Earlier this month, the Federal Reserve System raised its benchmark interest rate by half a percentage point to fight rising inflation, and it plans to continue these 0.50% moves over the summer. In popular mainstream media, this news will receive little more than a polite nod—disguising the complete confusion of journalists about what “the Fed” even is—before returning to news which feels more properly political: abortion, taxes, environmental regulation, war in Ukraine.
The acts of the Fed are often relegated to a “neutral” status because they are framed as a technical or scientific question. If the government needed to build a bridge, they could have a great debate about where on the river the bridge should be built, balancing all the complaints and requests of the inhabitants. But once the political questions of the bridge are settled (Where shall it go? How big will it be? Who will make it beautiful?), the ruler would be considered a fool if he opened a similar debate about how many piers were necessary to bear the weight. This task is legitimately left to an expert, in this case, an engineer, who knows the physics and mathematics to act prudently. The inputs of prudential judgment—the density of a certain stone, the speed of a certain river, the weight of a certain farmer’s vegetable cart—are fixed by Nature, not by man, and even the relativists know this. The pagans of this age admit by their deeds, if not by their philosophy, that they believe in Truth, when they draw up blueprints for skyscrapers, warheads, prophylactics, and 5G cell towers. Thus did Jesus cleverly ask of the great crowds: which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion? (Luke 14:28).
But the devil can turn this clever trick back on the City of God, and he has been known to. Whenever we consider giving craftsmen room to practice their trade, we ought only to do so when their trade is truly natural. That is, when their technical skill is grounded in a knowledge of God’s Creation and how to till and keep, or draw and drain, or hew and heap, or melt and mold it. Laborem Exercens narrows in on this point as a first principle of economic analysis:
…everything that comes from man throughout the whole process of economic production… presupposes these riches and resources of the visible world, riches and resources that man finds and does not create. In a sense man finds them already prepared, ready for him to discover them and to use them correctly in the productive process. In every phase of the development of his work, man comes up against the leading role of the gift made by “nature,” that is to say, in the final analysis, by the Creator. At the beginning of man’s work is the mystery of creation. (12:3)
However, after the Fall, the City of Man has attempted to wrest Creation away from its Creator, refusing to participate in the divine creativity, but setting itself up as a city and a tower with its top in the sky; a false god, an idol, a closed circle with itself in the center. Where can we definitively see this reversal of natural law? When a sinful deed is publicly and politically understood, decreed, and upheld to be natural. In such cases, our human reason, which is accustomed to observing the visible world and drawing conclusions about how reality functions, is deluded and turned against itself. In an idolatrous society, sins—which are metaphysically unnecessary—can seem as crucial to existence as fire and water. The sacrifice of infants to Moloch, the worship of the pagan god-king, the enslavement of foreign barbarians—these practices were not understood as merely political decisions, nor as expressions of the popular will, but as laws of nature. Just as the hearth will turn to ash if it is not fed by fresh logs, so human civilization, and perhaps the very earth itself, will collapse if the sacrifices to the gods are not continually offered.
And this brings us back to the Fed, which has recently raised interest rates by seventy-five basis points. The scope of this act is truly universal. The Mighty American Dollar is the international reserve currency; simply stated, every nation’s government is required to own USD if they want to participate in international trade. Therefore, the Fed’s regulations are regularly mimicked, and countries which choose not to get with the program are punished by global investors who want them to do so (e.g. one Financial Times headline reads, “Turkey defies warnings and cuts interest rates”).
The universal and procrustean nature of this system should ring alarm bells for Catholics, as well as any God-fearing people of good will who, knowing that “goodness is diffusive of itself,” are wary of any power which produces monolithic repetition rather than beautiful multiplicity. Though banks are known for subsidiaries, the principle of subsidiarity remains foreign to the Fed. This is unsurprising, because the Fed was commissioned to regulate a political act which is utterly undiffusive. The “benchmark interest rate” is the minimum amount of interest which one bank must charge another bank, whenever the former bank needs to increase the amount of money it places in the federal reserve or in its vaults (which all banks are required to do). This all sounds a bit too complicated for a layman, doesn’t it? Perhaps we should call in an expert? Who better to sort all this out than a well-trained economist? If the alarm bells weren’t ringing before, they should be now.
It’s in this line of sophistry that the complexity of capitalist economics confounds something as simple as sin with the inexhaustible mystery of Creation. Let us clearly pull back the wizard’s curtain: economics is not the same as physics, chemistry, or geology. These natural sciences study the things of nature: gravity, salt, mountains, all made by God. Economics, at least in the popular parlance, proposes to study money and the things measured by money: inflation, development, or gross domestic product (GDP). In other words, it studies the things of modern civilization, constructed by man. Economics is a “social” science, discerning the patterns and possibilities of how a particular society works. But while any society’s means of production and consumption can be measured, analyzed, and rendered mathematically, this research can say nothing about the moral quality of the human acts, habits, and structures it is describing. For this, we need to raise our eyes upward from our own social constructs and look towards the objective realities of the human person, such as happiness, virtue, and the natural law. Moral philosophy (or “ethics”), not natural philosophy (now rendered as “science”), is the study of these things.
