Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

66 Money, Bank Credit, and Economic Cyclesin order to circumvent the canonical ban on interest, manybankers and “depositors” expressly declared that they had takenpart in a monetary irregular-deposit contract, when they hadactually formalized a true loan or mutuum contract. Themethod of concealment to which this declaration belonged wasaptly named depositum confessatum. It was a simulated depositwhich, despite the declarations of the two parties, was not atrue deposit at all, but rather a mere loan or mutuum contract.At the end of the agreed-upon term, the supposed depositorclaimed his money. When the professed depositary failed toreturn it, he was forced to pay a “penalty” in the shape of intereston his presumed “delay,” which had nothing to do with theactual reason for the “penalty” (the fact that the operation wasa loan). Disguising loans as deposits became an effective wayto get around the canonical ban on interest and escape severesanctions, both secular and spiritual.The depositum confessatum eventually perverted juridicaldoctrine on the monetary irregular deposit, robbing thesetenets of the clarity and purity they received in classical Romeand adding confusion that has persisted almost to the presentday. In fact, regardless of experts’ doctrinal stand (eitherstrictly against, or “in favor” within reasonable limits) oninterest-bearing loans, the different approaches to the depositumconfessatum led theorists to stop distinguishing clearlybetween the monetary irregular deposit and the mutuum contract.On one hand, over-zealous canonists, determined toexpose all hidden loans and condemn the correspondinginterest, tended to automatically equate deposit contracts withmutuum contracts. They believed that by exposing the loanthey assumed was behind every deposit they would put anend to the pretense of the depositum confessatum. This is preciselywhere their error lay: they regarded all deposits, evenactual ones (made with the essential purpose of safeguardingthe tantundem and keeping it always available to the depositor)as deposita confessata. On the other hand, those expertswho were relatively more supportive of loans and interest andsearched for ways to make them acceptable to the Church,defended the depositum confessatum as a kind of precariousloan which, according to the principles embodied in theDigest, justified the payment of interest.