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Source: (consider it) Thread: Titanic struggle for the soul of the Catholic church
Russ
Old salt
# 120

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quote:
Originally posted by IngoB:
if I borrow money against (part of) some-thing, thus de facto transferring (part of) ownership (as will be realised if I cannot pay back), then I can be charged justly for retaining its usage while not having paid back the money. But if someone just lends me money, then interest charged has no grounding in the usage of some-thing, it is merely charge on account of having received the money and thus being able to use it. And that Aquinas thinks is unjust. But that just is what happens in a full recourse loan, where the lender of the money expects to be paid back more just for having given the money.

This doesn't make sense to me.

you seem to be saying that:

- it is OK (not morally wrong as such) for me to ask for some compensation in exchange for lending you something

- it is OK for me to loan you something without collateral - without naming any specific things that you must forfeit if you don't pay it back - but instead claiming a right to confiscate unspecified goods of yours up to the value of the thing loaned if you cannot or will not return it

- it is OK for me to lend you money rather than things

But that by some strange alchemy, combining these three aspects - asking interest for money loaned without collateral - generates a new sin called usury which isn't present if any of the three elements is lacking ?

Perhaps you can gently correct my misunderstanding ?

Best wishes,

Russ

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zippycatholic
Apprentice
# 18312

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Right IngoB, my response was directed at Dave W's post, which appeared to combine both an exaggeration of your characterization as well as a "silence of the Holy See" argument (in effect that the fact that the Church hasn't issued any new documents on contemporary practices negates existing doctrine which was affirmed and reaffirmed for millennia).

Whether the latter constitutes material heresy or is some sort of (nevertheless explicitly condemned) error is not a hill I'm prepared to die on. "Not just fallacious but explicitly condemned" is good enough for me.

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zippycatholic
Apprentice
# 18312

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Russ:
In order to understand usury you have to understand the difference between a mutuum loan and a contract for rent.

In a contract for rent, the borrower pays you for the use of the actual property (say a house), and returns that actual property at the end of the loan. If you stop making rent payments, he forecloses and claims his actual property -- but you, the borrower, are done at that point: he cannot continue to require payments from you after he has retrieved the actual property he loaned to you, or that was purchased (either from you as collateral or from a third party) with his money. Non recourse loans, licit census contracts, etc are variations on this kind of contract: there is always some actual property in which claims of the various parties terminate. As Vix Pervenit affirms, "from these types of contract honest gain may be made".

In a mutuum (the word "loan" in the English translation of Vix Pervenit is originally "mutuum"), the lender gives you something and you consume it - which is to say, once you are done using it, it is no longer in either your or his possession. Aquinas refers to this kind of situation as the loan of something 'consumed in its use'. This kind of loan is only morally licit as an act of charity or friendship, and cannot by its nature give rise to any titles to profit -- because any titles to profit would not be rooted in actual property, but rather in the person of the borrower, making this into a kind of partial enslavement of the borrower by the lender.

Of course this immediately gives rise to many other questions, which is why someone ought to post an FAQ covering all the different questions which tend to arise, citing Magisterial documents and Aquinas where appropriate, etc. ;-)

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zippycatholic
Apprentice
# 18312

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The second paragraph in my reply to Russ mixes up whether "you" are the lender or the borrower, and (I'm obviously a noob as far as this board goes, having discovered it from my referrer stats) apparently I can't fix it. But hopefully it makes sense once you mentally unscramble what I inadvertently scrambled.
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IngoB

Sentire cum Ecclesia
# 8700

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quote:
Originally posted by Russ:
- it is OK (not morally wrong as such) for me to ask for some compensation in exchange for lending you something

Sure. I want a car, but I don't have the money at the moment. You lend me the money with the car as collateral. Effectively this means that you buy the car, but I get to drive around in it. We see this by the fact that if I default, you can repossess the car without further ado and sell it to recover your money. Now, my payment plan on one hand means that I eventually pay that car price to you. But I also pay you more: interest. Is this just? Sure, after all I get to drive around in what is effectively your car, why should I not pay you for doing that? This is not really different from renting a car and paying for it, except that at the end of this, if I have paid the loan off, I get to keep the car.

Likewise, if I secure a loan against some thing I already own (instead of trying to buy something new), then I'm de facto selling it to you, but I pay interest for the privilege of continuing to have it in my possession. And this things does not necessarily have to be a physical entity. I may for example take a loan against my copyright on a text. If I default, then you own the copyright on that text. Even though copyright is not a physical thing, it is nevertheless something that persists as an independent entity, and thus can act as a collateral.

Obviously, these kind of contracts can also be unjust. For example if you grossly overcharge interest, then this is unjust. That's not the point. The point is that they can be just. They are really a special kind of rental agreement.

quote:
Originally posted by Russ:
- it is OK for me to loan you something without collateral - without naming any specific things that you must forfeit if you don't pay it back - but instead claiming a right to confiscate unspecified goods of yours up to the value of the thing loaned if you cannot or will not return it

No, that's not OK. In that case, you are really coming after me, you just happen to do so via my possessions (things I own). You did not effectively buy these things for me, and then granted usage to me. Neither did I effectively sell them to you, but retained usage. This is not a kind of rental contract with the ultimate goal of a transferral of ownership. The only thing you have to do with these possessions of mine is that you have an "I owe you" in your hand, and you are targeting the stuff I own because that's an easy way of getting something back from me. It is through me being personally liable that you are grabbing these things now, it is not the case that these things were put up as collateral in the first place. It's a different situation. Whether this is just or not is a different discussion, but first we need to agree that something different is happening here.

quote:
Originally posted by Russ:
- it is OK for me to lend you money rather than things

It can be OK, sure.

quote:
Originally posted by Russ:
But that by some strange alchemy, combining these three aspects - asking interest for money loaned without collateral - generates a new sin called usury which isn't present if any of the three elements is lacking ? Perhaps you can gently correct my misunderstanding ?

The middle element is not OK, hence also not the combination. The problem is that what I'm putting up as a collateral there is really myself. The security you get for your loan is not some thing, it is me. If I default the loan, you get rights over me. You can take away my things, even though I never intended selling them to you. You can force me to labour for you (if in the polite form of taking part of the wages I earn, rather than outright slavery). You can perhaps have me thrown into prison, if I fail to provide you with satisfactory repayment. I'm on the line, as a person, not a thing. In a non-recourse loan, you only have right over the agreed upon collateral, a thing, which you effectively rent out to me until I can assume full ownership by paying you off. If I default, then that collateral is all you can go for. Other than for that thing, I'm free to keep what I own and do what I want.

Aside from the moral problem of effectively buying a part of a person, the other moral problem is that money is a medium exchange. While money has physical realisations (the bank notes in my wallet), the point of money is that you can buy and sell stuff with it. It is intended to be used, and even if one saves it up, then the point of that is precisely to store it up for future usage. In that sense money is like food or drink. The point of food or drink is that it will be consumed eventually. Even if you store up food or drink, it is with the intention of future usage.

Now imagine you give a bagel to someone but you say "You are hungry... here, you can have my bagel, but I want to get a bagel back." That's fair enough. It may not be charitable or nice, but it is just. You give a bagel, you get a bagel back (eventually). OK. Now the person wolfs down the bagel. Then you say "Ah, but you ate my bagel. Now I want one and a half bagels back. One bagel because I gave you one, and half a bagel extra because you ate it." That's obviously nuts. The point of a bagel is to be eaten, and giving someone a bagel just means expecting them to eat it. One cannot in justice charge for what every sane person will think is the very purpose one is giving something for.

But so also for money - if I borrow money from you, then presumably not to put it in a frame to admire it. I borrow money from you obviously because I need to use it to do something for me. It is neither particularly charitable nor nice if you expect to get every penny back, but it sure is fair enough. Yet on what grounds would you charge me interest for that loan? Why do I have to pay you for using the money you lent me, if clearly the very point of me borrowing money from you is to use it?

