By April 15, 2013 19 Comments Read More →

Usury – The Root of All Evil?

Flickr - Money - Jeff BelmontePeter Russell, Spirit of Now
Waking Times

The love of money is the root of all evil. — 1 Timothy 6:10

Why do people value money so much? There is, after all, nothing very attractive about grubby pieces of paper, dirty metal discs, or digital records in a database. Money gives us the ability to obtain the things or situations we desire. With money we can buy the security, power, recognition, stimulus, or whatever else we think we need in order to find fulfillment.

But money also has more pernicious effect upon society. It takes no great mind to see that financial expediency lies behind much of our inhumanity to each other and our callous treatment of other creatures. Some more radical thinkers have argued that money should be eliminated—and with it the notions of possession and property. It is certainly true that some of the less material cultures have no notion of property, possession or money; and have survived very well, and in greater harmony with the rest of life. But in the more-developed societies some means of symbolic exchange is essential—we may not always want to receive chickens in return for our solar panels.

Furthermore, eliminating money would only eliminate the symptom of the problem. It is not ‘money’ that is the root of all evil (as is sometimes misquoted) but ‘the love of money’.

Usury

Our love of money not only causes us to make decisions that are not in our own best interests, it also leads to usury—the charging of interest on a loan.

Nothing wrong with that, one might think (particularly if you are the lender), everyone does it. Why should others not pay for the use of one’s money? At the very least we should receive a sufficient return on our investments to keep up with inflation —and if we can make a bit more, why not?


But it turns out that the lending of money at interest is one of the principle causes of inflation in the first place. And, as we shall see, fuels many of humanity’s other crises.

Outlawed

It is only in relatively recent times that usury has become a widely accepted practice. Though not that widely accepted. It is forbidden by the Koran, and today there are still many Islamic countries in which banks are not allowed to charge interest.

It was also originally outlawed in Judaism—and still is in some quarters. The Old Testament Book of Leviticus declares that ‘Thou shalt not give him money upon usury nor exact of him any increase of fruits’. And in Ezekiel it is advised that the just man does not ‘lend upon usury’. Yet, as happens with most religious traditions, the teachings gradually became diluted, distorted or ignored. By the time of Jesus the making of money on the lending and changing of money had become such an acceptable practice that it was even permitted within the precincts of temples. The upholders the Law, the ‘good’, were condoning the root of all evil. And so he threw the money-changers out.

The cultures of ancient Greece and Rome likewise denounced usury. Aristotle called it the most unnatural and unjust of all trades. Money, he said, was to be used for exchange, not the breeding of money from money. Plato condemned it on the grounds that it set one class against another and was therefore destructive to the state. In Rome Cicero, Cato and Seneca made similar censures.

Usury was outlawed by the Church of Rome’s Canon Law, but people got around it by various means. One was to claim that it was impractical to lend money completely free. There were, after all, various small costs involved—the time and paperwork, and sometimes the shipment—and some borrowers failed to repay their loans.Why should the lender lose money? So the Church allowed lenders to charge an interisse—the Latin word for ‘a loss’—to cover these costs. Soon this ‘loss charge’ became a fixed percentage, and as greed reared its ugly head the percentage grew, turning the loss into a profit. Usury was back, but under a new name—interest.

The Reformation saw the full legitimization of usury. Calvin, one of the fathers of the Reformation dismissed Biblical references to the evils of making money out of money, arguing that they were irrelevant to his times, and that charging interest was as reasonable as charging rent for land. (Although American Indians and other cultures might wish to replace ‘as reasonable’ with ‘as unreasonable’.) And when Henry VIII broke from Rome to set up ‘The Church of England’, he not only legitimized divorce he also gave the official seal of approval to usury.

The debate on the rights and wrongs of charging interest continued through the seventeenth and eighteenth centuries, but in the end the lure of easy money won the day. Today its hardly questioned; except perhaps by the person whose life is made a misery by the interest payments he cannot keep up. But certainly not by the governments and banks who make themselves so much money out of it. Nor by all the people who lend their money to these money-lenders on deposit.

Making Money

The impact of usury on our world runs far deeper than making the rich richer and the poor poorer—with all the social tensions that engenders. It exacerbates some of the most critical problems of our time.

