HONEST

MONEY
I
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Other books by C@-y North
Marx% Rel&ion flll?euolution, 1968
An I ntroduction to hristian Economics, 1973
~
Unconditional Surqder, 1981
Successfid I nvesting in an Age of Envy, 1981
The Dominion Covenant: Genesz3, 1982
Government By Emerge.qv, 1983
Th Last Train Out, 1983
Backward, Christian Soldiers?, 1984
75 Bible Questions Your I nstructors
Pray Mu Wont Ask, 1984
Coined Freedom: Gold in the Age of
the Bureaucrats, 1984
Moses and Pharaoh, 1985
Negatwnds, 1985
The Sinai Strategy, 1986
Unholy Sirits: Occultism and
New Age Humanism, 1986
Conspira~: A Btblwal View, 1986
Merit the Earth, 1986
F&hting Chance, 1986 [wi th Arthur Robi nson]
Books Edi ted by Gary North
Foundationsof Chrzitian SchoZursh$, 1976
Tactics of Chrzltian Resistance, 1983
The Theology of Christiun Resistance, 1983
*
HONEST
MONEY
The Bi bl i cal Bl uepri nt
for Money and Banki ng
Gary North
DOMI NI ON PRESS G FT. WORTH, TEXAS
THOMAS NELSON, I NC. G NASHVI LLE, TENNESSEE
Copyri ght 01986 by Gary North
Al l ri ghts reserved. Wri tten permi ssi on must be secured fi -om the
publ i sher to use or reproduce any part of thi s book, except for
bri ef quotati ons i n cri ti cal revi ews or arti cl es.
Co-publ i shed by Domi ni on Press, Ft. Worth, Tkxas, and Thomas
Nel son, I nc., Nabhvi l l e, Tennessee.
Printed in tb .Unitid States of America
Unl ess othemvi se noted, al l Scri pture quotati ons are from the
New Ki ng James Versi on of the Bi bl e, copyri ghted 1984 by
Thomas Nel son, I nc., Nashvi l l e, Tennessee.
Li brary of Congress Catal og Card Number 86-050796
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I SBN 0-930462-15-7
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Thk book i s dedi cated to
John Maul di n
who has assured me, as my di rector of marketi ng,
that thi s book wi l l make me a pi l e of money . . . honest!
TABLE OF CONTENTS
Part I : BLUEPRI NTS ,
I ntroducti on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...3
I
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
TheVal ue ofMoney . . . . . . . . . . . . . . . . . . . . . . . ...7
The Ori gi nsofMoney . . . . . . . . . . . . . . . . . . . . . . . 19
Mai ntai ni ngHonestMoney . . . . . . . . . . . . . . . . ...29
Debasi ng the Currency . . . . . . . . . . . . . . . . . . . . ...39
The Contagi on of I nfl ati on . . . . . . . . . . . . . . . . ...49
When the State Monopol i zes Money . . . . . . . . ...59
Bi bl i cal Banki ng . . . . . . . . . . . . . . . . . . . . . . . . . . ...70
Fracti onal Reserve Banki ng . . . . . . . . . . . . . . . . ...80 .
Protecti ngLi censedCounterfei ters . . . . . . . . . . ...91
A Bi bl i cal Monetary System . . . . . . . . . . . . . . . ...103.
Concl usi on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...113
Part I I : RECONSTRUCTI ON
11. A Program of Monetary Reform . . . . . . . . ...123
12. The Pol i ti cs of Money . . . . . . . . . . . . . . . . . . . . ...132
13. The ReformofDebt . . . . . . . . . . . . . . . . . . . . . ...142
Bi bl i ography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...153
Scri pture I ndex. . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Subject I ndex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...157
What Are Biblical Bl uepri nts?.. . . . . . . . . . . . . . . . . . ...161
vi i
Part I
BLUEPRINTS
We began by stati ng that the i ssue wi th respect to gol d i s an
i ssue more central l y wi th respect to God. I s there an ul ti mate and
absol ute order, and does Gods soverei gn l aw establ i sh an i nescap-
abl e order wi th respect to every sphere, so that transgressi on of
that l aw bri ngs soci al penal ti es and decay? Or i s humani sm true,
and the onl y val ue i s man and hi s desi res, ~ hi s pl easure i n con-
sumpti on, di spl ay, and expressi on? The monetary cri si s refl ects a
cul tural cri si s.
Those opposi g wel fare economi cs must of necessi ty have a
1 sound monetary p, l i cy. But a sound monetary pol i cy rests i n the
framework of abs@te l aw, i n the basi c premi se of the soverei gn
and absol ute Godl whose l aw-order governs al l real i ty. Wi thout
thi s fai th, the conservati ves economi cs l acks the consi stency of the
stati sts. The monetary pol i ci es of soci al i sm refl ect, after al l , a
consi stent fai th i n the ul ti macy and soverei gnty of man and mans
abi l i ty to create hi s own l aw, money, and worl d at wi l l . Here as
el sewhere the questi on i s si mpl y thi s: who i s God? I f the Lord be
God, then fol l ow Hi m. But i f Bad be god, then Baal must be fbl -
I owed. Not wi thout si gni fi cance, the U. S. coi nage, from the days
of the Ci vi l War, bore the i mpri nt, I n God We Trust.
R. J. Rushdoony*
* Rushdoony, Polihcs of Guiit and P@ (Fai rfax, VA: Thobum Press [1970]
1978), pp. 241-42.
I NTRODUCTI ON
Thi s i s a book on money, a subject that has defi ed anal ysi s by
professi onal economi sts for as l ong as there have been professi onal
economi sts. At the same ti me, i t i s a topi c for whi ch the most i l l -
i nformed peopl e thi nk they have the answers. Very often the most
i l l -i nformed peopl e are professi onal economi sts.
I wi l l gi ve you an exampl e. I n the fal l of 1985, I suggested to a
research assi stant to a U. S. Congressman that he conduct a qui ck
study of the Mexi can peso. I thought that the sharp i ncrease i n
cash Ameri can money i n ci rcul ati on, 1982-85, mi ght be expl ai ned
by Mexi can nati onal s substi tuti ng dol l ars for pesos i n Mexi co. At
the t@e that he began hi s i nvesti gati on, the peso was sel l i ng for
about 250 per do~ar. I suggested that he ask a staff economi st at
the Federal Reserve System, our nati ons central bank, i f he
thought that Mexi cans were hoardi ng cash dol l ars. I suspected
that Mexi can ci ti zens were usi ng the U.S. dol l ar as a substi tut,
for the col l apsi ng peso.
He phoned back a few days l ater. Two staff economi sts, one oi
whom was a speci al i st i n the Mexi can economy, had tol d hi m that
i t was qui te unl i kel y that Mexi cans were hoardi ng dol l ars,
because Mexi cans coul d take cash dol l ars to thei r l ocal bank, ex-
change thei r dol l ars for pesos, and the bank woul d pay them i n-
terest i n pesos.
Wi thi n one week, the peso fel l to 500 to the dol l ar. Thus, any-
one who had fol l owed the advi ce ~f the expert economi sts had l ost
hal f of hi s capi tal . On the other hand, those who had bought cash
dol l ars wi th thei r pesos and never went near a bank had doubl ed
thei r money (pesos). I n short, a l ot of i l l i terate Mexi can peasants
3
4 Honest Money
know more about practi cal economi cs i n an i nfl ati onary economy
than Federal Rese&e economi sts know. Somehow, thi s di scovery
di d not surpri se m~.
A few months I qter, a report on the apparent di sappearance of
Ameri can cash appeared i n the newspapers. I t sai d that Federal
Reserve economi sts now thi nk that peopl e i n forei gn countri es are
usi ng Ameri can bi l l s i nstead of thei r depreci ati ng nati onal curren-
ci es. So much for the consi stent vi ews of economi sts. They just
dont agree on much of anythi ng, except the need to keep econ-
omi sts on the payrol l . ,
The Cri si s We Face
There i s a debt cri si s i n the maki ng. I t i s i nternati onal . Every
i ndustri al nati on on earth faces a cri si s that coul d dwarf the cri si s
of the 1930s. The banks of the worl d have done the bi ddkg of the
pol i ti ci ans, and they have l oaned hundreds of bi l l i ons of dol l ars .
and other currenci es to the l ess devel oped countri es (LDCS).
The p+i ti ci ans wanted them to do thi s because the voters were
ti red of sendi ng government forei gn ai d to these backward soci al -
i st di ctatorshi ps and tri bal despoti sms. Begi nni ng i n the 1970s,
the bankers sent the deposi tors money by the hundreds of bi l l i ons
of dol l ars.
The resul t i n ei ther case i s the same: the money i s gone. The
despots bought what they wanted, and squi rrel ed away hundreds
of mi l l i ons or even bi l l i ons i n Swi ss banks. (I n earl y 1986, the
Swi ss government froze the bank accounts of deposed Phi l i ppi ne
Presi dent Marcos when i t was rumored that he was about to pul l
%k money out of Swi ss banks.) The governments bui l t ci ti es (the
cl assi c exampl e i s Brasi l i a) and power pl ants and steel mi l l s
none of whi ch produces a profi t. The money was spent, the pyra-
mi ds were bui l t, and now the Wests banks are si tti ng on top of a
mountai n of I OUs that are never goi ng to be pai d off, at l east not
wi th money that i s worth anythi ng.
Thi s means that you and I are si tti ng on top of those I OUs,
for i t was our economi c futures that the i di ot banker q gave away.
But i ts parti al l y our faul t; we trusted them, year by year.
I
1
I ntroduction 5
There are no sol uti ons. The l oans are sour. There wi l l be a
defaul t. The practi cal forecasti ng questi ons we need to get
answered are these: How soon wi l l the defaul t come? What ki nd
of defaul t wi l l i t be?
Thi s book asks a di fferent questi on: What vi ol ati ons of the
pri nci pl es of the Bi bl e di d the West commi t that l ed us i nto thi s
mess? I t al so asks thi s questi on: What shoul d we bui l d on the
rui ns of the present system after the col l apse?
Bi bl i cal Al ternati ves
There are Bi bl i cal al ternati ves. I f we had adopted them 500
years ago, or 100 years ago, or even 50 years ago, we woul d not be
faci ng the monetary cri si s that we now face. But we di dnt adopt
them, so we are faci ng i t.
Professi onal economi sts do not take the Bi bl es answers seri -
ousl y. They wi l l not take thi s book seri ousl y. But we have l i stened
to professi onal economi sts for 200 years, and what do we have to
show for i t? Where have they set forth a si mpl e, pri nci pl ed, cl ear
program for l ong-term economi c stabi l i ty? Where have they come
to any agreement on what ought to be done? Nowhere. Where
there are fi ve economi sts, there wi l l be at l east si x opi ni ons.
Professi onal theol ogi ans who bel i eve i n the B~bl e as the i nfal l i -
bl e Word of God al so have not taken the Bi bl es answers seri ousl y.
They are not used to thi nki ng of the Bi bl e as a book that offers
soci al , pol i ti cal , and economi c bl uepri nts. They have not con-
cerned themsel ves wi th broad soci al questi ons-for over a century.
Why, then, do I thi nk I know the thi ngs the Bi bl e says we
must da, when the athei sti c economi sts and l ets-not-get-i nvol ved-
i n-soci al -i ssues theol ogi ans are agreed that the Bi bl e doesnt offer
us any speci fi c bl uepri nts? Because I take the Ol d Testament seri -
ousl y. The economi sts and the l ets-just-preach-Jesus theol ogi ans
dont.
When the cri ses hi t and they are goi ng to hi t Chri sti ans
need to be i n posi ti ons of l eadershi p, ready wi th accurate answers
about how and why the cri ses hi t, and what the Bi bl e says needs
to be done to recover from them, and to keep these cri ses from hi t-
/
6 Honest Mong
ti ng us agai n. Thi s means that Chri sti ans need to understand the
Bi bl es bl uepri nts for every area of l i fe. One of these areas i s
monetary pol i cy.
The pri nci pl es of honest money are not di ffi cul t to l earn. I m-
pl ementi ng them, on the other hand, wi l l i nvol ve consi derabl e
soci al cost, but nothi ng compared to what the West wi l l go
through i f we Chri sti ans dont do the work, and the ci vi l govern-
ment doesnt begi n to enforce Gods l aw. I f we fai l to reconstruct
the present banki ng system because everyone refuses to pay
whatever soci al costs are necessary to do i t, we wi l l eventual l y pay
far hi gher costs anyway. Chr@i ans shoul d be prepared to fol l ow
Jesus warni ng about counti ng the costs:
For whi ch of you, i ntendi ng to bui l d a tower, does not si t down
fi rst and count the cost, whether he has enough to fi ni sh i t l est,
after he has l ai d the foundati on, and i s not abl e to fi ni sh i t, al l who
see hl m begi n to mock hi m, sayi ng, Thi s man began to bui l d and
was not abl e to fi ni sh (Luke 14:28-29).
1
THE V_UE OF MONEY
So when the money fai l ed i n the l and of Egypt and i n the l and
of Canaan, al l the Egypti ans came to Joseph and sai d, Gi ve us
bread, tfor why shoul d we di e i n your presence? For the money has
fai l ed (Genesi s 47.15).
Dani el Defoe wrote a novel i n 1719 about a man whose shi p
sank, and who ,wound up on a deserted i sl and for 28 years. I t was
cal l ed Robinson Crusoe. Economi sts l ove to use Robi nson Crusoe as
thei r exampl e when they begi n an i ntroductory textbook on eco-
nomi cs. Why? Because he was al one i ni ti al l y. We can then tal k
about scarci ty and i ts economi c effects i n a worl d wi thout a money
economy. Why di dnt Crusoes economy have money? Because i t
was a worl d wi thout exchange (trade) and the di vi si on of l abor.
Crusoe faced a hosti l e worl d. How was he goi ng to overcome
scarci ty? He needed food, cl othi ng, and shel ter. Fortunatel y for
hi m, he was abl e to get a l ot of hi s tool s from the shi p; i f he hadnt,
he woul dnt have survi ved even 28 days.
The reason why economi sts use Robi nson as an exampl e i s
that they dont have to begi n wi th the ddl i cul t probl ems of the
di vi si on of l abor and vol untary trade. Onl y when the economi st ,
has expl ai ned basi c producti on, savi ng, and the al l ocati on of ti me
and capi tal does he i ntroduce Fri day, the nati ve partner. That was
Defoes strategy, too.
The textbook Crusoe i ni ti al l y has to deci de what hi s hi ghest
pri ori ti es are. What i s hi s order of preferences? I s i t fresh water,
food, shel ter, or cl othi ng? What need does he attempt to sati sfy
fi rst? The whol e poi nt of the i l l ustrati on i s to show that i n a worl d
7
8 Hontwt Along
of l i mi ted resources, a person has to make deci si ons about how to
achi eve hi s goal s. He cant achi eve al l of them at the same ti me.
He has to deci de what he needs to dofi rst, second, and so on,
down to a hundred and thi rty-fi fth or more-and then he has to
compare thi s l i st wi th hi s avai l abl e resources, i ncl udi ng hi s per-
sonzd ski l l s and ti me.
One day he may pi ck berri es. But they dont l ast forever,and
besi des, he wants somethi ng el se to eat. He can cl i mb a tree and
pi ck coconuts, or he can spend several hours to make a sort of
poki ng sti ck that he can use to knock down frui t or coconuts from
trees. But the ti me he spends l ocati ng a sui tabl e sti ck cant be used
to cl i mb trees and get food di rectl y. The poi nt i s that he has to gi ve
up i ncome (food) i n order to get the ti me to produce or di scover
capi tal (the sti +).
He may want to go fi shi ng. That means he needs a fi shi ng
pol e, some l i ne, a hook, and maybe some bai t. Or.he needs a net.
But unl ess he fi nds i t as a free gi ft (the shi ps warehouse), he has to
make i t. He cant become too fancy, or el se he wi l l di e of mal nutri -
ti on before he fi ni shes the project.
(
Decisions on Board
Say that he has a pi l e of goods to take from the shi p. He has
put together a crude and i nsecure raft that he can use to fl oat
some goods back to shore. The shi p i s sl owl y si nki ng, so he has
l i mi ted ti me. A storm i s comi ng up over the hori zon. He cant
grab everythi ng. What does he take? What ~ i s most val uabl e to ,
hi m? Obvi ousl y, he makes hi s deci si on i n terms of what he thi nks
he wi l l need on the i sl and. He tri es to esti mate what tool s wi l l be
most val uabl e, gi ven hi s new envi ronment.
The val ue of a tool as far as he i s concerned has nothi ng to do
wi th the money i t cost ori gi nal l y. He mi ght be abl e to pi ck up a
sophi sti cated cl ock, or an expensi ve musi cal i nstrument, but he
probabl y wont. He woul d probabl y sel ect some i nexpensi ve
kni ves, a mi rror (for si gnal i ng a passi ng shi p), a barrel (for col -
l ecti ng rai n water), and a dozen other si mpl e tool s that coul d
mean the di fference between l i fe and death.
I
I %e l%lue of Mong 9
I n short, val ue i s subjecti ve. The economi st uses fancy l an-
guage and says that Crusoe imputes val ue to scarce resources. He
deci des what i t i s he wants to accompl i sh, and then he eval uates
the val ue to hi m personal l y of each tool . I n other words, the val ue
of the tool i s compl etel y dependent on the val ue of the toolt expectedfu-
ture outut. He mental l y cal cul ates the future, val ue of the expected
future output of each tool , and then he makes judgments about the
i mportance of any gi ven tool i n produci ng thi s output. Then he
cal cul ates how much ti me he has unti l the shi p si nks, how much
wei ght each tool contri butes, how l arge hi s raft i s, and how
choppy the water i s. He sel ects hi s pi l e of tool s and other goods ac-
cordi ngl y.
I n other words; he doesnt l ook to the past i n order to eval uate
the val ue to hi m of any i tem; he l ooks to the future. The past i s
gone. No matter what the goods cost ori gi nal l y, they are val uabl e
now onl y i n terms of what i ncome (i ncl udi ng psychi c i ncome) they
are expected to produce i n the future. Whatever they cost i n the
past i s gone forever. Bygones are bygones. The economi st cal l s
thi s the doctri ne of sunk costs. I n the case of Crusoes shi p, thats
exactl y what they are about to become: sunk. Thats why he has to
act fast i n order to avoi d l osi ng everythi ng.
There are objecti ve condi ti ons on the i sl and, and the vari ous
tool s are al so objecti ve, but everythi ng i s evaluated subjective~ by
Crusoe. He asks the questi on, What val ue i s thi s i tem to me?
Hi s assessment i s the sol e determi ni ng factor of what each i tem i s
worth. He may make mi stakes. He may re-ewduate (re-i mpute)
every i tems val ue l ater, when he better understands hi s condi ti ons
on the i sl and. He may l ater wi sh that he had pi cked up some other
i tem i nstead. The poi nt i s, i ts hi s deci si on and hi s eval uati on that
count. Because he i s al l al one, he and he al one determi nes what
everythi ng i s worth. He doesnt ask, How much money di d thi s
i tem cost i n the past? He asks i nstead, What goods and benefi ts
wi l l i t produce for me i n the future? Then he makes hi s choi ces.
He allocates the scarce means of producti on. He al l ocates some to
the raft and the rest he l eaves on the si nki ng shi p. He l oads hi s ,
top-pri ori ty i tems onto hi s raft, and fl oats i t back to shore.
10 Honest Mong
The Functi on of Money
W~t has money got to do wi th al l thi s? Absol utel y nothi ng.