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They’ll have me whipp’d for speaking true; thou’lt have me whipp’d for lying; and sometimes I am whipp’d for holding my peace. - The Fool in King Lear

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Dave W.
Shipmate
# 8765

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quote:
Originally posted by zippycatholic:
Right IngoB, my response was directed at Dave W's post, which appeared to combine both an exaggeration of your characterization as well as a "silence of the Holy See" argument (in effect that the fact that the Church hasn't issued any new documents on contemporary practices negates existing doctrine which was affirmed and reaffirmed for millennia).

OK, if not the whole financial structure, then at least credit card debt, student loans, and car loans, and at least a big enough part of the financial structure to be the source of the 2008 global financial crisis (I gather from your FAQ.)

And I think you're mistaking the purpose of my reference to the silence of the Holy See. IngoB suggested that silence justified your reliance on self-study over asking an expert, but that doesn't make any sense to me; surely you're not forbidden to ask questions about it (I presume.)

In any case, I wasn't invoking that silence as a sure sign that interest on unsecured loans isn't considered usury; I'm saying it's one of those things that makes you go "hmmm." You may be entirely correct - but since your conclusion seems to suggest that large numbers of RCs have been committing mortal sin (mostly inadvertently, if they mistakenly think usury is just excessively high interest) without the Church saying anything about it for the last few hundred years (during which time they haven't been shy about calling out lots of other mortal sins) - aren't you at least a little bit interested in asking an expert to see if you've read things right and find out what the official line on current teaching is?

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Dave W.
Shipmate
# 8765

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quote:
Originally posted by IngoB:
I borrow money from you obviously because I need to use it to do something for me. It is neither particularly charitable nor nice if you expect to get every penny back, but it sure is fair enough. Yet on what grounds would you charge me interest for that loan? Why do I have to pay you for using the money you lent me, if clearly the very point of me borrowing money from you is to use it?

This seems like it would be an argument against any kind of interest-bearing loan, not just loans that are unsecured.
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zippycatholic
Apprentice
# 18312

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quote:
Originally posted by Dave W.:
...during which time they haven't been shy about calling out lots of other mortal sins

I don't know what Catholic Church you are talking about. My updated version of Denzinger covers significant doctrinal proclamations by the Holy See over the entire two thousand year history of the Church. It is approximately the size of a Stephen King hard cover novel, and - generously - at most 15% to 25% of those doctrinal declarations address moral theology at all (as opposed to sacramental theology and other doctrines of faith as distinct from morals).

Sure, you can try to get a Bishop to submit a dubium to the CDF -- making the attempt isn't actually forbidden. You can write a letter and ask to have lunch with the President too.

Beyond that, of course, there already are all sorts of authoritative documents from the Holy See on usury.

Anyway, I don't know the players here nor do I even have a sense of this community. But I do appreciate y'all being willing to check out my FAQ and give it consideration. If anyone would like further clarification on any particular point, you know where to find me.

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Doc Tor
Deepest Red
# 9748

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What strikes me in all this are two things:

Firstly, That the RCC's teaching on usury is, for what of a better analogy, a duck. It walks like a duck, it quacks like a duck. It's a duck. You can swear till you're blue in the face it's a goose, but it's a duck. It started off as a goose, but somewhere between then and now, it underwent a series of subtle transformations until what we have is an actual duck. It's absolutely forbidden to eat a duck, even keep one as a pet, but as long as you can point some convoluted definition of goose which encompasses a duck, you're fine.

Secondly, it is built into the core of the RCC that RCC doctrine is never wrong, so will never ever admit to the duck thing. A duck has always been a goose.

So I expect, probably in the next hundred years, in whatever form the Ship takes, for someone to post:
quote:
The Catholic teaching on marriage has not changed. At all.


--------------------
Forward the New Republic

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Dave W.
Shipmate
# 8765

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quote:
Originally posted by zippycatholic:
Sure, you can try to get a Bishop to submit a dubium to the CDF -- making the attempt isn't actually forbidden. You can write a letter and ask to have lunch with the President too.

I rather doubt that your options for understanding church teaching are limited to autodidacticism on the one hand and the equivalent of "asking to have lunch with the President" on the other.

IngoB - The implications of Zippy's thesis seem pretty drastic. He may be right, but isn't there some way for a non-expert to ask an expert about another non-expert's opinion, short of going all the way to the Congregation for the Doctrine of Faith?

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Horseman Bree
Shipmate
# 5290

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Seems about time to introduce the evangelical POV: from Slacktivist's "Sex and Money"

Part 1, that I have linked, is about exactly what you guys are arguing.

Summary quote:
quote:
I found myself, a few years later, having a very similar conversation with Muhammad Yunus, who has since then received the Nobel Peace Prize for his efforts through the Grameen Bank to extend credit to the poorest of the poor in Bangladesh.

Yunus is a Muslim running a bank in a Muslim country. Islam forbids lending at interest. The Koran and Islamic religious law is not ambiguous on that point. When I asked Dr. Yunus if he personally had any religious qualms about lending at interest, his answer was nearly identical to what I'd heard years earlier from my Christian professor.

Read more: http://www.patheos.com/blogs/slacktivist/2010/05/29/sex-money-part-1/#ixzz3R4Kw3CFt



--------------------
It's Not That Simple

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zippycatholic
Apprentice
# 18312

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quote:
Originally posted by Dave W.:
I rather doubt that your options for understanding church teaching are limited to autodidacticism on the one hand ...

Reading the actual authoritative documents from the Holy See on the subject is "autodidactism". Got it.
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Dave W.
Shipmate
# 8765

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quote:
Originally posted by zippycatholic:
quote:
Originally posted by Dave W.:
I rather doubt that your options for understanding church teaching are limited to autodidacticism on the one hand ...

Reading the actual authoritative documents from the Holy See on the subject is "autodidactism". Got it.
Well, in your case apparently yes:
quote:
the process or practice of learning a subject without a teacher or formal education; self-education
Doesn't that describe your effort? (It's not a slur.)

And since you're still here and responding to fragments of my posts, would you care to respond to this one?:
quote:
... aren't you at least a little bit interested in asking an expert to see if you've read things right and find out what the official line on current teaching is?

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Eliab
Shipmate
# 9153

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quote:
Originally posted by IngoB:
quote:
Originally posted by Russ:
- it is OK for me to loan you something without collateral - without naming any specific things that you must forfeit if you don't pay it back - but instead claiming a right to confiscate unspecified goods of yours up to the value of the thing loaned if you cannot or will not return it

No, that's not OK. In that case, you are really coming after me, you just happen to do so via my possessions (things I own). You did not effectively buy these things for me, and then granted usage to me. Neither did I effectively sell them to you, but retained usage. This is not a kind of rental contract with the ultimate goal of a transferral of ownership. The only thing you have to do with these possessions of mine is that you have an "I owe you" in your hand, and you are targeting the stuff I own because that's an easy way of getting something back from me. It is through me being personally liable that you are grabbing these things now, it is not the case that these things were put up as collateral in the first place. It's a different situation. Whether this is just or not is a different discussion, but first we need to agree that something different is happening here.
Have you mis-read Russ here, or have I mis-read you/Zippy Catholic?

I thought the RC position (or at least, the RC position if it's being accurately portrayed by ZC) was that your can lawfully make a full-recourse/mutuum loan, but not make a profit from it. Getting your money back is OK - getting money and interest is not.

If that's right then Russ's qualifier "up to the value of the thing loaned" is important and prevents the arrangement from being usury - the lender is only claiming the right to get back what he lent, not a profit. Or have I missed something?

--------------------
"Perhaps there is poetic beauty in the abstract ideas of justice or fairness, but I doubt if many lawyers are moved by it"

Richard Dawkins

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zippycatholic
Apprentice
# 18312

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quote:
Originally posted by Dave W.:
Doesn't that describe your effort? (It's not a slur.)

Only to the extent it describes every effort to understand moral theology in detail. (And please: "Can't we talk to someone who is more of an expert than you?")