In essence usury is wanting something for nothing. Lending money involves no input of human labor—apart perhaps from signing of an agreement and entering some data in a computer. Nor does the act of lending in itself produce anything. The borrower may well use the money to do something useful, but the lender has done nothing. Yet he or she still expects to receive something in return.

But where does this extra something come form? Most money-lenders are so concerned with their own gains they do not consider this question—or turn a blind-eye to it. Yet it is the ultimate source of this additional money that makes usury such an undesirable practice.

Let me explain a little further. Most of the money in circulation consists not of notes and coins, but credit—the money the banks have loaned out to individuals and corporations, and which ‘circulates’ as it gets transferred from one bank account to another. The banks, of course, demand their interest on all this money out on loan, and in order that this interest can be paid the amount of money in circulation must increase. This extra money does not grow on trees; nor, except in the case of gold, can it be dug out of the ground. It is the banks who supply the additional money, and they do this by making more loans.

These additional loans are, of course, made at an interest, with the result that the money supply must be increased yet further to accommodate them. And so on…

Adding Fuel To The Fire

Having continually to increase the money supply in order that the interest be paid has two undesirable consequences. First, it promotes inflation. This occurs because the increase in money supply does not in itself increase a nation’s wealth. Increase in wealth comes from increased income from products and services. But seldom is this anything like as high as the increase in money supply. The difference is absorbed by inflation.

Let us take a very simple example—economists would make it a little more complex, but similar principles would apply. Suppose that the banks increase the money supply at the rate of 10% per year but the increase in economic growth is only 4%—quite an optimistic figure for most countries. For every $100 worth of real wealth a year ago there is now $104 worth, but the amount of money representing this new wealth has grown to $110. The net effect is that value of the money in circulation has been diluted by 6%. In other words, it takes more dollars to buy the same thing, This we call inflation.

Nobody likes inflation, particularly the money-lenders. If all the extra money supply is soaked up by inflation they make no net profit. Much better is to compensate for as much as possible of the extra money by increasing the real wealth. This results in a second undesirable consequence of continually increasing money supply—endless economic growth.

It is true that in our current system growth is deemed necessary for a ‘healthy economy’ and the maintenance of decent standard of living. But it is only necessary because of usury in the first place. And when we consider the wider impact of endless economic growth we are forced to question the real health of such an economy.

Nothing else in nature indulges in endless growth—except a malignant cancer, and from the perspective of its host that is far from healthy.

Since the rate of interest charged on a loan is a compound rate, the growth in the money supply and the consequent need for economic ‘growth’ increase exponentially. A dollar invested at 10% compound interest would be ‘worth’ $1.1 after one year; $1.21 after two years; $2.59 after ten years; $117.39 after fifty years; $13,780.65 after a hundred years; and around $2.473,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 after a thousand years—which is about ten trillion times the weight of the Earth in gold (at its current value). Imagine trying to collect the interest on that.

It is little wonder then economies based on usury eventually collapse.

Debt Across The World

We are trying to apply similar accelerating growth to the global economy. For a while the effects were absorbed by the growing size of the population and increasing industrialization. But now that population growth and industrialization are reaching their limits, the environment is beginning to pay the cost.

Meanwhile the banks, ever in search of new borrowers, entice the less-developed countries to take out enormous loans. ‘You need not remain peasants, with our money you can grow cash crops, trade with other countries, set up new industries, manufacture things you need, create new wealth. Why not become a ‘developing nation’ and enjoy the advantages and comforts of economic growth? Then you can live as we do and buy lots of the nice things we produce (which you don’t really need, but which we need to sell).

‘Like anyone else, you’ll of course have to pay interest on this loan (but in our money, please; not the worthless stuff you print). If at first you can’t manage to pay us back, don’t worry, we’ll lend you some more to tide you over. And if, as the interest mounts, you still can’t pay, we’ll help you out by buying some of those nice resources you have—but at a knock-down price.

The net result of usury? Rain forests are consumed even faster. Species become extinct more rapidly than we can classify them as endangered. More and more Earth is torn up to meet our ever-growing demand for minerals. And the extra waste generated by all this additional activity fouls the air, pollutes the water and poisons the land.

Meanwhile we continue to preach that endless economic growth is healthy.

Usurers One And All

Some would argue that things would not be quite so bad if industry were not always so concerned with maximizing profit. They could contain much of their waste, recycle many more resources and be more energy efficient. But that costs money and reduces profit.

