Monday, February 09, 2009

Something my dad wrote, on money and trust

A homily by J.-N. Chabot, May 16, 2008

St James is quite stern towards the rich. On Monday we read from his letter that the rich will disappear like a flower in the field. He said: Let the believer who is lowly boast in being raised up and the rich in being brought low. It’s not that material goods don’t count… we need them to satisfy our basic human needs. Because our human bodies are united to an immortal soul, material things are necessary even for our spiritual life. Think of the sacraments, for example, we receive the graces attached to them through sensible signs, particularly in the Eucharist which requires bread and the wine. However material goods cannot become an end in themselves and St James accuses some people of doing just that. Those are the people whose main purpose in life is to get rich is order to have the power that money gives – power to buy material comfort and pleasure, power to control others.

What is money, anyway? There is another word for money which helps us to understand what it is. That word is credit – originally, credito, which comes from the Latin credere, to believe. In a way it means trust. The power of money is only equal to the trust or faith we put in it. We believe and trust that certain numbers certified as money have the power to move and acquire goods and services. When we stop believing or trusting that our money can do those things, it looses all its power. Without trust or belief, money is just a futile symbol - numbers without real power –worth no more than the paper it is printed on.

Money is create exclusively by banks or other institutions that function as banks. Those institution do a great job of creating money, but because of the way they create it, they bring about a lot of misery in the world especially in poorer or so-called developing countries. What I’m getting at is the problem of usury, or interest. The meaning of usury in the Bible and the present meaning of interest are practically identical. The practice of usury was condemned in the Old Testament and so was interest in Christian times until the Protestant Reformation. There was even a time when those who claimed that exacting interest was not a sin were considered heretics. Nowadays, we make distinctions and we call abusive interest, usury - and usury is still considered a sin. Moderate interest is tolerated.

However, there is a domain where interest is causing much havoc and suffering, especially as I indicated, in poor nations, and that is when interest is taken at the source, that is, where is created. The banks and other institutions that function as banks are the only creators of money and they create it in the form of debt – they create debt money. The problem appears when the interest is added to the debt. I’ll give you an example: Suppose I have a hen that lays golden eggs. It’s the only one in the world. I don’t sell my golden eggs, I only loan them – with interest. I lend you a dozen golden eggs and you have to pay back the dozen plus one extra golden egg for interest. Of course you don’t have a hen that lays golden eggs so you can’t pay the extra one, which means that when you pay back you dozen you will have to borrow again to pay the interest you don’t have. That interest will never be paid and will accumulate.

In practice, interest does not seem to work as shown by my example because the complexity of economic interaction hides the reality, but taken globally the result shows that this is exactly what is happening. In the world economies, even the capital remains unpaid, because the need for debt money increases as production expands. We only have to look at our national debt which is 525 billions; or that of the U.S. which is in the trillions and growing. The richer the country, the greater the debt. This is not only usury, it is slavery. (It’s surprising that some who should know better see no contradiction in this.) Creators of money don’t have to charge interest, they can be paid by other means, but it is the interest that consolidates monetary power into their hands, so they want to keep it as is. The result of all this is an ever increasing monopoly of credit, a consolidation of monetary institutions with the bigger swallowing up the smaller until the world is in the hands of a handful of worshippers of Mammon – the God of money. I am not exaggerating. Listen to what Pius IX wrote in his encyclical Quadrasesimo Anno on Reconstruction of the Social Order. That Encyclical was published on May 15, 1931 : (Yesterday was its 77th anniversary.)

In the first place, it is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few, who often are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure. (#105)

This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.(#106)

This description of monetary dictatorship may not have extended much beyond the borders of different nations at the time of Pius XI, but it is now reaching the global level. However, the unjust distribution of power favouring the rich might backfire and the words of St James become true as well as those of the Virgin Mary in her Magnificat: He has filled the hungry with good things and the rich he has sent empty away. There is spiritual symbolism in those words, but they may have their temporal meaning also. As the rich consolidate their power over money, choking the producers of real goods, e.g. family farms and local enterprises, etc. that money will become increasingly disconnected from reality, from the production of goods and services, and people will loose trust and faith in its power. The tower of Babel the rich have been building will have to be abandoned and as a result those who adhere to the Christian social doctrine will be able to establish justice for the poor and the humble.