It is often said that money now is worth more than money later, and a common argument is that this justifies charging interest on mutuum loans: at least enough interest to compensate for the effects of inflation or currency devaluation

In a mutuum, or a more complex contract which includes a mutuum such as a home mortgage which allows for a deficiency judgment against the borrower, the borrower’s obligation to repay remains even if the proceeds and all of the things purchased with the proceeds are consumed. We tend to think of ‘loan for consumption’ as referring to what kind of thing is lent or what is done with the proceeds, as opposed to what the contract authorizes and requires. But the distinction between a mutuum and other contracts is not in the kind of property which is exchanged or in what the borrower does with the property; it is in the nature of the agreement itself. A mutuum contemplates and provides for consumption or alienation of the property which is lent in return for a personal IOU. Here is Aquinas again:

As the Philosopher says in the Politics, things can have two uses: one specific and priple, the specific and primary use of shoes is to wear them, and their secondary use is to exchange them for something else. (more…)