Crusoe doesnt use money. He si mpl y makes mental esti mati ons
of the val ue of anythi ng i n terms of what he thi nks i t wi l l produce
for hi + i n the future. I f whatever an i tem wi l l produce i snt worth
very ml ueh to hi m i n the future, i t wont be worth very much today.
~.
He! doesnt ask hi msel f, .1 wonder how much money al l thi s
cost before i t was l oaded onto the shi p? Unl ess he expects to be
rescued shortl y, thereby enabl i ng hi m to resel l the i tem, he
woul dnt bother wi th such a questi on. What does he care how
much money any i tem cost i n the past? Al l that matters i s what
actual servi ces (non-money i ncome) i t wi l l produce for hi m i n the
future.
Assume that he has real l y l i ttl e hope of bei ng rescued. -The
shi p i s si nki ng. Hi s raft i s al most ,si nki ng bel ow the water. The
storm i s comi ng. He has to get back to shore fast. As he i s about to
cl i mb off the shi p and onto the raft, he remembers that the captai n
of the shi p was rumored to own a chest ful l of gol d coi ns. Woul d
Crusoe run back to the captai ns room to try to fi nd thi s chest?
Even i f he had epough ti me, and even i f he real l y knew where i t
was, woul d he drag i t to the edge of the shi p and try to l oad i t onto
the raft? Woul d he toss the tool s i nto the ocean to make way for a
chest of gol d coi ns? Obvi ousl y not.
But money i s weal th, i snt i t? Gol d i s money. Why woul dnt he
sacri fi ce some i nexpensi ve kni ves and barrel s i n order to i ncrease
hi s weal th (money)? The answer i s si mpl e: i n a one-person envi -
ronment, money cannot exist. I t serves no purpose. Crusoe knows
that gol d i s heavy. I t di spl aces tool s. I t si nks rafts. I ts not onl y
usel ess; i ts a l i abi l i ty.
The val ue of money i s determi ned by what those who val ue i t
expect that i t wi l l do for them i n the future. A l onel y man on a
deserted i sl and cant thi nk of much that money wi l l do for hi m i n
the future. I f he remai ns al one for the rest of hi s l i fe, there i s noth-
i ng that money can do for hi m at al l .
So the val ue of money i n thi s exampl e i s zero.
Th Value of Momy 11 ~
Joseph i n Egypt
Now l ets take a real hi stori cal exampl e, the fami ne era i n
- Egypt. Joseph had warned the Pharaoh of the fami ne to come,
and for i i ev~n years, the Pharaohs agents had col l ected one-fi fth of
the harvest and had stored i t i n granari es. Then the fami ne hi t.
The crops fai l ed. The peopl e of nearby Canaan al so suffered. No
one had enough food.
And Joseph gathered up al l the money that was found i n the
l and of Egypt and i n the l and of Canaan, for the grai n whi ch they
bought; and Joseph brought the money i nto Phar aZWs house. So
when the money fai l ed i n the l and of Egypt and i n the l and of Ca- .
naan, al l the Egypti ans came to Joseph and sai d, Gi ve us bread,
for why shoul d we di e i n your presence? For the money has fai l ed
(Genesi s 47:14-15).
What di d they mean, the money has fai l ed? They meant
si mpl y that compared to the value of lz~e-gwing grain, the money was
worth nothi ng. Why woul d a man faci ng starvati on want to gi ve
up hi s remai ni ng suppl y of grai n i n order to get some money?
What good woul d the money do hi m? He wanted l i fe, not money,
and grai n offered l i fe.
Because the money fai l ed, i t had fal l en to al most zero val ue.
Thus, i n order to buy food, the peopl e had been forced to spend
al l of thei r money. Now they were wi thout food or money.
Then Joseph sai d, Gi ve your l i vestock, and I wi l l gi ve you
bread for your l i vestock, i f the money i s gone. So they brought
thei r l i vestock to Joseph, and Joseph gave them bread i n exchange
for the horses, the fl ocks, the cattl e of the herds, and for the don-
keys. Thus he fed them wi th bread i n exchange for al l thei r l i ve-
stock that year. (Genesi s 47:16-17).
Were the Egypti ans fool i sh? After al l , al l those cattl e and
horses were useful . But ani mal s eat grai n. The grai n was too val -
uabl e duri ng a farni ne to feed to ani mal s. Al l that the ani mal s
were worth was whatever they woul d bri ng as food, arm m Egypt,
the meat woul dnt l ast l ong. Dead ani mal s i n a desert country
dont remai n val uabl e very l ong. Why not trade ani mal s for grai n,
12 -- Honest Money
whi ch survi ves the heat?
The onl y reason the Pharaoh had ~y use for the ani mal s and
money i s that he knew he had enough food to suryi ve the fami ne.
He I &ew that i t woul d eventual l y end. Thus, he woul d be the
owner of al l the weal th of Egypt at the end of the fami ne. For hi m,
the exchange was a good deal , but onl y because he had the foods
and the army to defend i t, and he al so possessed what he bel i eved
to be accurate knowl edge concerni ng when the fami ne woul d end.
Joseph had i ol d hi m i t woul d l ast seven years.
Because he had a surpl us of grai n beyond mere survi val , and ,
because he had i nsi de i nformati on about the durati on ,of the
fami ne, money and ani mal s were val uabl e to the Pharaoh, even
though they were not val uabl e to the peopl e. Thus, a vol untary
. exchange became profi tabl e for both si des. The Pharaoh gaye up
grai n for goods that woul d agai n become very val uabl e i n the
future. The Egypti ans gave up goods worth very l i ttl e to them i n
the pres?nt i n order to get absol utel y vi tal present goods. Each
si de gave up somethi ng l ess val uabl e i n exchange for somethi ng
more val uabl e. Each si de i mproved i ts economi c posi ti on. Each
si de therefore gai ned i n the transacti on.
Noti ce here that we are not deal i ng wi th any so-cal l ed equal -
i ty of exchange. Thi s theory says that peopl e exchange goods
onl y when the goods are of equal val ue. I t i s true that i n the mar-
ketpl ace, they may be of equal @i ce, but they are not of equal
val ue i n the mi nds of the traders. What we are al ways deal i ng
wi th i n the case of vol untary exchange i s ineguzzlz~ of exchange.
One person wants to possess what the other person has more than
he wants to keep what he al ready has. Because each person eval -
uates what the other has as more val uabl e, a vol untary exchange
takes pl ace:
Egypts money fai l ed. I n fact, grai n became the newform of mong,
al though the Bi bl e doesnt say thi s expl i ci tl y. What i t says i s that
everyone was wi l l i ng to trade whatever he had of former val ue i n
order to buy food. But i f some i tem i s what everyone wants, then
we can say that i ts the true money.
.,, ,
The Kilue ofMoney 13
The Properti es of Money
Why woul d grai n have served as money? Because i t had the
fi ve essenti al characteri sti cs that al l forms of money must have:
1.
2.
3.
4.
5.
Di vi si bi l i ty
Portabi l i ty
Durabi l i ty
Recogni zabi l i ty
Scarci ty (hi gh val ue i n rel ati on to vol ume and wei ght)
Normal l y, grai n doesnt functi on as money. Why not? Because
of characteri sti c number fi ve. A parti cul ar cup of grai n doesnt
possess hi gh val ue, at l east not i n compari son to a cup of
di amonds or a cup of gol d coi ns. The buyer thi nks to hi msel f,
Theres l ots more where that came from. Normal l y, hes correct;
there i s a l ot more grai n where that came from.. But not duri ng a
fami ne.
Why di vi si bi l i ty? Because you need to count thi ngs. Fi ve
ounces of thi s for a brand-new that. Onl y three ounces for a used
that. ~ Both the buyer and the sel l er need to be abl e to make a trans-
acti on. The sel l er of the used that may want to go out and buy
three other used thats i n order to stay i n the that busi ness, so
he needs some way to, di vi de up the i ncome from the i ni ti al sal e.
Thi s means di vi si bi l i ty: ounces, number of zeroes on a pi ece of
paper , or whatever . -
Portabi l i ty i s obvi ous. I t i snt an absol ute requi rement. I have
-
read that the South Paci fi c i sl and cul ture of Yap uses gi ant stone
doughnuts as money. They are too l arge to move. But they area
si gn of weal th, and peopl e are wi l l i ng to gi ve goods and servi ces to
buy them. Actual l y what are exchanged are ownershi p certi fi cates ,
of some ki nd. Normal l y, however, we prefer somethi ng a bi t
smal l er than gi ant stone doughnuts. When we go to the market,
we want to carry money wi th us. I f i t cant be carri ed easi l y, i t
probabl y wont functi on as money.
Durabi l i ty i s i mportant, too: I f your preferred money uni t
wears out fast or rotsj you have to keep repl aci ng i t. That means
troubl e. A barrel ~ of fresh fi sh i n a worl d wi thout refri gerati on
14 Honest Money
wont serve as money. But there are excepti ons to the durabi l i ty
rul e. Ci garettes arent durabl e the way that metal i s, but ci garet-
tes have functi oned as money i n every known modern warti me
pri son camp. Thei r hi gh val ue per uni t of wei ght and vol ume
overcomes the l ow durabi l i ty factor. Al so, they stay scarce: peopl e
keep smoki ng thei r capi tal .
Recogni zabi l i ty i s cruci al i f youre goi ng to persuade anyone
to trade wi th you. I f he doesnt see that i ts good, ol d, fami l i ar
money, he wont ri sk gi vi ng up ownershi p of whatever i t i s that
youre tryi ng to buy. I f i t takes a l ong ti me for hi m to i nvesti gate
whether or not i ts real l y money, i t eats i nto everyones val uabl e
ti me. I nvesti gati ons arent free of charge, ei ther. So the costs ofex-
change go up. Peopl e woul d rather deal wi th a more fami l i ar
money. I ts cheaper, faster, and safer.
So what we say i s that any object that possesses these fi ve char-
acteri sti cs to one degree or another has the potenti al of servi ng a
soci ety as money. Some very odd i tems have served as money hi s-
tori cal l y: sea shel l s, bear cl aws, sal t, cattl e, pi eces of paper wi th
pol i ti ci ans faces on them, and even women. (The probl em wi th
women i s the di vi si bi l i ty factor: hal f a woman i s worse than no
woman at al l .)
Money as a Soci al Product
We have al ready seen that Robi nson Crusoe has no need of
money on hi s i sl and. From there we went to anci ent Egypt, and
we found that soci ety di d i ni ti al l y need money, but when a fami ne
struck, the ol der forms of money fai l ed, no l onger servi ng as
money. Maybe grai n took over as the new money. Or maybe
nothi ng repl aced money.
These exampl es shoul d gi ve us some prel i mi nary i deas about
what money i s, and how i t works. I t i s used i n exchange. Because
Robi nson Crusoe i s al l al one, he has no use for money. He doesnt
i ntend to make any vol untary exchanges. Si mi l ad y, i n a soci ety
that i s just barel y survi vi ng, and al most everyone i s a farmer,
there wi l l be no reason for money to exi st. Nobody buys and sel l s
for money any more. To trade away grai n i s to trade away l i fe.
Z3e l%lue ofMong 15
They al l hang onto every bi t of food they grow, and nobody trades
- very much. They may barter goods and servi ces di rectl y, but they
no l onger trade by means of money. Thi s i ndi cates a very l ow
amount of trade. So wi despread trade ceases. When thi s happens,
money fai l s . I t di es. I t no l onger serves soci ety, so i t fal l s i nto ,di s-
use unti l the cri si s i s over.
I f peopl e dont trade, they cant speci al i ze i n producti on. I n
the case of Egypt, what had been a ri ch nati on became poo~ The
Pharaoh was ri ch, and the peopl e of Egypt survi ved, but at very
hi gh cost: the l oss of thei r freedom. They sol d themsel ves i nto a
form of sl avery i n order to buy food, for they sol d thei r l and and
thei r chi l drens i nheri tance to Pharaoh (Genesi s 47:19-23). Thats
poverty wi th a vengeance. But they survi ved the fami ne. They
bought thei r l i ves.
Why does money exi st? Because i t serves peopl e wel l . I f they
want to i ncrease thei r personal weal th by gi vi ng up l ess val uabl e
i tems (to. them) i n order to buy more val uabl e i tems (to them),
they need tradi ng partners. I f I have onl y cattl e to sel l , and the per-
son I want to sel l to doesnt want cattl e, but wants an axe, I have to
go fi nd someone who wi l l trade an axe for my cattl e, and then I
have to try to fi nd the person who wants the axe. I hope and pray
he hasnt bought an axe from someone el se i n the meanti me.
But where theres a wi l l , theres a way. Where there i s a need
i n soci ety, men have an i ncenti ve to fi nd a way to fi l l the need. As
peopl e trade wi th one another, they vol untady begi n to search out
uni versal l y desi red i tems i n order to hol d for a rai ny day. They
sel l thei r surpl us goods or servi ces for thi s uni versal l y sought-after
good. Why? Because they make the assumpti on that peopl e wi l l
want thi s good tomorrow and next week, too. So i f they store up a
quanti ty of thi s good, they wi l l be abl e to fi nd peopl e who wi l l be
wi l l i ng to sel l them al l sorts of goods and servi ces l ater on. I n fact,
the owner of thi s good wi l l be abl e to change hi s mi nd next week
about what he wants to buy, and he wi l l sti l l be abl e to buy i t.
I n short, and most i mportant, nzon~ zs the most marketabl e com-
modi~ in a particular society. That i s the best defi ni ti on of money that
economi sts have been abl e to come up wi th. I n Egypt, when the
16 Honest Mong
ol der form of money was no l onger marketabl e, the Bi bl e says that
the money fai l ed. Fai l ed money i s the same as unmarketabl e
money. But there i s no such thi ng as unmarketabl e money. I f i ts
unmarketabl e, then no one wants i t. I f no one wants i t, i ts no
l onger money.
Money al l ows us to change our mi nds i nexpensi vel y. I t al l ows
us to make mi stakes about what we need or want, and we can sti l l
recover. Money broadens the number of peopl e who wi l l be wi l l -
i ng to sel l us what we want. The more peopl e who want money,
the more peopl e I wi l l be abl e to deal wi th.
/
Furthermore, money makes i t possi bl e for peopl e to establ i sh
common pri ces for most goods and servi ces. I dont have to com-
pute how many axes wi l l buy how many shoes, and then compare
shoes wi th cattl e, and sheep wi th axes, and on and on. Al l I need
to do i s to check the newspaper and see al l the thi ngs I can buy
wi th money. So we al l make better deci si ons because we can cal cu-
l ate more effecti vel y. Wi thout money, we can achi eve onl y a
pri mi ti ve economy, because cal cul ati ng the pri ce of anythi ng, l et
al one everythi ng, ti ecomes too di ffi cul t. I n fact, we can defi ne the
word pri mi ti ve as, a soci ety wi thout a devel oped money system.
Money i ncr easds the di vi si on of l abor. I t i ncreases our opti ons
of buyi ng and sel l i ng. I t therefore i ncreases our weal th and our
freedom of acti on. I t promotes economi c growth. And most i nter-
esti ng of al l , to achi eve al l thi s, the State* doesnt need to produce
i t. I t i s a product of i ndi vi dual economi c acti on, not government
l egi sl ati on. ,
Summar y
Robi nson Crusoe di dnt need money (except perhaps after
I ?ri day showed up) because he had no one to trade wi th. He had
to make hi s cal cul ~i ons of val ue di rectl y. 1 want thi s most of al l ,
thi s over here second, that over there thi rd: and so fofi . He cal -
G I capi tal i ze the word State when referri ng to cwi l government i n general . I
dont cap~tahze I t when I am referri ng to a Umted States pohtwd Juri schcti on
cal l ed a state.
I
1.
The Uzlue ofMonV 17
cul ated i n terms of fi rst, second, thi rd, etc., not by ten uni ts,
seven uni ts, fi ve uni ts, etc. He had no uni ts i n hi s head, so he
coul dnt use them to make compari sons.
I n Egypt, the money fai l ed because everyone wanted the same
thi ng, grai n, and nobody was wi l l i ng to gi ve up any grai n except
the Pharaoh. Trade ei ther ceased or sl owed down drasti cal l y.
Money ceased to serve as a means of trade. The fami ne made
peopl e poor, and as trade was reduced, they became even poorer.
The di vi si on of l abor col l apsed. Thi s means that the speci al i zati on
of producti on col l apsed. ~
Money i s a soci al phenomenon. I t comes i nto exi stence
because i ndi vi dual s begi n to recogni ze that certai n common ob-
jects i n soci ety are uni versal l y sought after. Peopl e then sel l thei r
goods and servi ces i n order to obtai n thi s sought-after good. They
store up thi s commodi ty because they expect others to sel l them
what they need i n the future. As i n the case of Robi nson Crusoe
on board the shi p, peopl e want to own whatever wi l l provi de them
wi th i ncome (goods and servi ces) i n the future. Peopl e make deci -
si ons concerni ng the present and the future. The past i s gone for-
ever. Money offers peopl e the wi dest number of opti ons i n the
future, so they sel l thei r goods and servi ces i n order to buy money
i n the present.
The pri nci pl es governi ng the val ue of money are these:
1. Economi c acti on begi ns wi th an ordered set of wants (fi rst,
second, thi rd, etc.).
2. A worl d of scarci ty doesnt permi t us to achi eve al l of our
desi res at the same ti me.
3. To i ncrease output, we need capi tal (tool s).
4. We have to sacri fi ce present i ncome i n order to obtai n
capi tal .
5. The val ue of the tool to each person i s dependent on the ex-
pected val ue (to hi m) of the future output of the tool .
6. Val ue i s i mputed by a person to goods and servi ces; i t i s
therefore subjecti ve.
7. Past costs are economi cal l y i rrel evant; present and future
i ncome are al l that matter.
18 Honest Money
1
8. ti e must a!l ocate our scar ce r esour ces r ati onal l y i n or der to
achi eve our goal 1.
4
9. Money d snt exi st i f youre al l al one.
10. Money i s a soci al phenomenon.
11. The val ue i of money i snt constant (for exampl e, duri ng a
fami ne). ~
12. There i s no equal i ty of exchange.
13. Moneys fi ~e characteri sti cs are di vi si bi l i ty, portabi l i ty, dur-
abdi ty, recogni zabi l i ty, and scarci ty.
14. Money i s {he most marketabl e good.
15. Money i ncreases our opti ons.
16. Money al l ows us to r ecover mor~ ea.dy when we have made
economi c er r or s.
17. Money i ncreases the di vi si on of l abor.
18. Money therefore i ncreases our producti vi ty.
19. Money i ncreases our freedom.
20. Money makes possi bl e a hi ghl y devel oped economi c cal cu-
l ati on.
21. The State doesnt need to create i t i n order for i t to exi st.
.
2
THE ORI GI NS OF MONEY
And the gol d of that l and [Havi l ah] i s good. Bdel l i um and the
onyx stone are there (Genesi s 2:12).
I n the second chapter of the Book of Genesi s, God, speaki ng
through Moses, saw fi t to menti on thi s aspect of the l and of
Havi l ah. I t was a pl ace where val uabl e mi neral s were present.
One of these mi neral s was gol d.
We cannot l egi ti matel y bui l d a case for a gol d standard from
thi s verse. We coul d as easi l y bui l d a case for the onyx standard,
or a bdel l i um standard (whatever i t was: possi bl y a whi te
mi neral ). What we can argue i s that Moses knew that peopl e
woul d recogni ze the i mportance of the l and of Havi l ah because
they woul d recogni ze the val ue of these mi neral s. One of these
mi neral s was gol d.
