Zippy Catholic has been interested in usury for some time now, and I have learned a lot about it from talking to him about it over the last few years. We’ve been having a colloquy over the last few days about whether government bonds constitute usury, which he has put up over at his site (here).

The basic thing to understand about usury, at least as St. Thomas approaches it, is that usury is selling what doesn’t actually exist. Zippy tried to explain this notion to me in a horribly long thread last year over at What’s Wrong with the World. The example that finally drove it into my understanding was this:

Zippy sells Lydia a $10K bond he has written, secured only by his promise to pay principal and interest (and not by any actual assets). Lydia in turn sells Kristor a similar $10K bond that she has written, again secured only by her promise to pay. Kristor then sells Zippy an exactly similar $10K bond that he has written. Note that no change has occurred in the real wealth – the real productive capacity, the causal power – of any of the three. If any one of them defaulted, they’d all default, and they’d all be in the same situation they had been in before any of the notes were sold.

This is more or less what happened in the Crash of 08.

When the Treasury sells you a bond that is backed only by its own promise to pay, does that constitute usury? Those of you who are into this kind of thing might want to check out what Zippy has to say on the subject. I’m not quite sure he’s convinced me, but neither am I sure I yet know exactly why I feel that way. Working on it!