The Ethics of Using Money–JÖRG GUIDO HÜLSMANN

Chapter 5 of The Ethics of Money Production

5. THE ETHICS OF USING MONEY
The Catholic tradition warned in the strictest terms against
abuses of money, but it did not deny that, if practiced within the
right moral boundaries, the use of money and the paying and
taking of interest were natural elements of human society.8
Jesus himself, when explaining the rewards given to the faithful

in the coming Kingdom of Heaven, used an illustration involving

the positive use of money and banking. He stated
that the Kingdom of Heaven would parallel the reward given
for good stewardship of money, and that hell would wait for
those who made no use of money at all. Two stewards who
used the money entrusted to them in trade and made a 100
percent profit, found the praise of the master and were invited
to share in his joy. But one steward who buried the money
given to him in the ground was severely chided as “wicked”
and “lazy.” The master pointed out that he could have turned

the money into some profit by simply putting it in a bank:
“Should you not then have put my money in the bank so that I
could have got it back with interest on my return?” He therefore
commanded his other servants to take the money away from
this servant and to throw him out of the house: “And throw this
useless servant into the darkness outside, where there will be
wailing and grinding of teeth” (Matthew 25: 26–30).
Thus the use of money and banking may very well be considered

legitimate from a Christian point of view. In any case,

in the present work we are primarily interested in the economics and ethics of producing money rather than of using money in credit transactions.9 We can therefore avoid discussing one of the most vexatious problems of Catholic social
doctrine, namely, the problem of usury. In very rough terms,
usury is excessively high interest on money lent. This raises of
course the question how one can distinguish legitimate from
illegitimate “excessive” interest. Theologians have pretty
much exhausted the range of possible answers. Some
medieval theologians went so far as to claim that any interest
was usury. Others such as Conrad Summenhardt held that
virtually no interest payment that the market participants voluntarily

agreed upon could be considered usury.
The teaching office of the Catholic Church has repudiated
the former opinion without taking a position on the latter. It
rejects “usury” but allows the taking of “interest” on several
grounds that are independent of (extrinsic to) the usury problem.10 It does not endorse on a priori grounds just any credit

bargain made on the free market. It affirms that taking and
paying interest is not per se morally wrong, but at the same
time retains the authority to condemn some interest payments
as usurious. This concerns especially the case of consumer
credit, because taking interest might here be in violation of
charity. Similarly, while interest on business loans is per se
legitimate, some business loans might be illegitimate because
of particular circumstances. Below we will follow Bernard
Dempsey in arguing that interest payments deriving from
fractionalreserve banking are tantamount to “institutional
usury.”11

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8This position was foreshadowed in Aristotle, Politics, bk. 1, chap. 9

9Nicholas Oresme distinguished three ways of gaining through money
in unnatural ways: (1) the art of the money-changer: banking and
exchange, (2) usury, and (3) the alteration of the coinage. “The first way
is contemptible, the second bad and the third worse.” See Oresme,
“Treatise,” chap. 17, p. 27.
10For an overview see Eugen von Böhm-Bawerk, Capital and Interest
(South Holland, Ill.: Libertarian Press, 1959), vol. 1, chaps. 2 and 3; John
T. Noonan, The Scholastic Analysis of Usury (Cambridge, Mass.: Harvard
University Press, 1957); Raymond de Roover, Business, Banking, and
Economic Thought in Late Medieval and Early Modern Europe (Chicago:

University of Chicago Press, 1974); and H. du Passage, “Usure,” Dictionnaire de Théologie Catholique 15 (Paris: Letouzey et Ane, 1909–1950). See
also A. Vermeersh, “Interest,” Catholic Encyclopedia 8 (1910); idem,
“Usury,” Catholic Encyclopedia 15 (1912); and Bernard Dempsey, Interest
and Usury (Washington, D.C.: American Council of Public Affairs, 1943).
A good discussion of “interesse” as compared to “usury” is in Victor
Brants, L’économie politique au Moyen-Age (reprint, New York: Franklin,
1970), pp. 145–56. Further discussion of the history of this concept is in
Ludwig von Mises, Socialism (Indianapolis: Liberty Fund, 1981), part 4,
chap. 3 and 4; Murray N. Rothbard, Economic Thought Before Adam Smith
(Cheltenham, U.K.: Edward Elgar, 1995), pp. 42–47, 79–81; Jesús Huerta
de Soto, Money, Bank Credit, and Economic Cycles (Auburn, Ala.: Ludwig
von Mises Institute, 2006), pp. 64–69.
11See Dempsey, Interest and Usury, p. 228.