Why do I stress gol d? Hi stori cal l y, gol d has served men as the
l ongest-l i ved form of money on record. Si l ver, too, has been a
popul ar money metal , but gol d i s hi stori cal l y ki ng of the money
metal s. There i s no doubt that Moses expected peopl e to recog-
ni ze the val ue of gol d. We read hi s words 3,500 years l ater, and we
recogni ze the i mportance of the l and of Havi l ah. I f we coul d
l ocate i t on a map, there woul d be as wi l d a gol d rush today as
there woul d have been i n Moses day. No one thi nks to hi msel f, I
wonder what gol d was?
Money: Past, Present, and Future
You may remember from the previ ous chapter that money
appears i n a soci ety when i ndi vi dual s begi n to recogni ze that a
parti cul ar commodi ty i s becomi ng wi del y accepted i n exchange.
19
20 Horwst MongJ
Peopl e want to be abl e to buy what they want tomorrow or next
week or next year. They arent real l y sure whi ch economi c goods
wi l l be i n demand then, so they seek out one good whi ch wi l l
probabl y be i n heavy demand. They can buy uni ts of thi s good
now, put them away, and then buy what other goods or servi ces
they want l ater on. I n short, money i s the most marketabl e com-
modi ty. I t i s marketabl e because peopl e expect i t to be ua(uable in
the~ture.
Thi s i snt too di i i i cul t to understand. But i t rai ses a probl em.
The uni t we cal I money i s val uabl e today. We have to sel l goods or
servi ces i n order to buy i t. I n other words, money has al ready es-
tabl i shed i tsel f as the common uni t of economi c cal cul ati on. My
l abor i s worth a tenth of a uni t per hour. A brai n surgeons l abor i s
worth a ful l uni t. A new car i s worth ten uni ts. Money has ex-
change val ue today. I f i t di dnt, i t woul dnt be money. We have al l
l earned about moneys val ue i n our dai l y ai l ai rs. We are fami l i ar
wi th i t.
How do we know what i ts worth today? We know what i t was
worth yesterday. We have a hi stori cal record for i ts purchasi ng
power. I f we di dnt know anythi ng about moneys val ue i n the
past, we woul d not accept i t as a uni t of account today. I f i t has no
hi story, why shoul d anyone expect i t to have a future? But i f peo-
pl e dont expect i t to have a future, i t cant serve as money.
So here i s the key questi on: How di d money ori gi nate? I f i t
has to have a hi story i n order to have present val ue, how di d i t
come i nto exi stence i n the fi rst pl ace? Are we confronti ng a
chi cken-and-egg probl em?
Thi s was the i ntel l ectual probl em faced by one of the greatest
economi sts of al l ti me, Ludwi g von Mi ses, an Austri an schol ar. I n
hi s book, The Z%eoty ofA40n~ and Credit (1912), he offered a sol uti on
to thi s i mportant questi on. Money, he argued, came i nto exi s-
tence because i n earl i er ti mes, i t was val ued for other properti es.
He thought that gol d was probabl y one of the earl i est forms of I
money not a uni que observati on, certai nl y. Before i t functi oned
.
as money, i t must have served other purposes. Perhaps i t was used
as jewel ry. Possi bl y i t was used as ornamentati on. We know that
The Oti gi ns of Mong 21
many rel i gi ons have used gol d as part of thei r ornaments. I t i s
shi ni ng, l ovel y to l ook at, and wi del y recogni zed.
Gold in the Bible ,
Anyone fami l i ar wi th the Bi bl e woul d recogni ze the accuracy .
of Mi ses theory. Abrahams servant gave Rebekah gi fts i n order
to l ure her i nto marri age wi th I saac. These gi fts i ncl uded jewel ry
made of si l ver and gol d (Genesi s 24:53). When the I srael i tes fl ed
Egypt, they were tol d by God to col l ect spoi l s as repayment for
thei r l ong ensl avement: jewel s of gol d and si l ver (Exodus 3:22).
God warned the I srael i tes not to make gods of gol d or si l ver to
worshi p (Exodus 20: 23), i ndi cati ng that thi s was a common form
of i dol atry i n pagan l ands. But hi s tabernacl e was to be fi l l ed wi th
gol d ornaments (Exodus 25, 26, 28, 37, 39). So was the templ e
(1 Ki ngs 6,7:48-51, 10). As a possi bl e (though not concl usi ve) argu-
ment, we can compare the shi ni ng bri l l i ance of gol d wi th the gl ory
cl oud of God (Ezeki el 1:4). I t i s not surpri si ng that men adopted
gol d i n rel i gi ous worshi p, and then i n ornamentati on and jewel ry.
Gol d has the fi ve characteri sti cs of money: di vi si bi l i ty, dura-
bi l i ty, transportabi l i ty, recogni zabi l i ty, and scarci ty (i n rel ati on to
wei ght and vol ume). I t i s uni quel y di vi si bl e. I t can be cut wi th an
i ron or steel kni fe i n i ts pure form. I t can be hammered i ncredi bl y
fi ne. I t i s uni quel y durabl e; onl y an aci d, aqua regi a, destroys i t.
I t i s easi l y transported and easi l y hi dden. I t i s i nstantl y recogni z-
abl e. As for i ts scarci ty, throughout hi story i t has been exceed-
i ngl y scarce i n rel ati on to other metal s. Men have searched for i t
for as l ong as we have records.
We can understand how i t was that gol d came i nto common
use as a form of money. Peopl e recogni zed i ts beauty, and i ts cl ose
connecti on wi th the gods. Men who are made i n Gods i mage un-
derstandabl y desi re to col l ect gol d for themsel ves. I f God wants
gol d i n hi s pl aces of worshi p, why shoul dnt peopl e want gol d to
adorn themsel ves?
God descri bed Hi s l ove of I srael by descri bi ng fi gurati vel y
what He had done for Hi s peopl e. Li ke a bri de, I srael had been ~
gi ven ornaments, bracel ets, chai ns around her neck, a jewel i n
22 Honest A40ng ~
her forehead and earri ngs. Thus you were adorned wi th gol d and
si l ver, and your cl othi ng was of fi ne l i nen, si l k, and embroi dered .
cl oth. You ate pastry of fi ne fl our, honey, and oi l . ,~ou were ex-
ceedi ngl y beauti ful , and succeeded to royal ty (Ezeki el 16:13).
The Most Marketabk Commodity
Gol d has been the most marketabl e commodi ty fur tl i ousands
of years. A sel l er of gol d has not had to stand i n the streets despe?-
atel y beggi ng peopl e to consi der bu yi ng hi s gol d. I f anythi ng, he
has needed bodyguards to keep peopl e from steal i ng hi s gol d.
Understand from the begi nni ng that the State was not neces-
sari l y a part of the devel opment of gol d and si l ver as money.
There i s nothi ng i n the Bi bl e that i ndi cates that gol d and si l ver
became money metal s because Abraham, Moses, Davi d, or any ~
other pol i ti cal l eader announced one afternoon: From now on,
gol d i s money! The State onl y affi rmed what the market had cre-
ated. I t col l ected taxes i n gol d and si l ver. I t thereby acknowl edged
the val ue whi ch market forces had i mputed to gol d and si l ver. But
the State di dnt create money.
Noti ce al so that i f Mi ses argument i s correct concerni ng the
devel opment of money, the ori gi nal money uni ts must have been
commodi ty-based. I f the uni t of account (for exampl e, gol d) must
have come i nto popul ar use because of i ts past val ue, at some
poi nt we must concl ude that i t was val uabl e as a commodi ty for
some benefi t that i t brought besi des servi ng as the most market-
abl e commodi ty: money. Money had to start somewhere. I t had
to ori gi nate someti me. Before i t was money, i t must have been a
commodi ty.
I n short, money was not ori gi nal l y a pi ece of paper wi th a pol i -
ti ci ans pi cture on i t.
Money and Taxes
There i s no doubt that the State can strongl y i nfl uence the
conti nuati on of one or more metal s as an acceptabl e uni t of
money. Al l the State has to do i s to announce: From now on,
everyone wi l l be requi red to pay hi s taxes i n a parti cul ar uni t of
The Or@ns ofMonq 23
account . After al l , taxes are an expense. There i s no escape from
death and taxes. (But, fortunatel y, the death rate doesnt go up
every ti me Congress meets.) The &ate has power. I f i t says that
peopl e must pay thei r taxes i n a parti cul ar uni t of account, there
wi l l be strong i ncenti ves for peopl e to store up thi s form of money.
Sti l l , the State doesnt have an absol utel y free hand i n sel ect-
i ng thi s uni t of account. I f i t i mposes on peopl e a l egal obl i gati on
to pay what the peopl e cannot actual l y gai n access to, there wi l l be
no revenues. I n the Mi ddl e Ages, for exampl e, there were no gol d
coi ns i n ci rcul ati on i n Western Europe unti l the mi d-1200s. There ~
was no way that a ki ng or emperor coul d compel peopl e to pay
gol d i n the year 1100 or 900, because hi s subjects coul dnt get any
gol d. They had nothi ng val ued by the East (Byzanti um, the East-
ern Roman Empi re) that coul d be exchanged for gol d.
The Bi bl e i s cl ear: taxes to the State were pai d both i n ki nd
(a ti the of actual agri cul tural producti on: 1 Samuel 8:14-15) and
i n cash, meani ng si l ver. A head tax was requi red when the na-
ti on was numbered i mmedi atel y before a mi l i tary confl i ct (Ex-
odus 30:12-14) the onl y ti me that i t was.l awful for the State to
conduct a census, as Ki ng Davi d l ater l earned (2 Samuel 24:1-17).
Sol omon col l ected 666 tal ents of gol d (1 Ki ngs 10:14), presumabl y
from taxes, gi fts from other nati ons, and from the sal e of any agri -
cul tural produce he col l ected. (We arent tol d where he got thi s
huge quanti ty of gol d.)
Tri bute i n si l ver and gol d was pai d to a mi l i tari l y vi ctori ous
State. There were i nci dents when I srael had to pay such tri bute
(2 Ki ngs 15:19; 23:33) and al so when forei gn nati ons pai d tri bute
to I srael (2 Chroni cl es 27:5).
The State al so hi red mi l i tary forces wi th gol d (2 Chroni cl es
25:6). Thus, taxes came i nto the treasury i n the form of si l ver and
gol d, but then expendi tures by the State came back out i n the
same form. There i s no doubt that thi s process made si l ver and
gol d the fami l i ar forms of money i n the anci ent Near East. There
are pl enty of exampl es i n anci ent records from other Near East
soci eti es that they asked for tri bute i n gol d and si l ver. I t was the
common currency of the anci ent worl d.
24 HonestMong
What must be ful l y understood i s that there were no coi ns i n
thi s era. Coi ns di dnt appear i n the wori d unti l about 600 years
before Chri st. Thi s woul d have been about the ti me that}Judah
fel l to the i nvadi ng Babyl oni ans, qui te l ate i n Hebrew hi story. So
there was no system of State money wi th the monarchs pi cture or
other symbol s on the metal bars, or i f there was, no exampl es of
such marki ngs have survi ved. I t i s reasonabl y I certai n that the
State di d not manufacture the,metal l i c bars i n anci ent I srael .
Thi s means that the State di d not ori gi nate money. A theoreti -
cal model (bl uepri nt) for the ori gi n of money doesnt need to i n-
cl ude any reference to the State. The States deci si on about what
to tax cl earl y had an i nfl uence on the ki nd of money peopl e ac-
cepted, but that deci si on was ti ed to the exi sti ng ki nd of money
that was al ready bei ng used by the peopl e. I n short, I f i t ai nt be-
i ng used, you cant tax i t .
Thi s i s very i mportant to understand from the begi nni ng.
There are many economi sts who rel y heavi l y on the i dea that the
State was the source of money ori gi nal l y, and that whatever the
State desi gnates as money h money. Thi s expl anati on i s Bi bl i cal l y
i ncorrect, hi stori cal l y i ncorrect, and l ogi cal l y i ncorrect. Money i s
the product of i ndi vi dual s who make deci si ons to buy,and sel l . I f
i ndi vi dual s refuse to use what the State desi gnates as money, i t
i snt money: I f the State refuses to use what the market has desi g-
nated as money, i t cant col l ect taxes or buy peopl es servi ces and
goods. The State can i nfl uence the val ue of a parti cul ar ki nd of
money, or the popul ari ty of that money, for the State i s a bi g
buyer and sel l er of goods and servi ces. But the State cannot
autonomousl y create money and i mpose i t on the market i f mar-
ket parti ci pants dont want to use i t.
No Commi ttee Needed
I
I t i s di ffi cul t for many peopl e to understand that the free
market operates rati onal l y, even though there i s no commi ttee of
expert pl anners or pol i ti ci ans to tel l the market what to produce.
Peopl e fi nd i t di ffi cul t to bel i eve that Gods worl d i s a worl d i n
whi ch i ndi vi dual peopl e, responsi bl e before God and thei r fel l ow
The Origins of Monqv 25
men, go about thei r dai l y busi ness, maki ng deci si ons, pl anni ng
for the future, and focusi ng thei r attenti on on thei r own personal
and fami l y needs, and out of al l thi s hustl i ng and bustl i ng, push-
i ng and shovi ng, comes the most producti ve economy i n the hi s-
tory of man.
Chri sti ans can bel i eve that the worl d i s orderl y because i t was
created by God. The Bi bl e teaches that God i s soverei gn, but men
are ful l y responsi bl e for thei r acti ons. As they i nteract wi th one ,
another, they l earn thi ngs. They fi nd out what the y must offer to
other peopl e i n order to buy what they want. They al so,fi nd out
what other peopl e are wi l l i ng and abl e to offer them for the thi ngs
that they presentl y own. Market competi ti on i s a form of exchang-
ing information. Free market acti vi ty can be descri bed as a Process of
t$kcovery.
We dont need a commi ttee to tel l us what we need to do to
sati sfy other buyers. I n fact, a commi ttee cannot possi bl y know al l
the thi ngs that we know as i ndi vi dual s, taken as a group. What
we l earn we can put to profi tabl e use l ater on.
Thi s spread of knowl edge i s made much easi er by the exi st-
ence of an agreed-upon currency uni t. I dont mean that we al l sat
down and agreed to use i t. I mean that peopl e l earned that other
peopl e wi l l usual l y accept a parti cul ar currency i n exchange for .
goods and servi ces. As thi s l earni ng process conti nues, certai n
currency uni ts become fami l i ar. I ts al ways easi er for us to deal
wi th each other i f the rul es of the game are known i n advance.
~ The currency uni t i s the most i mportant si ngl e source of i nformati on
concerni ng the state of the actual condi ti ons of suppl y and demand.
Who deci des whi ch currency uni t i s acceptabl e? Ori gi nal l y,
the peopl e di d who entered i nto agreements wi th each other about
buyi ng and sel l i ng. They l earned what was good for them, and
the rest of us have conti nued to l earn. A currency uni t becomes
fami l i ar. We get i nto the habi t of cal cul ati ng the pri ce of every-
thi ng i n terms of thi s fami l i ar uni t. I t saves us ti me and effort
when we can mental l y esti mate: Lets see, I can buy three of
these, but onl y two of those, or fi ve of yours; or ei ght of hers.
Whi ch do I want more?
26 Honest Mong
Do you want a commi ttee to set pri ces? Do you thi nk a com-
mi ttee can si t down and deci de what everythi ng shoul d cost i n
rel ati on to everythi ng el se? Wi l l a commi ttee be an i ntel l i gent,
rel i abl e economi c representati ve of al l of us? Most of us know the
\
answer most of the ti me: no.
Why then woul d a commi ttee do such a terri fi c job i n deci di ng
how much money to create or destroy? I f the commi ttee cant set
pri ces, why shoul d i t be al l owed to control the suppl y of money i n
whi ch al l pri ces are quoted? Why shoul d we trust a commi ttee i n
money cjuesti ons when the commi ttee di dnt i nvent money, and
when the commi ttee cant know enough to tel l al l of us what we
rea/ Ly need or shoul d rdy pay?
H&es another questi on. How do we know that the commi ttee
wi l l act onl y i n behal f of us ci ti zens? How can we be sure that the
commi ttee wont start fool i ng
-
around wi th the money suppl y i n
or der to feather i ts own economi c nest? Monopol i es are al ways
dangerous. Why shoul d some government commi ttee have a l egal
monopol y over money? No commi ttee i nvented money. No com-
mi ttee showed the rest of us how to use money. Why shoul d any
commi ttee possess absol ute control over money, now that the rest
of us have deci ded on what ki nd of money we want?
Summar y
Money i s a very i mportant soci al i nsti tuti on. I t was no more
i nvented by a government than l anguage was. Ti -ue, the govern-
ment can i nfl uence money i n the same way that i t can i nfl uence
l anguage, but i t i s not the source of moneys ori gi ns. I t cannot i m-
pose i ts monetary deci si ons on the publ i c unl ess peopl e deci de
that the government i s doi ng the ri ght thi ng. I f peopl e change
thei r mi nds l ater on, they can change the government or vol un-
tari l y, transacti on by transacti on, change over to a new form of
money.
Hi stori cal l y, peopl e have vol untari l y sel ected gol d as the com-
mon medi um of exchange. Si l ver has al so been wi del y acceptabl e,
al l over the worl d. No government l egi sl ated thi s; peopl e si mpl y
came to use these two metal s i n thei r economi c transacti ons.
l?ze Otigins ofMoney 27
Why do peopl e sel ect a parti cul ar form of money? Because
they l earn from experi ence that other peopl e usuul ~ accept thi s
monetary uni t i n exchange. We can make better predi cti ons and
pl ans about the future when we di scover that other peopl e gener-
al l y have accepted a certai n currency uni t i n the past. What peo-
pl e habi tual l y do they tend to keep on doi ng. They have a ri ght to
change thei r mi nds, but i ts easi er not to, at l east most of the ti me.
Thus, money al l ows us to gai n access i n the future to the goods
and servi ces we thi nk we wi l l want, or even to new ones that we
havent thought about yet.
Thus, hi stori cal l y i t was the free market whi ch determi ned
what was acceptabl e to peopl e for thei r economi c acti vi ti es. I t
happened to be gol d and si l ver, but other commodi ti es have some-
ti mes been used wi del y. The poi nt i s, peopl e uohmtanJI sel ected
what they wanted to use as money. They di d not need a commi t-
tee to make thi s deci si on for them.
The pri nci pl es of the ori gi ns of money are therefore these:
1. The Bi bl e doesnt say that peopl e shoul d be requi red to use
gol d and si l ver as money.
2. The Bi bl e does i ndi cate that peopl e i n Bi bl i cal ti mes came to
use gol d and si l ver as money.
3. Money wi l l be sel ected because peopl e expect others to use
i t i n the futur e.
4. To establ i sh what money i s worth today, we need i nforma-
ti on about what i t was worth yesterday.
5. Tr aci ng thk pri nci pl e backward, we concl ude that the money
commodxty must have been used for somethi ng el se ori gi nal l y.
6. Gol d and sal ver were used as jewel ry and ornaments.
7. The beauty of gol d and si l ver probabl y had somethi ng to do
wi th thei r popul ari ty.
8. The symbol i c shi ni ng of gol d may have been connected i n
peopl es mi nds wi th Gods gl ory.
9. The metal l urgi cal properti es of gol d make i t hi ghl y sui tabl e
as money (the fi ve characteri sti cs).
10. Money i s the most marketabl e commodi ty.
11. The State can i nfl uence the conti nued us; of a monetary
uni t by taxi ng and spendi ng m terms of that uni t.
28
HhnestMoney
12. Some economi sts argue that money i s what the State says i t
i s.
13. The Bi bl i cal evi dence poi nts to the concl usi on that money i s
what the market says i t i s.