The economists of the Fed boardroom see the benchmark interest rate as a mechanism to regulate the Market and the Dollar: they are entirely correct. But they have never bothered to ask an honest ethicist whether interest-taking is morally good in the first place. The answer, from Aristotle to Aquinas, is an emphatic no.
That taking interest on a loan, in their word, “usury,” is immoral is not an arbitrary private opinion, nor a product of justifying their own regime, nor even an aspect of religious revelation; it is a logical conclusion drawn from the nature of reality. The argument, unlike the capitalist economy, is quite simple. Very early in St. Thomas’ discussion of ethics (the second part of his Summa), he makes an important distinction into the meaning of “wealth”:
Natural wealth is that which serves man as a remedy for his natural wants: such as food, drink, clothing, cars [Latin: vehicula], dwellings, and such like, while artificial wealth is that which is not a direct help to nature, as money, but is invented by the art of man, for the convenience of exchange, and as a measure of things salable. (I-II Q2. A1. my emphasis)
That money is artificial, “invented by the art of man,” is obvious. There is no “natural money” which we find in the world, for every village, city, or nation creates their own monetary system. And no Christian can deny that money is not directly fulfilling, but merely a means to purchase the “necessities of life.” So it is always necessary to make sure that a monetary system, no matter how well understood by the economists, is truly ensuring the exchange of natural wealth in a just manner.
This leads us to a second distinction about possessions, which appears in St. Thomas’ question on “the sin of usury” (II-II. Q78. A1.). There are some possessions that are productive, like houses, hammers, and horses. In modern parlance, we call these “capital goods.” Because these goods continue to be valuable over many uses, the ownership of them is sometimes separated from the use of them. John may lend or rent his hammer to Peter. Peter may use it, but he does not own the hammer. He must give it back to John. The same may be true of a field or factory, a fishing boat or a freight train, but it is not true about everything. There are other possessions which are unproductive, like bread, wine, or medicine. Today, we call these “consumer goods.” As Thomas says,
…there are certain things the use of which consists in their consumption: thus we consume wine when we use it for drink and we consume wheat when we use it for food. Wherefore in such like things, the use of the thing must not be reckoned apart from the thing itself and whoever is granted the use of the thing, is granted the thing itself and for this reason, to lend things of this kind is to transfer the ownership.
The fact that the use of a baguette cannot be separated from the baguette itself lies in its very nature: it is unproductive; its purpose is not to be a tool, but to be eaten. The purpose of the bread has been baked into it. No social contract can undo this act of creation without becoming absurd. Thomas gives us an example:
Accordingly if a man wanted to sell wine separately from the use of the wine, he would be selling the same thing twice, or he would be selling what does not exist, wherefore he would evidently commit a sin of injustice.
Imagine the scene: after paying the bartender, he smiles, puts the money in the register, and hands you a second bill, rather than a receipt. “You must be mistaken,” any man would say. “I just paid!” “No, you must be mistaken. The first bill was for renting the wine. The second bill is for drinking it; after all, I was counting on you giving it back.”
Only a very drunk man could possibly be convinced. There is no such thing as “renting” wine, which is what the Common Doctor means when he says that this would be unjustly “selling what does not exist.”
Into which category does money fall? Is it productive capital or an unproductive consumer good? The answer was already stated: money is artificial wealth, created “for the convenience of exchange, and as a measure of things salable.” Its purpose, therefore, is to get rid of it, in return for natural wealth that is directly useful. (This is why the investment of money can be justified, in the right circumstances. The investor profits not from the sterile money, but from the productive “business” [Latin: societas] he has formed with a laboring friend, who transfers the money into useful things within this business. Cf. the Reply to Objection 5)
At the store, I have exchanged (digitized) dollar bills for shovels, nails, power tools, plywood, hurricane ties, and rebar; but I have never pulled out a credit card or a greenback on the job site. It would do no good. Money is utterly worthless until it has been “sunk in exchange,” as Thomas puts it. From this he concludes that
it is by its very nature unlawful to take payment for the use of money lent, which payment is known as usury: and just as a man is bound to restore other ill-gotten goods, so is he bound to restore the money which he has taken in usury.
So as the Fed raises interest rates, the most important question is not whether it will “work” to reduce inflation, but whether a system of usury, however finely tuned, is reasonable, natural, and good. There are, of course, all-too-common bromides that have dulled the Christian conscience, such as misreading the Parable of the Talents (an error which Jacob Imam has carefully responded to), baselessly asserting that the inherent nature of money has been altered since the Enlightenment, or correctly asserting that usury is “necessary” for the modern capitalist economy. To these latter two arguments, let us reconsider what has already been said above: Money is (still) not capital, and renting a consumer good is not real, at least as far as the created world—which God made to be rational, as well as beautiful and bounteous—is concerned.