The Church obviously still condemns usury: Pope Francis was denouncing it just recently, and Pope Benedict mentioned it in Caritas in Veritate. The Church condemns abortion, but you can't consult an expert with Magisterial authority on whether salpingectomy is or is not a form of abortion any more easily, or in any less fraught a way, than you can consult an expert with Magisterial authority on futures contracts. The most recent actual Magisterial pronouncement on ectopic pregnancy I was able to find is from 1902:

https://zippycatholic.wordpress.com/2009/01/12/breaking-news-the-magisterium-explicitly-addresses-ectopic-pregnancy/

So it is true that I consulted mildly older documents in order to reach my understanding of the technical nuts and bolts of usury, that I haven't consulted nonexistent or self-proclaimed experts with nonexistent degrees on the subject, and that the CDF hasn't responded to a dubium on the subject in a century or two. But that hardly distinguishes this subject from any other in the domain of moral theology.

As I said already, the Catholic Church you are talking about - the one with ubiquitous panels of credentialed experts who can be consulted and relied upon to give detailed technical answers to questions on moral theology with Magisterial authority - doesn't seem to exist in reality. I would not (for example) trust the 'experts' in New Natural Law as far as I can kick them on the subject of abortion and ectopic pregnancy, whatever degrees they may hold from whatever institutions -- and they certainly do not speak with Magisterial authority.

So again, to the extent understanding usury correctly is an autodidactic enterprise, that - contrary to what you seem to have assumed - doesn't distinguish it from every other area of moral theology. The "official" position on secured futures contracts and the "official" position on salpingectomy are in more or less the same boat.

[ 07. February 2015, 15:34: Message edited by: zippycatholic ]

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Dave W.
Shipmate
# 8765

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quote:
Originally posted by zippycatholic:
quote:
Originally posted by Dave W.:
Doesn't that describe your effort? (It's not a slur.)

Only to the extent it describes every effort to understand moral theology in detail.
Really? That's how you think theology is taught (well, "learned" I guess, "taught" would imply a teacher) in RC seminaries?

The to-and-fro of classroom discussion must be very intellectually stimulating. "Here's a big stack of documents - read them. If you have any questions about whether you're interpreting things correctly - feel free to read them again. And when you're finished, if any layman should ever happen to ask a question about moral theology - give them a copy of the big stack of documents."

(And no, "Can't we talk to someone who is more of an expert than you?" doesn't seem all that unreasonable a question to me. They don't have to be "self-proclaimed experts with nonexistent degrees"; aren't there any actual RCC-recognized experts with actual theology degrees who aren't too elevated to take questions from someone lower than a bishop?)

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moonlitdoor
Shipmate
# 11707

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I think the ship mate Trisagion would be a reasonable answer to your last question, although I don't think he is often posting here lately. He stated his job here a while back, but I don't have a link to him doing so and not sure what I am allowed to repeat, but it suggested he would be well informed on this subject.

--------------------
We've evolved to being strange monkeys, but in the next life he'll help us be something more worthwhile - Gwai

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zippycatholic
Apprentice
# 18312

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quote:
Originally posted by Dave W.:
That's how you think theology is taught (well, "learned" I guess, "taught" would imply a teacher) in RC seminaries?

I admit that this imaginary Catholic Church in your mind, where seminaries are not only uniformly orthodox but can be counted on to understand finance as well, would save 'autodidacts' from a lot of the trouble of thinking for themselves.
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Dave W.
Shipmate
# 8765

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quote:
Originally posted by zippycatholic:
quote:
Originally posted by Dave W.:
That's how you think theology is taught (well, "learned" I guess, "taught" would imply a teacher) in RC seminaries?

I admit that this imaginary Catholic Church in your mind, where seminaries are not only uniformly orthodox but can be counted on to understand finance as well, would save 'autodidacts' from a lot of the trouble of thinking for themselves.
So there's literally no one in the hierarchy you could ask whose opinion you might value? There's the CFD, you, the big stack of documents - and that's it? (Seems kind of lonely.)

As for orthodoxy - when I ask about the teaching of the RCC, I'm not asking about an eternal metaphysical truth (not that there's anything wrong with that!), I'm asking about what the RCC, in the form of priests and theologians, actually teaches its believers. That's really not such a strange definition of "the teaching of the RCC".

Now that I know what you think about the subject, I'm interested in learning what they would say if asked (and, secondarily, whom and how to ask), whether you would consider it orthodox or not.

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zippycatholic
Apprentice
# 18312

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"So there's literally no one in the hierarchy you could ask whose opinion you might value? There's the CFD, you, the big stack of documents - and that's it? (Seems kind of lonely.)"

I've talked to certainly hundreds and possibly thousands of people on this subject in the years since I first took an interest in it -- folks from all sorts of different backgrounds, including clergy, professors of moral theology, and finance/business experts like myself. The fact that some priests have been passing around my recently published usury ebook to others doesn't in itself make my position more likely to be orthodox though. Nor do my formal credentials and deep experience in finance and business guarantee either orthodoxy or technical accuracy in my views.

My arguments, claims, and Magisterial references should be evaluated on their own merits. I am not interested in ad hominem, whether of the "gosh Zippy is smart so he must be right" or "Zippy's doesn't have XYZ credential so that casts his arguments in doubt" sort. Feel free to pass my work on the subject on to anyone you like - I've explicitly placed it in the public domain - and get the opinions of anyone you like.

But don't mistake various peoples' views (including my own) for Magisterial authority. Unless the Magisterium actually pronounces on a specific question (I've referenced where it has on this subject in my work), it is not only mistaken but condemned to take the silence of the Holy See as evidence of approval.

I'm afraid that, on this subject as any other, at the end of the day you have to make up your own mind what is credible and makes sense; that relying on the expertise of others is as fraught here as it is in any other important and controversial subject.

And now I really am over and out on this nice Saturday, and I leave the last word to whomever wants to speak it. If anyone wants to actually discuss the actual subject matter itself, as opposed to how lonely I must be, y'all know where to find me.

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Dave W.
Shipmate
# 8765

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quote:
Originally posted by zippycatholic:
I've talked to certainly hundreds and possibly thousands of people on this subject in the years since I first took an interest in it -- folks from all sorts of different backgrounds, including clergy, professors of moral theology, and finance/business experts like myself.

Well, I'm sorry you didn't mention this before, since it is the very first thing I asked you about. I would have liked to know what their responses were (and I don't think that's unreasonable or insulting; after all, you presumably wanted to know that too.)

But as you've now gone, you will keep your experiences of hundreds/thousands of discussions and your sunshine, whereas I will get ... more snow.

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Russ
Old salt
# 120

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quote:
Originally posted by IngoB:
The problem is that what I'm putting up as a collateral there is really myself. The security you get for your loan is not some thing, it is me. If I default the loan, you get rights over me. You can take away my things, even though I never intended selling them to you. You can force me to labour for you (if in the polite form of taking part of the wages I earn, rather than outright slavery). You can perhaps have me thrown into prison, if I fail to provide you with satisfactory repayment. I'm on the line, as a person, not a thing.

I think you're right in what you say here - the moral issue in all this is how far creditors should be allowed to go in recovering unpaid debts. If justice is a fair balance of the interests of the two parties involved, then a legal system that gives the creditor too many rights is unjust. He should not be able to take away the shirt on your back. Or the tools of your trade. Or anything else that prevents you from being a functioning employed member of society.

But note that:

- this moral principle makes no distinction between the principal and the interest

- if the law rightly gives the debtor a limit on their liability, then this creates a greater risk of default on loans in general. Interest is compensation for such risk as well as compensation for not having the use of the money (or thing loaned) for the period of the loan

- if you live in a big house full of nice furniture, there may be in practice not all that much difference between a system that requires you to pledge your nice furniture as collateral in order to get a loan, and a system where a nominally-unsecured loan to you is underpinned by an unspoken threat to send the bailiffs round to confiscate your nice furniture...

quote:
the other moral problem is that money is a medium exchange. While money has physical realisations (the bank notes in my wallet), the point of money is that you can buy and sell stuff with it. It is intended to be used, and even if one saves it up, then the point of that is precisely to store it up for future usage. In that sense money is like food or drink. The point of food or drink is that it will be consumed eventually. Even if you store up food or drink, it is with the intention of future usage.

