Wednesday, January 10, 2018

The Modern Heresy

The Great Heresies, by Hilaire Belloc

Belloc offers his view of the transitions that occurred in the west after the Reformation and the modern heresy that followed – the heresy that we, in fact, are currently living through.  It will be my last post on this book.

The Transition

In the aftermath of the Reformation, men of Europe would come to regard religion as a secondary thing; at the same time, the dissolution of the Catholic position in Europe would unleash energies that Catholicism restrained – especially in competition and commerce. 

Both Catholic and Protestant cultures advanced in physical sciences and colonization, but the Protestant cultures were more vigorous:

To take one example: in the Protestant culture (save where it was remote and simple) the free peasant, protected by ancient customs, declined.  He died out because the old customs which supported him against the rich were broken up.

The rights (protected by custom) that the peasant previously held in property were lost, leaving such men without substance in difficult times.  I have examined before the position of the serf in the Middle Ages (and, more broadly, the classical liberalism of the time); in many ways, the serf of the time enjoyed more rights in his property and life than do the “free” men of the west today.

But the great, the chief, example of what was happening through the break-up of the old Catholic European unity, was the rise of banking.

Usury was practiced everywhere, but in the Catholic culture it was restricted by law and practiced with difficulty.  In the Protestant culture it became a matter of course.

Belloc identifies the merchants of Holland and England as introducing the practices of “modern banking.” 

I am certainly no expert on the history of modern banking, however I do believe the concepts of fractional-reserve banking and central banks were legitimized and institutionalized in these two Protestant countries (along with Sweden, also a Protestant country).  While I do not want to put words in Belloc’s mouth, it seems possible that when he speaks of “usury” and modern banking, what he means is this idea of charging interest on air.

[In an attempt to gain some understanding of this topic of usury in the traditional Catholic view, I read several examinations online using a search on the terms: usury Catholic tradition.  I found absolute statements against the practice, statements of conditional acceptance, different practices at different times driven by expanding foreign trade, etc.  So…this is why I concluded the last sentence in the preceding paragraph – I just don’t know what else Belloc could have meant given the context in which he makes this statement.]

Confidence was on the Protestant side, and waning on the Catholic.  The Protestant countries had superiority in financial, military and naval power.  This was drastically exaggerated with the establishment of the Protestant America. 

Italy, Spain, and Portugal in decline; England, Germany (led by Prussian Protestants) and America on the rise; France, confused and in constant turmoil after the Revolution.

The Tide Turns

Belloc sees the tide turning against this Protestant wave at around the turn of the last century (“somewhere between 1885 and 1904”; coincidentally – or not – the start of the Progressive era).  Not toward re-establishment of the Catholic Church, but in terms of the breakdown of ideas that gave the Protestant culture its strength.

Protestantism was being strangled at its root, at its spiritual root; therefore the material fruits of that tree were beginning to wither.

Belloc identifies two causes.  The first, perhaps less important, was a certain level of confidence reappearing in at least some nations of Catholic Europe – specifically in the wealthier classes of these nations.  More important was the decline of the Protestant culture from within, “the great internal weakness of the Protestant culture as opposed to the Catholic.” 

Lacking a better name, Belloc labels this period “the Modern Phase.”  The general cause of this Protestant breakdown he describes as “auto-toxic” – meaning, an organism which is beginning to poison itself.

What are the particular causes of this breakdown?  Belloc offers first: the breakdown of the Bible as a supreme authority; historical and scientific research have shaken this foundational belief – as it must if man is left with nothing but his rational thinking (limited, as it must be, when trying to understand God and His creation). 

A second cause, economic:

Protestantism had produced free competition permitting usury and destroying the old safeguards of the small man’s property – the guild and the village association.

Belloc describes “modern industrialism in its capitalistic form” and “modern banking” as “becoming master of the community” and, ultimately, breeding “vast social evils.”

Regarding the idea of “free competition” as it relates to usury and banking, given my assumption that he is addressing central banking and fractional reserves, his complaint is not about “free” competition in any meaningful sense – although the view of where (in which countries) these practices were first granted legitimacy by government is valid.

Third, internal quarrels; most notably, the British against the German (Prussian):

That was what one would have expected from a system at once based upon competition and flattering human pride. 

Finally, a lack of a plan:

The Protestant culture, having begun by exaggerating the power of human reason, was ending by abandoning human reason.

How has the Protestant culture abandoned reason?  I will come to this shortly.

And with this, Belloc comes to 1914 and the Great War.  Everything about the old order “came down with a crash.”  Then began a period of political experiments; the most disastrous political experiments known to man.

