A Biblical Model For Lending, Debt, and Interest

Money. There just never seems to be enough of it. “If only I had more,” says the consumer. “Then I would not have to wait until next year, or even five year’s time, to buy what I want.”

The sellers say the same thing, “If only consumers had more money they would buy now and I would not have to wait one or five years to make a sale.”

In steps the government: “We’ll solve the problem for everyone. We’ll just print more money.”

“But that’s inflationary,” argues the consumer. “It means prices will go up and I’ll have to pay more.”

“Great,” says the supplier. “Prices can go up and I’ll get more money. And so long as my prices go up more than my costs, I’ll be ahead.”

So the government complies and the printing presses manufacture more money. Prices rise, so they crank out even more money. For how long? No one knows. We do know, however, that one day boom conditions created by printing more money come to an end. Then recession.

Now there is a way of resolving this, it seems. Instead of manufacturing notes and coins, it is possible to create money (i.e., purchasing power) in the form of credit. No notes; no coins; just bookkeeping entries.

But prices continue to rise and even more credit is needed to keep the wheels of commerce turning. Consumers don’t want to wait until they save for purchases, suppliers don’t want to wait until consumers save, and soon everyone has a vested interest in keeping the credit-making machine alive and well on planet earth.

It is estimated that as of January 24, 2004, the amount of U.S. debt per person was $23,928.58. The national debt is presently climbing at the rate of close to $2 billion per day. And this, it is assumed, is the way to bring future purchases into the present, making wealth for all.¹

Conservative economists tell us we are in danger. Others support the credit expansion as the way to wealth, especially as a means to stave off any serious recession. This only means, however, that we cannot rely on economists, even conservative ones. For even some of them warn of the dangers of debt on the one hand while with the other they encourage us to take on debt as the way to wealth. Contradictions don’t help.

The current unemployment changes should warn us what is happening. Jobs paying $60 an hour in the U.S. are going to India where workers get $10 an hour. And credit expansion has played its part in causing these wage anomalies. For expanding money, either in the form of notes and coin or credit, will surely lead to higher prices. That much the economists have correct. And so, in the West, we’ve so inflated our money and our prices that now foreign workers can underbid us anytime they like and they still get to make a living in the home country.

The economists, however, will not solve our problem of money and credit, no matter how hard they try. At the end of the day, the only reliable guide we have is the Bible, and the Bible just happens to have some guidelines on this perplexing issue of debt.

Lending
Lending and borrowing go together. Just like love and marriage, you can’t have one without the other, as the old song says. In the Bible, there are some guidelines for lenders. First, it is imperative that we help our neighbor (Lev. 25:35-37). Sometimes, lending is the way to help.

Second, in Israel there was an important limitation on the lending period, with a release of the debt in the seventh year (Dt. 15:1-11). It is frequently argued that this passage means borrowers should not borrow for more than six years. But that is not what the text argues here. This is a limitation on the lender, not the borrower. It is the lender who is to release the debt in the seventh year, not the borrower who is to pay it all back by that time.

At the same time, the lender cannot use the seventh year release law as an excuse not to lend. He is to help his neighbor as best he can without any requirement for economic gain. And, in fact, since all loans were to be forgiven every seven years according to a preset calendar, there was a real possibility of economic loss if a loan was given out in the sixth year. One assumes here the size of loans would vary as the time to the release year diminishes. But the principle taught here is clear: there is to be a release of debt in the seventh year. No scope for a 25-year mortgage here.

Debt
The other side of the lending equation is the borrower. If there is no outright prohibition against being in debt in the Bible, there is certainly no encouragement to take it on. “Owe no man any thing,” is pretty clear (Rom. 13:8). So too is the idea that debt is slavery (Pr. 22:7). Put that alongside 1 Corinthians 7:23 where we are told not to be slaves to men and it is obvious that the Bible does not encourage us to take on debt, and certainly not as a means to overcome our impatience when we don’t want to wait for a new house, car, washing machine and so forth.

Of course, what is meant by not being in debt is complicated. The Bible elsewhere (e.g. Ex. 22:15) seems to allow for the hire of economic goods. Some have therefore concluded that if it is acceptable to rent a house, then it is acceptable to rent money (i.e., borrow). Some have even argued that since providing for basic necessities is an obligation, (e.g., paying rent if we don’t own a house, or providing goods for which we take a prepayment) then any prohibition on debt is not valid. But the borrowing of money as an economic transaction carries with it one important difference. When we rent a house, we take the house and return the house when we’ve finished. It is the same if we rent a vehicle for a period. But when we rent money we turn that money into something else. We do not return the lender “his” money, since we don’t identify money in this way. We do, however, return “equivalent value” in money.

Is the Bible saying we should take on no obligations at all? The Old Testament required the payment of wages daily (Lev. 19:13). Today, businesses accrue debts to employees that may be fourteen or thirty days long, sometimes much longer. There is no encouragement here for employers to accrue debts to employees.

Businessmen like the prepayment of goods and services because they think that helps their cashflow. If prepayments are accounted for correctly, however, it will not help cashflow at all since the money will only be called down as goods are supplied. In short, prepayments should not be available as advance payments but held in trust until the goods are supplied. Correct accounting does not make prepayment a debt; it’s an asset unavailable for use until goods are delivered.

