Economics 101: Credit and Debt – The Law of God and Public Policy

Economics 101: Credit and Debt
The Law of God and Public Policy

A just economy is not a debtor economy.

“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. You may charge a foreigner interest, but you may not charge your brother interest, that the LORD your God may bless you in all that you undertake in the land that you are entering to take possession of it.” Deuteronomy 23:19, 20

Credit—and with credit, debt—are the backbone of a consumerist economy such as that of the United States.

It is difficult to argue with the track record of prosperity which free market, credit/debt practices have accomplished over the past 250 years. The American economy has produced more wealth, and more goods and services, than any economy in the history of humankind. And it has largely been built on the extension of credit and the use of debt as a means of gaining wealth.

But as we are now beginning to discover, when material prosperity is the objective of an economic system, the use of credit and debt can quickly get out of hand, jeopardizing the wealth of the people and the well-being, not only of the economy, but of the polity as a whole.

The economics of justice set forth in the Law of God does not forbid borrowing and lending. People were allowed to borrow or lend from their personal property as they saw fit, within limits outlined in the Law of God. However, they should not expect, when loaning money, for example, to make more from the loan than they would from their own ordinary use of that money. A lender could expect a borrower to compensate him for his inability to use his resources while they were in the possession of the debtor. But lenders should not charge “interest” on such loans. There is some question among scholars as to whether the term “interest” refers to simple interest—payment for the use of something, or of money, that would compensate for the lost opportunity costs which the creditor would incur—or to usury—extracting interest beyond what is reasonable.

My own view is that “interest,” in the framework of the Law of God, probably refers to usury, which would encourage covetousness and amount to exploiting one’s neighbor, but does not preclude simple interest.

The Law recognizes what economists refer to as “opportunity costs” and expects those to be covered by the party responsible for imposing them on another (cf. Ex. 21:18, 19). When you loan money to me, it is to be assumed that the money you loan to me could be working for you, either gaining interest in the bank—which even Jesus did not discourage (Matt. 25:27)—or being used for your own personal needs. Therefore, it is not unreasonable for me, in paying back what I borrowed, to compensate you for your “losses” accordingly.

But it would be unreasonable, and unjust, of you to expect to make money on my loan, that is, beyond what borrower and lender might agree together in advance as a reasonable expectation of return. Terms of loans—of extending credit and incurring debt—were undoubtedly set case by case in ancient Israel. Loans these days are “set” not case by case but by all-comprehensive agencies such as the Federal Reserve, which uses interest rates and monetary flow to “manage” the overall economy.

In an economy defined by justice and neighbor love, those with money to lend should not be able to conspire or otherwise agree together on a “set” interest rate—or look to government to establish one. Instead, each transaction should be treated as a separate case with respect to the amount and length of the loan and terms of repayment.

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In the Gates is a devotional series on the Law of God by Rev. T. M. Moore, editor of the Worldview Church. He serves as dean of the Centurions Program of the Wilberforce Forum and principal of The Fellowship of Ailbe, a spiritual fellowship in the Celtic Christian tradition. He is the author or editor of twenty books, and has contributed chapters to four others. His essays, reviews, articles, papers, and poetry have appeared in dozens of national and international journals, and on a wide range of websites. His most recent books are The Ailbe Psalter and The Ground for Christian Ethics (Waxed Tablet).

Scripture quotations in this article are from The Holy Bible, English Standard Version, (c) copyright 2001, 2007 by Crossway Bibles, a division of Good News Publishers. Used by permission. All rights reserved.