| Subject: | Re: [socialcredit] 100 percent reserve system | | Date: | Sunday, May 17, 2009 23:43:06 (+0200) | | From: | François de Siebenthal <siebenthal @.....com>
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http://desiebenthal.blogspot.com/2009/05/its-all-about-usury.html
With
all the turmoil in the financial industry, you would think that there
would be a national conversation of money and lending. You would think
that this would be a good time to re-examine the way we create money
and the way we lend it. You would think, especially, that it would be a
good time to review the subject of usury, especially since the credit
card market is about to collapse in the same way the mortgage market
did. But no, that conversation has not taken place. Indeed,
the last great economist to address the subject was J. M. Keynes, back
in the 1930's. Keynes, who was no friend of the Church, surprised
himself by finding that the Church's restrictions on usury made perfect
economic sense, a sense ignored by classical economists: "Provisions
against usury are amongst the most ancient economic practices of which
we have record. The destruction of the inducement to invest by an
excessive liquidity preference was the outstanding evil, the prime
impediment to the growth of wealth, in the ancient and medieval worlds.
I was brought up to believe that the attitude of the Medieval Church to
the rate of interest was inherently absurd, and that the subtle
discussions aimed at distinguishing the return on money-loans from the
return to active investment were merely jesuitical attempts to find a
practical escape from a foolish theory. But I now read these
discussions as an honest intellectual effort to keep separate what the
classical theory has inextricably confused together, namely, the rate
of interest and the marginal efficiency of capital." [ The General Theory , 351-2] What
Keynes is saying in this somewhat technical language is that when
returns to pure loans are higher than returns to actual investments,
you will have a problem; if you can make more money lending to
consumers at 25% than to auto makers at 10%, then the money for making
things will dry up, and loans will shift to consumption and
speculation. We have often noted this problem in the pages of The Distributist Review , (see The Utopia of Usurers , Usury! , Usury: Wealth Without Work ,
and many other articles) but we can't honestly claim that we have made
a big impression on the public. However, Thomas Geoghagen in the pages
of Harper's Magazine , has written an indictment of the current system entitled "Infinite Debt: How unlimited interest rates destroyed the economy." There
is an interesting parallel between the lifting of the usury laws and
the abolishing of the abortion laws: both were accomplished not by
democratic process, but by legislative fiat; in Marquette National Bank v. First of Omaha Service Corp. ,
a 1978 Supreme Court opinion, the court found that an 1864 law
prohibited the states from enforcing usury laws in their own state if
it was legal in another state. For all practical purposes, this ended
usury laws. The lifting of the usury laws had dire unintended consequences, one of which was the decline of manufacturing: "It
may be hard to grasp how the dismantling of usury laws might lead to
the loss of our industrial base. But it's true: it led to the loss of
our best middle-class jobs. Here's a little primer on how it happened.
First, thanks to the uncapping of interest rates, we shifted capital
into the financial sector, with its relatively high returns. Second, as
we shifted capital out of globally competitive manu-facturing, we ran
bigger trade deficits. Third, as we ran bigger trade deficits, we
required bigger inflows of foreign capital. We had "cheap money"
flooding in from China, Saudi Arabia, and even the Fourth World. May
God forgive us—we even had capital coming in from Honduras. Fourth, the
banks got even more money, and they didn't even consider putting it
back into manufacturing. They stuffed it into derivatives and other
forms of gambling, because that's the kind of thing that got the
"normal" big return; i.e., not 5 percent but 35 percent or even more." But in addition to the economic effect, it had a profound effect on the moral character of the nation: "The
change in credit-card caps also had a bad effect on the moral character
of the nation. Because interest rates were so high, the banks no longer
wanted borrowers with good moral character. Look at the way
lending has changed just since the time I was in law school in the
early 1970s. Even then, the mantra of my teachers in contracts and
commercial paper was: "The loan must be repaid!" I have a friend, a
professor, who still quotes that refrain. But it's out of date. At
interest rates of 25 percent, or 50 percent, or 500 percent, lenders
don't really want the loan to be repaid—they want us to be
irresponsible, or at least to have a certain amount of bad character." One question, however, is why we were willing to oblige
the bankers by displaying such a poor moral character. No doubt the
convenience of the credit card was a factor, but there is more to it
than that. One reason is that we had to. The shift in the economy from
manufacturing to finance meant that workers were no longer able to
bargain for wages through unions and other means. Since 1972, the
median hourly wage has stagnated. We experienced a very odd
pheno-menon: productivity exploded, but wages remained the same.
