A Historical Perspective On The Debt Crisis

In recent years debt problems taken center stage

. As nations have to restructure their debt and gigantic international corporations hang on the verge of collapse, it is becoming increasingly common for individuals to face home foreclosure, an individual voluntary agreement, or bankruptcy. That debt didn't come out of nowhere. It has played an important role in economic growth around the world, and as the pace of business has increased that role has only expanded.

Until the discovery of the Americas, it was illegal for Christians to practice usury, or the lending of money at interest. The only people in Europe who were allowed to practice usury were the Jews, which is one reason why that group was so unpopular and so wealthy during much of the dark ages.

The discovery of the Americas presented Christian nations with a difficult dilemma. None of the national governments had the money to fund large-scale colonization in the new world without support from the private sector. Those willing to make the voyage and take the personal risk of setting up a new colony generally didn't have the money required to fund the undertaking. Those who had the money knew that there were considerable risks involved.

Academics began to argue that some exceptions could be made in the theological rule. The return on an investment is always tied to the risks that are involved, and those who invested in expeditions to the new world were more likely to lose money than to make it. Given that (and, the academics argued, given that it was necessary for Christians to travel to and colonize these continents full of people desperate to know the one true God) those willing to lend money to colonial efforts should be entitled to earn interest.

The theology condemning usury is sound from a moral and ethical perspective. It argues, in essence, that the reasons to borrow money at interest are themselves distractions from God and should be abandoned; and it argues that loaning money at interest yokes a debtor to a creditor in a way that conflicts with the fundamental vassalage to God and the Church.

But as so often happens, economic expediency took precedence over religious thought, and gradually, by degrees, the prohibition of usury disintegrated until it ceased to play any role at all. Much of the speculation that generated fortunes in the new world was funded by interest-bearing debt, and as the Americas were claimed for the thrones of Europe the bankers settled in. A dramatic economic expansion began, which was due as much to the availability of credit as it was to anything else.

Ultimately, every dollar that's borrowed in this world has to be paid back eventually, and the economic history of the Western world has been defined by booms and busts, which have been related to other forces (the emergence of new technology or the failure of crops), but which have been accelerated and made more severe by the role of debt. What we are seeing now is the system reaching its maximum and beginning to collapse.

In some ways we are now coming to an age of reckoning, where the interest on the moral debt we took on collectively by allowing usury is now coming due. The effects can be seen in the financial struggles of national governments, in the near collapse of major international corporations, and in the fact that record numbers of people are being forced into an individual voluntary arrangement or bankruptcy.

by: coleyghenderson

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