Being the reply of S.C. Mooney to Dr. Gary North, pertaining to Dr. North’s criticisms of Mr. Mooney’s book, Usury: Destroyer of Nations, found in Dr. North’s book, Tools of Dominion, and in various other of his essays.
To set the stage, we will hear from Gary North. (Click here to go directly to Mooney’s comprehensive reply, which is in pdf format.)
On page 716 of his book, North makes the following admission:
“No one likes to admit publicly that he was wrong in the past, but honesty requires it. For two decades, I followed R.J. Rushdoony’s lead on the question of the sabbatical year of debt release. I taught that no debt should be contracted by the debtor that is longer than seven years (Rushdoony says six years). I adhered to this in my own finances. It has cost me a great deal of money. I sold a rapidly appreciating investment property I wanted to keep because my seven years had run out, and I did not want to pay $45,000 cash to pay off the loan. I have paid off other real estate investment loans in the seventh year. I stayed out of other real estate investments I really should have made. I did my best to honor in practice what I had taught in theory. God holds us responsible for obeying our own interpretations of His law, even when we have misinterpreted the law. This is how we learn to obey. This is also how we show Him that we are serious about being covenantally faithful. But now I realize that I was wrong in my interpretation. I no longer wish to mislead people.
I was forced to rethink my position by S.C. Mooney… Mr. Mooney’s book offered a challenge to me. He observed, correctly, that I had previously argued that the interest-free loans of the Bible were (and are) charitable loans. I have always argued that business loans were (and are) loans of a completely different ethical and judicial character, and therefore lenders can legitimately ask for an interest payment. But I had also said that no loan beyond seven years is valid. He quite properly called me to account. If Rushdoony and I appeal to Deuteronomy 15 in order to defend the seven-year (or six-year) maximum on all loans, yet Deuteronomy 15 is also the basis of our arguing that morally compulsory loans – zero interest loans — are unique, then we are mixing our judicial categories.
He asked: ‘Why do they not hold that only the debts of ‘poor’ brethren are to be cancelled, and [thus] infer from this that it is lawful for one to continue to exact the debts of the ‘rich’? The present writer agrees with their views concerning the remission of debts, particularly as cited above.’ When I read that, I instantly changed my views. In the twinkling of an eye, I abandoned my old argument that there must be a seventh-year debt cancellation by civil law. Mooney is correct: either Christians must accept the fact that there is no biblically valid judicial distinction between charity loans and profit-seeking loans, and therefore no biblically legitimate economic distinction, or else we must interpret Deuteronomy 15 exclusively in terms of charity loans. Either all loans are to be zero-interest loans, or else charity loans alone are under the temporal restrictions of the sabbatical year principle. Thus, from this point on, I will argue, to cite Mr. Mooney, that ‘it is lawful for one to continue to exact the debts of the rich.’”
We now turn to North’s Appendix G.
LOTS OF FREE TIME: THE EXISTENTIALIST UTOPIA OF S.C. MOONEY
Consider the economic logic offered by any promoter of a zero-interest economy. As I have argued in Chapter 23, he is the economic world’s equivalent of the self-proclaimed scientist who insists that a perpetual motion machine is legal. But the promoter of a zero-interest economy is really far worse: he is like a crackpot physicist who insists that only perpetual motion machines should be legal. He is the classic defender of something (the use of an asset over time) for nothing (no rental fee). He says that you can construct an honest, fair, and productive economy by making interest payments illegal. Again, let me apologize in advance for filling up space in this commentary with arguments against nonsense. If this nonsense, or nonsense quite similar to it, had not been offered in the name of the Bible for about a millennium and a half, I would not bother to comment on it. Life is too short, and this book is too long. But the lure of crackpot theories of interest has been with us for a long, long time; first, under the authoritarian rule of clerics in an era before economics was an intellectual discipline, and second, under the hoped-for rule of amateurs who resent the very thought of economics as an intellectual discipline, and who have therefore never taken an economics course in their lives.