14. A commi ttee di dnt ori gi nate money.
15. A commi ttee i snt needed to mai ntai n money.
16. A monopol y over money i s a dangerous grant of power by
the State.

3
MAI NTAI NI NG HONEST MONEY
You shal l do no i njusti ce i n judgment, i n measurement of
l ength, wei ght, or vol ume. You shal l have just bal ances, just
wei ghts, a just ephah, and a just bi n: I am the Lord your God, who
brought you out of the l and of Egypt (Levi ti cus 19:35-36).
I t% not necessary to get i nto a debate over just exactl y what
uni ts of measurement an ephah and a bi n were. The poi nt i s
cl ear enough: once defi ned, they coul d not be changed by i ndi vi d-
ual s i n the marketpl ace.
Who defi ned them? *hat i snt sai d. Not the Hebrew ci vi l gov-
ernment, i n al l l i kel i hood, because i t was bei ng set up at the ti me
the l aw was announced. Li ke the wi despread use of gol d and
si l ver, certai n wei ghts and measures had al so come i nto wi de-
spread use on a vol untary basi s. The i mportant thi ng was not that
the ci vi l government make i ts defi ni ti ons sci enti fi c; the i mpor-
tant thi ng was for the ci vi l government to enforce a consutent
standar d.
I t shoul d be noted that God i mmedi atel y provi des the reason
for thi s commandment: He i s the One who brought them out of
Egypti an bondage. He i s the Lord, the soverei gn master of the
uni verse. He i s the del i verer of I srael . To avoi d bei ng pl aced i n ~
bondage once agai n, they had to di sci pl i ne themsel ves. Fi rst, they
had to di sci pl i ne themsel ves by means of honest wei ghts and
measures. -Second, they had to di sci pl i ne themsel ves by means of ~
Gods comprehensi ve moral l aw.
We cannot do wi thout di sci pl i ne. I t i s never a questi on of di s-
/
ci pl i ne or no di sci pl i ne. I t i s al ways a questi on of uhe di sci pl i ne.
29
.
30 Honest Mong
Wi l l we be di sci pl i ned by oursel ves, as i ndi vi dual s under Gods
l aw? Wi l l we be di sci pl i ned by God di rectl y (for exampl e, when
He sends a pl ague on us, as He di d several ti mes i n the Ol d T~ta-
ment)? Or wi l l we be di sci pl i ned by the State? I n our day, State
tyranny i s the most common al ternati ve to sel f-di sci pl i ne.
Wi thout sel f-di sci pl i ne under Gods reveal ed l aws, there can
be no freedom. Fal se wei ghts and measures l ead to unri ghteous-
ness. Peopl e who sel l i tems to the publ i c must be sure that they
avoi d gi vi ng l ess than what i s expected reveal ed on the scal es
through tamperi ng wi th the physi cal standards. I n short, tamper-
i ng wi th the soci etys physical standards is a si gn that men have
al ready tampered wi th the soci etys moral standards.
Market Scal es
When a person i n Ol d Testament ti mes (i ndeed, up unti l rel -
ati vel y modern ti mes) went to market i n order to buy somethi ng,
he brought wi th hi m somethi ng val uabl e to exchange. I n barter
soci eti es, he woul d bri ng some home-grown or home-made i tem
for sal e. He woul d try to exchange i t for some&e el ses home-
grown i tem, or manufactured i tem.
I f a man brought somethi ng that woul d requi re wei ghi ng (for
exampl e, a sheep) and wanted to trade i t for some other i tem that
requi red wei ghi ng (for exampl e, a sack of wheat), the questi on of
accurate scal es was l ess i mportant. I f somethi ng was underwei ghed 1
for the sel l eq i t was equal l y underwei ghed for the buyer. (Re-
member, both parti es are buyers and sel l ers si mul taneousl y: one
buys wheat and sel l s a sheep, whi l e the other buys a sheep and
sel l s wheat.) Di shonest wei ghts woul d be those i n whi ch the pro-
fessi onal sel l erthe man who coul d afford the scal es tampered
wi th the wei ghts i n one hal f of the transacti on. Tamperi ng i n hal f
the transacti on probabl y i snt easy.
-
When peopl e started bri ngi ng metal s to market i n order to
buy consumer goods, i t became easi er for sel l ers to use di shonest
scal es. The metal bar or i tem woul d normaI l y be measured i n
smal l uni ts of wei ght (ounces), or even smal l er (grams), i n the
case of gol d. But the i tem bei ng sol d for money woul d, i f sol d by
Mak.aning Honest Money .
31
wei ght, probabl y requi re much heavi er uni ts (>ounds). The
man wi th the scal es coul d cheat the buyer by l i ghteni ng up the
money metal scal e, whi l e maki ng heavi er the product scal e.
Thus, once money metal s came i nto wi despread use, as they
woul d i n an advanci ng, hi gh di vi si on of l abor economy, the op-
portuni ti es to commi t fraud i ncreased drasti cal l y.
The SeUer5 Advantage
The sel l er i n the marketpl ace normal l y has an advantage over
the buyers. He understands hi s trade, especi al l y scal es. I t i s easi er
for the professi onal sel l er to tamper wi th the scal es than i t i s for
the buyer to tamper wi th the coi ns. Thi s i s not a uni versal rul e,
:
however. Coi n cl i ppi ng i s an anci ent practi ce. Peopl e woul d shave
a bi t of the gol d off the ri m. Thi s i s why coi ns have those l i ttl e
ri dges around them: to reduce theft (a l egacy of the days when
coi ns were made of val uabl e metal s). I have heard that the
Chi nese i mmi grants i n Cal i forni a i n the gol d rush days woul d
pl ace several gol d coi ns i n a smal l sack and have ol d peopl e or
young chi l dren i n the fami l y shake the sack, unti l gol d fl akes
woul d rub o~. Then they woul d col l ect the dust from the sack.
There i s another odd exampl e from Uni ted States hi story. I n
the l ate 1800s, duri ng the wi l d west era, a famous crooked cat-
tl eman named Dan Drew herded hi s cattl e for days wi thout al l ow-
i ng them access to water. Then, just before he sol d them, he
woul d l et them dri nk thei r fi l l . He woul d then take them to the
stockyards and sel l them. Thi s became known as wateri ng the
stock. The same term was l ater appl i ed to a si mi l ar i mmoral prac-
ti ce by corporati ons. Corporate offi cers woul d pri nt up huge
quanti ti es of ownershi p certi fi cates (stock) and sel l them whenever
some outsi de group woul d try to take over the company by buyi ng
up 5170 of the outstandi ng shares. The buyers wound up wi th
shares of depreci ated val ue watered down stock.
On the whol e, though, the professi onal produce sel l er wi th the
scal es i s more l i kel y to cheat than the sel l er of goods. I t i s he who i s
normal~ the focus of attenti on by the ci vi l government. On the other
hand, i t i s easi est to check hi m, for he operates i n a publ i c pl ace.
32 Honest Mong
Perhaps even more i mportant, the sel l er of produce has com-
peti tors. Buyers catch on when they are bei ng cheated, i f they
have access to a ri val . The competi tors have an economi c i ncen-
ti ve to warn the buyers, or warn the ci vi l government, about the
fraud at any parti cul ar shop. Thus, market competition tends to
pressure produce sel l ers to stay honest, at l east wi thi n the gener-,
al l y accepted permi ssi bl e range of the free market.
Scales of J ustice
God l i nks the ownershi p of scal es wi th Hi s own soverei gnty.
The man who owns the scal es i s a judge. God judges men i n terms
of moral standards. He i s a Judge wi th the scal es of justi ce. When
the evi l Babyl oni an ki ng Bel shazzar was havi ng hi s great feast, i n
the mi dst of a mi l i tary si ege by the Medo-Persi ans, the hand of
God wrote the famous words on the wal l : MENE, MENE,
TEKEL, UPHARSI N. The ki ng cal l ed Dani el to transl ate, and
Dani el di d so: MENE: God has numbered your ki ngdom, and
fi ni shed i t; TEKEL: You have been wei ghed i n the bal ances, and
found wanti ng (Dani el 5:25-27).
We@ed in the balance: this i s symbol i c of Gods fi nal judgment.
Therefore, the man who control s the scal es of ci vi l justi ce i s a
judge. So i s the man who control s the actual wei ghts and meas-
ures i n the marketpl ace.
I f a man mi suses hi s posi ti on and cheats peopl e, he i s thereby
testi fyi ng fal sel y to the character of God. He i s sayi ng, i n effect,
that God cares nothi ng for justi ce, that He ti ps the bal ance, that
He cheats manki nd for Hi s own ends. This is precise~ what Satan
_ implies about God% role a-s J tige. I t i s fal se wi tness agai nst God.
Thus, God warns men that they must use honest wei ghts and
measures, for He i s the soverei gn God who del i vered them out of
bondage. He i mpl i es that He has the power to deliver them back into
bondage i f they cheat i n thi s very speci al area of economi cs.
-Honest Metal Money
What was money i n anci ent I srael i n the days before the
Babyl oni an capti vi ty? I t woul d have been any i tem that peopl e
vol untari l y accepted i n exchange for goods and servi ces. The onl y
!.
Maintaining Honest Money 33
monetary uni ts i denti fi ed i n the Bi bl e rel ati ng to money were the
shekel and the tal ent. These were units of ukight. I n pri nci pl e,
though the Bi bl e doesnt speci fy thi s, they, were al so uni ts of fi ne-
ness. (Fi neness refers to the percentage of pure gol d or si l ver i n
the total wei ght of the coi n.) We concl ude thi s because of the fact
that base (cheaper) metal s can be mel ted i n when ~e smel ter i s
pouri ng the metal i nto the mol ds. Wei ght was not enough; there
had to be a parti cul ar fi neness.
Years ago, when I was a boy, I vi si ted Juarez, Mexi co wi th my
fami l y. I saw an ol d woman si tti ng i n front of a stal l i n a l arge
market. Someone handed her a coi n. She stuck the coi n i nto her
mouth and bi t i t. I coul dnt fi gure i t out. My mother tol d me i t
was her way of testi ng the coi n. I f i t wasnt soft enough for her
teeth to l eave a mark, i t wasnt the proper wei ght of the preci ous
metal .
An i ngot or coi n of a speci fi c si ze, assumi ng i ts wel l known, i s
known by sel l ers to wei gh a certai n amount. By measuri ng the i n-
got or coi n, and then by wei ghi ng i t, the expert can determi ne
whether i ts of the standard fi neness (the proper mi xture of a base
metal for hardness and a preci ous metal for val ue). I own a si m-
pl e, i nexpensi ve set of wei ghts and measures that measure the
more common gol d coi ns.
The wei ghts and measures for the i ngot of gol d or si l ver i s the
professi onal sel l ers defense agai nst fraud. The scal es for produce
are the buyers protecti on agai nst fraud.
The Bi bl e l ays down the rul e of honest wei ghts and measures.
- To tamper wi th the scal es i s a moral evi l . I t i s theft through fraud.
Someone trusts the sel l er, and the sel l er mi suses thi s trust. I t i s
easi er to cheat a trusti ng person because the l atter i snt watchi ng
every move of the sel l er. Thus, tamperi ng wi th the scal es i s a ma-
jor si n. When sel l ers get away wi th i t because the authori ti es l ook
the other way, honest, trusti ng peopl e l ose, whi l e crooked deal ers
wi n. Thi s reverses Gods standards for domi ni on, namel y, domi n-
i on by ethi cal behavi or. Furthermore, i t reduces the effi ci ency of
the market, for buyers have to devote extra ti me and troubl e i n
testi ng sel l ers. God wi l l not tol erate such behavi or i ndefi ni tel y.
34 Honest Mong
One reason why gol d and si l ver came i nto wi despread use i n
the anci ent worl d was that they coul d be tested by sel l ers of goods
and servi ces. Today, a sel l er of goods (buyer of money) can use
si mpl e tool s, i f necessary, to determi ne the rel i abi l i ty of a parti cu-
l ar i ngot or coi n. He coul d test the i ngots i n the anci ent worl d,
too, usi ng si mi l ar si mpl e tool s. Because gol d and si l ver were rec-
ogni zed. and because standards of shape and wei ght made i t pos-
si bl e for peopl e to test the ful l wei ght (preci ous metal content) of
the i ngots, these two metal s coul d more easi l y functi on as the
most marketabl e commodi ti es i n soci ety.
Honest money i s. easy to defi ne i n the context of a pure
preci ous-metal s i ngot or coi n economy. An i ngot or coi n contai ns
a speci fi c quanti ty of gol d or si l ver of a known fi neness. I n the case
of the famous U.S. doubl e eagl e, the $20 gol d pi ece, the coi n
wei ghed 1.075 troy ounces (the standard uni t for measuri ng gol d),
wi th .967 ounces of pure gol d and the rest copper, for hardness.
For greatest ease of use, an i ngot woul d be stamped wi th some
fami l i ar mark or company, so that the user woul d know that smel -
ter or fi rm stands behi nd the honesty of the wei ghts and measures.
The coi n or i ngot i n a l i terate soci ety woul d announce i ts wei ght
and fi neness of the metal (such as one ounce, .999 fi ne). Perhaps
the tradi ti onal names of nati onal cumenci es mi ght be retai ned on
the coi ns dol l aq yen, peso, etc. but to reduce confusi on to
a mi ni mum, i t woul d be better to have no name attached. I t
woul d si mpl y be a one-ounce gol d coi n. Wi th or wi thout a
fami l i ar name, the coi n when ori gi nal l y produced woul d contai n
exactl y what i t says concerni ng the preci ous metal .
To tamper wi th ei ther the wei ght or the fi neness of the coi n
woul d be l i ke pouri ng water i nto the ground meat at the-super-
market. I t woul d be fraudul ent: the attempt to get somethi ng for
nothi ng.
Honest Paper Money
Coi ns and i ngots are heavy and bul ky. I t shoul d be obvi ous
why peopl e prefer paper money. I t fi ts i nto a wal l et or purse. I ts
fl at. I ts easi l y recogni zabl e. Paper can be pri nted to represent any
number of currency uni ts: 1, 5, 10, 20, 50, 100, and so forth.
Maintaining Honest Money 35
The key word i s represent. The paper money, to remai n honest,
must be i ssued by the money-i ssuer on a stri ct one-to-one basi s. I f
i t announces that i t represents a one-ounce gol d coi n, .999 pure,
then the i ssuer must have that one-ounce coi n i n reserve, ready to
be redeemed by anyone who wal ks i n and presents the pi ece of
paper .
To i ssue. a pi ece of paper that serves as an I OU for preci ous ,
metal s wi thout havi ng 1007o of the promi sed metal i n reserve i s
fraudul ent. I t i s theft. I t i s a form of tamperi ng wi th wei ghts and
measures.
How woul d such a system work? The coi n owner mi ght
deposi t hi s coi ns at a warehouse. He wants hi s coi ns kept safel y.,
He pays a fee for the safekeepi ng, the same way we rent safety
deposi t boxes at our bank. The warehouse i ssues a recei pt. Si nce
the recei pt promi ses to pay the bearer a speci i l c amount of coi ns,
or i ngots, on demand, the paper ci rcul ates as i f i t were gol d,
assumi ng that everyone knows and trusts the warehouse that
i ssued the recei pt.
Warni ng: whenever someone promi ses to store your preci ous
metal s for free, watch out. You never get somethi ng for nothi ng.
Ei ther there i s a hi dden payment, or el se there i s fraud. Any sys-
tem of paper money or credi t that doesnt somewhere i nvol ve a fee
for storage i s unquesti onabl y and i nevi tabl y fraudul ent. Keep
l ooki ng unti l you i denti fy the form of fraud.
The paper certi fi cate i s a metal substitute, someti mes cal l ed a
.
money substitute, But i t i snt a money substi tute; i t real l y i s money, Z~
the metal on reserve 5 regarded as money. I ts val ue i n exchange ri ses or
fal l s accordi ng to the exchange val ue of the money metal i n
reserve.
The bi g probl em i s counterfei ti ng. I t i s a l ot easi er to counter-
fei t a pi ece of paper than i t i s to counterfei t a gol d coi n. A counter -
.
fei t coi n i s easi er to detect. I t can be wei ghed. A pi ece of paper
l ooks just l i ke other pi eces of paper. So i ssuers take care to i denti fy
pi eces of paper by seri al numbers, or speci al water marks, or by
usi ng speci al paper that i s easy to i denti fy by the publ i c.
A counterfei ter i s cl earl y a thi ef when he pri nts up fal se
.
36 Honest Mony
warehouse recei pts. Some company .i s requi red by l aw to redeem
the paper recei pts by payi ng out the speci fi ed quanti ty and fi ne-
ness of gol d or si l ver. To i ssue phony recei pts pl aces the i ssuer at
ri sk. Or, i f the company shoul d go bankrupt and be unabl e to
redeem the notes, i t pl aces at ri sk the l ast person who accepted the
recei pt at face val ue. He goes to get hi s gol d, and the i ssui ng com-
pany has gone bankrupt. He i s stuck wi th a worthl ess warehouse
recei pt, whereas the counterfei ter has bought val uabl e goods and
servi ces: The l oser (among others) i s the l ast guy to get stuck wi th
the bad recei pt when the bad news i s made publ i c. Unquesti on-
abl y, counterfei ti ng i s a form of theft.
One way to protect users from counteti ei t bi l l s i s for the bank
to al l ow the deposi tor to, wri te recei pts for the deposi ted coi ns
whenever he makes a transacti on. Thi s way, the user has to si gn
hi s name at the ti me of purchase. He wri tes checks (warehouse
recei pts) unti l he runs f out of coi ns i n reserve. Then he stops,
unl ess he i s a thi ef, or he makes a mi stake (and pays a penal ty to
the bank), or he has made pri or arrangements wi th the warehouse
to cover hi s checks wi th extra gold which is held in reserve gol d that
has no warehouse recei pts i ssued agai nst i t for thi s purpose by
the warehouse fi rm.
Thi s i s why checks are money, ~the mong metal b@ing them up
is nwng. They are metal substi tutes. An honest check i s si mpl y
another form of warehouse recei pt.
A credi t card i s al so money, $the metal backing up the credit card is
m.ong. I t, too, i s a metal substi tute. An honest credi t card i s si mpl y
another form of warehouse recei pt.
We coul d add al l sorts of exampl es to thi s l i ne of reasoni ng,
but by now you have the i dea. The key i s the honesty of the ware-
house fi rm. I f i t i ssues no more recei pts than i t has gol d or si l ver i n
reserve to redeem the recei pts, then the recei pts can l egi ti matel y
serve as forms of money.
I f a warehouse company i ssues more recei pts to val uabl e
money metal s than i t has metal s on reserve, then i t has vi ol ated
the l aw agai nst fal se wei ghts and measures. The di fference i s that
i t i s harder to detect a fal se (unbacked) warehouse recei pt than i t
Maintaining Honest Monq 37
i s to detect a counterfei t coi n not contai ni ng the stated amount of
gol d or si l ver. The coi n can be measured and wei ghed; the paper
bi l l cant. But the pri nci pl e i s the same i n both cases: counterfei t
coi ns or counterfei t warehouse recei pts.
Summar y
The pri nci pl e of honest money i s qui te easy to understand.
You del i ver what you say youre del i veri ng. I f you promi se to gi ve
an ounce of gol d, .999 fi ne, to a sel l er, Ken thats what you ,
del i ver. He can make an esti mati on of how much that ounce of
gol d i s worth to hi m, and i f he deci des that he wants the gol d more
, than he wants what he has offered for sal e, then you get the i tem,
and he gets the gol d.