And who benefits from all these profits? I have yet to meet a greedy corporate director out to rape the world in order to line their own pocket. Most are on salaries, concerned more with job-security than making themselves more money, and as worried about the environment and the future of the planet as anyone.

The profits they are making go to their investors. Banks that fund new enterprises do not lend money at a mere ten or fifteen per cent as they do to you or me. Businesses are much more risky; many fail and never repay their loans. And to cover this extra risk the banks demand 25%, or even 40% per annum on their loans. This is what causes many growing businesses to cut environmental corners. If it’s a choice between foreclosure and a little pollution, guess which one is chosen?

And then there are the shareholders; the people-in-the-street who invest (or rather loan) a little of their money. They have very seldom invested this money out of the kindness of their heart, or because they really believe a particular company is doing good and should be supported. The usual criterion (ethical-investment included) is where will the most money be made. Whose shares will rise the most? Who will pay the best dividends? And the directors of the company, answerable as they are to the shareholders, do what they are told.

In how many shareholder meetings do you hear the shareholders voting for lower dividends and a little less pollution? Far too few. We have lent our money to the company, and was want as much usury in return as we can get.

So let us not too hastily condemn the official money-lenders. Let he who is without usury cast the first stone.

The Cultural Hypnotists

Sustained economic growth requires, as we have seen, the production of more and more goods. Most people in the more-developed countries already have the things they need for their physical well-being, so they have to be persuaded to buy them for other reasons. The obvious candidate is the satisfaction of their psychological needs—the needs for security, approval, self-esteem, power, stimulus, love and suchlike.

But the producers of all these superfluous goods are only pretending that they would like to satisfy these inner needs. If we were to become inwardly fulfilled we would no longer fall such easy prey to advertising and not buy so many of their goods—and this is the last thing they want. Instead contemporary economic systems must ensure that these inner needs are never actually satisfied—or rather that we never feel them to be satisfied. We, the consumers, have to be kept convinced that if we only had a little more we would be that much happier.

Society is caught in a vicious circle. Our belief that material well-being is the path to inner well-being underlies our love of money. Our love of money leads us to want to make more money out of the money we have, and so to the charging of interest on loans. The charging of interest leads to the need for continual economic growth, and to the need to produce and sell more and more superfluous products. And to keep us buying all these products we have to be kept believing that material well-being is the path to inner-well-being.

Thus do we remain locked in to a set of out-dated assumptions. This is the root of our collective cultural hypnosis.

So Near And Yet So Far

As far as present-day economies are concerned, the worst thing that could happen would be for people to wake up and discover that we do not need most of the things they want us to buy—to realize that there other routes to inner peace than continual consumption. Could this be one of the reasons that our materialist culture seems unwilling to take inner development very seriously? Does it suspect, perhaps unconsciously, that if we became less attached to the material world, less addicted to what we have and do, then this would spell its end?

Whether or not it is deliberate the effect is the same. A line is drawn across our development. The system that has raised many of us out of poverty, physical suffering and hardship and freed us from many of the limitations of the material world, suddenly says ‘Stop!’ It blocks the door to further liberation, telling us this is all there is. This is the best path to peace.

But as far as humanity is concerned, waking up is the best, not worst, thing that could happen. It would not only free us to discover other paths to the inner fulfillment we each seek, it would also remove the root of our malignant tendencies that are today threatening to destroy us.

We have to break the vicious circle society has caught itself in. And we have to break it at its origin. Just as a doctor does not heal a patient by only patching up the symptoms—if he does not look to the underlying cause the symptoms will more than likely reappear at some later time—so too, we will not eliminate the charging of interest and all its ramifications by outlawing it. In one form or another it will re-emerge—as history has shown.

To solve the many problems facing us we have to tend the root cause—our addiction to the world of things and the love of money to which it leads. This is the virus in our mind, the root cause of our malignant tendencies.

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  • Jct: Yes, usury is the root of all evil and interest-free media of exchange solve everything but time to speed things up. http://facebook.com/video/embed?video_id=533125386723062 explains the recent headline: “Incipient Collapse of US nuclear waste sites.” Incipient: about to happen! And no money to pay ourselves to save ourselves.

    http://youtu.be/IfJSauKiJPQ is my Argentine Solution to Alex Jones Paul Revere video submission to pay nuclear clean-up workers with small denomination bonds like Argentine provinces did and bury it all in a couple of years. If not, incipient collapse means incipient death and nothing but funding for clean-up can save us.

