:Usury:

Spiritual prohibition against usury is widespread:

• Vedic India
• Judaism (500 BC - 20th century)
• Roman Catholicism (12th century - 19th century)
• Islam (570-632 AD - now).

Catholic-Eras:

• 500 to 1050. The prohibitions are primarily applied to clerics. Usury itself is poorly defined. ‘At no time was it said that usury was a sin against justice, nor was restitution of usuries prescribed as an obligation of justice. . . . while the taking of usury was treated as a serious sin, it was denounced as a form of avarice or uncharitableness.’
  
  Noonan, John (1957), The Scholastic Analysis of Usury . Cambridge: Harvard University Press.
  
• 1050 to 1175. Usury is declared a sin prohibited by the Old and New Testaments. All interest rates greater than zero are considered usurious. Even the desire for a return beyond the good itself is declared sinful. Usuries are required to be restored in full before salvation is possible. Higher prices for credit sales are declared implicit usury.
• 1175 to 1350. Usury becomes a dominant concern for the Church. The peak of the ecclesiastical attack on usury is reached at the Council of Lyon in 1274 and the Council of Vienna in 1312. The punishments for usury include the following: usurers are refused confession, absolution, and Christian burial; the wills of usurers are declared invalid; rulers and magistrates of states or communities which permit usury face excommunication.
• 1350 to 1500. Professional usurers are allowed to partake in Church services and to be buried in Church graveyards. Numerous types of loan contracts are explicitly declared non-usurious. The sin of usury is increasingly applied only to excessive interest charges. In the late fifteenth century the Church helps to bring into existence monti di pietà: public pawnshops financed by charitable donations and run for the benefit of the urban poor. Interest charges are explicitly sanctioned in order to cover the cost of operation (6-15 percent).
• 1500 to 1600. In the sixteenth century, ‘The Church reaffirmed its traditional doctrine on the matter of usury and reverted to the uncompromising attitude which had prevailed prior to the fifteenth century. The secular authorities, however reluctantly, continued to issue licences, but the Church henceforth refused to grant dispensation to the Lombards [professional pawnbrokers]. They were, and remained, excommunicated. According to Charles V's ordinance of January 30, 1546 (n.s.), licenced usurers were forbidden to attend mass or to enter any church under the penalty of forfeiting their licences. The same prohibition applied to anyone who was in partnership with them . . . or who participated in their management.’
• 1600 to 1830: Usury prohibitions are under constant theological attack within the Church. In 1830, ‘the Sacred Penitentiary issued instructions to confessors not to disturb penitents who lend money at the legal rate of interest.’

De Roover, Raymond (1948), Money, Banking and Credit in Mediaeval Bruges . Cambridge: Mediaeval Academy of America.

1830 is the end to effective usury prohibitions by the Catholic Church, as interest rates had fallen to very low levels allowing a larger portion of the population to qualify for consumption loans; new technology and increased investment in agriculture resulted in increasing outputs with lower variance; the state took on more of the responsibility for poor relief in the form of poor law legislation; and innovations occurred in private insurance that reduced risk.

Consumption smoothing mechanisms in pre-industrial Europe:

• borrowing from manorial lords (e.g. in bad years rents could be reduced or forgiven);
• borrowing internally by consuming grain that normally would have been planted for next year’s crop;
• selling or leasing land in bad years;
• storing grain;
• scattering holdings;
• pooling incomes through Church fraternal organizations and informal practices;
• receiving charity directly and indirectly through the Church;
• borrowing at positive interest rates through the private capital market.
• engaging in illegal activities: stealing, urban food riots, peasant insurrections