Realism, on the other hand, argues that we could not impute even our notional values to real things unless there was something really out there and inhering in them that formed a fitting hook for our evaluations. We could not value the bike in respect to our purposes (so as to ascertain how much, e.g., we were willing to bid for it) if it was not really valuable as a bike – if it did not really have the valuable causal powers of a bike (this in just the same way that we could not evaluate the velocity of an object with respect to our inertial frame unless it really did have the inertial properties it has).

I should note that a potentiality does have ontological reality. It doesn’t have actuality, that’s all.

Simple. Stop enforcing deficiency judgments, as I proposed here. Problem solved, and watch all the usurers squirm.

I don’t really understand the difference you are drawing between a bank deposit and a bond.

There isn’t a difference. I’ve tried to explain to my readers who don’t understand corporate finance that the “cash” they “put in the bank” isn’t really cash put in the bank. But if you grokk corporate finance then yeah, a bank deposit is basically a bond or bond-like contract.

There are a number of common mistakes made about usury, mostly because it is (wrongly) considered to be some esoteric relic that doesn’t apply today. The most common mistake is the classic “usury means unfairly high interest”. But an even bigger, unspoken one is the notion that if usury (understood as charging interest for any mutuum, loosely but too broadly translated as “loan”) were not enforced then large, successful, prosperous economies would not be possible. Quite the contrary is the case, as Kristor observes in his more recent post.

I think the distributist wing of reaction sees the assumed draconian nature of the prohibition of “usury” – all interest charged on any kind of loan whatsoever – as a feature not a bug, because they have a bit of an understandable axe to grind against the material prosperity of modern economies and accompanying hedonism. But they are wrong about usury and about fiat currency. Usury ultimately causes economic misery not flourishing, unfairness not justice; and fiat currency is more honest than commodity-backed currency, for reasons I’ve covered before.

Thanks, I think I’ve got you. When you say that “money is not real”, you mean money “in the narrow sense”, i.e., cash or base money.

Bank deposits, money “in the broader sense”, can be real subject to the qualifications we’ve discussed.

But central banks are just a special type of bank, at the end of the day. Everything that we’ve said with respect to banks can also be said of central banks. Central bank liabilities like cash and bank reserves are backed by central bank assets like collateralized repo loans to the banking sector. Cash isn’t really the “pure bubble” with no inherent value beloved of economic theory.

Deposit holders are generally guaranteed in the event of default by deposit insurance schemes, up to a certain extent, to prevent bank runs. Beyond that, I’m not sure where depositors stand relative to the other creditors of the bank. Presumably, the are quite high, which is why you only make the risk free rate on deposits. But I have to admit that I’m not sure about that one.

Still, you have a claim, right? I don’t really understand the difference you are drawing between a bank deposit and a bond.

I do. A bank deposit is denominated in dollars (or whatever local currency); but it is not cash. It is a part of the capital structure very much like preferred shares, differing only inasmuch as preferred shares generally convert to common shares one their preference clauses have been satisfied while bonds are fully disposed of once principal and interest have been paid. This is not usury to the extent that the bonds are nonrecourse, that is, are secured only by real assets specified on the books and nothing more. That was the whole point of this post.

It becomes quite complex to analyze in the context of pervasive usury, because often enough “assets” specified on the books are themselves contracts. So we have contracts for contracts for contracts … none of which is usury as long as the complex contract chain fully terminates in actual and specific property claims to ontologically real things.

So again, you always have to ask “what happens when the contract winds up?” in order to determine if a given contract is usury. If it terminates in open ended claims upon persons to come up with money or assets, it is usury. If it terminates in property claims to specified real assets, it isn’t usury.

(Mind you, the fact that it isn’t usury doesn’t mean it isn’t unjust for some other reason. But usury qua usury fundamentally rests on renting out assets which don’t exist).

Money – unlike a share of AAPL – is not a contract representing ownership of specified ontologically real assets.

That said, anything can be used as a token for money. Used qua money it is morally wrong to charge usury no matter what token is used. See Aquinas’ objection 6 already linked.