Libertarian Answer Man: Usury, Bankruptcy, Contracts

by Stephan Kinsella on September 30, 2025

Re discussions with @Fhoer and Hoppe re Usury from an OrdoNaturalist Perspective A Hoppean Critique of Contractually Invalidity Interest. Abstract:

This article proposes a critique of the practice of usury — understood as the imposition of contractually invalid interest — from an OrdoNaturalist approach inspired by Hans-Hermann Hoppe’s argumentation ethics. Unlike utilitarian, Marxist, and religious views, which treat usury as acceptable if useful or condemnable if exploitative, it is argued here that usury is null ab initio because it violates the principles of self-ownership and contractual reciprocity. The text distinguishes legitimate loans, based on mutual risk and limited guarantees, from usurious loans, characterized by unlimited liability, perpetual debt, and the alienation of the debtor’s autonomy. It concludes that usury is incompatible with natural order and constitutes a disguised form of economic slavery.

The piece argues that certain debt arrangements are invalid ab initio because they violate self-ownership and reciprocity.

An edited exchange:

Fhoer:

I made an argument against usury based on self-ownership, because unpayable debts would end up in de facto slavery, and your own book argues against that, and I imagine this is the same position as Hoppe’s. Now I’ve written a new article because I dissected the entire modern problem until I found a practical, self-contained solution for the issue on a small scale. Then I noticed that private minting prevents this problem, so I wrote another article (in Portuguese, which I then translated).

Kinsella:

This analysis directly connects to the contractual invalidity of usury, as explored in my previous article Usury in Libertarian Contract Theory (not translated yet) . There, usury is analyzed and unmasked as a null contract in the charging of interest, since it violates reciprocity and autonomy.

What do you mean by contractual invalidity? Or null contract? Are you thinking in terms of the title transfer theory of contract ¹ or of conventional views of contract where contracts are viewed as binding promises?

Fhoer:

My article on usury (the second link) aligns with both the TTToC, deeming it null for failing to effect a legitimate, non-alienating transfer, and conventional contractual law, which voids it for lacking genuine consideration, mutuality, and enforceable promises without coercion. just didn’t address it explicitly because here in Brazil it’s not considered “canonical” among libertarians, and the argument is meant to be a natural recognition of the invalidity, but for both schools of thought, I present criteria that would invalidate the contract.

Kinsella:

You don’t need consideration even in normal contract law, at least not in Brazil. Consideration is required in common law countries, not civil law. ²

Fhoer:

Yes, but many Brazilian libertarians regard common law as a valid foundation, while rejecting Brazilian contract law for its roots in a civil code laden with state interventions, at the same time, they remain largely unfamiliar with the TTToC as they don’t have rigor.The core argument that usury invalidates contracts by alienating self-ownership and lacking genuine mutual title conveyance remains firmly rooted in TTToC principles, as evidenced by the emphasis on limited liability, voluntary exits, and non-coercive resource transfers, ensuring alignment with libertarian ethics while making the critique accessible to readers familiar with broader contractual norms.

Kinsella:

while rejecting Brazilian contract law for its roots in a civil code laden with state interventions

From KOL474 | Where The Common Law Goes Wrong (PFS 2025): Kinsella

refutes the misconception that civil law systems inherently embody totalitarian principles (“all that is not permitted is forbidden”), attributing Europe’s socialism to separate legislation, not civil codes. Both Roman and common law, Kinsella argues, offer valuable insights for libertarians, despite the former’s neglect in free-market scholarship. ³

I.e., this is a mistake IMO.