Now imagine you give a bagel to someone but you say "You are hungry... here, you can have my bagel, but I want to get a bagel back." That's fair enough. It may not be charitable or nice, but it is just. You give a bagel, you get a bagel back (eventually). OK. Now the person wolfs down the bagel. Then you say "Ah, but you ate my bagel. Now I want one and a half bagels back. One bagel because I gave you one, and half a bagel extra because you ate it." That's obviously nuts.

This argument doesn't make any sense to me at all. The point of a car is to be driven. Whether you drive a rented car or just park it in the driveway to impress the neighbours, whether you eat a borrowed bagel or exhibit it as modern art, whether you spend the loaned banknote or frame it on the wall, is entirely up to you. The interest or charge or rent you pay me for borrowing the thing from me is first and foremost compensation for the fact that I don't have those choices while the thing is on loan to you.

Of course, in the case of a financial institution like a credit union, the interest charged to borrowers may be considered as primarily being the interest paid to savers, with the institution paying its operating expenses (and covering the risk of default) out of a difference in the two interest rates.

Subject to the debt-collection procedures being just (as above), is there anything morally wrong with such an arrangement ?

Best wishes,

Russ

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Enoch
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quote:
Originally posted by zippycatholic:
Russ:
In order to understand usury you have to understand the difference between a mutuum loan and a contract for rent.

In a contract for rent, the borrower pays you for the use of the actual property (say a house), and returns that actual property at the end of the loan. If you stop making rent payments, he forecloses and claims his actual property -- but you, the borrower, are done at that point: he cannot continue to require payments from you after he has retrieved the actual property he loaned to you, or that was purchased (either from you as collateral or from a third party) with his money. Non recourse loans, licit census contracts, etc are variations on this kind of contract: there is always some actual property in which claims of the various parties terminate. As Vix Pervenit affirms, "from these types of contract honest gain may be made".

In a mutuum (the word "loan" in the English translation of Vix Pervenit is originally "mutuum"), the lender gives you something and you consume it - which is to say, once you are done using it, it is no longer in either your or his possession. Aquinas refers to this kind of situation as the loan of something 'consumed in its use'. This kind of loan is only morally licit as an act of charity or friendship, and cannot by its nature give rise to any titles to profit -- because any titles to profit would not be rooted in actual property, but rather in the person of the borrower, making this into a kind of partial enslavement of the borrower by the lender.

Of course this immediately gives rise to many other questions, which is why someone ought to post an FAQ covering all the different questions which tend to arise, citing Magisterial documents and Aquinas where appropriate, etc. ;-)

I can't follow this. Furthermore, what I can follow is both factually incorrect and over-precise logic-chopping. It reflects no credit on the moral theologians responsible, however celebrated.


If I let out my house to you, and you don't pay the rent, I can evict you. That does not discharge you from liability for the rent you owe. I can still sue you for it.

If I lend money to you secured on your house, and you don't pay, I have two options. I can foreclose. That means I keep your property but it replaces the debt + interest and you are discharged from it. The courts do not usually let creditors do this.

Or, I can sell the property. If I sell it for more than your debt + interest, I pay myself off and must give the surplus back to you. If I sell it for less than the debt, I can still sue you for the balance. This is called negative equity.

If I lend you money, you do not 'consume' it. Money is what is called a fungible i.e. if I put my money in the bank, my deposit isn't some specific notes with numbers on them. It's the amount, in whatever form it happens to be. The same could apply to a bag of sugar, but not really to an antique chair or a pork pie.

--------------------
Brexit wrexit - Sir Graham Watson

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IngoB

Sentire cum Ecclesia
# 8700

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quote:
Originally posted by Eliab:
I thought the RC position (or at least, the RC position if it's being accurately portrayed by ZC) was that your can lawfully make a full-recourse/mutuum loan, but not make a profit from it. Getting your money back is OK - getting money and interest is not. If that's right then Russ's qualifier "up to the value of the thing loaned" is important and prevents the arrangement from being usury - the lender is only claiming the right to get back what he lent, not a profit. Or have I missed something?

Good point, sorry, I didn't read that qualifier Russ added carefully. I think you are correct there, to simply ask one's money back without interest certainly should be OK. That this seems uncomfortable is because one would not expect somebody to provide an interest free loan other than motivated by charity, and it doesn't seem very charitable to recover outstanding debt from the presumably poor by confiscating their remaining property. But I guess we can construct cases where even a charitable lender would recover a debt "mercilessly". And anyhow, we did not make charity an explicit condition, so we cannot count on the lender being that.

quote:
Originally posted by Dave W.:
As for orthodoxy - when I ask about the teaching of the RCC, I'm not asking about an eternal metaphysical truth (not that there's anything wrong with that!), I'm asking about what the RCC, in the form of priests and theologians, actually teaches its believers. That's really not such a strange definition of "the teaching of the RCC".

In my experience as a convert with considerable interest in doctrinal matters, the RCC doesn't teach its believers anything about usury, other than in the sense that 1. there is a backlog of official documents on the subject, and 2. the word is occasionally used without further explanation in newer official documents. Nobody of the RCC has ever tried to teach me anything about usury as such. Without some apologetic interest in the topic, I would have simply looked up usury in the dictionary (e.g., "the action or practice of lending money at unreasonably high rates of interest" - OED), and would have thought that that is all this was about.

As zippy correctly points out, there is no official RC "Q&A service". In fact, one could argue that this apologetic role is actually proper to the laity. What of course does exist is somebody asking their priest about matters that concern them personally. And that sort of request can get kicked up from priest to bishop to CDF if it's a tough question. But I am not a money lender. So if I were to ask my priest about usury, then I would be doing it for the sake of apologetics or writing posts on SoF. It would not really be to save my own soul, or those of my loved ones. So in a sense I would be wasting his time, if I insist on getting a "philosophically precise" answer that I do not need myself. I would be quite reluctant to ask in depth about this, unless I'm friendly with the priest and think that he would enjoy looking at this for its own sake. A money lender however could more reasonably ask his priest about this...

However, I have in fact dug up two different (online) sources now, which seem to me to be reasonably well informed, and which contradict zippy concerning the extrinsic titles "loss occurring (damnum emergens) and profit ceasing (lucrum cessans)":

Fr G.L. Coulter (see in particular Chapter 3)
J. Burke (see in particular the revised version)

This is to be compared with Points 14-16 in Zippy's FAQ.

In summary, the story there goes like this: profit ceasing (lucrum cessans) was accepted as an extrinsic title that allowed charging of interest. The real change that happened in modern times is that the possibility of "profit elsewhere" became so ubiquitous, and the number of loans handed out so great (think of a banker), that the former practice of literally requiring a proof of "equal or greater lost opportunity" for every loan on which interest was charged was dropped. Basically, instead of assuming against the lender (in the confessional) unless the interest was proven justified, now it was assumed for the lender unless the interest was proven to be unjustified. And this de facto removed "normal lending" from the confessional altogether in short order.

quote:
Originally posted by Russ:
- this moral principle makes no distinction between the principal and the interest

It does. I answered your question improperly, see my response to Eliab above.

quote:
Originally posted by Russ:
- if the law rightly gives the debtor a limit on their liability, then this creates a greater risk of default on loans in general. Interest is compensation for such risk as well as compensation for not having the use of the money (or thing loaned) for the period of the loan

This seems to be the key question, really. To what extent is it justifiable to charge interest to compensate for the theoretical loss of gains elsewhere. Other Catholic commentators (see links above) disagree with zippy's conclusion that this is not justifiable (and consequently also interpret the actions of the Church differently).

quote:
Originally posted by Russ:
- if you live in a big house full of nice furniture, there may be in practice not all that much difference between a system that requires you to pledge your nice furniture as collateral in order to get a loan, and a system where a nominally-unsecured loan to you is underpinned by an unspoken threat to send the bailiffs round to confiscate your nice furniture...

