Being excessively burdened with an overwhelming amount of debt, many Americans have resorted to cries of injustice against their lenders. Borrowed money has reached such tremendous levels that many can afford to make only the interest payment. Frustrated with the fact that no progress is being made, some accuse their lenders of usury. Any amount of interest is unjust, they say. But are they right?
When consumable goods are borrowed, justice dictates that they must be returned in full. If you loan me ten pounds of corn to feed my chickens, I must return to you ten pounds of corn. If you attempt to solicit from me twelve pounds of corn, you are guilty of a usurious injustice.
When non-consumable goods are borrowed, justice dictates that the goods themselves must be returned. If you loan me the use of your fields for my chickens, I must return to you the use of your fields. But in addition to the return of your fields, you may also justly impose a fee for the use of your fields. This is not an injustice because you gave up the profit that you may have earned from using the fields yourself. Only if an exorbitant fee is charged are you guilty of injustice.
For example, if you could be reasonably expected to earn $1,000 in profit from the use of your fields, and you attempt to impose on me a $10,000 fee, you are guilty of an injustice. But if you only impose the $1,000 fee, justice dictates that I must pay up.
Simple enough, but what if money is what’s borrowed? This requires a bit of a caveat.
Until the relatively recent idea of wealth-creation came to fruition, money was a consumable good. People would borrow money in order to buy food and shelter, and once the money was spent–it was gone. People in this particular situation would only be required by justice to repay the exact amount of money borrowed. If any interest whatsoever was charged, the lender was guilty of usury.
But now things have changed. Wealth can now be created through the use of money. This means money is no longer necessarily a consumable good. For example, if you have $1,000 to spare, you could park that money in a good mutual fund and reasonably expect to earn somewhere around 10% on your investment. But let’s say I come along and ask for $1,000 to build a chicken coop. After I build the coop, am I only required to repay the original $1,000 I was loaned? No! By loaning me the money, you gave up the profit that you would have earned had you invested that money. Therefore, justice dictates that I repay you not only the $1,000, but also the reasonable amount of interest that you could have earned. This is not usury. This is justice.
Given the same scenario, had you attempted to charge me an interest rate of 20%, you would have been guilty of usury. For usury is not simply the charging of any interest, but rather, usury is the charging of excessive and unjust interest.