happens, and the variety of opinion, knowledge, understanding, etc was as disparate then as it is today.  In no particular order, some of the issues were as follows:

  • Clergy withholding sacramental absolution from businessmen (often falsely) thought to be usurers.
  • Clergy withholding sacramental absolution from actual usurers, genuinely penitent but unable to make restitution.
  • Poor people in desperate need of financial assistance
  • Usurers basically ‘loan sharking’ the poor for very high interest.
  • Institutions sponsored by the Church, pioneered frequently by Franciscan religious, with a charter of helping the poor
  • Upholding the Church’s doctrinal integrity
  • Widespread lack of understanding of the basic difference between full recourse (mutuum) loans and non recourse (societas) contracts
  • Widespread lack of understanding of legitimate business entrepreneurship
  • Lots of innovation in financial products by merchants and their exchanges, the precursors to commercial banks, including such things as insurance bonds.

Whatever the Magisterium might say on the matter, however carefully, would therefore have tremendous consequences. Confusion is virtually guaranteed absent a charitable hermeneutic which assumes that the Popes and St. Thomas Aquinas actually did their due diligence and knew what they were talking about.  A hermeneutic which assumes nonsense as input is guaranteed to produce nonsense as output.

The first two practices were ended by decrees of the Holy Office and changes to Canon Law. It was declared to be sufficient for the penitent to be prepared to follow the direction of the Holy See, in effect removing the problem of understanding the nuts and bolts of usury from the purview of confessors (who were frequently financially naive themselves). Usury apologists like John Noonan insinuate the non sequitur that this is evidence in favor of a change in doctrine; sexual revolutionaries (including, not coincidentally, Noonan himself) take it as evidence that basic doctrines can be selectively ignored or changed.  I leave it to the reader to assess the intellectual integrity of those positions.

Now, the institutional problem of helping the poor is qualitatively different from mere private donations or friendly loans.  The medieval “Mountains of Piety” were an institutional outcome of the efforts of Catholic religious to help the poor.  One of the great ironies of the tale is that this monumental institutional effort to rescue the poor from usury became a cornerstone of subsequent “progressive” Catholic usury apologia. There is perhaps still some parallel here in sexual matters: that desperately poor couples who cannot afford another child at the present time have the medicinal option of NFP, when complete abstinence presents too great of a trial, is regularly used by contraception apologists to attack the doctrine prohibiting contraception.  Apologists for the execrable will always use distorted conceptions of the mercy of the Church to propagate their lies.

Think about the basic problem from an institutional point of view. A charitable organization to help the poor can take on one of two models. In one model, donations are made to poor people simply. This is certainly the ‘cleanest’ way to do things, but it comes with a big disadvantage: the capital base used to help the poor is used up quickly, so people who could be helped with a more efficient institutional model starve. Beyond the loans themselves, running these charitable organizations results in actual expenses: buildings must be rented or bought and maintained, and not all services can be performed by volunteers who live under vows of poverty (although many can).  Benedict XIV tells us in Vix Pervenit that

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.

The poor are not saints, and not everyone who has been helped by a social welfare institution demonstrates due gratitude once his lot has improved.  It is a real injustice for the ungrateful to selfishly deplete the base of charitable capital in a “mountain of piety”. Furthermore actual costs (as distinct from imaginary gains from foregone opportunities) can arise in a particular transaction, such as the cost of collections, the cost of clerical work or what have you.

With the approval of the holy Council (Lateran Council V), we declare and define that the aforesaid “Mountains of piety” established by the civil authorities and thus far approved and confirmed by the authority of the Apostolic See, in which a moderate rate of interest is received exclusively for the expenses of the officials and for other things pertaining to their keeping, as is set forth, for an indemnity of these as far as this matter is concerned, beyond the capital without a profit for these same Mountains, neither offer an species of evil, nor furnish an incentive to sin, nor in any way are condemned, nay rather that such a loan is worthwhile and is to be praised and approved, and least of all to be considered usury. – Leo X, Inter Multiplices, April 28, 1515 (quoted in Denzinger). (Emphasis mine)

Setting aside the fact that these medieval charitable ancestors of pawnshops frequently held actual property as security, making many or possibly even all of the loans non-recourse (that is, not mutuum loans), the “steel man” argument then – the best argument that usury apologists can propose – is that this non-profit intrinsically charitable institutional activity can be translated into the commercial domain of property: that “extrinsic titles” on a mutuum can apply not only to actual losses of property from the “Mountain” in an intrinsically charitable institutional enterprise, but to profits in a commercial venture putatively founded in property and claims terminating in actual property. The argument also depends on the specific proposed extrinsic title of lucrum cessans, that is, title to recover opportunity cost or time value of money from the mutuum borrower: a title that the Magisterium has explicitly condemned.  So the “steel man” argument in favor of “reasonable interest” on mutuum loans depends on applying a condemned title to a kind of contract that is inherently illicit in a commercial context.

