Discussion in 'Faith, Devotion & Formation' started by bwallac2335, May 3, 2021.
I know the definition has changed throughout history but how is it defined in today's context?
I don't think it's applicable in today's context, at least that's what I've seen
I find usury is often misunderstood, because most people only understand it in the context of the medieval period where charging any interest was prohibited. However, the oldest arguments from the days of the Roman Empire argued loaning was acceptable to people with good credit. The Roman Empire allowed fixed 12% interest p.a. loans (1% per month) or less. The idea being that those with bad credit (the poor) should be given charity, not exploited. But those without need of charity you may loan to with interest, at reasonable rates. Charging more than 12% interest was a crime.
"If you lend money to my people, to the poor among you, you shall not deal with them as a creditor; you shall not exact interest from them."
- Exodus 22.25-27
As I understand it, usury is now considered primarily to be what we would call loan sharking (which in most countries is also a secular crime). That is, targeting vulnerable people in need, loading them up with debt, and charging them outrageous interest rates far above what is reasonable compensation, because they have no other options.
Naturally some Christians extend that definition to be broader. Some also include credit cards (which, to be fair, is sometimes hard to argue against. 29% interest including fees? That should be criminal). Some naturally go even further and target any loan with any interest at all like the medieval church, even the kinds of loans now considered healthy for an economy like low-interest home loans.
As far as I know Anglican clergy are still prohibited from loaning money with interest.
Ok, but can Anglican clergy loan money with disinterest?
Generally speaking, "interest payments" are basically fees collected from a borrower over and above the amount of the loan itself in order to compensate the lender for the opportunity costs they incur by loaning the money. E.g., if I loan you $200, and then my hot water heater breaks a few days later, I lose the ability to use that $200 I loaned you to repair my water heater. Thus as a lender I have incurred an additional cost over and above the amount of money I loaned out, and am morally due some compensation for that loss. Over the centuries Christians have struggled with this notion because it seems to conflict with notions of Christian charity towards the poor and love for others.
Modern lending practices have many exploitative and harmful aspects, and not just to the poor (though the poor tend to suffer disproportionately simply because they are nearer the financial edge). What is a "fair" interest rate? How does a lender gauge risk? Should a fellow Christian get a better rate than, say, a Muslim? How should a lender treat risk in terms of creditworthiness? I.e., should a lender consider how desperate a borrower is, or should the lender simply consider the ability of the borrower to repay the loan?
Ultimately "usury" isn't much used now because the term is not well-defined. It depends on the situation, on the people involved in the loan, on moral and ethical concerns, etc. etc. I consider 21% APR on a credit card to be usurious, for example, but if the borrower pays the bill off in full every month maybe the perks of the card outweigh the costs. There are most assuredly racial and class aspects involved in assessing creditworthiness, and I think that many lenders cheat poor minorities (think of the "payday loan" places); but on the other hand, these lending places are often the only place poor people can go to borrow money. It may be preferable to pay 20% interest on a 2-week loan than not be able to borrow any money at all. Financial considerations are often very complex, and it takes discernment for Christians to decide where to draw boundaries.
Ultimately, as in all else, we should follow Christ's admonition to love God with all our heart, minds, and souls; and to love our neighbors as ourselves. If we follow those commandments with an honest heart, the financial complexities are often mitigated (or disappear entirely). Matthew 6:19-21 is our guide here.
I don't think credit, as understood today, can be considered usury. The reason why is because credit is backed up by some kind of collaterial, capital, or financial asset. There is a safety net or cap-off if applied and used appropriately. Please correct me if I am wrong.
There are really only two kinds of debt: secured (i.e., backed by some kind of collateral) and unsecured. Unsecured debt is what underpins credit cards, and is part of why having a large unsecured debt is dangerous to both lender and borrower (as the 2008 financial meltdown showed). The problem in the modern era is that "collateral" has collapsed -- much so-called "collateral" is either fake or is nowhere near what it is notionally valued at. Remember the principal villain of the 2008 meltdown, the CDO? That's Collateralized Debt Obligation. Except that the "collateral" part was largely a fiction, several layers of financial chicanery that was opaque to non-specialists.
My opinion is that most modern debt is, de facto, unsecured (in that the backing security or collateral is nowhere near as valuable as claimed). The US national debt alone is a testament to this madness. The "full faith and credit" of the US government, as a guarantee, is laughable these days. I wouldn't loan the government five bucks let alone 5 trillion dollars. Our government has been borrowing money based not on existing wealth/value, but on notional future wealth that hasn't even been created yet! We are essentially turning our children and grandchildren into indentured servants to fund our big houses and fancy cars and tropical vacations. It goes beyond financial mismanagement and into an act of generational abuse.
Some day there will be a bloody reckoning for this madness.
That is very informative and personable. It's little wonder there's a minimalist trend these days. Hopefully, it won't go the other extreme: oversimplification.
Yes, the 2008 financial crisis involved mortgages bundled and packaged as "securities". Now they're doing it all over again, this time with bundled auto loans. People haven't learned.
Debt is not, in and of itself, a bad thing. If you think of it as pulling future earnings into the present time, and doing so in order to, e.g., buy a house or car, then it makes sense. Not many people can buy a house or a new car outright with cash. But you have to have a roof over year head and transportation to get around; in fact, if you don't have those things, you generally can't earn a living. So you take on debt in order to accrue wealth over the long term. The debt burden only becomes problematic when it outstrips your ability to pay it back (which is where the US, and many citizens of the US, are at right now). You cannot accrue actual wealth if you owe more than you make (in economic terms, if your net worth is less than your total debt).
Optimally, you take on debt when you are young and pay it down as time goes by such that by the time you are older you have many assets (car, house) and little to no debt. In other words, as you get older your net worth should increase. But Americans (and our Government) crossed an inversion point a few decades back where, in aggregate, our collective net worth went negative and has trended down ever since. Gen Z is on track to become the poorest generation since the Depression years (and is probably in worse shape financially than people who lived through the Depression if you look at it in terms of real-world assets).
There's an old saying in the finance world: if you default on a $1000 debt, you have a problem; if you default on a $1,000,000 debt, your bank has a problem.
I think if you want to find a modern example of usury, the revolting development that is the payday loan is an ideal example.
I don't know about calling securities that hold debt (e.g. CDOs and CLOs) usury, because usury implies a direct relationship between an exploitative loaner and a vulnerable loanee. Securities that hold debt often hold low-interest debt, and so its basically a package of all the forms of debts that are not usurious. There's no extortionate interest rate, and so no inherent breach of scripture. Usury is so despicable because it's the opposite of charity, it's the vicious predation of your neighbours misfortunes.
CDOs and CLOs are an issue (from a theological standpoint) not because there's an intrinsic exploitation involved, but rather because they're vectors for greed. From an economic standpoint, as they are manifested with higher credit scores than their underlying securities, they're nonsensical, and a product of a crippling flaw in the credit rating system. If that fact is manipulated to make huge sums of money, ignoring the very real destabilising effects your actions have on the economy, that's selfish and greedy.