This chart tells you why inflation is a wonderful thing:
But, when the population began to grow exponentially, the money supply had to grow with it. After all, you can't have 7 billion people in the year 2000 all chasing after the same amount of money that only 1 billion people had available to them in 1800. There wouldn't be enough money to go around. In order to accommodate the inflating world population, economies had to inflate their currencies.
This is why everyone moved to fractional reserve banking and eventually to fiat currency. It kept people from starving, gave everyone a shot at having money. How does it work? Fiat currency means you cannot demand a set amount of metal for a particular unit of currency. In metallic currency, a metal is worth its weight. When paper money was introduced, it was accepted only because it represented metal. Thus, prior to fiat currency, a paper dollar could be exchanged on demand for a set amount of metal: gold or silver. But with fiat currency, this ability to demand a set amount of metal for each unit of paper or electronic currency is taken away. No one can lay that demand against a bank or a government.
Fractional reserve banking means that a bank or government is allowed to lend out more money than it has. For example, for every dollar it keeps in its vaults, it creates five dollars out of thin air, and lends each of the five newly created dollars to a different customer. The single existing dollar is held in reserve in case one of the five customers is unable to repay the loan. If that happens, the bank can cover that default.
When the five pay back the loan, the amount of money in the system has now grown by a factor of five. The five have freely given their work to enrich the entire system so that everyone else has a shot at getting money too. Now that new money can be lent out at a five-fold increase. Now twenty-five others can donate their work to the system to keep the system going. The size of the pie is no longer fixed: everyone contributes to growing the pie.
The money supply inflates to keep pace with the inflating population. The transition away from metallic standards and into fiat currency allows the creation of money. In this system, new money is actually created through lending. Lending is how new money gets into the system. Everyone who takes out a loan contributes to the system by helping create more money through their work.
And see what has happened! Interest on a loan is no longer a way to consume money, it is instead a way to produce new money so that everyone can have money. In this view, charging and paying interest is no longer primarily an act of rapacity, it is now primarily an act of charity.
Thus, in the last two centuries, the definition of money changed. By the industrial age, money was no longer something that was primarily consumed, rather, it became something that is primarily created.
"Usury", as the name implies, only makes sense in regards to things that can be used up, consumed. The Church's teaching on usury were formulated when money was a fixed entity that was used up within an essentially fixed population. The Church's teaching assumes money is a consumable good. But when the definition of money changed from something we consume to something we create, the usury teachings concerning interest on a loan no longer applied. Our new definition of money - new value created through loans - had rendered them useless.
Now, Pope Francis recently denounced usury, a subject I have written on before. But notice what he said. He didn't denounce interest on loans. He denounced bills that kept poor people from even being able to afford food: "When a family has nothing to eat, because it has to make payments to usurers, this is not Christian, it is not human!"
So, if usury isn't interest on a loan, what is it? As Aquinas points out (ST II, II, 78, 1) usury has two components: (1) it is selling something that doesn't exist AND (2) it leads to inequality, which is unjust. He used interest on a loan as an example, but he also pointed out that not all interest charged for a loan was evil. He allowed, for instance, interest on the loan used to buy a house, because a house is not consumed, it is not eaten up, by being lived in.
Usury is the selling of something that doesn't exist that leads to inequality. It doesn't need to involve a loan or interest at all.
Everyone has an equal right to food. As Pope Francis points out, exacting payment in such a way that people cannot exercise their right to eat food is usury - it is exacting a payment to exercise a right that already exists, a right that no one should have to pay to exercise. Usury is my claiming that I control your right to eat. I have no such control nor any such right. Usury is my charging you so that you can exercise your right to eat. I am charging you for something - my "control" over you, my "right" over you - that doesn't exist in order to create my ownership of you. That is usury.
When we demand payment from the poor before we allow the poor to eat, we have engaged in usury, even if no loan is involved. It isn't interest on a loan that is the problem. Usury is the failure to recognize each person's inalienable rights to life, liberty and the pursuit of happiness, that is, the pursuit of God. What Pope Francis has said is perfectly in accord with both the current economic system and with ancient Catholic teaching.