The Modern Phase

The enemy which the Faith now has to meet, and which may be called “The Modern Attack,” is a wholesale assault upon the fundamentals of the Faith – upon the very existence of the Faith.  And the enemy now advancing against us is increasingly conscious of the fact that there can be no question of neutrality.

The intent is to destroy everything left of the culture and tradition of the Catholic Church.  Of course, the true Church cannot be destroyed; but what remains and what influence it holds is in question.  To those Christians who hold no sympathy for the Catholic Church, Belloc suggests that “the struggle appears as a coming or present attack on what they call ‘Christianity.’”

Whatever the foundation of your faith (even if you hold nothing that can be called Christian faith), this attack cannot be denied.  Whatever the foundation for your faith, the result is the same:

…there is a clear issue now joined between the retention of Catholic morals, tradition and authority on the one side, and the active effort to destroy them on the other.

You need not be Catholic, or more broadly “Christian” to see this.  We are living daily as witness to the destruction of traditional morals; we are told to praise these or be outcast from acceptable (and by certain corners of libertarian) society.  Today’s society worships these. 

Yet, if it is true that the freedoms that those in the west have enjoyed were built on a foundation of these morals and traditions, what does the destruction of these same morals and traditions portend for this freedom?

Do you think that those actively promoting this destruction, under whatever label they choose, are working for your freedom (whether you are red, yellow, black, white or any color of the rainbow)?  Think again.

Belloc describes the characteristics of this moral attack.  First, it is materialistic.  Consider the use of this term in Belloc’s context.  When he describes usury, he speaks of modern banking.  I believe libertarians and Austrians recognize the moral corruption that modern banking facilitates.

Second, it is superstitious; it has abandoned reason.  I have struggled with his meaning, but as he explains it, it seems to me he is describing the philosophies of Cultural Marxism and post-modernists (neither of which had any concrete form at the time of his writing).  These have taken root in the west; these both have abandoned reason – if reason is defined as considering man’s natural realities.

Belloc sees communism as a manifestation of this modern attack, although he describes this as “probably a passing one.”

Ultimately, of course, it is the fruit of the original break-up of Christendom at the Reformation.  It began in denial of a central authority.  It has ended by telling man that he is sufficient to himself, and it has set up everywhere great idols to be worshipped as gods.

I am certain that the term “central authority” sticks in the craw of many readers, certainly when used in the context above.  To rephrase his statement: the destruction of this “central authority” (The Church) has led to this modern attack, of which communism (a different central authority) is but one manifestation.

I will suggest, consider custom, culture and tradition as the “central authority” that was replaced – take out the idea of “The Church” and see if this works any better for you.  Because until someone convinces me (heck, even makes an argument) that nothing is necessary to govern and organize society, something will govern and organize society.  I will vote for custom and tradition.

It isn’t just in communism where Belloc sees this manifestation; it also exists in many of the nations and organizations that oppose communism.  He describes the fruits of this manifestation: first, the return of slavery.  In communism it is full slavery; in the west, he is willing to call it half-slavery.

Regarding the half-slavery of the west: he describes this as the state of the masses, now deprived of property and left with nothing but the possibility of wages, being dependent on the state to enforce conditions of security and sufficiency – call it welfare, social security, the social safety net, a livable wage, a basic income guarantee, unearned tax credits, whatever. 

Yet the more the state steps in to do this, the more the people become slaves.

If it be continued for, say, three generations, it will become so thoroughly established as a social habit and frame of mind that there may be no escape from it….

Second, Belloc sees the moral fruit of this manifestation, undermining “every form of restraint imposed by human experience acting through tradition.”

Note that regarding this “moral fruit,” Belloc does not lean on pronouncements from a “central authority” in any political sense.  He speaks of the lessons learned through dozens of generations and thousands of years: “human experience acting through tradition.”

…human society cannot co-exist with anarchy; new restraints and new customs will arise.

Let go of the Rothbardian definition of anarchism, as this is not what Belloc is referring to.  Imagine a society with no customs, norms, or traditions.  You cannot, as it cannot exist.  Something will fill the void, something not refined by experience but created from whole cloth; something man made, in a political environment where the worst get on top.

Belloc sees cruelty as the chief form of this moral degeneration: “men are not shocked by cruelty, but indifferent to it.”  Finally, Belloc describes the degeneration of human reason; reason is replaced with “reiterated affirmation.”  Call it political correctness; call it the bastardized terms of “diversity,” “tolerance,” “social justice,” and “inclusiveness.”


I think Belloc has pretty-well summed up the current state of the west.  He saw this coming, eighty years ago.