I f ei ther of the parti es tampers wi th the scal es, or i n any way
substi tutes somethi ng l ess val uabl e than what he has agreed to
del i ver, then he has commi tted a si n. Thi s si n i s an attack on
Gods pri nci pl es of justi ce and mans soci al peace. The si nner
must make doubl e resti tuti on (Exodus 22:11-12): the return of the
val ue stol en, pl us a 10070 penal ty.
The l aw regardi ng honest wei ghts and measures i s obvi ousl y a
speci fi c (case-l aw) appl i cati on of the ei ghth commandment: You
shal l not steal (Exodus 20:15). But because God i s a Judge, and
because the symbol i sm of Hi s perfect judgment i s the scal es,
honest wei ghts and measures become a theol ogi cal i ssue as wel l as
an economi c i ssue. To tamper wi th the scal es i s to defy God i n a
uni que way. I t i s to assert that man, the l aw breaker, bei ng made
i n Gods i mage, refl ects a God who i s equal l y a l awbreaker.
Honest money i s an economi c appl i cati on of the l aw agai nst
fal se wei ghts and measures. Because money i n the Bi bl e i s
metal l i c, any tamperi ng wi th the content of the preci ous metal i s
the equi val ent of tamperi ng wi th the scal es. Counterfei ti ng coi ns
i s i l l egal . So i s the counterfei ti ng of paper money: creati ng more
warehouse recei pts for preci ous metal than there i s preci ous metal
on reserve for future redempti on.
We fi nd the pri nci pl es of honest money i nvol ve the fol l owi ng:
3 8 Honest Monsy
1. The prevai hng defi ni ti ons of, measurement must be ob-
served i n al l our deal i ngs wi th one another.
2. The ci vi l government need not be the ori gi nator of these
standards, though i t i s supposed to certi fy them.
3. The goal i s consi stency of use.
4. The God who requi res honest measures i s the same God
who del i vered I srael from bondage.
5. Vi ol ati ng these physi cal standards i s the equi val ent of
vi ol ati ng Gods moral standards.
6. The professi onal sel l er i n the marketpl ace has more oppor-
tuni ti es to tamper wi th the scal es.
7. Market competi tors moni tor each other, thereby reduci ng
the extent of tamperi ng.
8. Gods acti vi ti es as Judge symbol i cal l y undergi rd the l aw of
honest wei ghts and measures.
9. Money i n anci ent I srael consi sted of gol d and si l ver i n
fami l i ar si zes and shapes.
10. When the ci vi l magi strate-refuses to enforce honest wei ghts
and measures, evi l peopl e temporari l y prosper at the expense of
honest peopl e. Thi s reverses Gods standards of domi ni on.
11. Wi despread di shonest wei ghts al so i ncreases everyones
transacti on costs (costs of exchangi ng): ti me i nvol ved i n checki ng
scal es.
11. Paper money represents speci fi c quanti ti es of gol d or si l ver
(or whatever money uni t whi ch i s common).
13. Any i ssui ng of warehouse recei pts to money consti tutes a
vi ol ati on of the law prohi bi ti ng di shonest wei ghts and measures. .
14. I ssui ng more recei pts than there i s metal to redeem them i s
a form of counterfei ti ng.
15. Paper bi l l s, checks, and credi t cards are al l forms of metal
substi tutes; they are al l true money.
16. Whenever some agency promi ses to create a paper money
system that doesnt requi re storage fees for money metal s, i ts mak-
i ng a fraudul ent offer. You dont get somethi ng for nothi ng.
4
DEBASI NG THE CURRENCY
Your si l ver has become dross, your wi ne mi xed wi th water
(I sai ah 1:22).
The prophet I sai ah came before the nati on of Judah, the
Southern Ki ngdom of the di vi ded nati on of I srael , someti me ,
around the year 750 B .c. He began hi s mi ni stry wi th a condemns
ti on of the spi ri tual condi ti on of the peopl e, from the man i n the
street to the rul ers.
The Ol d Testament prophets di dnt just tal k about the i nternal
mental state of the peopl e. They bel i eved i n what the Bi bl e
teaches, that the heart of a peopl e i s refl ected i n thei r acti ons.
Al most ei ght centuri es l ater, Jesus sai d: Even so, every good tree
bears good frui t, but a bad tree bears bad frui t. A good tree can-
not bear bad frui t, nor can a bad tree bear good frui t. Every tree
that does not bear good fmi t i s cut down and thrown i nto the fi re.
Therefore by thei r frui ts you shal l know them (Matthew 7:17-20). -
Jesus al so sai d, A good man out of the good treasure of hi s
heart bri ngs forth good; and an edi l man out of the evi l treasure of
hi s heart bri ngs forth evi l . . . (Luke 6:45a).
I sai ah was sayi ng exactl y what Jesus sai d so many years l ater.
The peopl e were corrupt i n thei r hearts. He used the i magery of
dross. What i s dross? I t i s cheap or base metal . I t i s unfavorabl y ,
compared wi th preci ous metal s, si l ver and gol d. I t can be re-
moved from the preci ous metal onl y by mel ti ng down the i ngot
and purgi ng out the base metal , ei ther by heat or by chemi cal re-
acti on. Thi s, too, i s a fami l i ar Bi bl e i mage: purgi ng away dross
by pl aci ng the metal i nto a hot fi re.
39
40 Honest Mmg
God spoke to the prophet Ezeki el , who wrote over a hundred
and fi fty years after I sai ah: Son of man, the house of I srael has
become dross to Me; they are al l bronze, ti n, i ron, and l ead, i n
the mi dst of a furnace; they have become dross from si l vef
(Ezeki el 22:18).
Thi s same i magery i s found i n the New Testament, regardi ng
he fi nal judgment of God. The apostl e Paul wrote concerni ng
Chri sti ans who are judged on the day of the Lord: Each ones
work wi l l become mani fest; for the Day wi l l decl are i t, because i t
wi l l be reveal ed by fi re; and the fi re wi l l test each ones work, of
what sort i t i s. I f anyones work whi ch he has bui l t on i t [the foun-
dati on ofJesus Chri s~ verse 11] endures, he wi l l recei ve a reward.
I f anyones work i s burned, he wi l l suffer l oss: but he hi msel f wi l l
be saved, yet so as through fi re (1 Cori nthi ans 3:13-15).
Those who rel y of the work of Chri st at Cal vary are Chri s-
ti ans. I f thei r l i fes work i s dross and i s burned up, they wi l l sur-
vi ve the ordeal , but wi thout rewards. Those who dont trust i n
Chri sts perfect (zero-dross) work at Cal vary are doomed to,wi nd
up as permanent dross i n eternal judgment. The apostl eJohn
saw thei r fearful desti ny i n hi s God-gi ven vi si on of the future:
And anyone not found wri tten i n the Book of Li fe was cast i nto
the l ake of fi re (Revel ati on 20:15).
The Ol d Testament prophets understood that si n served as
dross i n I srael . They knew that i f peopl e di d not purge away
thei r spi ri tual dross vol untari l y through personal moral reform, to
be fol l owed by pol i ti cal , economi c, and i nsti tuti onal moral
reform, then God woul d purge the whol e nati on. There woul d be
war, or pl ague,, or fami ne. God wi l l not tol erate moral dross i nde-
fi ni tel y. I sai ah announced the warni ng of God: I wi l l turn my
hand agai nst you, and thoroughl y purge away your dross, and
take away al l your al l oy (I sai ah 1:25).
Moral Evi l Produces Publ i c Evi l
The prophets were Gods prosecuti ng attorfi eys. God brought
them before I srael wi th Hi s case agai nst the peopl e. God had set
forth Hi s l aw at Mt. Si nai , and He had pl aced them under a cove-
Debasing the CurrengJ 41
nant. Obedi ence to Gods covenant bri ngs externa~ visible blessings,
He promi sed (Deuteronomy 28:1-14), whi l e di sobedi ence bri ngs
en!ernal, utiible cursings (Deuteronomy 28:15-68). The l i st of curs-
i ngs i s much l onger than the l i st of bl essi ngs. God wanted them to
know just how seri ous He i s about obedi ence to Hi s l aw eternally
seri ous.
As an offi cer of Gods court, the prophets brought Gods cov-
enantal l awsui t agai nst I srael and Judah. But to make a case, the
prophets had to have evi dence. I t i s not enough i n Gods earthl y
l aw court that peopl e are suspected of harbori ng evi l thoughts. I t i s
not enough to convi ct someone i n Gods earthl y court of bad inten-
tions. There must be publ i c evi dence of a cri me. Whoever i s
worthy of death shal l be put to death on the testi mony of two or
three wi tnesses, but he shal l not be put to death on the testi mony
of one wi tness (Deuteronomy 17:6).
Thi s i s why God sent many prophets to bri ng charges agai nst
I srael . I n I sai ahs day, there al so appeared Hosea (Hosea 1:1 has
the same l i st of ki ngs as that i n I sai ah 1:1), Amos (Amos 1:1), and -
about a generati on l ater, Mi cah (Mi cah 1:1). They al l brought the
same message of Gods anger and comi ng judgment.
What was the publ i c evi dence? Fi rst, I sai ah poi nted to the
fal se judgment by the rul ers. How the fai thful ci ty has become a
harl ot! I t was ful l of justi ce; ri ghteousness l odged, i n i t, but now
murderers (1:21). Second, he poi nted to the dross metal i n the si l -
ver, and the water i n the wi ne (1:22). Thi rd, he returned to the
theme of corrupt judgment: Your pri nces are rebel l i ous, And
compani ons of thi eves; Everyone l oves bri bes, And fol l ows after
rewards. They do not defend the fatherl ess, Nor does the cause of
the wi dow come before them (1:23).
Noti ce that the si ns l i sted by I sai ah are qui te speci fi c:
murderers i n the capi tal ci ty (evi dence of a breakdown of l aw and
order), debased commodi ti es bei ng sol d as hi gh qual i ty, and fal se
judgment ~ by bri be-seeki ng, gi ft-seeki ng judges. Even before he
began to tal k about the spi ri tual si ns of the peopl e (dross i n thei r
hearts), he spoke about the vi si bl e si ns of the rul ers. The rul ers
were vi si bl y corrupt, i ndi cati ng that thepeojde were also corrupt. The
,,
42 Honest Mong
corrupt l eaders of Judah were true representatives of the peoph. ,
I worked on Capi tol Hi l l as an assi stant to a Uni ted States
congressman i n 1976. The cri me rate i n Washi ngton, D.C. was so
bad even then that Congress empl oyed i ts own pol i ce force to
patrol the, few square bl ocks where Congress i s l ocated: over a
thousand offi cers, a pol i ce force l arger than the enti re U. S. border
patrol guardi ng the U.S.-Mexi co border.
Wi thi n a few mi nutes taxi ri de from the Capi tol , there were
street corners on whi ch prosti tutes. attracted (and sti l l attract)
thei r cl i ents. The parks at ni ght were (and are) fi l l ed wi th mal e
homosexual prosti tutes. More aborti ons are performed i n Wash-
i ngton, D.C. each year than there are l i ve bi rths.
When I was worki ng there, two of the most powerfi .d congress-
men had thei r careers destroyed by revel ati ons concerni ng thei r
adul terous ti ai rs wi th young women. One of these women, who
was on the congressmens pai d staff as a secretary, wrote a best-
sel l i ng book about her acti vi ti es. The second congressman l ater
admi tted hi s l ong-ti me probl em wi th al cohol i sm and di d not run
for re-el ecti on.
But the si gn of thi s corrupti on at the hi ghest l evel s of govern-
ment had been vi si bl e si nce 1965. I t was i n that year that the
Uni ted States abandoned i ts si l ver currency and substi tuted a
pure dross standard of si l very (but not actual si l ver) pl ated cop-
per coi ns. Not onl y had the si l ver become parti aI l y dross; i t had
become enti rel y dross. The government pl ated the coi ns for tradi -
ti ons sake, but there was no more preci ous metal i n them.
Gol d coi ns had been i l l egal i n the U.S. si nce 1934.
The poi nt whi ch must be understood i s that there i s a rel ati on-
shi p between the moral corrupti on of a nati ons ci ti zens, the moral
conni pti on of thei r pol i ti cal representati ves, and the debasement of
the currency. The prophet I sai ah di d not si mpl y bri ng a compl ai nt
agai nst excl usi vel y i nternal spi rkual si ns; he brought Gods covenant
l awsui t agai nst the l eaders for thei r speci fi c publ i c si ns. They were no
l onger enforci ng Gods l aw as Hi s representati ves to thepeopl e. I n-
stead, as representati ves of a corrupt popul ati on, they were enforci ng
the peopl es God-defyi ng standards on the defensel ess.
Debasing the Currency 43
Wei ghts and Measures
We have al ready seen i n Chapter Three that God requi res the
ci vi l government to enforce predi ctabl e standards of wei ght and
measure. Thi s makes i t easi er for peopl e to make vol untary eco-
nomi c transacti ons i n a free market. Not onl y do.we say, as buvers ,
and sel l ers, What you see i s what you get, we al so i mpl i ci tl y say,
What I my you are getti ng you wi l l get. More speci fi cal l y, What
my scaZe says you are getti ng i s what you wi l l get.
Our scal es are symbol s of Gods justi ce. I f we ri g our scal es to
cheat our customers, we are i mpl i ci tl y sayi ng ei ther that God
doesnt care (because He i s al so at heart a cheater) or that God
cant do anythi ng about i t (meani ng that He i snt real l y God). We
are sayi ng that God as Judge of al l manki nd i s a l i ar. He i snt
real l y a Judge. Therefore, i f we can get the earthl y judges to l ook
the other way: we can conti nue to ,cheat our customers.
Corrupt busi nessmen want to deal wi th ci vi l offi cers who are
equal l y corrupt. They are wi l l i ng to pay bri bes to get them to
l ook the other way, to get them to turfi a deaf ear to those weak
peopl e who wi l l be cheated by corrupt scal es. Thi s was I sai ahs ac-
cusati on agai nst the l eaders: they were bri be-seekers, peopl e who
di d not hear the wi dows pl ea.
But they were somethi ng el se. They were al so men who refused
to prosecute those who tampered wi th fal se scal es. Remember, the
State i n thi s era di d not i ssue coi ns. Coi ns were i nvented about a
century l ater. There i s no i ndi cati on that the State even certi fi ed
the wei ght and fi neness of any i ngots i n ci rcul ati on as money. But
the State coul d prosecute fraud. The authori ti es coul d prosecute
anyone who was passi ng dross-fi l l ed si l ver or gol d bars as i f they
were hi gh qual i ty (normal market standard).
Centuri es l ater, when offi ci al s l earned about the wonders of
debased money, they made the State the monopol i st over money.
I nstead of servi ng God by enforci ng l aws agai nst debased money,
pol i ti ci ans took the profi ts for the State. They el i mi nated the
mi ddl emen. They stopped taki ng bri bes from the corrupt money-
manufacturers and started steal i ng from the publ i c di rectl y. One
44 HonestMonq
of the mai n reasons that the Roman Empi re fel l i nto the hands of
the Chri sti ans around 320 A.D. i s that the pagan emperors had
destroyed the Roman coi nage system. Nobody trusted the money,
so nob.dy trusted the State.
The Process of Debasement
Why woul d any pri vate producer of si l ver i ngots want to
debase hi s product? Because he coul d get more short-run profi ts by
doi ng so.
Say that you ar e a corrupt expert at smel ti ng metal s. Thi s
-
ski l l ed trade was a near-secret trade i n the anci ent worl d. A secret
gui l d control l ed mi ni ng and smel ti ng i n many cul tures. Not many
peopl e knew the secrets. Thi s made corrupti on easi er, whenever
the gui l d deci ded to produce short-term profi ts for i ts members.
The smel ter coul d do the fol l owi ng. He had mol ds i nto whi ch
he poured mol ten metal . He coul d pour i n pure si l ver, but si l ver
was i n short suppl y. Thi s was why i t was a, preci ous metal . I t was ~
a l ot cheaper to buy ti n. So the cheater woul d mel tdown some ti n,
and then pour a l i ttl e ti n i nto the formerl y pure l i qui d si l vek
Who woul d know? The i ngot woul d sti l l l ook shi ny. I t woul d
l ook l i ke si l ver. How many peopl e woul d own accurate measures
and scal es to detect the shi ft i n wei ght produced by the ti n?
Hardl y anyone.
The si l ver producer coul d sel l the debased si l ver i n exchange
for scarce goods and servi ces. But by addi ng cheap metal s (dross),
he coul d conti nue to buy as many scarce goods and servi ces as he
had been abl e to buy the day before wi th pure si l ver. Peopl e
trusted hi m. They woul dnt measure and wei gh hi s i ngots. They
woul dnt i nsul t hi m i n thi s way.
But what i f the authori ti es found out? He coul d bri be them.
Onl y i f the bri be was as val uabl e as the profi ts on the decepti on
woul d he real l y worry.
I t was a si mpl e scheme. Just pour a l i ttl e ti n, or other cheap
metal , i nto the mol ten si l ver, pour the mol ten metal i nto an i ngot,
and there was i nstant profi t.
What i s hi s profi t? The extra si l ver he has l eft after the ti n has
( .
Debasing the CurrenV 45
repl aced si l ver i n the i ngot. But understand: thi s extra si l ver can
be transl ated i nto profi t onl y by spendi ng i t i nto ci rcul ati on i n
other words, by sel l i ng i t i n exchange for addi ti onal goods and
ser vi ces.
Who Wi ns, Who Loses?
Our worl d i s a worl d of scarci ty. I t i s al so a worl d of God-
i mposed l aw. The rul e says: You never get somethi ng for noth-
i ng, except as a gi ft . Thi s testi fi es to Gods mercy i n redeemi ng
us: sal vati on i s a gi ft: For by grace you have been saved through
fai th, and that not of yoursel ves: i t i s the gi ft of God (Ephesi ans
2:8). But thi s gi ft had to be pai d for: Jesus di ed on the cross to
meet Gods sti ff requi rements agai nst si n. But God demonstrates
Hi s own l ove toward us, i n that whi l e we were sti l l si nners, Chri st
di ed for us (Remans 5:8).
So i f someone i s abl e to wi n by cheati ng, someone el se
becomes a l oser. I t i s not a questi on of everyone wi nni ng because
there has been new weal th created i n the economy. I t i s profi t
based on decepti on. No new weal th has been created. Someone
has to l ose.
.
The person who buys the si l ver i ngot uses i t for somethi ng.
Perhaps he makes an ornament. He sel l s the ornament, or barters
wi th i t. But the buyer gets stuck wi th an ornament whi ch i s over-
pri ced. Why? Because the ori gi nal cheater can col l ect hi s profi t.
onl y by sel l i ng the extra si l ver i nto the market. Someone wi l l
make more ornaments (or whatever) wi th thi s extra si l ver. The
suppl y of si l ve& ornaments goes up; therefore, the val ue (pri ce)
of the exi sti ng suppl y of si l ver ornaments wi l l drop. The earl y
buyer has overpai d.
What i f the cheater just produces i ngots, and spends them
i nto ci rcul ati on? He trades the debased i ngots for somethi ng he
wants. I f whoever sel l s hi m what he wants then turns around and
sel l s the newl y produced debased i ngot for whatever he wants, he
wi l l not be hurt economi cal l y. The secret i s thi s: sel l the ingot before a
lot more phony silver ingots hit the market. I n other words, get whi l e
the getti ng i s good. Or take the money and run run to the
46 Honest Mong
nearest store and buy goods wi th i t.