  • Omar

    “Those who devour usury will not stand except as stand one whom the Evil one by his touch Hath driven to madness. That is because they say: “Trade is like usury,” but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (The offence) are companions of the Fire: They will abide therein (for ever).” (Quran 2:275)

    Narrated Abu Huraira:

    Prophet Mohammad said, “Avoid the seven great destructive sins.” They (the people!) asked, “O Allah’s Apostle! What are they?” He said, “To join partners in worship with Allah(God); to practice sorcery; to kill the life which Allah has forbidden except for a just cause (according to Islamic law); to eat up usury (Riba), to eat up the property of an orphan; to give one’s back to the enemy and freeing from the battle-field at the time of fighting and to accuse chaste women who never even think of anything touching chastity and are good believers.”
    (narrated by Abu-Huraira)

    Some Muslims may argue that only the taking of interest is prohibited. But one Sahih Hadith says:

    “The Messenger of Allah cursed the devourer of usury, its payer, its scribe and its two witnesses. He also said that they were (all) equal (in sin).”
    (narrated by :Hazrat Jabir, Mishkat-ul-Masabih)

  • Read labor leader William Sylvis (1828-1869) essay “What is money” at:http://bitchworld.weebly.com/whats-bourse.html

  • ruby

    Oh, and it is the Quran as a generally prefered spelling in english by the way. It is more phonetically correct… Should have stated before, this is a very interesting article, not sure how the the Windsor/Rothschilds et al will ever be able to let go though…such sticky fingers…?

  • ruby

    Zakat i.e. the 2.5% tax of annual income or net wealth is a solution to all of these interest (riba in arabic)based economic woes suffered by the majority on this planet. Why not have a closer look at how paying Zakat works for a healthier society in detail and how it will cure so many of the money related illnesses circulating this globe. It would help the greedy lenders not to feel the need to hoard their wealth and it would boost productivity as you don’t get taxed on a variety of other assets such as tools for manufacture etc. This charitable tax goes only to the very needy and or poor and those who can earn keep the rest and don’t become so discontented with giving so much of their income away.

  • herzmeister

    I think this interest thing is always a bit of a red herring.

    The problem we have today is more succinctly described as socialism for the rich, and capitalism (without real capital) for the masses.

    Interest the way it is often described in articles like this doesn’t really exist. If anyone tells you money magically multiplies in your savings account, they are lying. They are hiding the real mechanics how things work: where value is created and where it’s sucked up. Today inflation alone outruns most granny’s savings accounts anyway.

    If we have soft money (like credits or promises for future services), then we don’t need interest, because money supply can always be expanded on-the-fly by people on the spot. There is no counterpart risk. This is how it works in most LETS (local trading systems). There’d at most be reputation loss.

    If we have a hard currency (i.e. debt-free, think gold and silver or bitcoins), and I lend someone money, I carry the risk that they won’t pay back. So I charge interest. This way I can hedge against that risk of other loaners going bankrupt. Also without interest I wouldn’t have any incentive to lend anyone any money in the first place.

    Again, *I* carry the risk. If the loaner goes bankrupt, there’s basically nothing I can do.

    The loaner is mostly a business. This means I’d basically have a share of that business. They need to produce the interest that I charge. This is also called dividends. So interest would always be backed by dividends. Interest and dividends is essentially the same.

    The business can also make a loss. So I’d have negative earnings, negative interest in that month.

    Yes, interest could also be negative. So you see, in an honest and not corrupted economy, everything is a transparent zero sum game. No magically multiplying money. The problem today is that banks do not have to take on such losses. They get the benefits of their investments without the risk. That’s why we have socialism for the rich.

    Compound interest: another fallacy that’s often purported. If I have a share of a company, and I get dividends, and I reinvest them into the same share, what happens? The price of the share rises. Eventually it will be overvalued, and the price of the share will drop again: I will have made loss. Again, everything is correct, a zero sum game.

    There was a phase of free banking in the US when things worked like that. Banking as a service mediating between lenders and loaners. If I get more and more loaners than savers, I must raise the rates for loaners and/or lower the rates for savers. If I get more and more savers, then I must lower the rates I give to them. That way I’d always keep balances in check if my bank wants to stay alive.

