BTC and Subjective Theory of Value

Suppose that you are approached by a vacuum salesman. You ask the obvious question, “Why should I buy this vacuum?” The salesman being a committed libertarian says, “Because everyone believes this vacuum is extremely valuable.” Being a realist you ask, “But why do they consider it valuable?” The salesman responds, “Because everyone else believes its valuable.” The circularity continues until you get fed up.

Now in real cases, people will make objective claims of value and BTC is no different. The vacuum is valuable because of the objective qualities that it possesses. So, when people discuss BTC and attempt to give a plausible account of its value, rather than the dance above, they make objective claims about its value. They can be used in smart contract, transferring money between accounts, other people give valuable thing for them, etc. All of these claims already presuppose that BTC is something valuable.

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Usury and the Church in Error

It may not be sufficiently clear the criticism that is leveled against the Scholastics and the Church by the claims in the previous post.

When the scholastics were making arguments about the evil of usury and proposing that it is intrinsically evil, they were doing this all under the presupposition of uncertain economic gain. This is perhaps the farthest thing possible from their actual considerations, but even considered on that basis they and the Church were eminently wrong. One cannot arrive at a claim that something is intrinsically evil, that is every where and under all conditions, under the assumption of uncertain economic conditions.  There must have been a fundamental flaw in their arguments, a mistaken proposition and for the Church a manifest error in teaching. The usury that is owed the lender is based on economic conditions, rather than something intrinsically unjust for the lender to demand by the nature of usury itself.

Moreover, if right, the author must also admit that the usury ban was in effect during the financial crisis when making a profit through investment of money was very uncertain.

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Usury Errors in recent Articles I

Take usury as an example. Zmirak defines usury as any “lending at interest,” and points out that it was condemned for centuries by popes and councils (which he names).

Usury was later redefined from ‘any interest’ to ‘excessive interest.’ That is not a minor tweak, but a fundamental change. To appreciate its significance, imagine a future pope redefining ‘contraception’ to make room for its general use, withholding permission only when it was employed ‘abusively.’

But by what principle did the Church condemn usury? Aquinas, following Aristotle, said that taking interest on a loan was akin to “selling what does not exist.” In a time of no growth, taking a payment merely and solely for the act of lending is just that. But in a growth economy, the Church saw that interest was no longer merely a case of “selling what does not exist.”

If you loan me money in a growing economy, you lose the gain you would have gotten from that money—so I owe you, not for “nothing,” but for your “cessant gain” and “emergent loss” (to use the terminology from English history).

If I were to take your money and not restore your loss, then I would be cheating you, not you cheating me. The same principle of justice that condemns interest in a no-growth economy demands reasonable interest in a growth economy.

And the same principle of justice rejects excessive interest, even to this day. St. John Paul II in a Feb. 3, 2004, general audience called usury “a plague that is a disgraceful reality even in our days that can place a stronghold on the lives of many people.” Pope Benedict XVI in his commentary on the Psalms on Nov. 2, 2005 condemned “the shame of usury, which destroys the lives of the poor.’”

So when Zmirak purports to show that the Church has done “a 180-degree reversal” on usury, the Church in fact did the opposite: She faithfully applied the principle despite changing circumstances.“Weakness of Witness”, First Things, Thomas Hoopes

In his fifteen-page section on usury Noonan presents quite fairly the interplay between moral teaching and the emergence of new economic systems. The biblical strictures on usury were evidently motivated by a concern to prevent the rich from exploiting the destitution of the poor. But when capitalists of early modern times began to supply funds for ventures of industry and commerce, the situation became different. Moralists gradually learned to place limits on the ancient prohibition, so as to allow lenders fair compensation for the time and expenses of the banking business, the risks of loss, and the lenders’ inability to use for their own advantage what they had loaned out to others.

