Two days ago, Professor Brian M. McCall of the University of Oklahoma College of Law, the focus of our last substantial post, wrote me to correct an impression my critical words may have given. Upon my request, he kindly gave me permission to post that email and my reply (of the same date). Only minor punctuation changes (a comma here, italics there) were made.
Dear Mr. Flood,
A friend recently showed me your web posting that touched upon one of my articles on usury. (Several others are available from the link below.*) I wish to reply to your criticism of my lack of critique of the Federal Reserve System. This topic was too large to discuss in a law review article with its constraints on length. The serious problem of the Federal Reserve System and its government enforced ability to create money for its own cartel profit purposes is discussed at some length (although confined to a chapter) in my forthcoming book, The Church and the Usurers: Unprofitable Lending for the Modern Economy (Sapientia Press of Ave Maria University). As will be demonstrated in my book, the combination of the abandonment of usury law with the public/private cartel of the Federal Reserve System and fractional reserve banking is the deadly tonic that has driven many of our current financial problems. I briefly allude to this topic in a footnote to Father Dempsey in the Cardozo article,** but certainly did not have the space to do the topic justice. If you are interested in this topic I encourage you to read the book which is anticipated as being available in print this summer.
Brian M. McCall
University of Oklahoma College of Law
* “To view my [i.e., Brian McCall’s] published and unpublished works or sign up for email updates of new content please go to either [here] or [here].”
Dear Professor McCall,
Thank you for the news of your upcoming book, which I expect to be very much worth reading. I am more than happy to distinguish one ethical question (the moral permissibility of entering into a contract that involves charging interest on a pure money loan) from another (the fraud of fiat money and the central bank facilitation thereof), and look forward to seeing how you approach both. I apologize if I seemed to have regarded you as guilty by association with Christopher Ferrara. May I make a post of your message to me, followed by this one? Besides alerting people to your book, it will give my visitors a sense of where the blog stands.
My blog's 85 posts examining the first part of Mr. Ferrara's book has left me allergic to the whole business of responding to defenders of empirical Catholic Social Teaching. That is unfair to writers like you. Perhaps if we were to restrict our engagement to the work of gentlemen who honor the ethics of controversy, they and Austro-Libertarian Catholics could learn from one another.
It is good to have agreement with Professor McCall over the morally problematic character of central banks, for it reduces the number of things about which proponents of scholastic and Austrian economic thought have yet to achieve mutual understanding. One of them is the ethical question of whether justice in exchange requires (in part) the exchange of equivalents, a notion that informs the footnote to which Professor McCall refers. Those familiar with the Austrian School know that it regards every economic exchange as involving a double inequality of evaluation, that is, each party values what the other is offering more highly than what he is giving up.
Another is the epistemological problem of how one ascertains whether or not there is equivalence or disparity of value between things exchanged, apart from the question of equivalence’s being a condition of catallactic justice. In his message to me Professor McCall referred to his citation, in a half-dozen or so places in the linked article, of a 1943 book by Bernard Dempsey, S.J. (1903-1960).* The work is Interest and Usury, for which Joseph Schumpeter (the Austrian, but non-Austrian School, economist) wrote the introduction. In Professor McCall’s final citation of Father Dempsey (page 610, note 287) he wrote:
Such considerations led Dempsey to speculate about the presence of institutional usury within a monetary system allowing fractional reserve banking (even before the abandonment of the gold standard). In summary he speculates that when lenders (government or bankers) can create (by printing more or lending more than deposited) the money they lend, there is no cost incurred or lost opportunity of investment (since the money did not exist before the request arises to lend, the money is not being diverted from another profitable enterprise). . . . Dempsey’s critique suggests a broader debate about the justice or injustice of modern monetary policy and reserve banking outside the scope of this article.
In the paragraph to which the above-quoted note is appended, Professor McCall wrote:
. . . due to the nature of the money at that time [of the scholastics], people assumed money would retain a relatively stable value and thus its future value was not subject to real doubt. Under the modern monetary system, there is likely real doubt that the value of money remains constant.
The logical distinction between these two topics, i.e., catallactic justice as requiring equivalence and the variability of the purchasing power of money due to the low transaction costs of designing and printing certificates (compared to mining, refining, and coining precious metals), was certainly “outside the scope of this article.” We look forward to his exploration of this and related issues on a wider canvas.
This is as good an occasion as any to address this blog’s “hiatus” status. As noted in the “About this blog” box (right column), we have left room for reasonable doubt about whether our apologetic effort is, or even has been, “worth it.” We believe that the lines of criticism indicated in our treatment of Part 1 of TCATL could help accordant efforts by others. But are there others?
It may be that resources would be better spent engaging Mr. Ferrara’s propaganda selectively (rather than seriatim) or, alternatively, ignoring him altogether (as those in the Austro-libertarian camp have generally done) and instead engage from time to time more responsible and scholarly representatives of empirical Catholic Social Teaching.
In any case, the “thrill is gone,” at least for now. Other claims on our resources grow in urgency. We’ll see how the Spirit moves us in the future.
* For an introduction to Father Dempsey’s economic thought, see D. Stephen Long, “Bernard Dempsey’s Theological Economics: Usury, Profit, and Human Fulfillment,” Theological Studies, 57 (1996), 690-706.