  1. I need to re-read, but this lays out Catholic views on usury and central banking. I can't recall if he gets into Protestants starting central banks. It is Tom Woods's book.

  2. BM,

    Great post!

    "Belloc identifies the merchants of Holland and England as introducing the practices of “modern banking.” "

    Perhaps this isn't important to Belloc's thesis, but I believe fractional reserve banking began in the Catholic strongholds of the city-states of what is now Italy and Spain.

    from linked article:

    "The Florentine banking houses had begun to lend out money held in demand deposits in the late 13th and early 14th century, which created a sizable economic boom. When early in the 14th century Neapolitan princes began to withdraw funds and England was found incapable of repaying loans it had received from these banks, the artificial boom could no longer be sustained. In addition, the public debt of Florence had been financed by speculative bank loans, and the value of these government bonds also began to decline dramatically."

  3. Judaism
    Israelites were forbidden to charge interest on loans made to other Israelites, but allowed to charge interest on transactions with non-Israelites, as the latter were often amongst the Israelites for the purpose of business anyway, but in general, it was seen as advantageous to avoid debt at all, to avoid being bound to someone else. Debt was to be avoided and not used to finance consumption, but only when in need.

    Originally, the charging of interest, known as usury, was banned by Christian churches.

    n Islam it is strictly prohibited to take interest; the Quran strictly prohibits lending money on Interest.

    Medieval Europe
    Banking, in the modern sense of the word, is traceable to medieval and early Renaissance Italy, to rich cities in the north such as Florence, Venice, and Genoa.

    Jews.... They had one great advantage over the locals. Christians were strictly forbidden the sin of usury, defined as lending at interest (Islam makes similar condemnations of usury). The Jewish newcomers, on the other hand, could lend to farmers against crops in the field, a high-risk loan at what would have been considered usurious rates by the Church; but the Jews were not subject to the Church's dictates.

    The Jewish trader performed both financing (credit) and underwriting (insurance) functions.

    Merchant banking progressed from financing trade on one's own behalf to settling trades for others and then to holding deposits for settlement of "billette" or notes written by the people who were still brokering the actual grain. And so the merchant's "benches" (bank is derived from the Italian for bench, banca, as in a counter) in the great grain markets became centres for holding money against a bill (billette, a note, a letter of formal exchange, later a bill of exchange and later still a cheque).
    These deposited funds were intended to be held for the settlement of grain trades, but often were used for the bench's own trades in the meantime. <---- First fractional reserve ????

    The term bankrupt is a corruption of the Italian banca rotta, or broken bench, which is what happened when someone lost his traders' deposits. Being "broke" has the same connotation.

    Discounting of interest

    A sensible manner of discounting interest to the depositors against what could be earned by employing their money in the trade of the bench soon developed; in short, selling an "interest" to them in a specific trade, thus overcoming the usury objection.

    Foreign exchange contracts
    In 1156, in Genoa, occurred the earliest known foreign exchange contract. Two brothers borrowed 115 Genoese pounds and agreed to reimburse the bank's agents in Constantinople the sum of 460 bezants one month after their arrival in that city.[citation needed] In the following century the use of such contracts grew rapidly, particularly since profits from time differences were seen as not infringing canon laws against usury.

    Italian bankers
    The first bank was established in Venice with guarantee from the State in 1157.

    There were banking failures from 1255 to 1262.

    In the middle of the 13th century, groups of Italian Christians, particularly the Cahorsins and Lombards, invented legal fictions to get around the ban on Christian usury;[144] for example, one method of effecting a loan with interest was to offer money without interest, but also require that the loan is insured against possible loss or injury, and/or delays in repayment (see contractum trinius).[144] The Christians effecting these legal fictions became known as the pope's usurers, and reduced the importance of the Jews to European monarchs;[144] later, in the Middle Ages, a distinction evolved between things that were consumable (such as food and fuel) and those that were not, with usury permitted on loans that involved the latter.


  4. My definition of "usury" is deriving (not "earning") profits without incurring any risk. So, when bankers are bailed out by the government, then bankers aren't exposed to any risk of loss. This creates moral hazard, and is also present whenever the government extends a "guaranty" of loan repayment on behalf of the citizenry. This occurs in student loan programs (government guarantees repayment of the loans) and small business loans that are guaranteed by the SBA, among many other programs. The level of fraud in the SBA program is staggering. The economic distortions caused by the student loan program are mind boggling (this is why tuition has sky rocketed). The same concept of eliminating risk can be extrapolated to any businesses that do business with the government, even if they are not in the business of lending money. The military industrial complex derives obscene profits from no-bid contracts with the government, that involve no risk of loss whatever. These concepts are somewhat different from the traditional examination of "usury" based on lending that requires collateral to secure the repayment of a loan, in the event the borrower defaults, or the charging of a reasonable rate of interest to compensate for giving someone else possession of monies that have been loaned out. Crony capitalism is one gigantic scheme that amounts to usury in my opinion.