Before I begin my analysis, let me also say that in one sense, it is legitimate to call for a restructuring of economics by revising interest theory. In fact, it is imperative. Bohm-Bawerk’s path-breaking History and Critique of Interest Theories (1884) certainly set forth economic principles that were instrumental in making possible a major revision of economics. But let me also say that it is insufficient to offer a new theory of interest - or even a revived version of Aristotle’s theory, dressed in swaddling clothes - without restructuring all of economics. Like value theory and price theory, interest theory is at the heart of economics. In fact, price theory apart from a theory of interest is dead before it begins. It does no good for a self-proclaimed economic revolutionary to offer a wholly new theory of interest and then not explain exactly how his interest theory is “to be integrated into the whole of economics. The economist must show that economic reasoning as such is still possible in terms of his proposed interest theory. This is what Bohm-Bawerk did a century ago. This is what not even one of the zero-interest theorists has ever attempted.
I do not believe that a person has to earn a Ph.D in a particular field in order for him to have an academic impact in that field. I do believe that a person needs to demonstrate the same degree of intellectual self-discipline and accomplishment that a Ph.D degree requires before he thinks himself competent to restructure the whole world from behind his computer. It is not the formal degree that counts; it is the years of thankless work in the shadows that are required to produce a successful paradigm shift. It is this price that the monetary cranks are not willing to pay. They offer us half-finished blueprints for 80-story skyscrapers, before they have built a tree house, and then demand that the world’s architects give them a polite hearing. And Christians wonder why we are not taken seriously.
Mooney on Money
I have in my possession a first edition paperback book by a self-identified Christian Reconstructionist, Mr. S. C. Mooney. Mr. Mooney calls for an economically just world which is devoid of both rents and interest payments, just as John Maynard Keynes did. Since I have responded to the main thrust of his arguments in Chapter 23, there is no need of going over the same material. We need to go right to the “soft underbelly” of his critique of interest.
Mooney insists that from a biblical perspective, “it is not lawful for one to sell the use of his property (rent).” If a person has money at his disposal, he faces a decision: What is the most productive use of this capital? Say that he does not want to manage his investments actively. He wants to spend his life doing other things. He therefore decides to buy an economic asset which he expects will produce a stream of future income. He could buy a piece of real estate that he expects will give him a return of x per annum (“net, net, net”) after he delegates management responsibilities to a professional. He could also deposit the money in a bank. How much will the bank have to offer him in order to persuade him to make the deposit? Assuming that he expects no entrepreneurial profits from the appreciation of the real estate, the bank will have to offer him something in the range of xxx. Why? Because in each case, the bidders – the property seller and the banker – are in the market for his money. They must offer competitive bids, as with any auction. They bid in terms of a promise: so much future income per annum. This competitive bidding process is why the economists have long concluded that the rate of interest on a money loan produces a percentage rate of return that will be competitive with a comparably risky investment in income-producing real estate. In short, interest income equals rental income on a competitive free market. So, Mr. Mooney’s argument against the biblical legitimacy of interest income lives or dies with his conclusion that income from rental property is also prohibited by the Bible. If rental income is allowed, then there seems to be no economic reason why interest income from a collateral-secured loan is not also allowed.
Mr. Mooney’s conclusion is in direct opposition to the economic terms of the jubilee year, which specified that anyone could lawfully rent his life and his property to another person for a period of time. In other words, a buyer could lawfully contract with a seller for the latter to supply him with a stream of income – labor income or agricultural income. In either case, when a kinsman bought the land or the person out of bondage (the contract), he had to ‘pay the leaseholder a pro-rated price based on the number of years remaining until the jubilee year. This, it should be obvious, was a rental contract. Not-only was it legal, it was legal even for unbelieving resident aliens to buy up to 49 years of future labor services from poverty-stricken Hebrews or 49 years worth of agricultural income.
If thy brother be waxen poor, and hath sold away some of his possession, and if any of his kin come to redeem it, then shall he redeem that which his brother sold. And if the man have none to redeem it, and himself be able to redeem it, then let him count the years of the sale thereof, and restore the overplus unto the man to whom he sold it; that he may return unto his possession. But if he be not able to restore it to him, then that which is sold shall remain in the hand of him that hath bought it until the year of jubilee: and in the jubilee it shall go out, and he shall return unto his possession (Lev. 25:25-28).