That's true to a degree. However, in the former case I get to decide what furniture I'm willing to lose if I default. In the latter case, the bailiff gets to choose.

quote:
Originally posted by Russ:
This argument doesn't make any sense to me at all. The point of a car is to be driven. Whether you drive a rented car or just park it in the driveway to impress the neighbours, whether you eat a borrowed bagel or exhibit it as modern art, whether you spend the loaned banknote or frame it on the wall, is entirely up to you. The interest or charge or rent you pay me for borrowing the thing from me is first and foremost compensation for the fact that I don't have those choices while the thing is on loan to you.

People do not borrow money for fun or to have it on display. They borrow it so they can spend it, usually because they need it urgently, sometimes perhaps because they want to spend it frivolously. At any rate, it may be possible to charge interest as "extrinsic title", in particular because you forego a profit elsewhere by supplying this money as a credit. But the analogy I made concerns the justification (or rather the lack thereof) of an "intrinsic title". Imagine you have plenty of money (you don't need all of it for yourself) but currently have no particular other investment opportunity. Can you then charge interest on a loan just because you lend that money? Is that just? That's the question I was trying to talk about.

--------------------
They’ll have me whipp’d for speaking true; thou’lt have me whipp’d for lying; and sometimes I am whipp’d for holding my peace. - The Fool in King Lear

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Dave W.
Shipmate
# 8765

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quote:
Originally posted by IngoB:
quote:
Originally posted by Dave W.:
As for orthodoxy - when I ask about the teaching of the RCC, I'm not asking about an eternal metaphysical truth (not that there's anything wrong with that!), I'm asking about what the RCC, in the form of priests and theologians, actually teaches its believers. That's really not such a strange definition of "the teaching of the RCC".

As zippy correctly points out, there is no official RC "Q&A service". In fact, one could argue that this apologetic role is actually proper to the laity. What of course does exist is somebody asking their priest about matters that concern them personally. And that sort of request can get kicked up from priest to bishop to CDF if it's a tough question. But I am not a money lender. So if I were to ask my priest about usury, then I would be doing it for the sake of apologetics or writing posts on SoF. It would not really be to save my own soul, or those of my loved ones. So in a sense I would be wasting his time, if I insist on getting a "philosophically precise" answer that I do not need myself. I would be quite reluctant to ask in depth about this, unless I'm friendly with the priest and think that he would enjoy looking at this for its own sake. A money lender however could more reasonably ask his priest about this...

Fair enough. I don't think I would have hesitated to ask such a question of the pastor of the church I grew up in, so it seemed to me a natural thing for a curious RC to do as well. (It seems zippy felt the same way; it would have been interesting to hear what kind of responses he got.)
quote:
However, I have in fact dug up two different (online) sources now, which seem to me to be reasonably well informed, and which contradict zippy concerning the extrinsic titles "loss occurring (damnum emergens) and profit ceasing (lucrum cessans)":

Fr G.L. Coulter (see in particular Chapter 3)
J. Burke (see in particular the revised version)

This is to be compared with Points 14-16 in Zippy's FAQ.

In summary, the story there goes like this: profit ceasing (lucrum cessans) was accepted as an extrinsic title that allowed charging of interest. The real change that happened in modern times is that the possibility of "profit elsewhere" became so ubiquitous, and the number of loans handed out so great (think of a banker), that the former practice of literally requiring a proof of "equal or greater lost opportunity" for every loan on which interest was charged was dropped. Basically, instead of assuming against the lender (in the confessional) unless the interest was proven justified, now it was assumed for the lender unless the interest was proven to be unjustified. And this de facto removed "normal lending" from the confessional altogether in short order.

As it happens, a some-time SoF poster today directed me to a source (J. Noonan's "The Scholastic Analysis of Usury") which apparently says pretty much the same thing. The book itself seems a little hard to find, so I was going to post a link to a summary of the main points ... but it turns out it's the same as your 2nd link.
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zippycatholic
Apprentice
# 18312

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quote:
Originally posted by IngoB:

In summary, the story there goes like this: profit ceasing (lucrum cessans) was accepted as an extrinsic title that allowed charging of interest. The real change that happened in modern times is that the possibility of "profit elsewhere" became so ubiquitous ...

Accepted by whom?

That's how the story goes as told by the modernists (e.g. Noonan, who not incidentally also agitated for change in doctrine on contraception and is cited frequently by those agitating for change of doctrine on contraception, e.g. Charles Curran). But the people telling it never produce an actual Magisterial proclamation permitting charging interest for lost opportunity (opportunity cost). At least they've never produced one that I have seen. That's the dog that doesn't bark.

However, there actually is explicit Magisterial condemnation of that story, as documented in my FAQ, e.g.

"[The following proposition is condemned as erroneous:] Since ready cash is more valuable than that to be paid, and since there is no one who does not consider ready cash of greater worth than future cash, a creditor can demand something beyond the principal from the borrower, and for this reason be excused from usury. – Various Errors on Moral Subjects (II), Pope Innocent XI by decree of the Holy Office, March 4, 1679 (Denzinger)"

and

"We exhort you not to listen to those who say that today the issue of usury is present in name only, since gain is almost always obtained from money given to another. How false is this opinion and how far removed from the truth! We can easily understand this if we consider that the nature of one contract differs from the nature of another. – Vix Pervenit, Pope Benedict XIV, November 1, 1745"

(Damnum emergens as a just title, understood as actual open your wallet and pay out of pocket expenses on the part of a charitable lender, was accepted even by Aquinas at least in cases of borrowers who are 'back on their feet' and able to restore what the lender actually paid out of pocket).

That different people (including clergy) have different opinions on the subject is neither here nor there. It is easy enough (and has always been easy enough) to find clergy who support all sorts of heresies. And I've gotten all manner of different opinions from all manner of different people, just as you would expect.

What matters though is what can be supported by authoritative magisterial proclamations of doctrine; and the modernist story on usury gains no more support there than the modernist story on (e.g.) contraception.

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zippycatholic
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# 18312

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quote:
Originally posted by Dave W.:
Fair enough. I don't think I would have hesitated to ask such a question of the pastor of the church I grew up in, so it seemed to me a natural thing for a curious RC to do as well. (It seems zippy felt the same way; it would have been interesting to hear what kind of responses he got.)

I've gotten every kind of response you could imagine, typically based on the politics of the person asked. I've noticed no difference between clergy and laymen. Dorothy Day types want to condemn all profits of every kind as immoral. Republicans in cassocks take the opposite tack and view usury as something that just doesn't apply in modern economies with modern money, unless just in illegal loan sharking. The great majority of people haven't given the subject a second thought, know next to nothing about it, and would probably just defer to sources like the Catholic Encyclopedia, Noonan, and the few online commentaries which reference Noonan (this describes me circa 2007 or so).

That's why you have to actually check up on the claims people make by actually reading the authoritative Magisterial sources (if they even exist) which support or undermine the view expressed. You can find someone in a clerical collar to give you just about any view of the subject you like.

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zippycatholic
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quote:
Originally posted by Enoch:

If I let out my house to you, and you don't pay the rent, I can evict you. That does not discharge you from liability for the rent you owe. I can still sue you for it.

If I lend money to you secured on your house, and you don't pay, I have two options. I can foreclose. That means I keep your property but it replaces the debt + interest and you are discharged from it. The courts do not usually let creditors do this.

Or, I can sell the property. If I sell it for more than your debt + interest, I pay myself off and must give the surplus back to you. If I sell it for less than the debt, I can still sue you for the balance. This is called negative equity.

If I lend you money, you do not 'consume' it. Money is what is called a fungible i.e. if I put my money in the bank, my deposit isn't some specific notes with numbers on them. It's the amount, in whatever form it happens to be. The same could apply to a bag of sugar, but not really to an antique chair or a pork pie.