These concessions do not seem to me to be a reversal of the original teaching but rather a nuancing of it. The development, while real, may be seen as homogeneous. In view of the changed economic system the magisterium clarified rather than overturned its previous teaching. Catholic moral teaching, like contemporary criminal law, still condemns usury in the sense of the exaction of unjust or exorbitant interest. – “Development or Reversal”, First Things, Avery Cardinal Dulles

In regard to our first question [i.e. is usury still a sin], in light of the various Roman decisions of the nineteenth century and of the 1917 Code, no one can be condemned for taking the legal or customary rate of interest on a loan, provided that it is not excessive. The reason for this, I argued above, is that the complexity of modern finance renders it safer simply to allow moderate interest than to engage in probably fruitless endeavors to determine the presence or absence of extrinsic titles. The Church presumes these titles to exist generally and makes the judgment that even if in some cases they do not, it is better for the sake of consciences to ignore that fact. The remedy always exists, moreover, for restitution to be made via almsgiving in case a penitent is troubled or there seems a well-founded and probable case of real usury. – “Is Usury Still a Sin?”, Distributist Review, Thomas Storck

[Aquinas] did not think it was right to sell and rent the very same thing, but he did not hold that in all cases a person extending a loan must accept as repayment the exact loan amount. The lender may also require monies as insurance against loss of the principle. Thomas did not think that, had the loan been returned on time, it justified charging interest. He said:

The lender cannot enter an agreement for compensation through the fact that he makes no profit out of his money: because he must not sell that which he has not yet and may be prevented in many ways from having. (ST II-II.78.2 ad 1)

This condemnation rests on circumstances that may, and did, change. In some market situations—apparently the ones prevalent in the thirteenth century—the likelihood of growing money through investment was seen as greatly uncertain. But in contemporary market situations, investment growth is virtually assured. As secure ways of investing money developed, the lender did lose profit on money unless interest was charged.

To take a different example, in the Middle Ages removing a man’s heart was the same as killing him, but today a heart may be removed in surgery to restore life. Intentionally killing an innocent person is always wrong, but the specific actions that count as intentional killing change and depend in part upon the development of technology. – “Did the Church Change Its Stance on Usury?”, Catholic Answers,Christopher Kaczor

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Bitcoin Blockchain vs. BTC

There is a distinction between the system of the blockchain and the actual units of account on the ledger run on a blockchain. A blockchain may be valuable as a means of transacting under various conditions, however, the question then comes to what is being transacted.

The value of a particular blockchain ledger will depend on what is actually being transacted, since the ledger is simply a means of transaction. Therefore, Bitcoins cannot be valuable because the blockchain ledger allows for transacting, because this already presupposes that it transacts something valuable.

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BTC as Superstition

Suppose that you own some stock in a company. The price of the stock does fairly well. However, you take a look at the books of the company in detail and realize that the company is a fraud. Their liabilities outweigh their assets and they are bound to go bankrupt very soon. You look at the stock exchange and see that the stock continues to be bought and sold at a high price. By the subjective theory of value, even though the company is worthless and will declare bankruptcy soon, the company is very valuable simply for the reason that people believe (wrongly) that the company is valuable. Being a realist you judicially sell all your stock and are summarily sent to prison for insider trading.

Suppose that you sell pebbles you find on the ground in a local village. The people in the village are superstitious and because you are quite the con man, you convince them that the pebbles have magical properties. The people are therefore willing to pay a high price for the pebbles. The pebbles are valuable simply because the people believe that they are. When reality hits the fan, you are gone with all of their really valuable property.

Suppose that you are a fashionable king and you like to have the best clothes. A con man of the highest order sells your an invisible robe of the highest quality. You pay loads of money for it and so this non-existent robe is valuable simply because you believe it is. Everyone in the town starts to get one and purchases the robes. Then some silly boy comes along and points out everyone is naked.

Suppose you have a ledger and you offer to enter numbers in the ledger in exchange for real property. Being a first rate con man, people agree and you track the exchanges of these numbers between different accounts. Now the numbers in the book are nothing but numbers, but because people believe they are valuable they are valuable.

