Against Usury – Part 1: On the Abuse of Markets and Money

Money and markets were invented because of necessities created by the fall of man – not because they were part of the perfect divine order. In the state of innocence, man had no need of such things. But after the fall and the expulsion from Eden, scarcity necessitated a division of labor for efficiency’s sake. It was much more efficient for one man in the community to make tools than for each one to make his own. But what would this man eat, if he gave a substantial part of his time to his specialty? He would have to reduce the size of his plantings. Naturally, his deficit in production of food would be made up by the ones who wanted his tools. Thus, a barter system arose, which was adequate at first.

But as other specialties arose, barter became awkward. What if one man needed a tool, but had only wool to trade for it – and the smith had no need of wool, but rather charcoal for his forges? The wool man could try to trade some wool for charcoal, and then trade the charcoal for the tool, but this would be cumbersome and time-consuming. That’s when money was invented – a durable, portable commodity of relatively great value was employed as a  medium of exchange. The barter market was transformed into a money market.

Now, a certain amount of wool could be exchanged for a small amount of money instead of goods that the seller did not want, because the wool seller knew that he could go to any of the other producers in the community and exchange the money for the commodity that he wanted. How, though, would the rate of exchange be set? Who would decide how much money a tool was worth, or a bag of wool? At first, the buyer and seller would simply negotiate a price that was mutually agreeable, on any basis that made sense to them.

Soon, a range of exchange rates would emerge for every good or service. This range of prices would take into account the quality of the goods, the amount purchased (discounts for bigger customers, etc.), the prestige of the producer, and any other significant factors. But the actual price of any particular good was still up to the buyer and seller to negotiate. This range of prices was not a result of planning or imposition, but was the natural and spontaneous result of a free market. It gave prospective purchasers and sellers information that they needed to plan – whether for production or for spending — and provided useful guidelines for price negotiations.

While a market remains free, this information is useful and valuable to all participants in the market – until the speculator appears on the scene. The speculator is a species of human vermin who disrupts the proper working of a given market and invalidates the market as a source of information to buyers and sellers in order to make a profit without honest labor. He abuses money to buy and sell products which he has no interest in either producing or owning, in order to force the price on goods he purchases below the price that the seller would freely agree to, and to force the price on goods that he sells higher than the buyer would freely agree to. The latter he achieves best by cornering the market and establishing a monopoly. The former, by becoming the most important customer, and using that fact as leverage to get a better price.

Both of these techniques require large amounts of capital. Therefore, it is necessary to acquire a large amount of money to facilitate the speculation. This is no problem, because all he has to do is to borrow the money at interest from someone who already has amassed a fortune, or inherited one. By offering the usurer a huge return on his investment, the speculator can get the large sum he needs to induce the seller of wool to sell him his entire year’s yield of wool, then extort an inordinate price from the rest of the community for that product. After paying the usury and repaying the loan, a handsome profit is his for doing nothing to benefit the community, but rather depriving his neighbors of the opportunity to participate in a free market, or a mutually beneficial system of exchange.

The usurer is happy, because the “work” is done by someone else, and he is guaranteed his usury. He has not loaned a penny to a poor man at usury, so he is considered a respectable businessman – though he has harmed all the poor in the community and greatly enriched himself at one stroke. The speculator is happy to do the “work”, because it is far less work and time than he would otherwise have had to invest to honestly gain such a large sum. The community, however, is not happy, because it has been “legally” ripped off by a pair of parasites. The abuse of the market has hurt them, but they have no recourse or remedy.