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Distributivist Political Economy and MMT

Just wanted to share an insight from John Médaille’s book on distributist political economy. In the book, he distinguishes between legitimate interest and usury and this insight becomes really interesting in light of modern money theory (MMT):

“Here we must distinguish between lending for investment and usury. Investment means giving money to firms and entrepreneurs in order to expand production and increase the wealth of society. In this case, interest is merely the investor's participation in the profits; it is the ‘wage’ of the capital supplied, and the one who supplies it is entitled in justice to that wage. Usury, on the other hand, is lending money at interest to increase consumption. Nothing is added to the wealth of society, however much may be added to the wealth of the lender. Since nothing is produced, there is no valid claim to profit. Interest payments in this case merely constitute a transfer of wealth from the borrower to the lender, but no net increase in the social stock of wealth. In fact, wealth is actually ‘used up’ in this process without making a contribution to production, hence the name ‘usury.’”(Towards A Truly Free Market, Ch. 5)

Now, one of the insights of MMT is that any increase of the money supply that is not productive will be inflationary. Thus, usury, as defined here, is always inflationary and destructive insofar as it devalues the currency. By lending money at interest for consumption rather than production, the lender is not only transferring wealth from the borrower, but actually devaluing the currency itself and stealing from everyone.

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