The best argument for charging rent on property which does not exist rests, unsurprisingly, on asserting a property title which does not exist (property title to the “time value of money”) by a kind of institution which does not exist (a for-profit non-profit).

Seems more like a tin man to me.

An annulment mill straw man, or, turning ignorance into the eighth sacrament redux

October 4, 2014 § 25 Comments

Catherine Harmon quotes Ed Peters:

No, the objections of the first group to the number of annulments being declared is, I suggest, not to the annulment process but to the people running that process. Tribunal officers are, it is alleged, too naive, too heterodox, or just too lazy to reach sound decisions on nullity petitions; they treat annulments as tickets to a second chance at happiness owed to people who care enough to fill out the forms. How exactly members of this first group can reach their conclusion without extended experience in tribunal work and without adverting to the cascade of evidence that five decades of social collapse in the West and a concomitant collapse of catechetical and canonical work in the Church is wreaking exactly the disastrous effects on real people trying to enter real marriages that the Church has always warned about, escapes me. Nevertheless that is essentially their claim: the process needs no major reform, processors do.

Peters in effect asserts a reverse ad hominem, suggesting that opponents of the annulment mill are attacking the character of the people carrying out the process rather than attacking the process itself.

There is a another view, which is that the process needs to be reformed because the ‘internal forum’ criteria for defective consent are inherently subjective. On this view, attempting to judge the majority of ‘internal forum’ annulments is like attempting to judge whether a particular confession was valid or not, based on the testimony of the penitent — who, by the time the issue comes up juridically years later, may not be certain himself.

In the case of a bad confession there is a simple sacramental solution: go make a good, valid confession and don’t leave anything involving ‘grave matter’ out, including the possible invalid confession.

In the case of uncertain consent to marriage there is also a simple sacramental solution: convalidation.  This is how the Church has always consistently treated epistemic doubt about the validity of sacraments, to wit, conditional baptism.  When in doubt because of inherently subjective factors or other uncertainties, the way forward is to ensure that the sacrament is confected validly and licitly.

Modern annulment practice is unique in the history of the Church, inasmuch as it treats a possible sacramental irregularity – based on purely subjective considerations – as a two way street.  It doesn’t provide a way forward, it provides a way backward, in the name of a false ‘mercy’. This is terribly unfair in a way in which carrying out the death penalty without objective third-party evidence would be terribly unfair.  Errors in death penalty cases result in killing the innocent; errors in ‘internal forum’ annulment cases turn various people (including innocent ‘spouses’, past and future) into material adulterers.  This is just the very modern phenomenon of turning doubt or ignorance into an eighth sacrament: it pretends that mercy means letting people stew in objective evil with no real way out.

It is quite human for the sinner to acknowledge his weakness and to ask mercy for his failings; what is unacceptable is the attitude of one who makes his own weakness the criterion of the truth about the good, so that he can feel self-justified, without even the need to have recourse to God and his mercy. An attitude of this sort corrupts the morality of society as a whole, since it encourages doubt about the objectivity of the moral law in general and a rejection of the absoluteness of moral prohibitions regarding specific human acts, and it ends up by confusing all judgments about values. – Veritatis Splendour

I’ll cite the documents of one American diocese just to give flavor on the sort of criteria which are actually being employed in the actual current process to annul marriages.  Of course examples can be multiplied, and I’ve seen many more egregious examples than these.  If someone doubts that, we can hold a contest to come up with more examples.  This just happened to be what I grabbed with a quick Google:

Error Concerning a Quality of the Person: (canon 1097, §2) Defect of consent due to error concerning a quality of the other person, directly and principally intended in a spouse. If one party intended to marry someone who possessed a certain quality (perhaps of a moral, social, physical, religious, psychological or legal nature), and the primary reason for entering the marriage was the erroneous belief the intended spouse possessed that quality, the marriage may be invalid. The intended quality must be of such a magnitude that, without it, the person would not have married the other, and the discovery of the truth must have had a serious effect on the nature of the marriage.

Conditioned Consent – Past and Present Condition (c. 1101, §2) Defect of consent when a person entered a marriage based on a past or present condition of the existence or non-existence of a fact, typically concerning the spouse’s or his/her past (e.g., citizenship, criminality) or present state (e.g., pregnancy, a medical condition, career, a character or trait). Placing such a condition on the marriage raises serious questions, and it invalidates marriage when it is proven the condition, upon which the marriage decision depended, was not fulfilled at the time of marriage. This ground may be considered when one or both spouses entered the marriage with an expressed condition based on something from the past or present

Notice that, in addition to relying on wholly subjective testimony about peoples’ expectations going into marriage, these two criteria basically contradict each other. If you married expecting your spouse to have a certain quality and your spouse doesn’t turn out to have that quality, the marriage is null because your spouse didn’t have that quality. But if you married expecting your spouse to have a certain quality at all, that too casts doubt on the validity of the marriage.