  5. "Finally, Belloc describes the degeneration of human reason; reason is replaced with “reiterated affirmation.”"

    I don't know enough about Belloc to say with any confidence what he meant by this. However, it occurs to me that he was making this statement at the time that PR was strongly taking hold in the West, where folks like Bernays were achieving great success in implementing their agendas via modern propaganda. The "reiterated affirmation" might be equivalent to what was also called "The big lie", which when repeated often enough and with sufficient authority, became the truth in the minds of the bulk of the population.

  6. Well done; great post, BM. I've been having visions of babies being thrown out with the bathwater of late and your insights give me hope that more people will recognize that level-headed reason can be balanced with an appreciation for working traditions. Reason and dogma need not be mutually exclusive.

    1. In this journey - in which I feel I am still taking the first few steps - I am learning that 1) both are necessary; 2) one without the other is deadly, and 3) the *proper* tradition may be the more important of the two, as it represents the "reason" of countless generations.

    2. From Edmund Burke's, "A Vindication of Natural Society:"

      "I have done with the Forms of Government. During the Course of my Enquiry you may have observed a very material Difference between my Manner of Reasoning and that which is in Use amongst the Abetors of artificial Society. They form their Plans upon what seems most eligible to their Imaginations, for the ordering of Mankind. I discover the Mistakes in those Plans, from the real known Consequences which have resulted from them. They have enlisted Reason to fight against itself, and employ its whole Force to prove that it is an insufficient Guide to them in the Conduct of their Lives. But unhappily for us, in proportion as we have deviated from the plain Rule of our Nature, and turned our Reason against itself, in that Proportion have we increased the Follies and Miseries of Mankind." - Burke

      This is an interesting essay and a wonderful compliment to the thought of any conservative libertarian. Burke originally published this anonymously, and when he was found to be the author, he wrote that it was a satire, which showed how the arguments used by athiests to denigrate religion, could be used in the same manner to denigrate the state. In other words, he wished to show the dangers of reason, and I think the latter is true as far as it goes, but I found this article (below) by Murray Rothbard which argues, quite effectively, that this was a sincere work of Burke's before he entered politics as a profession.

      Burke expressed misgivings about the workings of reason detached from a connection with tradition or experience throughout his life, but this does not mean he was against reason itself. Reason can be dangerous if it is not grounded in observable reality.

      Mises also made this point about praxeology, that all truth discovered by logic must be deduced from a rooted observable truth. For Mises, this truth was that humans act with purpose.

      “You can only find truth with logic if you have already found truth without it.” - G.K. Chesterton

  7. Commentary to Bionic Mosquito
    Appreciated your commentary on Belloc’s Great Heresies. For a thorough study of interest and usury from a Catholic perspective, I’d recommend Bernard Dempsey’s Interest and Usury. (I consider him to be the best Catholic economist of the 20th century. Also see his Functional Economy and The Frontier Wage. Unfortunately, I missed having him as an economics teacher by one year. )
    In his work he tried to give flesh to the comments on banking and usury made by Leo XIII in Rerum Novarum and Pius IX in his Quadragesimo Anno. I think Belloc expands on his idea of half-slavery in Belloc's book, Servile State. It is too bad that more Catholic schools did not pursue a better understanding of this relationship between central banking, property centralization and modern warfare.
    The convergence of judgments on the evils of modern fractional reserve banking between the Popes, Dempsey, von Mises and Rothbard is best summarized by D.Stephen Long in his study, Divine Economy: theology and the market. It is in chapter 12. In part of this chapter Dr. Long compares and contrasts Fr. Bernard Dempsey’s concept of ‘institutional usury’ and Ludwig von Mises’s understanding of the deleterious effect on income distribution which results from the creation of artificial credit by banks and governments. (Scarily titled: Von Mises and divergences of income from tenable patterns of involuntary displacements, p.205 Also see von Mises’s The Theory of Money and Credit) Your mention of Rothbard brought to mind the hour long chat that I had with him in 1987 when he mentioned that the Catholic Church was the greatest friend of liberty during the Middle Ages.

  8. Jacques Barzun was one of those writers, calling WWI the suicide of the west.

    Of course, a healthy person doesn't just wake up one day and commit suicide. Therefore, we are left to look back - when did the sickness first set in?