Those who are hurt are those who hol d onto these debased i n-
gots too l ong. As more and more of them fl ood the market
remember, the onl y way for the cheaters to col l ect thei r profi ts i s
to spend the extr a. si l ver one of two thi ngs happens. Fi rst, i f the
dross i n the new i ngots i s undetectabl e, the market pri ce of al l
si l ver i ngots wi l l fal l : more suppl y, l ower pri ce per i ngot. Second,
i f the dross-fi l l ed i ngots are detectabl e (i nexpensi vel y), then the
pri ce of the phony si l ver i ngots wi l l drop i n rel ati on to pure si l ver
i ngots. Thi s means that there wi l l be two separate pri ce-quote sys-
tems i n the economy: a pure si l ver pri ce per good or servi ce, and a
dross-fi l l ed si l ver pri ce per good or servi ce.
I n ei ther case, the person who i s stuck wi th a pi l e of
dross-fi l l ed i ngots wi l l l ose when pri ces ri se. He sol d goods and
servi ces at yesterdays l ower pri ce l evel , but he wi l l buy hi s goods
and servi ces at todays hi gher pri ce l evel , or perhaps at tomorrows
even hi gher pri ce l evel .
Thus, the wi nners are those who get access to the phony
money earl y, and spend itfast. The l osers are those who get access
to the phony money l ater, after pri ces i n general have ri sen.
Worse, what about the peopl e on fi xed money i ncomes, who dont
see thei r i ncomes ri se at al l , but who now face hi gher pri ces?
Who are these peopl e l i kel y to be? Pensi oners. Smal l
busi nesses that are barel y maki ng money. I n short, WZZOWS: the
very peopl e that I sai ah sai d were bei ng harmed by fal se judg-
ment. They were to be protected, and to fai l to do so was a si gn of
si n wi thi n the nati on, but especi al l y among the rul ers: You shal l
not affl i ct any wi dow or fatherl ess chi l d. I f you affl i ct them i n any
way, and they cry at al l unto Me, I wi l l surel y hear thei r cry; and
My wrath wi l l become hot, and I wi l l ki l l you wi th the sword;
your wi ves shal l be wi dows, and your chi l dren fatherl ess (Exodus
22:22-24).
I sai ah was threateni ng them wi th just such mi l i tary judgment
by God. Thi s i s why i t i s ri di cul ous to argue that I sai ah was not
tal ki ng about the speci fi c si n of monetary debasement, but onl y of
a stri ctl y spi ri tual anal ogy. He was tal ki ng about corrupt metal
.
Debasing the CurrengJ 47
whi ch was i tsel f a refl ecti on of corrupt hearts. He was tal ki ng about
both forms of corrupti on.
Summary - ,
The prophets came before I srael wi th a covenant l awsui t from
God. They warned the peopl e that i f they refused to repent, from
the l owest worker to the ki ng hi msel f, that God woul d bri ng judg-
ment agai nst them. He woul d purge thei r dross . Thi s judgment
woul d be as vi si bl e as thei r si ns. Thi s judgment woul d not be l i m-
i ted to i nternal cri ses: psychol ogi cal fears, and so forth. Hi s
judgment woul d be both i nternal and external , just as thei r si ns
were both i nternal and external .
One si gn of thei r si nfhl condi ti on was thei r corrupt si l ver.
Thei r money was corrupt, dross-fi l l ed. Thei r money refl ected
thei r moral condi ti on. I t testi fi ed agai nst them publ i cl y. They had
debased thei r money because they had debased thei r moral s. The
two practi ces went together.
Hi stori cal l y, nati ons that are marked by honest money do not
fal l to external enemi es. Wars that are begun wi th honest money
are fought wi th di shonest money: debasement on a massi ve scal e.
Both si des do i t, but the truth i s sti l l the truth: the l oser wi l l not be
found wi th cl ean hands, monetari l y speaki ng.
Ci vi l i zati ons fal l when they become moral l y corrupt. One si gn
of thi s corrupti on i n vi rtual l y al l known i nstances i s debased
money. When a soci ety fi nds that i ts rul ers have debased the cur-
rency uni t, the peopl e recei ve a warni ng: the rul ers are corrupt,
and i f the peopl e conti nue to support these rul ers, then they, too,
are corrupt.
And i n modern ti mes, ci vi l governments have the ful l support
of thei r peopl e for at l east l i mi ted i nfl ati on , meani ng a l i ttl e cor-
rupti on of the money suppl y.
We have l earned the fol l owi ng l essons from I sai ahs cri ti que of
Judah:
1. A corrupt tree bri ngs forth corrupt frui t.
2. The peopl e were moral l y corrupt.
3. God promi sed to purge them because of thei r si ns.
48 Honest Money
.
4. A si gn of thi s moral corrupti on was the debased condi ti on of
thei r money.
5. Thei r si ns were therefore not si mpl y i nternal si ns.
6. Corrupt ci ti zens prefer corrupt rul ers.
7. The capi tal ci ty was corrupt: murderers l i ved there, the
money was corrupt, and fal se judgment was common.
8. I n short, I sai ah l i sted speci fi c si ns as speci i i c vi ol ati ons of
speci fi c l aws.
9. The corrupti on of thei r si l ver was a vi ol ati on agai nst Gods
l aw regardi ng fal se wei ghts and measures. ,
10. The profi t from debasi ng si l ver can come onl y when the
suppl y of debased i ngots i ncreases.
11. The corrupt metal producer produces corrupt metal .
12. He buys more goods and servi ces than woul d otherwi se
have been possi bl e.
13. The hol ders of the debased i ngots wi l l eventual l y suffer
l osses, as pri ces of other goods and servi ces ri se.
14. The secret of success i n a ti me of corrupt money i s rapi dl y
to sel l the money for goods and servi ces.
15. Those who are on fi xed money i ncomes are hurt: wi dows.
16. The treatment of the weak (wi dows) i s a si gn of a nati ons
commi tment to Gods l aw.
5
THE CONTAGI ON OF I NFLATI ON
Your si l ver has become dross, Your wi ne mi xed wi th water
(I sai ah 1:22).
I n Chapter Four, I focused on the actual process of debasi ng a
preci ous metaJ currency. I di scussed I sai ahs accusati on agai nst
the rul ers that they were not enforci ng Gods l aw, and thi s was re-
fl ected i n the corrupti on of the nati ons si l ver. He used-thi s to
poi nt out the spi ri tual rebel l i on of al l the peopl e, from the hi ghest
to the l owest. The corrupti on had spread from top to bottom, and
back agai n.
I f moral corrupti on i s wi despread, then there i s no more char-
acteri sti c si n than monetary debasement, for money i s the com-
mon medi um of exchange. Everyone i n an advanced economy
uses i t. Thus, i f the money i s corrupt, everyone wi l l eventual l y
recogni ze thi s. Corrupt money testi fi es to the corrupti on of the
producers of money, the defenders of money, and the users of
money. Corrupt money testi fi es to corrupt peopl e.
Where we fi nd debased money wi thout wi despread protests,
we al so fi nd debased peopl e. The peopl e of Judah coul d see the
debased money. Thi s i s why I sai ah cal l ed i t to thei r attenti on. He
knew that they woul d recogni ze the truth of what he sai d concern-
i ng thei r corrupt money; he used thi s to cal l thei r attenti on to thei r
corrupt hearts. He started wi th the si mpl e, and worked toward
the more subtl e. (Jesus di d the same thi ng when he used parabl es
to make Hi s poi nts: pocketbook parabl es and agri cul tural
par abl es.)
Once the process of moral debasement begi ns to spread, i t i %
-
4
9
50 Honest Money
very hard to stop i t. Peopl e must stand i n pri nci pl e agai nst thi s
spreadi ng mor al corrupti on. The more tha~ peopl e see that cor-
rupti on seems to profi t peopl e, at l east i n the short run, the more
di ffi cul t i t i s to get peopl e to change. The corrupti on i s contagi ous,
al most l i ke a di sease. But i t i snt a di sease; i ts a moral condi ti on.
I t maybe accompani ed by di sease-venereal di seases, for exampl e
but i t i snt i tsel f a di sease.
Moral corrupti on i s someti mes spread by passi ve acceptance,
but onl y because Gods representati ves, the pri ests of soci ety, have
been si l ent i n wai mi ng the peopl e about thei r moral obl i gati on to
chal l enge such practi ces by forthri ght, acti ve resi stance. Al so,
such passi ve, i l l -i nformed acceptance of somewhat obscure si ns
(for exampl e, monetary debasement) i s al ways accompani ed by
practi ces that are recogni zed by the si mpl est peopl e as corrupt, but
whi ch they acti vel y pursue anyway. Pornography i s a good examp-
l e i n our day; so i s aborti on.
Wi ne Mi xed Wi th Water
I t was not si mpl y that Judahs si l ver had become dross. Thei r
wi ne had al so become adul terated.
Consi der the wi nemaker. He spent a l ot of ti me growi ng, car-
i ng for, and harvesti ng hi s grapes. I t took ti me for the fermenta-
ti on process to produce wi ne. These retardi ng factors reduced the
avai l abl e quanti ty of wi ne. Thus, for peopl e to buy i t, they had to
pay a hi gher pri ce than they woul d have been forced by competi -
ti on to pay i f there had been abundant suppl i es of comparabl e-
qual i ty wi ne.
By the way, we shoul d not argue that the hi gh cost of wi ne pro-
ducti on i s what produced the hi gh pri ces. Thi s has cause and
effect backward. What we shoul d recogni ze i s that al l those buyers
competed agai nst each other to buy the wi ne. Thei r wi l l i ngness to
pay for i t i s what l ured producers to stop produci ng other prod-
ucts and start produci ng wi ne. Buyers determi ned the pri ce of
wi ne by competi ti ve bi ddi ng; the producers di dnt force the buy-
ers to buy i t. I n short, consumers set pnces, not producers. I f producers
set pri ces too hi gh, many consumers -wont buy; they wi l l buy
i%e Contagion of I nJ ation 51
somethi ng el se i nstead, and then the hi gh-pri ce producers have to
l ower pri ces or suffer l osses.
I t i s obvi ous that i f good wi ne were easy to produce i n huge
quanti ti es, consumers woul d not have to bi d so much money to
buy the wi ne. But i t i snt cheap to produce i n l arge quanti ti es, so
they do have to pay hi gh pri ces.
Now, l ets return to the probl em that faced the prophet I sai ah:
the moral corrupti on of the peopl e. I t was not just the si l versmi ths
who were corrupt. I t was the wi nemakers, too. I t was everyone.
How di d the wi nemaker practi ce hi s corrupti on? By a process
al most i denti cal to that of the si l versmi th: debasement. The si l ver-
smi th was pouri ng cheaper base metal s i nto the mol ten si l ver, and
cal l i ng the product si l ver. Thi s was preci sel y the process of the
corrupt wi nemaker. He was pouri ng debased wi ne (water) i nto
the pure wi ne, and cal l i ng i t pure wi ne.
How coul d he make hi s profi t? The same way the corrupt si l -
versmi th made hi s. He woul d di spl ace pure wi ne when he poured
i n the water. Thi s di spl aced wi ne coul d then be used to pour i nto
other wi neski ns al ong wi th more water. Then he coul d take, say,
20% more wi neski ns ful l of wi ne to market and sel l them.
Presto: a 20% profi t, at l east i ni tti l l y.
He was tradi ng on hi s own former reputati on. Before, he had
produced a hi gh-qual i ty product Gust as the si l versmi th had
formerl y produced). People trusted hk products because thg trusted htk
morals. So he coul d take advantage of thi s trust by pouri ng water
i n the wi ne. He was si mpl y i mi tati ng the si l versmi th.
But moral corrupti on bei ng what i t i s, i t never stays i n one
pl ace. I t gets worse. So more and more water woul d wi nd up i n
the wi ne, just as more and more dross woul d wi ndup i n the si l ver.
Pretty soon, everyone woul d begi n to see that a parti cul ar si l ver-
smi ths si l ver was mostl y dross, and a parti cul ar wi nemakers wi ne
was mostl y water. At that poi nt, peopl e woul d stop doi ng busi ness
wi th these corrupt peopl e, or el se start offeri ng them fewer
val uabl e goods and servi ces i n exchange.
Unl ess. . . .
Unl ess the existing si l versmi ths were acti ng as a gi ant monop-
52 Honest Mong
ol y to debase the si l ver uni forml y (a cartel ). Unl ess the aukti ng
wi nemakers were doi ng the same thi ng. Unl ess they control l ed
the markets (wi th the cooperati on of the rul ers) to keep out com-
peti tors who were wi l l i ng and abl e to offer consumers hi gh qual i ty
si l ver or wi ne.
Wi th government control s agai nst honest newcomers, i t
woul d have been possi bl e for corrupt sel l ers to mai ntai n thei r cor-
rupt practi ces and not l ose thei r markets to honest newcomers.
But thi s woul d have requi red coerci on agai nst newcomers, ei ther
di rectl y (pri vatel y hi red thugs) or i ndi rectl y (thugs hi red by the
gover nment).
Thi s was the very essence of economi c oppressi on i n Bi bl i cal
ti mes. I t sti l l i s. When corrupt producers capture the government
i n order to keep out honest producers, the l osers are consumers.
They are the ones whose i nterests are hurt, ri ot just the i nterests of
honest producers who are kept out.
Wi despread economi c oppressi on al ways requi res the consent
of the governors. I n G&l s worl d, i t al so requi res the consent of
the governed. God bri ngs oppressors agai nst those who practi ce
oppressi on pri vatel y and who want to practi ce i t wi thout threat of
judgment by the ci vi l government. God hears the cri es of the
affl i cted, and bri ngs judgment agai nst the oppressors (Exodus
22:22-24).
\
The Bi bl e says that speci fi c corrupt practi ces are l i ke yeast
(what the Bi bl e cal l s l eaven): they corrupt the whol e l oaf. But,
on the other hand, honest deal i ng i s al so l i ke yeast; i t, too, can
spread to the whol e l oaf. What determi nes whi ch yeast i s more
powerful i n any parti cul ar soci ety? The hearts of the peopl e. They
wi l l choose whi ch ki nd of yeast they prefer, corrupt or i ncorrupt.
I n Judah, they had chosen corrupt practi ces.
Greshams Law
Back i n the l ate 1500s, an offi ci al i n Queen El i zabeths court,
Si r Thomas Gresham; made a famous observati on. He sai d that
bad money dri ves good money out of ci rcul ati on. I n short,
debased money dri ves honest money out of ci rcul ati on.
The Contagzon of I nJ ation 53
But i f Gods l aw real l y does rul e the worl d, how can thi s be
true? How i s i t that somethi ng bad (corrupt, phony, debased
money) can dri ve good money (pure gol d or si l ver) out of ci rcul a-
ti on? I s here somethi ng corrupt about market competi ti on? Why
shoul d the bad product defeat the good product i n a competi ti ve
free market?
Economi sts fi nal l y fi gured out the answer. Somethi ng was
mi ssi ng from Greshams anal ysi s. The bad money dri ves out the
good money onty when tfzegovernment says the two are equal in value, and
enforces this decision with the threat of punishment.
I f I have a si l ver coi n that wi l l buy a l oaf of bread, and I al so
have a phony, si l ver-l ooki ng coi n that has onl y hal f the si l ver, the
l atter coi n shoul d buy onl y hal f a l oaf of bread. But what i f the
government says the two coi ns are of equal val ue? Whi ch coi n wi l l ~
I spend on the l oaf of bread, the ful l si l ver coi n or the phony? I
wi l l spend the phony coi n and hoard the ful l si l ver one, or trade
the ful l si l ver coi n to someone who wants to gi ve me (perhaps i l -
l egal l y) th~ee-quarters of a l oaf of bread for i t. (The bread sel l er
wi l l keep an extra quarter l oaf or whatever as hi s profi t, to
compensate hi m for troubl e and ri sk.)
So Greshams l aw shoul d read: The coi n that i s artjicziztty ouer-
uakwd by the government wi l l dri ve out of l egal , vi si bl e ci rcul ati on
the coi n whi ch i s artjtkialty undematued by the government.
But thi s arti fi ci al pri ce whi ch i s set by the governm~nt i snt a
free market pri ce. I ts a form of coercion. I ts a l i e whi ch i s enforced
as i f i t were truth. I ts another exampl e of the governments vi ol a-
ti on of Gods l aw concerni ng weights and measures.
.The Spread of Corrupt Products
/
Let us consi der a soci ety i n whi ch the rul ers have establ i shed a
fi xed pri ce whi ch equates honest money (ful l -wei ght of gol d or si l -
ver) wi th di shonest money (parti al l y gol d or si l ver, or even zero-
content of gol d or si l ver). The government l i es, and i t enforces
that l i e on everyone.
We are rati onal peopl e. We dont want to spend a ful l si l ver
coi n on a product whi ch says for sal e for one si l ver coi n . We
54 Honest Mong
woul d much rather spend the common coi n whi ch l i es, whi ch says
pure si l veq but whi ch i s i n fact onl y hal f si l ver. We wi l l hoard the
ful l si l ver coi n for a better deal at a l ater ti me.
What does the busi nessman do? He knows he wi l l not be get-
ti ng ful l si l ver coi ns i nto hi s ti l l that day. He knows hi s customers
wi l l spend the hal f-si l ver coi ns. Now what shoul d he do:
1. Conti nue to sel l hi s product for one si l ver coi n, when he
knows that he wi l l recei ve onl y hal f-sal ver corns?
2. Doubl e hi s pri ce to two si l ver coi ns, i n order to get the same
amount of si l ver per i tem sol d?
3. Debase hi s product wi th cheaper qual i ty materi al s, but
mai ntai n the fi cti on that each umt i s worth one sal ver coi n the
real , ol d-fashi oned, true si l ver coi n?
Consi der thy consequences to hi m of each of the three possi bl e
deci si ons:
1. Same pri ce, same product. he gets stuck wi th phony coi ns.
He i s sel l i ng hi s product at 50% of what i t was worth before the
phony corns started ci rcul ati ng.
2. Doubl ed pri ce, same product. he ri sks l osi ng sal es. Maybe
hi s competi tors wi l l take the thi rd approach, and debase thei r
products. Hi s customers, not bei ng experts at qual i ty control s,
may not recogni ze thi s. He l oses busi ness.
3. Same pri ce, reduced qual i ty: hi s customers are i ni ti al l y
defrauded (unti l they fi gure out the new rul es). He sel l s fraudul ent
hi gh-qual i ty goods at the fami har (pre-debased money) pri ce.
You can understand how tempti ng the thi rd deci si on i s. The
government i s not enforci ng the l aw of honest wei ghts and meas-
ures agai nst corrupt si l versmi ths. Si l versmi ths who dont practi ce
corrupti on cannot get the government to step i n and stop the
decepti on of thei r competi tors. Thei r competi tors make more
profi ts, and the honest ones eventual l y go out of busi ness, or
begi n to i mi tate the corrupt si l versmi ths.
Once the si l versmi ths are al l (or mostl y) corrupt because of the
corrupti on of the rul ers, the other producers face a probl em as i n-
di vi dual s. Shoul d they rai se pri ces? Shoul d they i nstead cut profi t
TZe Contagzon of I nzation 55
margi ns but try to sel l hi gh-qual i ty goods at the ol der, fami l i ar
pri ce? Or shoul d they fol l ow the l ead of the corrupt si l versmi ths,
and start debasi ng the qual i ty of thei r products?
I sai ahs condemnati on of Judah i ndi cates that the wi nemakers
had fal l en i nto the same corrupti on as the si l versmi ths. They were
pouri ng water i nto the wi ne.
Step by step, the debasement of money provi des i ncenti ves i n
the short mm for decepti on. The sel l ers are tempted to decei ve the
publ i c. But remember, the pubhc wanti to be deceived. The publ i c
wants to bel i eve i n somethi ng for nothi ng. The pubhc i s crooked,
too .