These are all addressed in my FAQ. In general, unsecured contracts for profit are not licit. Secured contracts for profit are licit, and if the borrower defaults you recover what you are owed from the security. Notice how this makes lawsuits disappear unless there is actual negligence or fraud: lawsuits arising from misfortune are off the table.

"Consumed in its use" just means that whatever was loaned (it doesn't really matter what) is no longer in the possession of either the lender or the borrower, and it has not been exchanged for something else - something which actually exists - which explicitly secures the contract.

I cover this in the FAQ, and here is one of Aquinas' descriptions of "consumed in its use":

https://zippycatholic.wordpress.com/2015/02/02/more-numbskull-medieval-finance/

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IngoB

Sentire cum Ecclesia
# 8700

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quote:
Originally posted by zippycatholic:
Accepted by whom?

By the Church, according to those who disagree with you.

quote:
Originally posted by zippycatholic:
But the people telling it never produce an actual Magisterial proclamation permitting charging interest for lost opportunity (opportunity cost). At least they've never produced one that I have seen. That's the dog that doesn't bark.

But aren't you arguing from silence here just as much as those opposed? They are saying: the magisterium has not spoken against it, therefore it is allowed. You are saying: the magisterium has not spoken for it, therefore it is forbidden. A law needs to be made public to be in effect. Thus the opposing side here has an advantage, all other things being equal. (You will say - I assume - that all other things are not equal. Fine. But I'm just saying that I find the line "but it has not been explicitly allowed" far from convincing as such.)

quote:
Originally posted by zippycatholic:
"[The following proposition is condemned as erroneous:] Since ready cash is more valuable than that to be paid, and since there is no one who does not consider ready cash of greater worth than future cash, a creditor can demand something beyond the principal from the borrower, and for this reason be excused from usury. – Various Errors on Moral Subjects (II), Pope Innocent XI by decree of the Holy Office, March 4, 1679 (Denzinger)"

That however is not a direct statement about opportunity cost. It is a statement about the value of liquid assets as such. The point here can simply be that it is not sufficient to say that money that I have is better than money owed to me. If I have a mountains of spare money lying around, but do not see how I can invest it other than by lending it to you, then where is my "lost opportunity"? Of course, we are used to a world now where those with lots of money find an endless array of possible investments. But apparently this was not the case in the middle ages (and perhaps still in early modernity), where some "players" were sitting on considerably more coin than they knew what to do with. The magisterial statement could then simply mean that you have to argue an actual alternative investment opportunity to motivate the taking of interest. It is not sufficient to merely value liquid assets higher, because if those liquid assets can flow nowhere but remain stagnant, then they do not represent an opportunity. If all this is true, then modernity would have changed the picture by making the proof of alternative investments too trivial to remain an issue.

quote:
Originally posted by zippycatholic:
"We exhort you not to listen to those who say that today the issue of usury is present in name only, since gain is almost always obtained from money given to another. How false is this opinion and how far removed from the truth! We can easily understand this if we consider that the nature of one contract differs from the nature of another. – Vix Pervenit, Pope Benedict XIV, November 1, 1745"

Once more, it is far from clear that this speaks to opportunity cost. First, one really needs to continue this paragraph in the encyclical to its conclusion:
quote:
By the same token, the things which result from these contracts will differ in accordance with the varying nature of the contracts. Truly an obvious difference exists between gain which arises from money legally, and therefore can be upheld in the courts of both civil and canon law, and gain which is illicitly obtained, and must therefore be returned according to the judgments of both courts. Thus, it is clearly invalid to suggest, on the grounds that some gain is usually received from money lent out, that the issue of usury is irrelevant in our times.
Thus what this paragraph is apparently about is the simple assertion "everybody is doing it (namely taking interest), therefore it is OK". And the answer of the pope is: 1. No, even if everybody is doing it, some of it is OK and some not. 2. This is obvious, since even secular courts condemn some interest taking. This paragraph simply does not state what is OK and what not. It merely points out that "all loans charge interest nowadays" is no moral guarantee that "all loans are decent nowadays".

quote:
Originally posted by zippycatholic:
What matters though is what can be supported by authoritative magisterial proclamations of doctrine; and the modernist story on usury gains no more support there than the modernist story on (e.g.) contraception.

Well, I don't think that you've really demonstrated your case so far. But here's the best counterargument from the opposing side, as far as I am concerned: as documented by Burke from Noonan here, see pages 8-10, the Holy See did not challenge practice in the confessional which according to your interpretation was letting usurers off the hook. Admittedly, there seems to be an "until further notice" attached here. Still, it's been almost 200 years with no further notice forthcoming. The first case is this:
quote:
In 1822, a woman of Lyons “gave her capital to certain persons with the agreement that they pay her the interest rate prescribed by civil law.” She appealed her confessor’s refusal of absolution and the sacraments.] The Holy Office, judging the appeal, declared that “a response will be given at a suitable time”; that meanwhile, however, restitution was not necessary; and that the woman might receive the sacraments.
Now, what is supposed to be different if a woman did so in 2012 in Lyons? Must we not conclude that her charging interest as prescribed by civil law is also currently not considered a matter for the confessional by the Holy See?

Of course, one can argue that if this is actually usury, then everybody here is inculpable except for the Holy See. Everybody would act in good faith, but for those who have been delaying a clarification - an easy clarification, you would say - for almost 200 years. It is not impossible that the Holy See is attempting to build up the biggest millstone ever, so that they can go to hell with the largest accumulated responsibility for human sin. But it just seems more likely that the Holy See simply never got around to making the positive statement that argues why the woman in fact does not sin there. And they can afford being ... a bit slow, if they think that the practice has already been adjusted to what is good and proper, even if they haven'y said exactly why it is good and proper.

Mind you, I'm playing the devil's advocate here a bit. I actually think that it is entirely possible that the Holy See gave up, dropped the ball and decided to look the other way, leaving themselves an "escape clause" as they did so (the pending decision that never ever comes). But I think there are weaknesses in your argument for that. And "lucrum cessans" seems to be the pivot point.

--------------------
They’ll have me whipp’d for speaking true; thou’lt have me whipp’d for lying; and sometimes I am whipp’d for holding my peace. - The Fool in King Lear

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Erroneous Monk
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We know from the Gospels that God expects interest on his (unsecured) loans, otherwise why would the servant entrusted with one talent have been castigated for putting it in the ground instead of in the bank?

What we *don't* know is how God values financial instruments, therefore we are unsure what the components of the interest are. I have always reasoned that the interest must be *at least* the time value of money (otherwise the lender still does not get his principal back - he gets back an amount that is nominally the same as his principal, but intrinsically less, since it will buy less (unless you are in a deflationary economy)).

But does God expect interest to cover credit risk? If you include credit risk in interest, you are effectively viewing the borrowers as a portfolio or system. You need to estimate the average propensity of them to "go bad" and spread that forecast loss across the portfolio as a whole.

What would God do? Does He actually "know" for sure our default rate? He is certainly capable of knowing it, but does he make that calculation? And does he expect us, as a portfolio, to systematically bear the cost of each other's default? Some would say that we *do* bear that cost, and that that must be part of His plan - in which case interest that covers credit risk gets the thumbs up.

--------------------
And I shot a man in Tesco, just to watch him die.

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zippycatholic
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# 18312

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quote:
Originally posted by IngoB:
quote:
Originally posted by zippycatholic:
Accepted by whom?

By the Church, according to those who disagree with you.


... and who provide no doctrinal support for that position.

quote:
But aren't you arguing from silence here just as much as those opposed? They are saying: the magisterium has not spoken against it, therefore it is allowed. You are saying: the magisterium has not spoken for it, therefore it is forbidden.
I do cite where the Magisterium has spoken against it.

Furthermore Vix Pervenit explicitly states what kinds of contracts are licit for gain: non-mutuum contracts.