It is hard, then, to find in the Bible any encouragement to take on debt, especially long-term debt.²

Interest
The Bible limits usury, or interest, in an unusual way. We may not charge interest to the poor (Ex. 22:25), but neither may we charge interest to a brother (Dt. 23:19-20). Now if a brother means a fellow Christian, then who do we classify as Christians? Those who go to our own local fellowship? Do we think all Presbyterians, Baptists, and Charismatics are Christians? How about those who have been baptized in the name of the Father, Son, and Holy Spirit, which would include a lot of people who are not Protestants, or even who are not faithful, professing believers? We find it difficult to solve the question, let alone work out who can legitimately be charged interest.

It is often suggested that John Calvin provided a theological justification for the charging of usury to everyone. Calvin’s position, however, appears somewhat ambiguous. For example, he argues on the one hand “there is no scriptural passage that totally bans usury.” This is true, but the issue at stake today is not whether there is a general ban on usury, but whether there is any ban at all on the charging of usury. The Old Testament did not place a total ban on usury: it allowed usury to be charged to non-brothers.

While Calvin does not argue against usury on Biblical grounds, he nevertheless attempts to put moderation on the charging of interest. He prefers that “usurers were chased from every country.”³ Nevertheless he is not willing to place any prohibition on charging usury. He is careful to place the emphasis on Christian charity and moderation in our dealings with others.

Using Calvin on the topic is risky when the following words are taken into consideration. “I conclude now that we must judge usuries not according to some certain and particular sentence of God, but only according to the rule of equity.”⁴ In fact, Calvin is even more precise on one issue: that the Old Testament is no longer to be taken as the standard for determining the answer to the issue of usury. Instead, Calvin posited a new standard, that of “equity.” Thus, Calvin says, “It is well known that usury was forbidden to the ancient people. But at the same time, we must confess that it was a part of the judicial law which God appointed for the Jews in particular; whence it follows that usuries are not to be condemned today, save wherein they contravene equity and brotherly union….”⁵ Equity and brotherly union? Whose version of these? That is the key question once we depart from the words of the Bible.

The limitation on usury is clear. What is not clear is our acceptance of the Old Testament. This is a problem I have highlighted in other essays in the Chalcedon Report. Contemporary Christianity has yet to figure out a consistent hermeneutic of interpreting the Old Testament in the New Testament era.

The charging of interest, however, is often thought of in terms of retaining purchasing power. If I lend $100 and inflation makes this worth $90 a year from now, then to charge $10 interest maintains the purchasing power of my money. But this is not the kind of society the Bible imagines. It imagines a society where money is “hard” money, gold and silver. The bureaucrats cannot inflate this. In a stable money society, the lending of money would increase the goods and services available. This drives down prices as the goods and services compete for the money that is available. A lender would therefore find his lending would brings him — and everyone else — an improvement in the purchasing power of his money. Usury is not needed as a mechanism to maintain purchasing power.

In the meantime, to argue that since we don’t live with stable money we need to charge interest, is suggesting that in order to make something wrong we need to do something else the Bible discourages, as if two wrongs will somehow make a right. We cannot, however, fix the problem of our monetary system by the charging of interest. All we would do is exacerbate the problem.

Inflation
To complete our thinking on this topic of credit, we must stop and pause on the Old Testament requirement concerning weights and measures (Lev. 19:35-36). This has correctly been applied to the idea that we should, as far as humanly possible, maintain the value of our money. Deliberate expansion of the money supply — and that means expansion through credit — lowers the value of money. Another way of saying that the value of money is lower is to say that prices are rising. And that’s the story of our economy today. Rising prices along with the myth that higher prices mean greater wealth.

Conclusion
Recovering a Biblical view of lending, debt and interest will be a challenge to a generation that thinks debt is the way to wealth. We need to ask ourselves at times whether we are part of the problem or part of the solution. We cannot solve the modern economic problem with more debt. We cannot solve the problem by the manipulation of interest rates as a means to get people to borrow more and more. We cannot even begin to solve the problem until we are ready to go without today so we can buy in the future. We have to stop the notion that we need to buy today what we cannot afford until tomorrow.

It is the idea that we should buy as the means become available to us, which is what the Bible encourages. Whether or not we read the Bible as an outright prohibition on borrowing and charging of interest, we certainly have no reason to feel comfortable that our present system is anywhere near what the Bible requires.

But until we are ready to step past the contemporary disregard for the Old Testament, it is unlikely that we will see any change in the way we do business today. And that means ever-rising prices and more unemployment as our price for labor goes way beyond that of competitors elsewhere in the worldwide market. It will also mean an eventual recession after the boom conditions end, but we keep dismissing this as the view of crackpot conservative economists and theologians.

What should worry us is that the world believes we are part of the problem and disregards the biblical solution. But we will have even more to worry about if God judges us as irrelevant for providing His solution to a worldwide dilemma.

Notes

1. Taken from information at http://www.brillig.com/debt_clock/.

2. For a more detailed discussion on the Bible and debt, see my book, Making Sense of Your Dollars: A Biblical Approach to Wealth (Vallecito, CA: Ross House Books, 1995), especially Chapters 7 and 8, and Appendix A, “Eight Arguments Against Debt.”

3. Calvin’s letter to Oekolampadius.

4. Quoted in Herbert Lüthy, From Calvin to Rousseau (New York: Basic Books, 1970), 78.

5. Ibid., 77.