This sort of jurisprudence makes the very idea of validly consenting to marriage into a joke.

Now reforming the process to basically close off the way backward represented by ‘internal forum’ annulments still leaves ‘external forum’ cases open to adjudication, and I would use the term broadly to include cases where objective third-party evidence of defective consent prior to the wedding is admissible: e.g. bragging to friends about the mistress at the bachelor party, as attested by third party witnesses.

But closing the door on all ‘purely subjective’ and even self-contradictory internal forum cases – whatever one thinks of it – would (contra Peters) be a process reform, would be consistent with the way the Church treats cases of possible invalidity when it comes to other sacraments, and would preach to the world by walking our talk – unlike current practice – that the Catholic Church is serious about the indissolubility of sacramental marriage.

This distinction between positive and negative rights, isn’t

August 1, 2014 § 6 Comments

Libertarians – and some other folks who are liberal moderns but are under the delusion that they are not – will sometimes make use of a distinction between “positive rights” and “negative rights”, condemning the former while celebrating the latter. Negative rights involve protection of the individual from things others demand of us without our consent, while positive rights involve an imperative to hand over our stuff to others even though we didn’t consent to do so.

This distinction is illusory for the same basic reason that the libertarian ideal of completely consensual contracts is illusory.  It presumes a whole metaphysic of what certain people are entitled to from others – which is precisely what is in contention – and then pretends that it hasn’t made this presumption.

Justice cannot be fabricated whole cloth from consent or contract. Consent and contract do mediate what people are entitled to in justice in particular situations, of course. But the idea that what is just can be fabricated whole cloth from consent is another form or cognate of positivism. An epistemological positivist doesn’t comprehend that in order for words to communicate meaning, almost all of the meaning must already exist in the minds of the people talking. And a consent-positivist doesn’t comprehend that when a given disposition of property is just, almost all of what the parties are entitled to from each other did not arise from the consent of the parties.

None of this is to suggest that people are not entitled to things from each other. A property owner is entitled to walk around on his property; a trespasser isn’t, even though that represents a restriction on the trespasser’s freedom.

But what it means is that the illusion of consent which forms the basis of the positive-negative rights distinction is just that: a question-begging illusion.

Pay no attention to that gun to your head

August 1, 2014 § 20 Comments

Contracts are always definitely consensual.  Contracts are never completely consensual. One who has not grasped this essential political fact will remain one of liberalism’s useful idiots, waking up each morning still trapped in a dystopian liberal Groundhog Day. And it is impossible for a positivist, who confuses definiteness with completeness, to grasp this essential fact.

Libertarians and libertarian-sympathetic reactionaries are ultimately just enablers of liberalism, because they have not fully grasped that making freedom a political priority necessarily leads right back around to liberalism. In order to escape the mind trap of liberalism it is not enough to unequivocally reject equality as a political priority. You must also unequivocally reject freedom as a political priority.

If a lot of people happen to be free, it means that a lot of people are actually able to choose what they wish to be able to choose. That is a consequence of either:

  • their wills being conformed to what is good in a good society; or
  • their wills being conformed to wickedness in a wicked society.

Treating freedom or equality as political priorities at all involves a basic misapprehension: it involves deliberately taking our eyes off of what is good and adopting a pose of neutrality. And because political neutrality is actually impossible, this in effect makes wickedness the goal.

So treating freedom and/or equality as a political priority is just political support of wickedness, simpliciter.

No matter how many times it is dealt with, the objection that libertarianism does insist that people face the consequences of their own free choices pops up like a game of whack-a-mole. Libertarianism represents a genuinely consensual politics because, while it is true that contracts are considered binding once freely entered, only consensual contracts are permitted.

But this is just the same old question-begging blindness to metaphysical baggage all over again. Contracts and other choices take place in a context, and the context is not itself a consensually entered contract[1]. As a simple example, who ‘owns’ what, and what ‘ownership’ does and does not entail in specific situations, is the tip of the iceberg of the non-consensual context in which every contract is entered, and in the shadow of which it is bargained.

If you happen to find a given nonconsensual context pleasing for ideological or personal reasons it is more likely to be invisible to you. But even then it isn’t something you created by giving consent.

So libertarianism or even residual libertarian sympathies in reaction just end up back in the same old circular trap.  We can have whatever politics we want as long as everyone else gets to have whatever politics they want. You can have any political system you want — as long as it is liberalism.

[1] If folks understood how political philosophy has developed it would be obvious why such manifestly question-begging errant nonsense as social contract theory and government by consent of the governed was considered necessary. In order to justify authoritative discrimination in favor of liberal governance on its own terms liberalism has to pretend that authority is ‘consensual contract’ turtles all the way down.

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