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Perennial Objections to Usury

[Super Sent., lib. 3 d. 37 q. 1 a. 6 arg. 1]

Utrum usuras accipere sit peccatum

Videtur quod usuras accipere non sit peccatum. Nihil enim est peccatum nisi quod est contra praeceptum aliquod morale: caeremonialia autem, et judicialia legis Mosaicae nos non obligant. Sed praeceptum de non accipiendo usuram, non est morale: quia praecepta moralia obligant respectu omnium, et ad omnes; sed Deut. 23, Judaeis conceditur quod fenerentur non proximis, sed extraneis. Ergo usuras accipere non est peccatum.

My uncritical, unprofessional, amateurish, first stab at translation

Commentary on the Sentences, book 3, distinction 37, question 1, article 6

Whether to accept usury is a sin

It seems that to accept usury is not a sin. For nothing is sin if it is not contrary in some way to a moral commandment. However, we are not obliged to the ceremonial and judicial [commandments] of the Mosaic law. But the commandment of not accepting usury is not a moral [commandment], because moral commandments oblige respecting everything and to everyone, but [by] Deut 23, Jews were not allowed to take gain from [other Jews], but from strangers. Therefore, to accept usury is not a sin.

Stay tuned for the reply…

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Noonan Notes III – Justifying Usury with Just Price

  • Reading the first paragraph of the chapter on just price gives the impression that this is a sort of throw away chapter. Just price and usury are not formally connected theoretically and there is no strict contradiction between the two, though they may produce different practical results. An interesting chapter, but not really about the usury doctrine.
  • On the contrary, the just price chapter is the bomb shell of the whole book (so far). This comes in only very late in the chapter under the consideration of a particular sort of transaction (credit sale on speculative commodities) which then attempts to move the logic of the otherwise usurious transactions from the usury framework to the just price framework and opening the flood gates for usury. Here Noonan proves Aristotle correct that a small error in the beginning leads to manifold errors in the end.
  • The section on the scholastic theory of just price is interesting in itself though Noonan’s prior incompetence continues to make me skeptical regarding his reading. It is probably worth noting that the references to Aquinas (which I have ready access to English translations) are reducible to one question in the Summa (ST II.II.Q77) and a short letter on credit sales. Compared to the content on usury from the Commentary on the Sentences, the Summa, the De Malo, and others this is perhaps a difference of an order of magnitude.
  • We can easily just move to the credit sales. I take a credit sale to be some property is exchanged for the promise to pay the price of the property at some future date. This seems kind of like a tab at a bar, where the promise is to close it before the end of the night.
  • The big point against usury comes in when it is considered permissible to charge more than the just price today for a credit sale on commodities whose future price is doubtful and expected to increase at the future date of repayment. So, had the vendor held the good till later, he’s expected to have been able to sell them at a higher price than they are currently.
  • Here Noonan returns to his obtuse reading of Aquinas about the value of money and money as the object of usury. He makes a subtle but important error. He notes that if we were able to see that the value of money changes over time then we should be able to get around the usury prohibition as is done with speculative commodities. Hence we may be able to loan 100 florins for 110 florins on a just price basis.
  • The error here is that in the credit sale, the vendor sells some, say, silk on credit to the borrower. However, the borrower is to pay the promise in money. Now the just exchange rate between silk and money may change over time and we may even expect it to increase or decrease in the future. However, the just exchange rate of money for money, e.g. florins for florins, is manifestly identity just as a foot of silk is justly exchanged for a foot of silk.
  • My next post probably needs to take the Commentary on the Sentences under consideration, since this the core of Noonan’s error which he explicitly references in the discussion of credit sales.
  • One additional note is that here in the credit sale, we say manifestly and by Noonan’s own consideration that Aquinas considers this a matter of usury when this credit sale is not a “money loan” contrary to his prior claim that Aquinas’ consideration of usury only extends to money.
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