Somethi ng for Nothi ng .
The worker who i s empl oyed by the si l versmi th says to hi m-
sel f, I want a rai se. I see that my boss i s corrupti ng the si l ver, and
he i s pocketi ng the profi ts. I want a pi ece of the acti on. He can
afford to gi ve me a rai se. To keep hi s empl oyee qui et, the si l ver- ~
smi th gi ves hi m a rai se. The worker now gets pai d i n extra quan-
ti ti es of the debased si l ver. He, too, can rush out and spend i t on
goods and servi ces atyesterday% pn.ces. He, too, has won. He, too,
has been corrupted.
What does the person do who sel l s somethi ng to the si l ver-
smi ths empl oyee? He makes more money. Busi ness has pi cked
up! He orders more goods to sel l to the empl oyee next payday.
And what does hi s empl oyee thi nk? My boss i s getti ng ri ch by
sel l i ng goods to these si l versmi th workers. I want my pi ece of the
acti on . ~ he asks for a rai se, and gets i t.
And so i t goes, al l the way through the economy. Everyone
just l oves havi ng more money. Everyone l oves becomi ng a bi gger
spender. Everyone seems to have gotten somethi ng for nothi ng.
Guess what starts happeni ng to pri ces? Ri ght: they start goi ng
up. So what do consumers do? Some pay more for the thi ngs they
buy. (Thats why pri ces go up.) But others start l ookl ng for bar-
gai ns: sel l ers who are stupi d: who keep sel l i ng goods at ol der,
pre-i nfl ati onary pri ces. Buyers seek bargai ns, meani ng ol der-
pri ced goods and servi ces. They want somethi ng (di scounts) for
56 Honest Mong
\
nothi ng (l ots of debased new money ji ngl i ng i n thei n pockets).
So corrupt wi ne sel l ers accommodate corrupt buyers. Yes, si r,
a brand-new, 100% top-qual i ty i tem at l ow, ol d pri ces! Mean-
whi l e, they have poured water i nto thei r wi ne. So do a l ot of other
sel l ers.
The qual i ty of many products starts goi ng down. Pri ces stay
arti fi ci al l y l ow, because i n pri nci pl e peopl e are vi ol ati ng the pri n-
ci pl e of honest wei ghts and measures al l through the soci ety.
Ms, you get ten yards of 100% si l k at l ast years l ow pri ces. I ts a
l i e. Ei ther the si l k i snt 100% si l k, or i ts an i nferi or qual i ty si l k, or
i ts actual l y seven yards because the sel l er has substi tuted a fal se
measure.
Pri ce Control s
But what i f the government steps i n and tel l s al l the other sel l -
ers except the si l versmi ths to mai ntai n the ol d standards of qual i ty?
Then ei ther pri ces wi l l ri se, or el se the amount consumers can buy ,
at the ol d pri ces wi l l be reduced, or el se qual i ty wi l l drop.
But what i f the government passes a l aw agai nst rai si ng
pri ces? Thi s means that sel l ers cant cut the amount sol d. What
then? Qual i ty wi l l have to drop.
What i f the government passes another l aw, maki ng i t i l l egal
to cut qual i ty? Then many sel l ers wi l l go out of busi ness, and con-
sumers wi l l not be abl e to buy al l the goods they want.
Meanwhi l e, ri sk-ori ented producers wi l l start sel l i ng thei r
goods i n the free market, meani ng an unregul ated market, mean-
i ng the black market.
(1 hate to use the term bl ack ma&et. I prefer to use the term
al ternati ve zones of suppl y.)
I f the si l versmi ths al one are al l owed to debase thei r product
money and the government passes l aws agai nst pri ce ri ses or
qual i ty cutti ng, the l aw-abi di ng consumer and the l aw-abi di ng
producer wi l l be rui ned.
Summar y
I n short, i f there i s any tamperi ng wi th the monetary uni t, and
the government al l ows such fraud to conti nue, the whol e economy
The Contagion of I nzation 57
i s threatened wi th a progressi ve debasement. I t i s not si mpl y the
monetary uni t that wi l l be\debased, but al so many other products.
Any sel l er or producer who fi nds that hi s consumers are unwi l l i ng
to accept pri ce i ncreases i s forced to consi der adopti ng the same
corrupt practi ces as the si l versmi ths, just to stay i n busi ness.
Thus, a debased currency i s l i ke a gi ant engi ne of economi c
corrupti on. Where the rul ers al l ow, not to menti on promote, thi s
sort of debasement, the whol e soci ety i s brought under the temp-
tati on of adopti ng corrupt practi ces. Because money i s the uni ver-
sal l y used medi um of exchange, debasement of money i s the most
effi ci ent yeast of corrupti on that an economy faces. I f govern-
ments al l ow thi s debasement, to say nothi ng of getti ng a monop-
ol y over money and then begi nni ng the process of debasement,
the spread of i mmoral i ty speeds up. Every economi c enterpri se i s
tempted to i mi tate the corrupters i n order to stay i n busi ness.
Somethi ng for nothi ng i n the fi el d of monetary pol i cy even-
tual l y l eads to di saster. God wi l l not be mocked.
Thus, the process of monetary debasement causes a stri ng of
undesi rabl e, yet tempti ng effects. The peopl e of Judah were i n
si n.
1. Peopl e coul d see the debasement of si l ver, yet there was no
opposi ti on.
2. The rul ers were corrupt i n al l owi ng the debasement of si l ver.
3. The spread of monetary corrupti on was not merel y passi ve;
evi l was wi despread i n Judah.
4. (Now l ets tal k about today.) Hi gh qual i ty goods normal l y
cost more to produce than l ow qual i ty goods.
5. Producers begi n to i mi tate the corrupt practi ces of money
debaser s.
6. Conti nued monetary debasement requi res the cooperati on
of government, meanmg coerci on (di rector redi rect) agai nst hon-
est money producers.
7. Evi l and good both spread l i ke yeast (what the Bi bl e cal l s
l eaven).
8. Bad money dri ves good money out of ci rcul ati on onl y when
the gover nment equates the two by l aw.
.
9. The pubhc thi nks i t benefi ts fmm the i nfl ati on, at l east at fi rst.
58 Honest Mong
10. The publ i c wans to fool sel l ers i nto sel l i ng at di scount
(honest money) pri ces.
11. Se~ers fool the publ i c by cutti ng qual i ty and offeri ng di s-
count pri ces.
,12. The corrupti on spreads from empl oyers to empl oyees.
13. Government-l egi sl ated pri ce control s are i n fact %eopl e
control s. They control the deci si ons of peopl e, not pri ce: as such.
14. Government pri ce control s reduce peopl es weal th by
destroyi ng the free market.
15. The bl ack market i s si mpl y the product of peopl e who are
tryi ng to escape di shonest &oney i n a worl d of pri ce control s.
b
6
WHEN THE STATE MONOPOLI ZES MONEY
Show me the tax money. So they brought Hl m a denari us.
And He sai d to them,
Cc
Whose i mage and i nscri pti on i s thi s? They
sai d to Hi m, Caesafs. And He sai d to them, Render therefore
to Caesar the thi ngs that are Caesa#s, and to God the thi ngs that
are Gods (Matthew 22:19-21).
By the days of Jesus, rul ers had l earned the wonders of i ssui ng
money.. No l onger was money the product of si l versmi ths or gol d-
smi ths. No l onger di d pri vate i ndi vi dual s have the l egal ri ght to
i ssue i ngots or other easi l y recogni zed uni ts made wi th preci ous
metal . The State had made money a monopol y.
There were many reasons for thi s. Lets begi n wi th the key fact
i n thi s famous confrontati on between Jesus and the Phari sees: the
face and the i nscri pti on. The coi n was a Roman si l ver denari us. I t
was speci fi cal l y a tax coi n, a coi n for payi ng tri bute to Rome.
Now, why woul d the questi oners ask hi m about the l awful ness
of a Roman tax? To tempt Hi m. Ei ther He woul d say that i t was
unl awful to pay the tax, and i ncur the wrath of the Roman au-
thori ti es i n Jerusal em, or He woul d say to pay i t, and i ncur the
wrath of the mul ti tudes who fol l owed Hi m. So He turned the
tabl es on them fi gurati vel y, thi s ti me, He had al ready turned the
tabl es on them i n the templ e (Matthew 21:12).
What ki nd of coi n di d they bri ng Hi m? A tri bute coi n. So they
.
possessed a tri bute coi n? Of course. Thi s meant that because of
the real i ti es of Roman power, they had al ready made thei r own
deci si on to use coi ns as currency that were tai coi ns. They were
the benefi ci ari es of a wi del y respected coi nage system whi ch had
59
60 Honest Mong
.
been i mposed by a forei gn rul er. I f they profi ted from the system,
why shoul dnt they pay taxes to support the system? End of argu-
ment.
We can l earn a l ot by a study of Roman coi nage. The Roman
Empi re was a rel i gi ous organi zati on al l anci ent soci eti es wer e:
(So are al l modern soci eti es, but most of them di sgui se thi s fact.)
I ncreasi ngl y, the emperors were regarded as gods, especi al l y i n
the eastern hal f of the Roman Empi re. The coi ns were used as
pol i ti cal devi ces. I n an i l l i terate worl d, the pi ctures on the coi ns
announced rel i gi ous messages, and therefore pol i ti cal messages.
Ti beri us Caesar? pi cture was on the den?ri us that they handed
to Jesus. Ti beri us i ssued onl y three types of denari i duri ng hi s
rei gn, and by far the most wi del y ci rcul ated had hi s face on one
si de, adorned wi th a l aurel wreath, a si gn of hi s di vi ni ty. The i n-
scri pti on read, Emperor Ti beri us august Son of the august God,
referri ng to Caesar Augustus, the father who had adopted hi m.
On the back of the coi n, hi s mother appears, seated on a
throne of the gods. I n her ri ght hand she hol ds an Ol ympi an
scepter, and i n her l eft hand i s an ol i ve branch, a symbol of peace.
As Professor Stauffer comments concerni ng the coi n: I t i s a sym-
bol of power. For i t i s the i nstrument of Roman i mperi al pol i cy.
Roman coi ns from Augustus on, announced di vi ne emperors,
savi ors of the worl d. Yet by the year 300, the coi ns were worth-
l ess, pri ce control s had been i mposed, and the empi re was an eco-
nomi c catastrophe. The more the coi ns promi sed del i verance, the
worse they became. The si l ver was taken out of them, and cheap
copper was substi tuted. Professor StauffeFs book, Chri l t and the
Cawm (1955), tel l s the story of the col l apse of the pagan Roman
Empi re through a study of i ts progressi vel y debased coi nage. As
the Empi re col l apsed, so di d i ts coi nage.
A Si gn of Soverei gnty
Pol i ti cal rul ers l earned very earl y just how powerful coi ns
coul d be i n servi ng as symbol s of pol i ti cal and rel i gi ous authori ty.
They coul d serve as uni fi cati on devi ces; just as fl ags serve modern
men. The users were remi nded constantl y of the source of the
When the State Monopolizes Mong 61
coi ns (the State) and the person who made the State possi bl e (the
pol i ti cal -rel i gi ous l eader).
I t i s not surpri si ng that the fi rst coi ns ever i ssued were i ssued
i n order to strengthen the State. Whi l e Greek coi ns i n the anci ent
worl d were i n part used to expand commerce, hi stori ans are now
general l y agreed that pol i ti cal moti ves were equal l y i mportant as
economi c moti ves. The ri ght to i ssue coi nage was a si gn of a ci ty-
states pol i ti ckl and l egal i ndependence. I n other words, the States
offi ci al s saw coi ns as an effecti ve means of strengtheni ng ci ti zens
l oyal ty to the exi sti ng government.
But the symbol i c i mportance of coi ns was ofi l ythe begi nni ng.
The State coul d use coi ns as a means of col l ecti ng taxes. I f the
State i ssued preci ous metal coi ns, i t coul d col l ect coi ns as taxes,
Thi s made i t easi er to keep tax records, and pol i ti ci ans al ways l i ke
to si mpl i fy tax col l ecti ng! The State coul d buy goods and servi ces,
i ncl udi ng the servi ces of armi es, i f i t had coi ns.
Where coul d the State get the preci ous metal s? From mi nes,
or from successful warfare, or from taxi ng busi nessmen who were
i nvol ved i n trade. Once the State sancti oned money, i t woul d
have l ed to an i ncrease i n demand for cen&ed money. After al l , the
State col l ected i ts taxes wi th i ts own money. Thi s woul d have cre-
ated demand for money just i n i tsel f.
Eventual l y, the pol i ti ci ans l earned about the short-term bene-
fi ts of debasi ng the currency. They l earned qui te earl y, i n fact.
When the State took i n gol d and sal ver, i t then i ssued coi ns th~t
were pure. But as ti me went on, and peopl e became accustomed
to the coi ns, the ol d debasement tri ck became too tempti ng for ~
pol i ti ci ans to resi st.
Peopl e dont l i ke to pay taxes. They never have. Pol i ti ci ans
l ove to spend money. They al ways have. So pol i ti ci ans l ong ago
fi gured out a way to i ncrease spendi ng wi thout i ncreasi ng di rect
tax col l ecti ons. I f they just took out some of that mol ten gol d or
si l ver, and poured i n some cheaper metal , they coul d produce
more coi ns wi th the extra gol d or si l ver. You have heard al l thi s
before. (Take a si l ver coi n ha, haout of your pocket. You
have i n your hand tangi bl e proof that pol i ti ci ans havent changed
62 Honest Mong
over the l ast two thousand years or so.)
The government then spends these extra coi ns i nto ci rcul a-
ti on. I t makes l i ttl e di fference i n the l ong run whether i ts the gov-
ernment or a pri vate si l versmi th who does thi s. The resul t i s more
coi ns i n ci rcul ati on. Pri ces wi l l eventual l y go up. The tri ck i s to
spend the debased money before everyone el se catches on and
hi kes sel l i ng pri ces.
There i s a new probl em, however. The peopl e may trust the
State more than they trust pri vate si l versmi ths. They thi nk that
the State i s honest. I n the ol d days, they thought the State was
di vi ne. Thus, when the State starts produci ng debased money, i t
threatens peopl es confi dence i n l aw and order. I n the anci ent
worl d, i t made peopl e doubt &e honesty of ~he gods.
We are back to Gods l aws regardi ng honest wei ghts and
measures. I f God i s the Judge, then Hi s l awful representati ves i n
the ci vi l government shoul d not cheat. To cheat here i s to cdl i nto
questi on the rel i abi l i ty and the i nti gn~ of God.
The State may be abl e to get away wi th the debasement proc-
ess l onger, si nce peopl e trust the State. But coi ns are coi ns, and i f
more of them are comi ng i nto ci rcul ati on, peopl e are bui l di ng up
a suppl y i n reserve. Why not spend some of the extra ones? As
they are spent, pri ces begi n to cl i mb, compared to l ast years
pri ces, whi ch were produced by an economy wi th fewer coi ns i n
ci r cul ati on.
Ul ti matel y, i t doesnt matter who produces the coi ns. Peopl e
wi l l respond to the new condi ti ons of the suppl y and demand for
money. I f there i s a greater suppl y of money, the pri ce (exchange
val ue) of the money wi l l drop. Hol ders of cash wi l l be hurt.
A New Form of Debasement
The troubl e wi th money metal s from the pol i ti ci ans poi nt of
vi ew i s the very measurabl e character of metal . I f a user can
measure i t and wei gh i t, he can tel l i f someone has added a
cheaper metal to the preci ous metal . The coi ns wei ght wi l l
change. I t al so starts to change col or as more and more base
metal s are added. Then everyone fi nds out about the corrupti on.
When the State Monopolizes Money 63
Peopl e l ose fai th i n the i ssuer of the coi ns.
But paper money overcomes thi s i nherent weakness. One
pi ece of paper l ooks l i ke any other pi ece of paper. They al l wei gh
the same. How can the user determi ne whi ch pi ece of paper i s the
phony? He cant.
How does the State get peopl e to accept pi eces of paper as
money? By maki ng them converti bl e on demand for si l ver or
gol d. Then the State just starts i ssui ng more paper notes than i t
has gol d i n reserve. Most peopl e dont catch on. They accept the
States paper as i f i t were honest money. After al l , these are our
l eaders. They woul dnt cheat us.
Yes they wi l l . . . i f they thi nk they can get away wi th i t. They
can, too. They al ready have: i n the Uni ted States i n 1933 (gol d).
and 1967 (si l ver).
As more and more pi eces of paper come i nto ci rcul ati on, the
pri ce of goods starts to ri se. Thi s i ncl udes the pri ce of gol d or .
si l ver. Now, i f a pi ece of paper cal l ed one dol l ad enti tl es the
bearer to col l ect an ounce of si l ver, but the pri nti ng of paper
money rai ses the pri ce of si l ver to two dol l ars, i t pays the person
who owns the pi ece of paper to go the treasury and get an ounce of
si l ver wi th hi s paper dol l ar.
Guess what he then does wi th the ounce of si l ver? He takes i t
to a free market si l ver deal er and sel l s i t for two dol l ars. Then he
takes two dol l ars to the treasury and gets two ounces of si l ver.
Then he sel l s i t to the publ i c for four dol l ars. ~ Then he. ., . .
You get the pi cture. The treasury wi l l run out of si l ver. I n fact,
i t wi l l run out a l ong ti me before the free market pri ce hi ts two
dol l ars an ounce. I t wi l l run out by the ti me i t hi ts a dol l ar and ten
cents, probabl y.
So the pol i ti ci ans ei ther have to stop p~nti ng more paper
money, or el se they have to shut the wi ndow on peopl e who want
to exchange dol l ars for si l ver.
Thi s i s what they di d i n the Uni ted States i n 1967. The fol l ow-
i ng year, the pri ce of si l ver doubl ed.
Why di dnt they stop pri nti ng paper dol l ars? Dont be si l l y. I f
they had stopped creati ng money, they woul d have had to rai se
64
taxes (unpopul ar) or
unpopul ar). So they
Honest Mong
cut back government spendi ng (even more
pri nted money i nstead. So pri ces of goods
and servi ces more than tri pl ed, 1967-85.
Wi l l the Publ i c Revol t?
Not very often. The publ i c deci des that paper money i s
money, not pi eces of shi ny metal . I f paper i s acceptabl e by the
store down the street, then who cares? Who cares i f pri ces go up,
year after year? Whats a l i ttl e pri ce i nfl ati on? Were al l doi ng
better, arent we?
The troubl e i s, we are al l thi nki ng short term. We forget what
happens to the val ue of our m,oney when i ts purchasi ng power
erodes year after year (that i s, pri ces keep goi ng up). What hap-
pens i f you reti re and are forced to l i ve on a fi xed money i ncome?
Look at the tabl e on page 65. See what happens to what your
money i s worth at vari ous rates of pri ce i nfl ati on.
Pi ck a year. See what happens to your i ncome at vari ous rates
of i nfl ati on. I t i snt comforti ng.
I nfl ati on cant hurt anyone too badl y i s a del usi on of ful l y
empl oyed younger workers. I t can hurt everyone who i snt stayi ng
ahead of i t wi th pay i ncreases, and I mean ajer-tax pay i ncreases.
Hi gher Tax Brackets
Thats another reason why governments l i ke i nfl ati on. Gov- ~
ernments si nce the era of Worl d War I have convi nced voters to
vi ol ate the Bi bl i cal pri nci pl e of the ti the, and i mpose hi gher rates
of taxati on on peopl e wi th hi gher i ncomes. Thi s i s done i n the
name of a hi gher moral i ty. I t i s done i n the name of justi ce. .
