What is usury? Why is it evil?

The best dictionary definition of usury is, “Interest paid for the use of money.”  Pre-Protestant  western Christianity condemned it.  So did Islam.  In fact, the rapid spread of Islam can be largely attributed Moslems “liberating” those in-debt from the usurious lenders.

From a moral stand-point, money lent for things like entertainment and personal consumption are considered usury.  Money lent for economic gain is not.  For example, you discover you have oil under your land and need to borrow $50,000 to extract $5,000,000 worth of oil — the loan is not considered usurious so long as the lender shares in the profit or loss of the venture.  Lending money to someone so they can watch a movie, go out to eat, buy a house to live in, a car to drive, or Christmas presents for their grandkids — all that is usury.

The problem is that the loans do not cause economic growth, so money must actually be created to pay-off the loan or the system collapses.  Lets use Sam & Pat as an example.

Sam & Pat are traveing across the Pacific Ocean. A storm comes and sinks their ship but they are able to swim to an undiscovered, uninhabited island.

Sam & Pat each have $100.

Sam doesn't need his money right now so he lends Pat $100 to use as he wishes: "I'd like to watch all my favorite movies!"

The terms of the loan are $100 lent at 20% annual interest over a 10-year period.  Pat doesn’t know it but he owes more money than even exists! This is an amortization table, what lenders use to calculate annual payments of principle (original loan) and interest.  Note, misspelling of principle is not my doing, it is from http://www.amortization-calc.com.

Even if Pat never spent the money, it is impossible to repay the loan -- unless he (or the island government) prints more money.

Take this and multiply it across the 308 million people in the United States.  Is it any wonder our people and our nation are bankrupt?  The only difference between Pat and the United States is the United States prints more money (by creating debt) — delaying but escalating the inevitable.  Greed will eventually cause our demise.  It’s called usury.



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2 responses to “What is usury? Why is it evil?

  1. Bernarda Oehm

    Nice piece. I really appreciate learning that part of the Islamic conquest success was due to people fleeing usury. Will there be a modern day equilivant?

  2. Elton Casebolt

    Excellent post. I was doing some research on this and you gave me exactly the information I was looking for.