THE NEAR PANIC in Europe and the United States about the stability of American Banks is a mirror of the economic chaos into which the international banking system has been driven.
It also reminds us that usury, once considered a most grave sin by the Church still thrives and increases. Lending money at vicious interest still outrages both Christian and Moslem morality in a way which no modern economic theories can excuse.
The Continental Illinois Bank, the eighth largest in the United States has been rescued by a massive whip-round by other banks.
In addition the Federal Reserve Board has agreed to find immediate cash to satisfy frightened depositors. The Federal Deposit Insurance Corporation has said that it will protect all general creditors of the Bank.
There is a warning here for American and some Europoean Banks.
They have lent to desperate developing nations because they saw the possibility of high returns from rapid growth.
They made it easy for these countries to take up a steadily increasing number of loans.
When some of these banks began to realise that initial capital outlay was not necessarily recoverable, they were faced with a liquidity crisis.
A cry for help went out to the IMF. The usual IMF answer is to compel debtor governments to make severe economies as a condition of loan rescheduling.
It is the poor of the third world who suffer. Their standards of living — often already far too low — decline still further. Output plummets, the poorest countries can no longer afford to buy vital "inputs" with which to improve their agriculture. At the same time, interest rates continue to rise. The debtor countries are locked in an apparently unbreakable cell of hopelessness.
We should remind ourselves that it is little more than 60 years since Chesterton and Belloc anathematised modern usury and some Catholics laughed at them.
Uvedale Tristram