Lending at interest

Ryan asks a good question about lending at interest, and whether allowing it amounts to an innovation. Here’s the 1913 Catholic Encyclopedia on the question. Now the 1913 has never been accused of liberalism, by anyone. Yet it concedes that the rate of interest should be determined as any other price: “In practice…as even the answer of the Sacred Penitentiary shows (18 April 1889), the best course is to conform to the usages established amongst men, precisely as one does with regard to other prices, and, as happens in the case of such prices, particular circumstances influence the rate of interest, either by increasing or lowering it.”

I have a discussion of this extremely complicated issue in my now completed book on Catholic social teaching. In a nutshell, exceptions to the usury ban, worked out by the scholastics, eventually engulfed the prohibition itself.

St. Thomas’ position on the question, incidentally, is so full of inconsistencies and contradictions that a Jesuit we all admire suggested to me that he must have realized the nonsensical nature of the prohibition, and was simply making the best of a bad situation. After studying the issue myself, all I can say is the less said about the interest prohibition, the better.

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