It may be claimed that the social fiction of “renting money” has led to the most rapid and consistent climb of GDP in human history. This is true, but it does not make renting money—“selling what does not exist”—natural. It may be claimed that treating money as capital has created a techno-economic system that generations past would regard as magical. I do not doubt this! But it does not make treating money as capital any more conformable to reason. It may even be claimed that the “discovery” and influx of usurious loans, beginning with the Dutch Empire in the early 17th century, has worked dozens of “economic miracles” which transformed entire countries. This statement—however misleading—is not false. But it does not absolve the sin of usury, a form of theft. False messiahs and false prophets will arise, and they will perform signs and wonders so great as to deceive, if that were possible, even the elect (Matthew 24:24).
How can man’s social constructs dare to rewrite reality? Or more gravely put, how can we who fear God dare to pit our social constructs against His Creation? If the act of lending money at interest is unnatural, irrational, and sinful, then the tricks of those who theorize and uphold capitalism are like those of Pharaoh’s magicians, who were eventually taught a painful lesson about how little power they had over Creation.
Equally perverse to the act is the ethos of usury. In this and every decision to raise interest rates, or even in the decision to set 0% as the minimum rather than the maximum interest rate, the Fed is infusing into global civilization a spirit of scarcity, acquisitiveness, and covetousness. The family in need of a loan is confronted in the Market not with a gift, nor even an honest loan, but a thousand institutions looking to make a profit on their poverty. While the Fed does not directly commit usury against individual borrowers, it requires banks to borrow at higher rates, which in turn ensures that the banks commit usury more extensively, if they want to maintain their profitability for their shareholders (which is their self-stated reason to exist). The real source of the value is extracted from workers, who lack ownership, and the land, which lacks stewardship. What could be more contrary to the open-handedness of the Almighty? God created the world, gifted it to mankind, and daily makes His sun rise on the bad and the good, and causes rain to fall on the just and the unjust (Matthew 5:45). A truly human economy will act analogously to its Creator, or it will refuse to comply with the divine order of the cosmos, as did Satan. So while the sinfulness of the act of usury can be understood through natural law, per St. Thomas’ argument above, the wickedness of the ethos of usury should be clear to those who know the Father’s Love. In the words of Caritas in Veritate:
…in commercial relationships the principle of gratuitousness and the logic of gift as an expression of fraternity can and must find their place within normal economic activity. This is a human demand at the present time, but it is also demanded by economic logic. It is a demand both of charity and of truth. (§ 36:4, emphasis original)
To be clear, I am not critiquing the cunning judgment of the Fed. Raising interest rates now (as inflation grows), just as slashing interest rates two years ago (when Covid-19 created a recession), is necessary to stabilize global capitalism. Since April, Jerome Powell, Chairmen of the Fed, has been trying to sell the process as a well-orchestrated “soft landing”—but it is increasingly clear that this is code for one of the cyclical recessions which our speculative system requires in its war with reality. One can almost admire the technocratic agility of tinkering with an unwieldy world-spanning but invisible apparatus. On the other hand, it is an amusingly absurd sight: a board room of twelve men is expected to juggle roughly 7.9 billion balls.
But lest I be misunderstood, I am suggesting that the Fed, no matter how well or poorly it does its job, should itself be unemployed. Of course, this cannot be done without destabilizing or perhaps upending the world market. This will not be done by any imperial edict which comes from the “Iron Triangle” of billionaires, technocrats, and politicians who rule the world. (Unless, perhaps, the World Bank finds a new Bretton Woods-opportunity to transfer the global reserve currency to something even more abstracted from reality, which is to say, demonically deluded. God forbid we live to see the rise of the “digital dollar”!)
While we may praise in principle any attempts to curtail and regulate the rapacious interest-taking of the globalized economy, it is likely that these efforts, even at their noblest, will have an effect akin to usury laws in the pagan Roman Empire, which served to perpetuate rather than eliminate an extractive economy based on theft. What will ultimately eliminate the social sin of usury is the virtue, not merely private but political, of the saints, who lend no money at interest (Psalm 15:5). What will bring down the Fed, as with any institution of the City of Man, will be the Body of Christ choosing holiness over sin, community over cupidity, God over Mammon. Either that, or the chastisement of the Almighty, Who of old scattered them from there over all the earth, and they stopped building the city. Let us pray for the former.
Sean Domencic is contributing author for New Polity and the former editor of Tradistae. He and his wife, Monica, are involved in the Catholic Worker Movement and raising their children in Lancaster, PA. He prefers to write for free but would appreciate your support through prayer and alms. Donations can be made at patreon.com/tradistae