    Turns out the problem wasn’t usury in this era: many banks went bankrupt. People demanded more stability, and the FED was introduced. The rest is history. Since then, the FED dictates interest rates: it’s a command economy that dictates growth without substance, mindless consumption and runaway inflation.

    We now have the worst of both worlds (soft and hard currency): Money backed by nothing, it is debt (or promises, we’re held as collateral for public debt), but they charge interest on it nevertheless.

  • billy jo mama

    And what fuels usury in America? Is it the American dream, is it the “I want it now” attitude of trying to keep up with the Jones’? Perhaps banks should not be allowed to charge interest on things like student loans and then make you sign a document that says even if you go bankrupt you still have to pay this loan off. If an education is everyones right as our politicians claim, then why does a poor or middle class student have to leverage their future cash flows and future asset allocations with dubious $100,000 dollar loans with 4.5% interest? It seems the rich don’t have to worry about that at all. I should know, I went to school with them at the University of San Diego. they come back from Spring break with new Mercedes Benz’s and rhinoplasty operations. I stay the week and work at the school to subsidize my loan repayment schedule.

  • Ian

    Makes me want to buy a gold coin

  • Ted

    The bible does not say that money is the root of all evil, it says it is the root of all kinds of evil. There is a difference.

  • jim

    great article, yes it is usury that causes many problems, you have to get rid of usury, just think america and the west would not be in the problems today if usury was abolished

  • John

    Here’s what the Jewish law says about usury: “Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.” (Deut 23:20)

    Remember when Lloyd Blankfein of Goldman Sachs said that he was simply “doing God’s work” back in Nov 2009? It is absolutely true — from a Jewish perspective.

    • Deuteronomy 23:20
      20 You may charge a foreigner interest, but not a fellow Israelite, so that the Lord your God may bless you in everything you put your hand to in the land you are entering to possess.
      Leviticus 19:34
      The foreigner residing among you must be treated as your native-born. Love them as yourself, for you were foreigners in Egypt. I am the Lord your God.
      Leviticus 25:35
      “‘If any of your fellow Israelites become poor and are unable to support themselves among you, help them as you would a foreigner and stranger, so they can continue to live among you.
      Ezekiel 18:13
      He lends at interest and takes a profit. Will such a man live? He will not! Because he has done all these detestable things, he is to be put to death; his blood will be on his own head.

  • Mayor of NYC USA

    If so called Christians would only take the logs out of their own eyes before trying to remove the splinters from their brother’s eyes they would see the truth of our world’s economic system.

    For Jesus taught “No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.”

    So just Imagine if you could as John Lennon wrote “no need for greed or hunger,a brotherhood of man”.

  • abinico warez

    Great article – kids in school need to be taught this and debate the issues – yeah, right, like as if that will ever happen. In our society, you cannot criticize usury – if you do are are accused of being an anti-semite.

  • Victor Gagnon

    A great article. I have often wondered a while back why the institutions, banks, governments, and corporations, decided to change our system of Company Pensions to a so called better system called RRSP’s. Spinning a story that this will benefit us. At the time I was sure it was to benefit them and not me but the root cause was not obvious at the time or I did not look for it. It sounded good I the time and I had no choice.
    I believe the key to your article is we have to tend to the root cause and look for it. In todays society we simply correct an effect and make new laws for that effect but never really go to the root cause and by doing that we as individuals loose our power. The root cause is most likely to do with money or power in some form or other. To really address the root cause is most likely not beneficial to those involved as the real truth may emerge. Hence a controlled society.
    Thanks Loved the article.

  • dimitri

    Islamic law forbids usury: one of the hidden or subtle reasons the West is decimating the Middle East.

  • Jct: Another great anti-usury tract though he thinks printing more money would cause inflation Shift A. So no workable solution though the problem of usury and the need to abolish it is well-explained. http://johnturmel.com/biglie.htm shows how printing more labor-backed money fights inflation!

  • Kukulkan

    Excellent article. Now if only I can get others to take a look…

  • Sue

    Great stuff. I am heartened every time I see one more article about interest and debt and why it matters so much. It’s a strange web many people don’t even seem to question or at least don’t seem to understand why there is an issue surrounding it. We need to keep talking about this 🙂

    (That verse in the bible actually says however that the love of money is the root of *ALL KINDS* of evil. Which is a little different. And makes more sense. It always seemed a ridiculous idea to me that the love of money is the reason behind serial killers, for example).

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