To take usury for money lent is unjust in itself because this is to sell what does not exist.
This is not to rule out lending per se, but to rule out usurious lending. It is not to rule out interest per se, but usurious interest. These distinctions obtain, even granted that money can operate as a store of value (although I would point out in respect thereto that money’s capacity to function as a store of value depends entirely upon its general acceptance as a medium of exchange; “stored value” is just a way of saying “deferred exchange”).
Perhaps the distinction might be made clearer by tracing the aetymology of “usury,” which derives from the Vulgate usare, “to use.” A usurious loan is one in which the lender expects to continue to enjoy the value of the use of his money, *in addition* to his enjoyment of the value of his equity interest in the project for which his money has been lent.
The equity interest of a creditor in his debtor’s project is realized – is implemented in economic history – via the collateralization of the note by some really actual asset belonging to the debtor. In effect, the creditor uses the principal of the loan to “buy” the collateral from the debtor, which the creditor then rents to the debtor in exchange for interest – the interest being the debtor’s rent payment. The asset that the creditor has invested in the debtor’s project, then, is his equity stake. There is no theologically given upper limit to the interest rate that is just under such an arrangement. Rather, the justice of the interest rate will depend upon the circumstances, as justice ever does.
Such “non-recourse” loans are not usurious:
Non-recourse debt or a non-recourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender’s recovery is limited to the collateral. Thus, non-recourse debt is typically limited to 50% or 60% loan-to-value ratios, so that the property itself provides “overcollateralization” of the loan.
To the extent that the lender has recourse to other assets not specifically collateralized by the note – including the human life value of the debtor – his note is usurious.
Why is such excess interest – i.e., & NB, not “interest that is too high,” but “interest in excess of the creditor’s equity interest in the project” – immoral? Because it represents an attempt by the lender to have his cake and eat it too. How so? “Having his cake” is “having the use of his money.” It is enjoying the option of doing whatever he likes with his money. But once he has invested his money in the debtor’s project, that optionality has utterly disappeared from the world, even as a potentiality. He has “eaten” it, and he is no longer free to have done other than as he has done. The very notion of such a freedom is nonsense. By investing in the note in the first place, he has used up his option to use his money, and it is just gone. It is perverse then for the creditor to expect to be compensated for what no longer exists, which therefore he does not possess.
A proscription of usury would not destroy the credit markets as we know them. It would merely forbid recourse loans. This would prompt creditors to undertake more careful due diligence than they now do, to ensure that the assets they are specifying as collateral do actually exist and are actually worth what their counterparties say they are worth. It would also prevent borrowers from overextending themselves in their use of credit.
But neither of these would be bad things. Indeed, they would be good things. They would have prevented the Crash of 08. They would ensure that we (as an economic polity) did not commit ourselves to funding projects for which the economic resources did not actually exist. They would, that is to say, prevent us from lying to ourselves, or misleading ourselves about what it is really possible for us to undertake, given the resources we have actually on hand. And this would in turn greatly reduce the moral hazard of the credit markets, by reducing the opportunities for misleading others provided by the current prevalence of recourse loans. If recourse loans were proscribed, the risk embodied in the credit markets would be reduced to a fantastic degree. This is another way of saying that such a proscription would increase the perfection of the credit markets, by decreasing the noise to signal ratio of its pricing mechanisms. Proscription of recourse debt would increase the accuracy of the credit markets, and this would tend to prevent booms and crashes generated by misinformation.
Nor would proscription of recourse loans even necessarily reduce the velocity of the credit markets. All it would do is push them away from unsecured lines and toward secured lines, which are next door to preferred stock. The market for preferred stock is perfectly liquid, and the velocity of finance implemented via such instruments is just as great as for common stock. There is nothing, e.g., to prevent a syndicate of banks from agreeing to provide Apple with a secured line; this would be tantamount to an agreement to buy from Apple each day as much preferred stock in Apple as Apple desired to put to them, and sell back as much as Apple desired to take (this would not be a new kind of business; it is exactly what market makers now do on the floor of the NYSE).
A proscription of usury would reduce the size of the fake economy, and increase the size of the real economy; and by reducing noise and moral hazard, it would make the good more apparent to all economic agents, so that over time it would operate to increase the proportion of the real economy that was engaged in the production of real goods, as opposed to evils. It would increase the likelihood that social assets would be invested in such a way as to promote human flourishing.