And if a sojourner or stranger wax rich by thee, and thy brother that dwelleth by him wax poor, and sell himself unto the stranger or sojourner by thee, or to the stock of the stranger’s family: After that he is sold he may be redeemed again; one of his brethren may redeem him: Either his uncle, or his uncle’s son, may redeem him, or any that is nigh of kin unto him of his family may redeem him; or if he be able, he may redeem himself. And he shall reckon with him that bought him from the year that he was sold to him unto the year of jubilee: and the price of his sale shall be according unto the number of years, according to the time of an hired servant shall it be with him. If there be yet many years behind, according unto them he shall give again the price of his redemption out of the money that he was bought for (Lev. 25:47-51).
Mooney’s Strategy of Avoidance
It is worth pointing out that Mr. Mooney’s book includes comments on Leviticus 25, but only on verses 2-7, 15-16, 35-37, and 39-45. He scrupulously avoids mentioning verses 25-28 and 47-51 – verses that absolutely refute his conclusion regarding the supposedly biblically illegitimate nature of rental income. He freely admits that the economists are correct, that rental income is the same as interest income — a payment for the use of an asset over time, said Bohm-Bawerk, whom he quotes favorably on the question of the equivalence of rental income and interest income– and then he tries to justify his universal condemnation of interest income by laying down an equally universal condemnation of rental income. The problem is, the Bible clearly honors the legitimacy of rental income: a stream of income, either labor income or land income, which one receives when he purchases an income-producing asset for cash (i.e., capitalization). Mr. Mooney’s answer to this dilemma is simple and direct: he refuses to cite that portion of the Bible that categorically destroys
his argument. So, he says, it is immoral to collect income from any form of property. While Mr. Mooney is sufficiently astute tactically not to spell out the implications of this statement - in this regard, he follows the lead of his predecessor, Mr. Keynes - what he really means is that it is illegal biblically to seek a positive rate of return by loaning someone money to buy a house, and it is also illegal biblically to rent him a house. You are morally obligated to give him the use of the loan, interest-free, or the use of the house, rent-free. This is the economics of love. It is also a classic crank prescription for creating a society of homeless people. Sadly, this book is being read by otherwise intelligent Christians who are not used to following a complex chain of economic reasoning, so this broken chain of economic error impresses them.
He wrote the book specifically to refute me, as his footnotes and text reveal. He has read (but has not understood) my view of time preference as the true origin of interest. He recognizes that I am following Bohm-Bawerk and Mises on this point: that there is always a discount for cash when you purchase an expected stream of future services. People discount the present value of expected future goods in comparison to the same goods in the present. Because of this, no rational person will pay a thousand ounces of gold, cash, for that hypothetical gold mine.
The “Present” Is Mostly in the Future
Mr. Mooney argues that there are no future goods but only present goods. In one sense, he is correct. I would put it this way: “The present is all that any man can be certain he has, moment by present moment.” He puts it this way: “Future goods do not exist. There are only present goods in external reality.” The author believes that he has somehow refuted the concept of the inescapable discount applied to future goods. He has not. Future goods are not real in the present, he says, so therefore they do not command a cash price. He does not recognize, for one thing (among many, many others), that this non-existence of future goods is a very good reason why there is always a risk premium in free market interest rates: the promised future goods may not actually be returned to the lender. Instead of acknowledging this obvious fact, the author concludes: “Since the contemplation of ‘future goods’ is characterized by idealism, one may not actually compare ‘present goods’ and ‘future goods’ for purposes of economic calculation. The preference that is dictated by the discount of the ‘future goods’ cannot be avoided because one cannot possibly call upon an idea in his mind to serve a purpose that only a concrete object can serve. This is the economics of love. It is also the economics of incoherence. To the extent that I can make any sense of this argument, I think he is saying that future goods, not being physically present, are therefore irrelevant for present decisions. So much for the biblical doctrine of eternal judgment in the afterlife! Mr. Mooney regards the concept of future goods in much the same way as the covenant-breaker regards the concept of eternal punishment. “If it ain’t here now, it ain’t relevant now.” This is a fanatical form of present-orientation, the outlook of the lower-class individual. He makes himself as clear as he can on this point: “The point is that ‘future goods’ vs. ‘present goods’ presents no real choice. The two cannot be compared in value as though they were different quantities of the same class of goods. In truth, the choice of goods for meeting one’s needs is a choice of presently available goods. One present good compares only to other present goods.” The clearer he becomes, the more preposterous he sounds.
