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Rerum Novarum of Leo XIII

on Thursday, 01 January 2015. Posted in Encyclical letters

“A devouring usury, practiced under another form”

Pope Leo XIIILeo XIII, Pope from 1878 to 1903

Many of our readers will have noticed that Pope Francis has often been denouncing the dictatorship of money, that has become a god and taken the place of man in the center of the economy. This denunciation of the present financial system that governs us is not new, since we can find such denunciations throughout the great social encyclicals of the Popes.

In the following two articles, Louis Even comments on two of these social encyclicals: Rerum Novarum of Leo XIII (in English, “new things” or “changes,” according to the first words of the encyclical) and Quadragesimo Anno of Pius XI (in English, “forty years”, because the encyclical was written to precisely mark the 40th anniversary of Rerum Novarum).

Although recent Popes have published more than thirty encyclical letters on social issues, Pope Leo XIII’s encyclical letter Rerum Novarum on the condition of the working classes, issued on May 15, 1891, is considered to be the first major encyclical on social justice, beginning the whole series. This encyclical letter was a great light in a time when the working classes were suffering unjust conditions, which came from an industrial revolution that could, and should have been beneficial to all classes of society. Pope Leo XIII wrote, in the first paragraphs of his letter:

“After the old trade guilds had been destroyed in the last century, and no protection was substituted in their place, and when public institutions and legislation had cast off traditional religious teaching, it gradually came about that the present age handed over the workers, each alone and defenseless, to the inhumanity of employers and the unbridled greed of competitors.”

Was the goal of the “unbridled greed of competitors” to increase the standard of living of the whole population, and to increase the amount of consumer goods through industrial developments ? No. But even if some employers were inclined to be good and humane, they were bound by the requirements of the money barons behind them. Money had to breed more money, not only to allow money barons to enjoy a luxurious lifestyle, but to feed their thirst for more power over other individuals. Money was already at that time the main purpose of enterprises, which even hired children. Man existed to serve industry, and not the opposite. And industry existed to serve money.

“A devouring usury”

Just after the paragraph quoted above, there follows two lines that certainly relate to this thirst for money, but that also leave us intrigued with the use of an expression that is not precise, and that is not repeated in the rest of the encyclical:

“A devouring usury, although often condemned by the Church, but practiced nevertheless under another form by avaricious and grasping men, has increased the evil...”

What is this “devouring usury practiced under another form”? What does it consist of? Usury has been often condemned by the Church, said Pope Leo XIII, who also said that it is now being practiced under another form. What form? The average reader of Pope Leo’s encyclical may perhaps not pay attention to this issue, but he who does has every reason to be intrigued (especially back in 1891, before this expression was to be explained in another encyclical letter by Pope Pius XI in 1931, as we will see in the next article).

The form of usury often condemned by the Church was for a long time any interest on a loan of money. Then, once interest was legitimized, they called “usury” high rates of interest. At the end of the 19th century, when Rerum Novarum was written, catechisms taught that the maximum rate tolerated for interest was five per cent. More than that was considered usury.

But what about the term “usury practiced under another form” used by the Pope? Does it mean too high an interest rate? If so, of what percentage? Or is it something else, and under what form?

In a book he wrote in 1935, an English priest, Father Drinkwater, identified this “devouring usury under another form” as the monopolization of credit, which was to amount more and more to a monopolization of money-creation, although the workings of this monopolization of credit were still mysterious, at that time, to almost everyone.

Tomb of Leo XIIIUnlike most of the Popes, the tomb of Leo XIII is not in St. Peter’s Basilica, but in the Basilica of St. John Lateran in Rome. In front, two full-time Pilgrims of MICHAEL, Melvin Sickler and Alain Pilote, in Rome in 2010.

The monopolization of credit

Father Drinkwater recorded that a committee called the Union of Fribourg, in Switzerland, had prepared some elements for the drafting of Rerum Novarum, and that among the members of this committee there was at least one person, from Austria, who was well aware of the money question and of bank credit. A text that this Austrian had prepared, and that was apparently approved by the committee, showed clearly how mere bank money—which is created in banks and consists basically of figures written in bankbooks and ledgers, and which was already becoming the major monetary instrument for trade and industry —was nothing but the monetization of the production capacity of the whole community.

The new money thus created can only be social by nature (belonging to all of society), and not the property of the bank. This new money is social because of its basis: the community or society, and because it can buy any good or service in the country. The control of this source of money therefore puts in the hands of those who exercise it a discretionary power over all economic life.

This text of the Austrian expert also showed that banks do not lend their depositors’ money, but rather deposits that they create out of nothing simply by inscribing figures in bankbooks, and that when banks lend money—no account is dimished in the bank—they do not have to extract one penny from their safes. So the interest charged on their loans is certainly usury: whatever its rate—it is actually more than 100%, since it is interest charged on a capital of zero, nil—the lender (the bank) does not have to do without the money he lends; he just creates it ! This usury can rightly be described as “devouring”, since banks require creditors to pay back money that has never been created, that has never been put into circulation. (Banks create the principal they lend, but not the interest.)

It is therefore mathematically impossible to pay back all loans; the only way for the economy in such a system to keep going is to borrow again to pay the interest, which creates unrepayable private and public debts.

In an article published in the Catholic Times of May 9, 1941, and reproduced in The Social Crediter of May 24, 1941, Father Drinkwater commented on this paragraph of Rerum Novarum that talked about “a devouring usury”:

“When the encyclical at last appeared, it was in many respects based upon the Fribourg circle’s facts and findings. In one point, however (but a very crucial one), the encyclical was a disappointment to those who had hoped so much from it.

“The Fribourg group had hoped for something much more explicit in the direction of money reform. They were quite aware—especially those who came from Vienna—to the process of credit-creation, and of the evils arising from such a power in private hands.” Fr. Drinkwater then quotes the words of one of them: “If we do not succeed in transforming our actual system of credit, all other means to rescue us from the social peril will fail.”

“To say why it was left out,” continues Fr. Drinkwater, “or rather reduced to a vague condemnation of usury in a different guise, would need more research than anybody is likely to give.

What was the exact wording of this text about the monopoly of credit? One cannot know, since there is no mention of it in the encyclical. Was it suppressed in Fribourg in the final draft sent to Rome? Was it stolen between Fribourg and Rome, or between its arrival in Rome and its delivery to the Sovereign Pontiff? Or was it Pope Leo XIII who decided to put it aside? Fr. Drinkwater writes: “Somebody or something prevented it—that is all we can say for certain.”

Fr. Drinkwater goes on to point out that somehow the truth about money always has been smothered. Men like Bishop Berekeley, Abraham Lincoln, Gesell (and Douglas) became aware of what the money-power was doing, but somehow their ideas have always been pushed out of sight.

“The money-masters took care to control the sources of public authority and information, not to mention the sources of private income, and were able in a thousand ways to silence critics or make them seem mere cranks.

“Even if Pope Leo had spoken plainly, the money-power would have smothered the effect of his words. If the Pope spoke plainly about the money-power tomorrow, his words would fall dead and unheeded by the world.

“How do I know? Because he did speak plainly, ten years ago, in Quadragesimo Anno (in 1931), and nobody has yet taken any notice of that part of it except a few money-reformers, mostly non-Catholics.

“If you do not believe me, look up the various official explanations of that encyclical given by the Catholic Society which deals with such things in this country, and marvel at such skill in soft-pedalling the ‘indiscretions’ of the Sovereign Pontiff.”

This is what we are going to see in the next article, dealing with Pope Pius XI’s encyclical letter Quadragesimo Anno, in which the “devouring usury” finally had a name: “the monopoly of cr

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