"Financialization" Of The Economy Is Simply Usury By Another Name

By Ajax the Great 

(Originally posted on the True Spirit of America Party blog)

The TSAP in a previous article wrote how the root cause of virtually all of the social and economic ills of the past half-century are a result of the "financialization" of the economy.  That is, when the financial sector (often known colloquially by the synecdoche of "Wall Street" or "The Banksters") takes on a massively outsized share of the economy and effectively becomes its master rather than its servant.  This occurred since 1971 when our "leaders" in Washington basically sold out to the 0.01% financial oligarchy, and made the conscious decision to have the lion's share of all newly created post-gold standard dollars flow directly from the printing press (or more accurately, keyboard) to Wall Street rather than to We the People.  The financial sector then used such massive excess money as leverage to further consolidate their power and control over the rest of us, and as they say, the rest is history.

But of course, it actually goes much deeper than that.  Professor Richard Westra had actually written a whole book back in 2016 about the deeper root causes of all of this financialization and the extreme inequality that has resulted.  And it turns out, there really is nothing new under the sun, but rather it is simply a newly-unleashed (and somewhat more sophisticated) reincarnation of the very ancient practice of usury.  He does not mince words here:

Usury laid medieval society to waste. Western civilization was saved by the rise of capitalism, which tamed the activities of money lending, and endowed them with socially redeeming value, tethering finance to expanding production of material goods and increased social wealth. Now, as the 21st century begins, bloating tides of money with no possibility of ever being converted into real capital wash over the world. Finance again has turned to its dark side, using money to make money with no socially redeeming purpose. Such is the endgame of economies managed by capitalists without capitalism. As Marx foresaw, capitalist society, like all others, is destined to be outpaced by history as the conditions of its existence decompose and become a drag on the human future. Either we will succeed in bringing about new politico-economic structures—or civilization will collapse into barbarism, just as usury broke it down in the past.

In other words, usury (broadly defined as the charging of any sort of fees for the mere use of money, thus using money to make money) has paradoxically both saved Western Civilization from itself once, but is now devouring that very same civilization.  In fact, Westra's book is titled, Unleashing Usury: How Finance Opened the Door to Capitalism Then Swallowed It Whole.  It is not even really capitalism anymore, as this financialization has fundamentally changed the rules of the game, turning it into "casino capitalism".  It explains not only the ever-increasing inequality that characterizes the postmodern era, but also debt slavery, wage slavery, inflation, and even the inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host.  After all, without economic growth, there can be no interest payments, thus the "grow or die" paradigm reigns supreme.  All for the benefit of the oligarchs at the top.  Ellen Brown had also made similar observations as well in her book, Web of Debt, as has the American Monetary Institute as well.

Even Aristotle himself talked about it back then, and not favorably at all.  Can you say, ipse dixit?

Contrary to its proponents, usury does NOT create wealth, because it does not actually create anything of value.  Rather, it literally does nothing more than milk existing wealth, much like a casino does.  Thus, it is inherently a zero-sum game at best.  Worse, in the long run, it acts as a slow poison and ultimately becomes a wealth-destroying negative-sum game, cannibalizing the real economy over time.

After all, while banks do create the principal of a loan out of thin air every day, they don't create the interest that must be paid back, which has to come from somewhere.  And that "somewhere" is, of course, the real physical economy.  Thus results a cascade of perpetual debt, artificial scarcity, and an ever-yawning chasm between the haves and have-nots, which then gets blamed on anything and everything but its actual root cause.  But "pay no attention to the little man behind the curtain", say the mainstream economists.  Move along, nothing to see here folks....

There is thus a very good reason why the practice was banned or restricted throughout a large chunk of history, and why practically all major religions have at some point or another considered it to be a sin to one degree or another (and some still do to this day).  And only in the past half-century or so has it been allowed to proceed with almost no restrictions at all.  In 1978, for example, the federal usury cap on interest rates was lifted, followed by further deregulation of Wall Street, and again, as they say, the rest is history.

Thus, it would behoove America (and the world) to ultimately phase out the practice of usury.  Set a binding cap on all interest rates and similar financial fees that are charged to individual borrowers (but crucially, no limit on the reverse, such as savings accounts and government bonds, as that would not really be usury), say 10%, and make it a "sinking lid" that gradually drops each year until it ultimately reaches zero.  Also, phase out the practice of fractional-reserve banking in favor of full-reserve banking, by gradually raising the reserve ratio each year until it reaches 100%. Make the FERAL Reserve truly FEDERAL instead.  Bring back the ancient practice of debt jubilees as well.  And of course, reverse the deregulation of Wall Street that has occurred since the 1970s.  And finally, make it so any newly-created money goes first to We the People before it even reaches the big banks at all.

Additionally, the global scam of poorer countries being forced to borrow at interest (usually in a foreign currency, which makes it that much worse for them) from the oligarchs in rich countries, trapped in perpetual debt and thus manipulated for their resources, also needs to end as well.  Yesterday, full stop. World Bank and IMF, we're looking at YOU.

So what are we waiting for?

UPDATE:  The ever-insightful Jared A. Brock has an excellent article about the inherent unsustainability of usury (and rent-seeking in general) here as well.