What’s the Point?
Fact: the present moment – a “point in time” – is as philosophically and operationally undefinable a phenomenon as a Euclidian point (an infinitesimal, no-dimensional section of a sequential phenomenon, a line). The fact is, we really cannot fully describe the pure instant in time that we call “the present.” Anyway, I cannot, and surely Mr. Mooney does not attempt to do so in his book. What we call “the present” is in fact the relatively more immediate future. I cannot do everything I would like to do right now, including offering you a precise working definition of “right now.” I have to pick and choose my decisions through time. I must order my choices: first, second, and third in the future, and even this ordering process takes time. Therefore, when I make a decision regarding the present cash value of any good, I make this evaluation moment by moment as I move through time. I make it in terms of whatever value I place on a future stream of services or pleasures that I expect to receive from the physical or the contractual item. The “front end” of this stream of future services is close at hand; how long it will continue to flow is guesswork. The initial flow of services may in fact be somewhat removed, as indicated by the warning in the fine print on the side of the box, “some assembly required.” The beginning of that expected flow of services may be a day away or a week away or a year away. The point is, there is just barely a “how” in any economic decision. There are only present expectations of varying degrees of the future. So, contrary to Mr. Mooney, who insists that there are no future goods in the present, I insist that from a rational decision-maker’s point of view, there are mostly future goods in the present — and this “mostly” is very, very close to one.
Infinite Interest Rates
If everyone were to conclude that the expected future stream of services provided by physical goods is irrelevant for present economic calculation, as Mr. Mooney insists that it is, then free market interest rates would approach infinity, for no one would voluntarily give up present goods for the sake of receiving economically “irrelevant” future goods. Also, the price of durable capital goods and durable consumer goods would fall almost to zero, for no one would value them for the sake of their expected future productivity, meaning any expected value three seconds away. Or two seconds away. Or a split second away. In short, we would say goodbye to civilization. This is the “economics of love.” It is also the economics of existentialism: the philosophy of the autonomous moment.
Decapitalization
I single out Mr. Mooney’s analysis because he is the only person I have ever seen who so forthrightly confronts the issue of time preference in his denial of the moral legitimacy of interest. He offers economic nonsense — incredibly naive nonsense — in his attempted denial of time preference in human action; to oppose the Fetter-Mises view of interest is necessarily to argue nonsense. It is the stark reality of Mr. Mooney’s nonsense that is so impressive. He makes it clear that if you refuse to go with Mises on the question of time preference, you logically must wind up with Mooney’s view regarding the economic irrelevance of the future. If society were to adopt Mr. Mooney’s view, and then attempt to enforce it by civil law, it would recapitalize itself. Rushdoony’s eloquent explanation of capitalization and his warnings regarding decapitalization should be taken seriously: we must choose between Christianity and existentialism.
Capitalization is the product of work and thrift, the accumulation of wealth and the wise use of accumulated wealth. This accumulated wealth is invested in effect in progress, because it is made available for the development of natural resources and the marketing of goods and produce. The thrift which leads to the savings or accumulation of wealth, to capitalization, is a product of character. Capitalization is a product in every era of the Puritan disposition, of the willingness to forego present pleasures to accumulate some wealth for future purposes. Without character, there is no capitalization but rather decapitalization, the steady depletion of wealth. As a result, capitalism is supremely a product of Christianity, and, in particular, of Puritanism, which, more than any other faith, has furthered capitalization. Today, however, the mood of modern Western man can best be described as existentialist. It subscribes to a philosophy in which the “moment” is decisive. It is not future oriented in that it does not plan, save, and act with the future in mind. The existentialist demands the future now. Some of the causes which concern student rebels may be valid, but their existentialist demand that the future arrive today make them incapable of capitalizing a culture. Existentialism requires that a man act undetermined by standards from the past or plans for the future; the biology of the
moment must determine man’s acts.