"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."

quote:
But here's the best counterargument from the opposing side, as far as I am concerned:
I agree that the pastoral changes to practice in the confessional are pretty much the best case that the progressives can make. I discuss that in Question 47 of my FAQ. But if we buy that pastoral instruction to confessors has doctrinal implications then Pope John Paul II reversed doctrine on contraception in 1997:

https://zippycatholic.wordpress.com/2015/01/22/did-the-church-reverse-course-on-contraception-in-1997/

Folks can and will argue (and have argued) the thing endlessly, and it is always possible that I am wrong (though I wouldn't argue the case if I thought that was likely). But the case for profitable interest in mutuum loans (especially loans like credit cards) is untenable to outright ludicrous given the Magisterial statements defining where profit is and is not morally licit; and is supported by tendentious appeal to changes in pastoral practice which - if the argument were valid - would just as effectively undermine doctrine on contraception and other matters of chastity. On that much I am in agreement with John Noonan and Charles Curran: that is, if the argument from pastoral practice and sensus fidelium is valid on the one hand it is just as valid on the other.

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zippycatholic
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quote:
I wrote:


Furthermore Vix Pervenit explicitly states what kinds of contracts are licit for gain: non-mutuum contracts.

"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."

That is far from the only citation, by the way. I also cite Regimini Universalis and Cum Onus on what kinds of contracts are licit for gain, and support that with Aquinas' account in the Summa and in De Malo.

The notion that the opposing view from e.g. Noonan and later scholastics is on equal footing with Aquinas' view is simply false. I've read Noonan's book at least twice, and his spin on his own citations is tendentious and wrong. His best case is pastoral and juridical changes which do not pertain to doctrine, tendentious citation of all sorts of non-magisterial scholastic disputation from the progressive side, and confusion about the nature of a mutuum versus other kinds of contracts.

My case (which just is Aquinas' case, as far as I can tell and which certainly is my intention) is argued from numerous Magisterial citations defining both what kinds of contracts are licit and what kinds are not. It is also certainly colored by my own background in finance and entrepreneurship, which I touch on in the preface to the ebook version of the FAQ.

[ 09. February 2015, 17:18: Message edited by: zippycatholic ]

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Russ
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Hi zippycatholic, and welcome aboard.

Finding myself in agreement with IngoB is a bit of a novel experience...

I'm wondering if what you're doing here amounts to extending Magisterial authority beyond faith and morals into matters of economics.

The Church hasn't always held to scholastic philosophy. If the Church has "always held" to anything in this area it would seem to be the proposition that there is sin in charging excessive interest. In deciding what is excessive, the benchmark is not "what is normal" in a particular culture but a consideration of what the lender can justly claim compensation for.

Inclusion of opportunity cost in that consideration is a development in economic understanding that does not change the moral principle.

You are as free to disagree with Benedict XV on economics as with Paul V on astronomy...

Best wishes,

Russ

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zippycatholic
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Hello Russ,

The prohibition of usury has no more dependence on specific economic theory than "thou shalt not steal". Mutuum loans as agreements between parties have been around for thousands of years, and usury was recognized as a form of slavery by pagans long before Christ let alone scholastic philosophy. I suppose certain economic theories might be incompatible with the immorality of theft, but, if so, that is so much the worse for those economic theories.

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leo
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quote:
Originally posted by Erroneous Monk:
We know from the Gospels that God expects interest on his (unsecured) loans, otherwise why would the servant entrusted with one talent have been castigated for putting it in the ground instead of in the bank?

That is to make the dubious assumption that the parable of the talents is an allegory and that the man going away is God.

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Fr Weber
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quote:
Originally posted by leo:
quote:
Originally posted by Erroneous Monk:
We know from the Gospels that God expects interest on his (unsecured) loans, otherwise why would the servant entrusted with one talent have been castigated for putting it in the ground instead of in the bank?

That is to make the dubious assumption that the parable of the talents is an allegory and that the man going away is God.
How is that dubious?

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Enoch
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Zippy I am sure you will condemn this as typical Proddy slackness. Alas, you would be quite wrong. They may apply the reasoning to different materials but this approach to Christian ethics is just as prevalent among some Prods.

If you find yourself applying the words or concepts, licit or illicit to ethical decisions, it's a warning sign.

Licit is all too often a sign we'd like to persuade ourselves something is OK but have a sneaking feeling God doesn't agree with us. Illicit all too often goes with something we think other people should not do, but God isn't really that bothered about it one way or the other.

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Fr Weber
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"Licit" and "illicit" are canon law terms. Their definitions are pretty clear cut, and though it's understandable that connotations from their conversational use might be brought to mind, those connotations are ultimately irrelevant to their use in legal terminology.

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Russ
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quote:
Originally posted by zippycatholic:
The prohibition of usury has no more dependence on specific economic theory than "thou shalt not steal".

Exactly the point I was making.

But I was using "usury" to mean the moral principle of not charging excess interest.

You seem to mean something that involves categorising every loan into one of two forms of contract that were prevalent in a particular time and place. Which seems to contain an economic proposition.

Now it's possible that you mean something like "secured loans" and "unsecured loans" which could reasonably be taken to be mutually exclusive and exhaustive categories that could be applied irrespective of any economic understanding. In which case, my apologies - I'm getting the wrong idea from the way you express things.

What' I'm not seeing is how the valid reasons why I might charge you interest on a loan to buy an imperishable commodity, such as land - reasons such as opportunity cost, out-of-pocket expenses, risk of default - somehow cease to be valid reasons if instead you spend the money on a consumable commodity, such as a holiday. I appreciate that the land forms a security for the loan that the holiday, once taken, doesn't. But that doesn't seem to connect to the validity of the reasons for charging interest. Except that the risk of default becomes higher. Which is an argument for higher risk premium, not lower.

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Russ
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quote:
Originally posted by zippycatholic:
usury was recognized as a form of slavery by pagans long before Christ let alone scholastic philosophy.

Paying off interest can become a form of slavery, yes. And the loan being unsecured may be a necessary condition for that to happen. But it is not, I think,a sufficient condition.

A: about the money you lent me. A hundred ducats, lent until harvest time.
B: at 10% interest. You've come to pay me back ?
A: I cannot. Locusts ate the whole crop. All I can pay you this year is 10 ducats.
B: that will cover the interest. But what about the principal ?
A: the best I can hope for now is to pay you 10 ducats every year for 10 years to clear the debt.
B: that will not clear the debt. By next harvest you will owe another 10 ducats interest...
A: No. The agreement was for one year only. I do not consent to those terms
B: then I will have you thrown in prison for non-payment
A: wait...


Slavery-in-all-but-name is all too possible, but arises ISTM from an unjust method of resolving the situation where someone defaults on a loan.

What prevents a good society from permitting interest on loans (secured & unsecured alike) at a level that compensates the lender for licit costs - opportunity costs, out-of-pocket costs, and insurance or cover against risk - whilst resolving defaults in a way that limits the debtor's liability ?

Best wishes,

Russ

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Eliab
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quote:
Originally posted by Russ:
You seem to mean something that involves categorising every loan into one of two forms of contract that were prevalent in a particular time and place. Which seems to contain an economic proposition.

Now it's possible that you mean something like "secured loans" and "unsecured loans" which could reasonably be taken to be mutually exclusive and exhaustive categories that could be applied irrespective of any economic understanding. In which case, my apologies - I'm getting the wrong idea from the way you express things.

"Secured" and "unsecured" are somewhat misleading terms for the distinction being made. The important point is not what is being lent, or why, but the extent of the obligation on the borrower.

A "mutuum" loan or "full recourse" loan can be "secured" (like a mortgage) or "unsecured" (like a credit card debt) but it's still the sort of loan on which (according to the RCC according to ZC) you can't justly charge interest on, because the borrower's liability is unlimited. It isn't restricted to the subject matter of the loan, or ascribable to the use the borrower is making of some tangible property, but is pure profit on the advance of cash - usury.

You can (potentially) charge interest on loans where the borrower need not repay more than the security, or where the 'borrower' is a company, not an individual (because then the individuals behind the company have a liability limited to a fixed asset). That's not a mutuum loan, so not usury. It may be unfair or exploitative on ordinary ethical principles of fair dealing, but it isn't specifically usury.