Obviously, there was not enough purchasing power to clear the markets.
Workers responded in two ways. One was to work more hours and put more
family members to work, with a devastation effect on family life. The
other was to borrow more. Further, the best and brightest of our
students no longer went into engineering or manufacturing, but into
finance. We started to lose even the knowledge of how to make things.
As Thomas Geoghagen points out, not only did financial companies
account for 40% of corporate profits in 2003, (up from 18% in 1988) but
this may understate the problem. Many "manufacturing" firms, like GM
and GE, actually made their profits from their finance divisions. GM
became a company that manufactured cars in order to make loans on them.
Our current bailout plans are mainly directed at the banks, the
hedge funds, the insurance companies, and other financial institutions.
But this will not work. Without restoring manufacturing, farming,
mining, and other basic industries, we cannot rescue the economy. But
we have the order exactly reversed. The bankers get an instant bailout,
no questions asked, while manufacturers, like the Big Three, have to
crawl over broken glass to get what amounts to "chump change" in the
context of the overall "rescue" numbers. Moreover, "contracts" with the
derivative traders of AIG are regarded as sacred and unbreakable, while
union contracts are broken at will. It is the habit of the
modernists to despise the past, and so it is no surprise that a
restriction which existed in most cultures from the time of the
Babylonians to the time of Jimmy Carter would be overturned. Yet, even
modern-ism posits some empiricism, actually looking at the effects of
an action. It is now long enough to look at the effects of the Supreme
Courts 1978 decision. And without revisiting this decision, we cannot
fix the economy. Reprinted from The Distributist Review. Houston Catholic Worker, Vol. XXIX, No. 3, May-June, 2009. JOHN PAUL II CALLS FOR END TO USURY: Support for Peter Maurin, Catholic Worker Theme
 On
April 14, 1999, Pope John Paul II addressed the members of the National
Council of Anti-Usury Foundations and their regional delegations. The
Holy Father gave a special welcome to about one thousand volunteers
"who came to call the public's attention to the worrisome and,
unfor-tunately, widespread phenomena of usury, which often brings with
it dramatic social consequences." The Pope continued, "I know
well, dear friends, the difficulties that you face. But I know that you
are determined and united in fighting this serious social evil.
Continue to combat usury, giving hope to individuals and families who
are its victims. The Pope encourages you to pursue your generous work
to build a more just society, one of solidarity, and more attentive to
the demands of the needy." In 1997 Bishop Tarcisio Bertone,
secretary of the Vatican Congretation for the Doctrine of the Faith had
said that "It seems opportune to publish a new encyclical on the
subject of usury and, on the use of money in general," and that this
document should be proposed energetically both to people involved in
pastoral activity as well as to those in economic endeavors. Bishop
Bertone not only denounced the critical aspects of usury, but also "the
problem of loans among nations which ends up by creating the problem of
international debt." To Peter Maurin and Dorothy Day, halting usury was a very important step in establishing a just society. Peter Maurin wrote an easy essay on the subject: Legalized Usury
Because John Calvin legalized
money lending at interest
the State has legalized
money-lending at interest.
Because the State has legalized
money-lending at interest
home-owners have mortgaged their homes..
Because the State has legalized
money-lending at interest,
farmers have mortgaged their farms.
Because the State has legalized
money-lending at interest,
institutions have mortgaged
their buildings.
Because the State has legalized
money-lending at interst,
Congregations have
mortgaged their churches.
Because the State has legalized
Money-lending at interest,
cities, counties, States,
and the Federal Government
have mortgaged themselves
in all kinds of financial difficulties
because the State has legalized
money-lending at interest.
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Re: 100 percent re
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