Very briefly stated, existentialism is basically lower class living converted into a philosophy. It is, moreover, the philosophy which governs church, state, school, and society today. The “silent majority” has perhaps never heard of existentialism, but it has been thoroughly bred into it by the American pragmatic tradition of the “public” or state schools. Our basic problem today, all over the Western world, is that Western civilization no longer has a true upper class at the helm. Future-oriented men no longer dominate society, politically, economically, religiously, educationally, or in any other way. Instead, dreamers who are basically lower class, who believe that political power can convert today into tomorrow, are in charge. The result is the domination of our politics by an economic policy which is the essence of the lower class mind and which leads to radical inflation. Spending today with no thought of tomorrow is a lower class standard, and this is the essence of our modern scene.
The vocal minority and silent majority are both deeply in debt, and they create national economies which are deeply in debt. The growing anarchism of our social life is a product of this same lower class mentality. This popular anarchism is a refusal to submit to law and discipline, and unwillingness to accept any postponement of hopes and dreams. It is closely related to tantrums of a child who demands his will be done now. Every major social agency today, church, state, school, and home is dedicated to creating this anarchistic, lower class mentality.
Mr. Mooney’s view of time-preference is existentialist and lower class to the core. He no doubt fails to understand this. His recommended policies would destroy civilization. He no doubt fails to understand this, too. Such is the fate of the compulsory economics of love. The road to economic hell is paved with good intentions.
He says that my views are incorrect because I rely on the Austrian School economists for insights into time preference. Were he more familiar with the history of economic thought, he would recognize the origin of his own ideas: the worst of Aristotle and the worst — economically, I mean — of John Maynard Keynes.
Conclusion
Every new movement that calls for a transformation of thought or culture will attract its share of fringe figures. The more publishing-oriented it is, the more it will attract people looking for the bogus immortality that the printing press appears to provide. I call this phenomenon the graffiti syndrome. It is the same temptation that persuades people of more limited literary aspirations to carve “John loves Mary” on public school desks, or limericks on the inside of lavatory doors. The Fabian movement in England is a good example of the sometimes fatal attractiveness of publishing: occultists, vegetarians, free love advocates, feminists, and screwballs of all varieties were drawn to the Webbs like midnight moths to a candle. All of them were looking to become part of the “wave of the future.” Only a few of them survived the test of time, to become remembered as the founders of yet another failed social religion.
Anyone can hang out a sign which announces that he is a Christian Reconstructionist. There is no licensing required. Not very many people choose to do this, since to join the tiny band of theonomists today is to become a modern-day John the Baptist, typing in the wilderness. But what should make a reader more than a little suspicious of anyone who claims to be a theonomist is the promoter’s narrow range of concern. Specialization is legitimate, but anyone who claims that he is offering a revolutionary blueprint for this or that aspect of society had better also offer at least a first draft of the overall integrated plan. The old rule of ecology is true: you cannot change just one thing. You cannot reconstruct just one aspect of society, or just one aspect of an economy. For example, if you suggest a zoning code that makes sewers illegal, you had better strongly recommend the installation of septic tanks; otherwise, you can expect considerable overflow problems. I perceive that Mr. Mooney is drowning in overflow.
Again, I do not expect any society to adopt Mr. Mooney’s baptized Aristotelianism. If it does, it will not remain productive very long. What does concern me is that a lot of well-meaning Christians will take such nonsense seriously, assume that it is “truly biblical” economics, and then try to “spread the gospel” of crackpottery in the name of Jesus. This would be an embarrassment to the kingdom of God generally and Christian Reconstruction specifically. We Christians are already regarded as otherworldly dreamers. Let us not provide additional ammunition to our enemies. But if you’re not convinced by the logic of my presentation, I’d like to borrow a few ounces of gold from you, interest-free, for ten years. Drop me a letter.
Click here to download Mooney’s reply in pdf format. If there are any questions or comments, Scott would like to hear from you. Send an email to scmooney{at}parakrisis{dot}com.
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