The principle is that if you lend anything, and want to charge interest, you can't keep the borrower on the hook for the full debt with unlimited liability, regardless of what happens to the asset lent. You can have the right to collect interest*, OR you can have the right to unlimited enforcement of the debt* - you can't justly have both.

Whether or not you agree with ZC that usury is always unethical, the distinctions being made do seem to me to be genuine ones.

(*though either of these might be unfair for other reasons in any given case, of course)

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Enoch
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quote:
Originally posted by Fr Weber:
"Licit" and "illicit" are canon law terms. Their definitions are pretty clear cut, and though it's understandable that connotations from their conversational use might be brought to mind, those connotations are ultimately irrelevant to their use in legal terminology.

Law, whether canon or civil, should try to express morality, to encourage good behaviour and discourage bad, but should never, however canon, be regarded as defining them.

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zippycatholic
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When I use the term "morally licit", what I mean is "not prohibited under the Divine or natural law".

One can of course look at this from a virtue ethic point of view as well, and argue/conclude (just as an example) that usury is wrong because it involves contractually micro-enslaving your fellow man (as categorically distinct from contractually purchasing claims against actual property) as a hedge against risk and a guarantee of profit. Usury involves treating people as only things should be treated, which is inherently uncharitable (even when the counterparty agrees to be treated as only a thing should be treated). In either case (law or virtue), there is no dependence upon particular economic theories, theories of currency, etc. The principles involved in usury (as I understand it, which I believe to be as Aquinas understood it, which I believe to be as the RCC has _doctrinally_ defined it -- all of which should be verified by any reader to his own satisfaction before embracing my view) are as universal as the principles involved in theft.

Personally I find both the 'law' and 'virtue' perspectives helpful in moral theology generally. The former helps define lines which we just should not ever cross, but in its monomaniacal form turns moral good into something negative and encourages a 'minimum daily requirement' attitude. The latter is more holistic and is really ultimately the better perspective, but can tend toward 'pastoral' permissiveness as a false form of mercy.

Inferences from my choices of terminology to my personal psychology I leave as an exercise for people who care about that sort of thing. I do not claim (or believe myself) that my editorial choices are optimal.

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leo
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quote:
Originally posted by Fr Weber:
quote:
Originally posted by leo:
quote:
Originally posted by Erroneous Monk:
We know from the Gospels that God expects interest on his (unsecured) loans, otherwise why would the servant entrusted with one talent have been castigated for putting it in the ground instead of in the bank?

That is to make the dubious assumption that the parable of the talents is an allegory and that the man going away is God.
How is that dubious?
The landlord is the Roman Empire

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Russ
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quote:
Originally posted by Eliab:
The principle is that if you lend anything, and want to charge interest, you can't keep the borrower on the hook for the full debt with unlimited liability, regardless of what happens to the asset lent. You can have the right to collect interest*, OR you can have the right to unlimited enforcement of the debt* - you can't justly have both.

That would make sense if interest is seen purely as a risk premium.

Limited liability => risk of default => proportionate interest justified

Unlimited liability => no risk, as the lender can always recover the principal by going after the borrower's assets or future earnings => no justification for interest.

But I thought it was being argued earlier that in the happy case (where the indestructible non-consumable asset is always available to repay the lender and thus protect the borrower from the threat of unlimited liability), that interest is potentially justifiable...

Best wishes,

Russ

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Fr Weber
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quote:
Originally posted by leo:
quote:
Originally posted by Fr Weber:
quote:
Originally posted by leo:
quote:
Originally posted by Erroneous Monk:
We know from the Gospels that God expects interest on his (unsecured) loans, otherwise why would the servant entrusted with one talent have been castigated for putting it in the ground instead of in the bank?

That is to make the dubious assumption that the parable of the talents is an allegory and that the man going away is God.
How is that dubious?
The landlord is the Roman Empire
That's an interesting interpretation, and one which works on the parable considered by itself. But in the context of Mt 25, it's sandwiched between the parable of the wise & foolish virgins (be ready for the bridegroom!) and a prophecy about the last judgment. I'm not sure how it makes sense to have an arc of discourse about being prepared for Christ's return and the Last Judgment and then interrupt it with an irrelevant jab at the Roman Empire.

I'll stick with the traditional exegesis, thanks.

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leo
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Clearly, Matthew saw the parable as you do. Redaction criticism looks at the way the evangelists ordered their materialism.

Originally, however, the parable would have been free-standing.

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Russ
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quote:
Originally posted by zippycatholic:
In either case (law or virtue), there is no dependence upon particular economic theories, theories of currency, etc. The principles involved in usury... ...are as universal as the principles involved in theft.

If in thinking about this topic you don't recognise opportunity costs as being real, then that's not a moral failing, it's a deficiency in your economics.

If you think about all transactions in terms of trading goods (rather than trading goods and services), and therefore conceive of a contract as changing the ownership-property of Things rather than as creating obligations upon people (some of which involve Things and some of which don't) then you may end up with a model that doesn't fit reality, not through any failing in the logic of your thought but from building on a foundation of an inadequate grasp of economics.

Yes there are universal principles.
- there's the principle of keeping one's word.
- There's a principle around the idea of a fair price - that what you charge should bear some relationship to the cost of what you provide - the opposite of greed, of charging as much as you can get away with.
- There's a principle around not being able to own another human being - of accepting that the right to payment of a debt is not a moral absolute, that liability may run up against the limit of "cannot pay".
- And there's a principle that a person's consent means something and needs to be respected in one's dealings with them.

How you combine those principles into a clear, consistent and logical position regarding the payment of interest on loans is not yet clear to me.

Such a conclusion - a balance - once reached, is not itself a principle; it's something that needs to be argued for, showing how it does justice to each of the moral principles you hold (which may be more or less in number than the four which occur to me).

It may be that you have fully understood Aquinas' answer and that it's the right answer. But the explanation - the connections between the principles and the conclusion, in a way which doesn't rely on a distorted view of economics, hasn't yet been made satisfactorily.

I'm not aware that Aquinas was an economist. If he knew no more economics than a typical educated person of his time, that's not a fault. On that subject he may be found to be honestly and sincerely wrong without being thrown out of the ranks of the great moral philosophers.

Best wishes,

Russ

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zippycatholic
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quote:
Originally posted by Russ:
If in thinking about this topic you don't recognise opportunity costs as being real, then that's not a moral failing, it's a deficiency in your economics.

And you are using the term 'real' equivocally, which is confounding your capacity to understand the point.

Opportunity costs are not ontologically real (actual) property - property which can be possessed, repossessed, owned, bought, and sold - and used to collateralize a non recourse loan. Whether opportunity cost is 'real' or not in some other abstract sense as a parameter in some economic theory is irrelevant to the doctrine prohibiting usury, which is not dependent upon any particular economic theory. Whatever opportunity cost is, it isn't actual property which actually exists.

Now whether someone agrees with the usury doctrine is another matter. But as long as you think that opportunity costs are the same kind of thing as actual property which can collateralize a non recourse loan, you have not correctly understood the doctrine which you reject. Lenders/investors clearly do understand the difference between posting actual property as collateral and not doing so, and between business loans with personal guarantees and those without; so even from the practical side the failure to understand the point is not on the side of the discussion which makes and understands the distinction between what constitutes actual property and what does not.

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zippycatholic
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quote:
Originally posted by Russ:
...and therefore conceive of a [morally licit investment of capital] contract [for profit] as [encumbering] the ownership-property of Things rather than as creating obligations upon [that is, enslaving] people ...

That is precisely what bounds morally licit investment of capital for profit under the usury doctrine.

That other kinds of obligations can arise in entirely different contexts which do not justify the pursuit of profit - say when you accidentally run over your neighbor's dog - is neither here nor there since it is outside of the scope of morally licit pursuit of profit.

Paying wages is addressed in my FAQ, as are most of the other usual questions which arise.

Whether one agrees with the doctrine or not is one thing. But if you think it depends on economic theory or can be refuted by economic conditions or practices, you don't yet understand it.

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