Usury In Our Time

by Don McCormick

Calvin Coolidge, the President of the United States between 1923 and 1929, said that the business of America is business. While that saying is not pregnant with meaning, it is an indication of a sickness which has spread to the rest of the world, and plagues the poor in our time. Mr. Coolidge rode high on a tide of speculation and investment, and he believed in the economic system built on investment with returns of money at a compound rate of interest. He was a fervent supporter of the life insurance industry. He probably thought himself to be a man like Alexander Hamilton or Benjamin Franklin. Historians treat these men kindly and regard them as wise in the disciplines of finance and the practical matters of money. But Mr. Coolidge was not like these men and he said it wrong: the business of America is not business, but usury. Business is the purchase and sale of goods to make a profit, and that is not the substance of what has been going on in our time.

While many goods have been traded for gain and loss, the vast majority of the profits have gone to the lenders and investors. Thus, business is more than Mr. Coolidge thought and more than most men believe. Its underpinning is usury and we are indifferent to it and our indifference separates us from the wisdom of the last five thousand years. The economic systems in the world depend on lending at interest, and few people complain except about the rate of interest and the time required to repay the loans. They do not say, as did the prophets, that it is wrong; only that it should be regulated by the government.

I regret having to remember what Mr. Coolidge said in the same way one would regret quoting Henry Ford on the value of history, which he said was “bunk.” However, both Calvin Coolidge and Henry Ford exemplify the kind of indifferent mediocrity which leads men to ruin. The buying and selling of goods is what people do to maintain their lives. The way in which they do that perfects or destroys their souls. If it were not convenient to use money to homogenize the exchange of goods and labor, then the misconceptions of Mr. Coolidge and those of the bankers and investors would not rule our world. The mountain does not charge for the gold. The labor of men is the value of the gold. The gold belongs to God. It is his surplus put into the garden of Eden, this earth, from the stars. It has a proper and very narrow use, as does every material gift from God. According to St. John Chrysostom, gold is to ransom captives, but that is a broader view than should be granted. In the past, gold was money, but now confidence backed by an army is money. Electronic signals in the Automatic Clearing House are money. Gold and paper notes are illusions of money.

If you take the interest and margins from savings and investments and do not turn them back into “needed goods” and “necessary labor,” you turn God’s surplus into nothing. You reverse creation. If this is done repeatedly, you will turn the earth into a barren rock and our Garden of Eden will be sucked into the black hole of space. If you become rich and the masses become poor, all labor will become meaningless. You simply cannot take from God’s surplus and keep it for yourself. It is against nature.

Corporal and spiritual works of mercy are not reserved for the religious, but are a fundamental reality supporting our existence. When we develop economic systems that undermine these works we ruin life on earth. We know that one who opposes earning interest on money invested will be regarded as a lunatic. And if one is successful in his opposition he will be locked up. This is what is happening in Latin America and most of the third world today. They suffer because their governments have borrowed from the rich and are paying back with the lives and health of their people. The reason this does not happen as much in rich countries is that their people live off of this usury, which is just labor stolen from the poor elsewhere in the world.

Usury is so ingrained in our culture that it is very difficult to show its evil. By example, I will explain something about life insurance that few people ever question, and even fewer understand. The reason to pick life insurance, instead of bank savings or bonds or stocks, is that it is more subtle and it represents a great concentration of wealth among a few people in our country. Consider, first, that the purpose of life insurance is aimed directly at a corporal work of mercy — to bury the dead. It is a good solution for people to share the costs of a funeral and the celebration of a sacrament. But in the last century, the life insurance contract became a financial tool of business. It became a way for some companies to make huge profits because the cost of death is low while the premiums people pay are very high.

Because of gross abuses by insurers, state governments began to reform and regulate the industry at the turn of the century. One of the reforms was to standardize the policy and to require companies to keep reserves. Most of the policies sold after these reforms were based on a “whole life,” which was assumed to last until age 95 ( later increased to age 100 ). During most of this century, mortality experience was taken from the 1850’s. Even after more current data was used to compile the mortality tables, there was always an overstatement of costs which resulted in greater profit margins for the companies. From the point of view of the state, that meant ” bigger reserves and safer companies.”

By the time of Mr. Coolidge’s Presidency, the life insurance industry had become rich and powerful. A few companies controlled 90% of the life insurance business. Mr. Coolidge believed what these companies believed: that “whole life” insurance was good for America. He and they were sued by a man who disagreed with the industry’s opinion about “whole life” insurance. To most people, then and now, this conflict seems absurd. But, actually, it is a basic example of how usury distorts and destroys a device which can be helpful in doing a corporal work of mercy. The contention has always been that the interest earned by policyholders in whole life contracts was too little and that information was hidden from them in the obscure language of the standard policy form: “… this policy is computed based on the Commissioner’s Reserve Valuation method using interest at 2%.” It takes about 6000 calculations to solve that problem. Consequently, the companies printed the summary answers which do not reveal their loads and surrender charges. The contenders with Mr. Coolidge and the life insurance industry wanted the “savings” element in the contract separated from the “insurance” element. That way people could buy a short term life insurance policy and invest the difference in premiums into higher-yield savings accounts.

Neither the proponents nor the opponents in this “whole life” contest were technically correct about the contract over which they were suing. Both parties were focused on the “savings” and “interest earnings” in the contract and how much of the earnings were for the buyer. In fact, in a whole life policy there is no “savings” part. It is all expected mortality expense which has been averaged over a whole life, a life assumed to last until age 95 or 100 years. The effect of averaging mortality costs over many years is that the insurance company holds an unearned premium reserve. The reserve must be returned to the policyholder if he cancels the policy before its term expires. Since the insurer holds these funds in reserve, they can invest them in government securities, mortgages, stocks, and bonds. Thus, they earn money on the reserves from usury and they reduce the amount of the reserve requirement by the present value of the future mortality costs. Only a sales minded person wanting to oversimplify this set of assumptions could have styled these reserves, which can be only partially reclaimed, as a “saving account” for the buyer.

The conversion of these reserves into buyer benefits to motivate sales has built the life insurance industry into a financial giant that controls much of the government and business of the United States. The irony of this is that life insurance is one of the tools invented by man to carry out a corporal work of mercy –to bury the dead. Instead, it has become a tool for lending and usury, and it enslaves the living. It has been so corrupted by lies and greed that it would be better to barter for the material and labor needed to bury our dead than to insure against the cost of death.

It is very difficult for us to accept that the surplus of goods in the world is already in the hands of God. What men do is move some of it under their control for a short time. When they do, they become their own “gods.” When, as “gods,” they fail to feed the hungry, cloth the naked, visit the sick, give drink to the thirsty, shelter the homeless, ransom captives, and bury the dead, they are unlike the God from whom they extracted the surplus. They ruin their lives and God’s creation. There are better and easier ways to handle our economic lives than in the systems we have accepted. These ways are known by most men already. They are manifested everywhere a need is filled by charity in the kind of poverty God wants all men to experience. It is a poverty in which men work and give their surplus to foster the lives of others. It is the kind of poverty that will make the earth into another Garden of Eden.

2 Responses to “Usury In Our Time”

  1. Emma Says:

    [W]e shall continue to have a worsening ecologic crisis until we reject the Christian axiom that nature has no reason for existence save to serve man…

  2. Don Says:

    I reject axioms, especially if they are thought to be Christian. I have a friend whose parents were killed by the Nazis and he said that the more he knew about man the better he liked dogs. I’m sure the earth and nature will continue without man for a very long time. George Carlin said it would.