    Further, given the amount of stored up "wealth" (in culture, tradition, etc,) of the west, it is no surprise it is taking some time for the victim of the self-inflicted wound to finally die. It may have been WWII, it may not have happened yet. I am not sure we would know it while living through it.

    "I for one have no positive feeling about that which is here and is to come."

    Les Claypool would agree. As he says, "there ain't no cure for suicide."

  9. "While I do not want to put words in Belloc’s mouth, it seems possible that when he speaks of “usury” and modern banking, what he means is this idea of charging interest on air."

    For Belloc’s definition of and views regarding usury please read his essay entitled "On Usury" from “Essays of a Catholic” (

    Here are a few highlights:

    “Usury does not mean high interest. It means any interest, however low, demanded for an unproductive loan.”

    “What are the conditions distinguishing a demand for payment of interest which is legitimate in morals from a demand which is illegitimate?

    The distinction lies between a demand for part of the product of a productive loan, which is moral, and the immoral demand for either (1) interest on an unproductive loan, or (2) interest greater than the annual increment in real wealth which a productive loan creates. Such a demand "wears down"-----"eats up"-----"drains dry" the wealth of the borrower, and that is why it is called Usury…

    Usury, then, is a claiming of interest upon an unproductive loan, or of interest greater than the real increment produced by a productive loan.”

    “[Following the Reformation, Usury] grew to be a general practice sanctioned by the laws, and the payment of it enforced by the civil magistrate… In general the governments which broke away from the unity of Christendom one after the other introduced legalized usury, and thus got a start over the conservative nations which struggled to maintain the old moral code. To the new moral, or rather immoral, ideas thus introduced we owe the rapid development of banking in the "reformed" nations, the financial hold they acquired and maintained for three centuries. Everyone at last fell into line, and today Usury works side by side with legitimate profit, and, confused with it, has become universal throughout what used to be Christian civilization. It is taken for granted that every loan shall bear interest, without inquiring whether it be productive or unproductive. The whole financial side of our civilization is still based on that false conception.”

    “If you say today, "Usury is wrong," or even, "Usury is dangerous," or even no more than, "Usury must in the long run break down," all but a very few will, even today, refuse to follow this discussion of the matter. Most of the careless and all the foolish will put you into the company of those who think the earth is flat.”

  10. Glad to see that people are still reading and learning from the great Catholic historian. A year ago, I posted a short item on his foreseeing of the Islamic jihad against western civilization almost 80 years ago. See

  11. I recommend getting a copy of "Usury: the Mortal Sin that Was and Now is Not" by Michael Hoffman. Modern usury really began in Catholic Germany and Italy with the Fuggers and Medicis. They used legal loopholes to overrule the older bans on usury which was understood to accept any interest whatsoever on loans. Usurers were once denied Christian burial. They were expected to return their ill gotten gains to be accepted back into the Church. Also, the early Puritans were also against usury. Now, I am not sure how you can run an economy today without interest. Banning interest will just result in more renting of goods instead of renting money. Debt will be replaced with equity. My only point is that the true history of this issue is not being told, especially how the churches failed to uphold traditional Christian dogmas on just economics.

  12. While reflecting on your essay on Belloc’s Great Heresies, a paragraph from Von Mises’s work, The Theory of Money and Credit, came to mind. “The connection between banking proper and the business of speculation and flotation is similarly loose and superficial. This is the branch of their activities on which the general economic importance of banks nowadays depends, and by means of which on the continent of Europe and in the United States they secured control of production, no less than the provision of credit. It would not be easy to overestimate the influence on the organization of economic life that has been exerted by the change in the relation of the banks to industry and commerce; perhaps it would not be an exaggeration to describe it as the most important event in modern economic history.” (Indianapolis; Liberty Classics, 1981, pg 294) In regards to the role or influence of banking on modern life, it seems to me that Belloc and von Mises were on the same page.

  13. I am trying to understand the Israelite opposition to usury/interest, the long term Catholic opposition [1], and the similar Islamic opposition. [2] The following is a summary of what I have gleaned so far. All mankind are brothers and sisters created by God and the earth is given to mankind for its sustenance. Interest is wrong because it gives the lender most of the gain without much risk of bearing losses. Since most economic enterprises are a communal effort, gains and losses should be distributed proportionately to contributions-labor and capital.
    [1] Pope Benedict XIV – 1745, Vix Pervenit: On Usury and Other Dishonest Profits
    [2] M.A. Mannan, Islamic Economics: Theory and Practice; (Lahore, Pakistan, Muhammad Ashraf Publishers: 1983) Also, Shaikh Ahmad, Economics of Islam; ( Lahore, Ashraf Press, 1974) pg 42-44