At fi rst, onl y ri ch peopl e, are supposed to be taxed at these
hi gher rates. Thats what the pol i ti ci ans promi se. Cross thei r
hearts and hope to di e. I n 1913, the year the i ncome tax was passed
i n the Uni ted States, the tax rates began at I $l o and went as hi gh as
7%. The 1% rate was appl i ed to al l i ncome over $20,000 a year,
and the 7?Z0 tax was on al l i ncome over $500,000 a year. Thi s was
i n an era i n whi ch the average fami l y earned about $1,000 a year.
Al most nobody got taxed for about four years.
When the State Monopolizes Money 65
PURCHASI NG POWER OF $100 OF FI XED PENSI ON l l ENEFI TS
UNDER VNtI OUS WTES OF I NFLATI ON
Years
\ <
Irdation Rate
after
retire- 3% 49?0 5% 6% 7% 8% 970 10% 1170 12% 1370 idyo 15%
ment
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
.
16
17
18
19
20
97
94
92
88
86
84
81
79
77
75
72
70
68
66
64
63
61
59
57
55
96 95 94 93 93 92 91 90 89 88 88 87
93 91 89 88 85 84 83 81 80 78 77 76
89 86 84 81 79 77 75 74 71 69 68 66
85 82 79 76 74 71 68 66 64 61 59 57
82 78 75 71 68 65 62 60 57 54 52 50
79 75 70 67 63 60 56 53 51 48 46 43
76 71 67 62 58 55 51 48 45 42 40 38
73 68 63 58 54 50 47 43 40 38 35 33
70 65 59 54 50 46 42 39 36 33 31 28
68 61 56 51 46 42 39 35 32 29 27 25
65 58 53 47 43 39 35 32 29 26 24 22
63 56 50 44 40 36 32 29 27 23 21 19
60 53 47 41 37 33 29 26 23 20 18 16
58 51 44 39 34 30 26 23 20 18 16 14
56 48 42 36 32 27 24 21 18 16 14 12
53 46 40 34 29 25 22 19 16 14 12 11
51 44 37 32 27 23 20 17 15 13 11 9
50 41 35 30 25 21 18 15 13 11 9 8
47 40 33 27 23 19 16 14 12 10 8 7
46 38 31 26 21 18 15 12 10 9 7 6
Then, i n 1917, the bottom bracket was dropped from $20,000 a
year to $2,000. The pol i ti ci ans swept a l ot more peopl e i nto the
net. Andhok at what they di d to the top brackets: 1913-15: 770;
,.
66 Honest Mong
1916, 15%; 1917, 67%, 1918, 77%. I n short, they changed the
rul es. The y al ways do.
Here was thei r pl an: l ower the l evel of taxabl e i ncome, and i n-
crease the rate of taxati on i n every bracket. Next, i nfl ate the
money suppl y, so that everyone i s pushed i nto hi gher and hi gher
taxabl e brackets. The hi gher your m.ong i ncome, the l arger the
percentage of your i ncome gets col l ected by the State.
The graduated i ncome tax (al so cal l ed the progressi ve i n-
come tax) was recommended by Karl Marx, the founder of Com-
muni sm, i n hi s 1848 book, the Conzmunz3t Manz@to. He under-
stood that such a tax system woul d hel p to destroy pri vate prop-
erty. He forgot to menti on that i t woul d pl ace a major temptati on
i n front of pol i ti ci ans to i nfl ate the currency, i ncrease everyones
money i ncome, and push everyone i nto hi gher tax brackets.
The l ure of greater tax revenues from a graduated i ncome tax
makes i nfl ati ng the currency l ook too producti ve. I t makes the i m-
moral i ty of changi ng wei ghts and measures l ook l i ke a good i dea.
I t makes the destructi on of peopl es economi c futures too popul ar.
The government begi ns to i nfl ate, and al most never i n hi story has
the process stopped unti l the val ue of the currency fal l s to zero. I t
may take a hundred years, but at the end, the peopl e l ose what
they had needed: a rel i abl e, general l y predi ctabl e monetary system.
I nzation is an invisible tax. I nstead of taxi ng peopl e di rectl y, the
pol i ti ci ans fool peopl e. They i ncrease government spendi ng but
they dont col l ect enough tax revenues to pay for i t. So they pri nt
up the money to make up the di fference and spend i t i nto ci rcul a-
ti on. The vi cti ms (peopl e on fi xed money i ncomes who face ri si ng
pri ces) sel dom know who i t i s who Wi ned them. They bl ame
specul ators and pri ce gougers , not the pol i ti ci ans.
But eventual l y everyone l earns who di d i t to them. They read
a book l i ke thi s one. They get angry. I nfl ati on of the currency i s a
good way to create a revol uti on. The pol i ti ci ans fi gure thi s out .
way too l ate.
Two Ki nds of Counterfei ters
The pri vate counterfei ter pri nts up currency and spends i t i nto
ci rcul ati on. The government counterfei ter pri nts up money and
spends i t i nto ci rcul ati on.
When the State Monopolizes Mong 67
Pri vate counterfei ti ng rai ses pri ces i f enough counterfei ters do
i t fast enough and l ong enough. Government counterfei ti ng rai ses
pri ces, i f the government does i t fast enough and l ong enough.
The pri vate counterfei ter doesnt agree to del i ver a speci fi ed
wei ght and fi neness of gol d or si l ver to the person who cashes i i
hi s p?per note. The government counterfei ter does promi se to cash
i n gol d or si l ver for paper, but eventual l y he breaks hi s promi se.
The publ i c doesnt trust pri vate counterfei t money. The publ i c
does trust government counterfei t money, at l east for a l ong ti me,
unti l peopl es trust i s total l y betrayed (mass i nfl ati on).
What i s the di fference i n @i nc@l e between pri vate counterfei t-
i ng and government counterfei ti ng? None.
What i s the di fference economical~? Onl y the benefi ci ari es:
pri vate counterfei ters who buy up goods and servi ces, or pol i ti -
ci ans who buy up goods, servi ces, ana {otes.
What i s the di fference politically? Pr wate counterfei ters betray
peopl es trust i n cri mi nal s. Government counterfei ters betray peo-
pl es trust i n the government.
I f government counterfei ters and pri vate counterfei ters-both
i ssue paper and cal l i t money, then on what legal basi s can the gov-
ernment prosecute counterfei ters. The onl y thi ng I can thi nk of i s
that i ts a vi ol ati on of the governments trademark l aws.
Summar y
From about 600 to 500 B. C., governments began i ssui ng gol d,
si l ver, gol d-si l ver, and copper coi ns. Thi s became an aspect of the
authori ty of ci vi l government. Ci ti es (whi ch were ci ty-states)
cl ai med a pol i ti cal monopol y over mbney. So di d the Roman Em-
pi re several centuri es l ater.
The coi nage system was both a rel i gi ous and a pol i ti cal phe-
nomenon. I t was al so economi c. As peopl e began to use the coi ns
of a parti cul ar government because of the fami l i ari ty of the coi ns,
a temptati on was pl aced i n front of the government: to debase the
currency. The government coul d buy extra goods and servi ces for
i tsel f i ni ti al l y, before pri ces started to @se by spendi ng new
(debased) money i nto ci rcul ati on. Al l i t had to do was mi x dross
68 Honest Mon~
metal s i n wi th the preci ous metal s. I n short, coi ns made i t easi er
for corrupt governments to steal from trusti ng ci ti zens.
Eventual l y, peopl e caught on, and peopl e started aski ng
hi gher pri ces. After al l , the economy i s a gi ant aucti on, and i f peo-
pl e are gi ven more money by the State, they can afford to bi d
pri ces hi gher than before they got access to the new money,
Ri si ng pri ces eventual l y destroy peopl es confi dence i n the
money system. Thi s l oss of confi dence eventual l y refl ects i n thei r
l oss of confi dence i n the State. I t i s the States responsi bi l i ty to
protect the i ntegri ty of the money, because the State i s supposed
to enforce honest wei ghts and measures.
But who can enforce honest wei ghts and measures regardi ng
money i f the enforcers pol i ti ci ans and rul ers are profi ti ng from
the cheati ng? That i s the probl em that no soci ety has ever been
abl e to sol ve. Government money eventual l y becomes corrupt
money.
I t boi l s down to thi s: i t i s cheaper to pri nt a pi ece of paper wi th
some dead pol i ti ci ans pi cture on i t than i t i s to mi ne gol d two
mi l es beneath the earth. Bei ng cheaper, i t becomes too great a
temptati on for pol i ti ci ans to resi st i n a cri si s, or even i n peaceful
ti mes. They are unrestri cted by the geol ogy of gol d mi ni ng. Al l
they need i s paper and i nk.
When the voters have l arceny i n thei r hearts (somethi ng for
nothi n~ from the government), they eventual l y get stuck wi th
nothing for something: they sel l thei r goods and servi ces to the gov-
ernment, and get depreci ati ng paper money i n return. When they
try to spend i t, they fi nd out they have been robbed by the robbers
they el ected. God wi l l not be mocked.
Al l thi s happens because peopl e accept i t when the State
grants i tsel f a monopol y over money. The pol i ti ci ans vi ol ate Bi bl i -
, cal pri nci pl es, but nobody protests. The States money system i s
eventual l y destroyed. So are those who have become dependent
on i t.
The State step by step vi ol ates these pri nci pl es:
1. The State at most i s supp&ed to certi fy the honesty of
money: wei ght and fi neness.
W?wn the State Monopolizes Mong 69
2. The State then vi ol ates the pri nci pl e of economi c freedom:
al l owi ng peopl e to buy and sel l on thei r own terms: i t makes
pri vate coi ns i l l egal .
3. The State cl ai ms for i tsel f an economi c monopol y that i t
cannot be trusted to possess.
4. The State i n the anci ent worl d used the coi nage to pro-
pagandi ze the publ i c (fal se rel i gi on).
5. The State mi suses the trust of the peopl e.
6. The State becomes an offi ci al debaser of the metal coi nage:
addi ng cheap metal (dross) to the preci ous metal .
7. These new, dros.# coi ns add to the number of monetary
uni ts i n use.
8. Peopl e then bi d up the pri ce of goods and servi ces, si nce
they have more money to spend. .
9. Pri ce i nfl ati on begi ns to erode peopl es fai th i n the money.
10. The modern State uses paper money to hi de, and then
speed up, the debasement process.
11. The State has i mposed an i nvi si bl e tax: i nfl ati on.
12. Economi cal l y and moral l y, there i s no di fference between
pri vate counterfei ti ng and publ i c counterfei ti ng.
13. Pol i ti cal l y, there i s a di fference: the publ i c l oses fai th i n the
l aw.
7
BI BLI CAL BANKI NG
Therefore you ought tQ have deposi ted my money to the bank-
ers [money exchangers], and at my comi ng I woul d have recei ved
back my own wi th i nterest (Matthew 25:27)
The transl ators of the Ki ng James Versi on of the Bi bl e (1611)
transl ated the Greek word I OkU as usury. But i t doesnt mean
usury i n the Greek; i t means i nterest. Thi s i s how modern transl a-
ti ons transl ate i t. There i s a di fference between usury and i nterest.
How di d the Ki ng James schol ars make such an error?
Because they assumed that the concept of i nterest i n the Bi bl e
al ways means usury. The Hebrew word usury was a term of
cri ti ci sm. Usury referred onl y to i nterest taken fmm a poor fel l ow
bel i ever, i n other words, i nterest secured from a charztabb l oan.
Such usury i s prohi bi ted by Bi bl i cal l aw. But i nterest as such i snt
pr ohi bi ted.
Before I attempt to prtwe thi s fi -om the Ol d Testament texts,
l et me poi nt, out that i n thi s parabl e of the tal ents, Jesus was
affi rmi ng the i mportance of producti vi ty and profi t. I n expl ai ni ng
Gods ki ngdom, He tel l s the story of a ti ch man who goes away,
but before he goes, he cal l s three of hi s stewards and gi ves them
money (tal ents), each accordi ng to hi s abi l i ti es (Matthew 25:15).
One recei ves fi ve tal ents; one recei ves two tal ents; and one
recei ves one tal ent.
The fi rst two doubl ed thei r money through trade (25:16, 17).
The thi rd one buri ed hi s tal ent i n the ground. Upon the ri ch
mans return, each servant came to settl e hi s accounts. The
master was most pl eased wi th the fi rst man, who doubl ed a l arge
70
Biblical Banking 71
amount of capi tal . He was al so pl eased wi th the. second, who
doubl ed a smal l er amount of capi tal . To both he sai d, Wel l done,
good and fai thful servant; you were fai thful over a few thi ngs, I
wi l l make you rul er over many thi ngs. Enter i nto the joy of your
l ord (w. 21, 23).
But to the thi rd man, who buri ed hi s tal ent because of hi s fear
of l osi ng i t i n trade, the owner was furi ous. At l east the servant
coul d have pl aced the money wi th the money changers and recei ved
i nterest back on i t.
Jesus was affi rmi ng the l egi ti macy of both profi t through trade
and t,he normal rate of return whi ch i s secured by l endi ng money.
The two forms of acti vi ty are not the same, as the parabl e i n-
di cates, but both are l egi ti mate.
Profi t through trade i s ri sky. Thi s i s why the thi rd man was
afrai d to attempt i t: And I was afrai d, and went and hi d your
tal ent i n the ground. Look, there you have what i s yours (v. 25).
He thought i t woul d be best just to return the owners pri nci pal .
The owner cri ti ci zed hi m. Why? Because he had forfei ted the
use of that tal ent. The onl y reason anyone forfei ts the use of
money i s to get a ,greater amount of mone y i n the future. Other-
wi se, why not just spend i t on whatever i t wi l l buy today? Why
wai t? Thus, wterest i s a basi c category of human acti on. I t i s i n-
{
escapabl e.
Wai ti ng
To show you why i nterest i s i nescapabl e i n every aspect of
human acti on, l et me gi ve you two exampl es.
Fi rst, assume that I run a nati onal contest. You have just won ~
the grand pri ze, a brand-new Rol l s-Royce automobi l e. I have
pai d al l the taxes on i t. You can ei ther keep i t or sel l i t. I ts up to
you.
But I come to you and ask you to make a choi ce. You can take
del i very of the car today, or you can take del i very three years from
now. Because Rol l s-Royce styl es dont change very often, and
because the car probabl y wont go down i n val ue, you dont face a
l oss of capi tal di rectl y. But you assume that i t wont appreci ate,
72 Honest Mong
ei ther. So what do you do, take del i very now or l ater?
Obvi ousl y, ,you take del i very of i t i mmedi atel y. Why wai t? c
What do I have to do to get you to wai t? I have to offer you the
car, pl us somethi ng el se. Maybe I wi l l toss i n a smal l sedan at the
end of three years, or extra money. But to get you to wai t for
del i very, I have to compensate you, to make i t worth your ti me to
wai t.
Now, l ets take another exampl e. Thi s ti me, youre the buyer
of somethi ng from me. You want to buy a pi ece of property. I
show you that you can earn one ounce of gol d per year net profi t
from thi s l and, si mpl y by renti ng i t out. You dont have to do
anythi ng. Furthermore, ,we both agree that the l and wi l l probabl y
be abl e to produce thi s profi t for a thousand years wi thout damage
to the l and. Then I ask you to p~y me one thousand ounces of
gol d for the l and.
You, of course, protest. I t i snt worth a thousand ounces. I
counter by showi ng you that you al ready agreed that the l and wi l l
produce a thousand ounces of gol d, so why shoul dnt I be enti tl ed
to a thousand ounces? We al l agree: equal for equal , ri ght?
Where i s my argument i ncorrect? I t has to do wi th the val ue to
you today of those future ounces of gol d. I am aski ng you to gi ve
me gol d, ounce for ounce, i n advance. But what i s the thousandth
ounce, a thousand and one years fkom now, real l y wor& to you?
Wi l l you gi ve up an ounce of gol d today (and al l that i t wi l l buy)
for that thousandth ounce i n the di stant future for some unnamed
hei r of yours? I dont thi nk so.
You appl y a di scount to that future i ncome. An ounce of gol d
a thousand years down the road i snt worth as much to you as an
ounce i s worth to you today. (I f i t i s, pl ease contact me i m-
medi atel y. Do I have a deal for you! Theres thi s bri dge i n New
York Ci ty that I know youl l want to buy.) You wont be here to
enjoy i t.
But thi nk about thi s pri nci pl e. An ounce of gol d fi fty years
from now, or twenty years from now, i snt worth an ounce today.
I t al so i s di scounted i n your mi nd. So i s an ounce a year from
now. We have therefore di scovered a l aw of human acti on (whi ch
.
. Btblical Banking 73
appl i es i n every area of economi cs): the firesent value of~turegoods is
always discounted in comparison with the immediate value of those saw
goods.
What i s thi s di scount cal l ed? I l l bet youve al ready fi gured i t
out. I ts cal l ed the rate o~ interest.
You di scount the future val ue to you of any good compared to
what that same good i s worth to you i mmedi atel y, whether i ts that
Rol l s-Royce or an ounce of gol d from that pi ece of property. For
me to get you to hand over the present good today (money), I
have to promi se to return i t to you i n the future, pl us extra money
or other benefi t. I n other words, I have to pay you interest.
I n the parabl e of the tal ents, the mast& was angry wi th the
fearful stewa~d because the steward onl y gave hi m back hi s ori gi -
nal coi n. At the very l east, the master sai d, he coul d have l ent i t to
the money changers, and have recei ved back some i nterest.
Banks, Ri sk, and I nterest
I nformati on i snt free of charge. Someone has to pay for i t.
You may be gi ven i t as a gi ft (Let me gi ve you a pi ece of my
mi nd, fri end!), but peopl e sel dom val ue such free advi ce (Buddy,
I dont thi nk you can spare a pi ece ofymr mi nd!). So usual l y we
have to pay for i t. Nobody compl ai ns about havi ng to pay for
somethi ng val uabl e.
Say that you have a l ot of cash. Youre a fi -ugal person and
concerned about your future. You want to have a nest eggj for
the future. So youre i nterested i n l oani ng out some of the money.
I come to you and tel l you that I know a busi nessman wi th a
great i dea for a profi tabl e i nvestment. He wants a partner to put
up the money. He wi l l pay the partner 2570 of the profi ts. But i f he
goes bankrupt, the partner l oses the i nvestment. No, you thi nk to
yoursel f, thats too ri sky.
.
You counter wi th thi s offer: have the busi nessman, guarantee
me out of hi s own pocket a 10% rate of return on my money,
whether the project works or not. Then I l l l oan hi m the money.
What do I do? Fi rst, I go to the busi nessman. He thi nks he
wi l l be abl e to make 30% on the money.
74 Honed Money
Second, I ask mysel f that magi c questi on: Whats i n i t for
me? For my troubl e i n putti ng the deal together that i s, for my
i nformati on of where the money i s (you) and where the profi t op-
portuni ty i s (the busi nessman) I shoul d get somethi ng. So I ask
the busi nessman, are you wi l l i ng to pay 13% for the use of the
money? I f he says yes, then I come back to you and get the money
from you.
The busi nessman gets hi s money and the chance at maki ng a
l ot more. You get your 10% rate of return (your di scount of future
goods as agai nst present goods), and I get 3% on the deal for my
troubl e.
Thats honest banki ng. I t i s the exchange of i nformati on. I t i s
al so the exchange of ri sk. Youre worri ed about your WCS in the
jdure. You want more money to deal wi th those ri sks. The busi -
nessman worri es about the ri sks of guaranteei ng the credi tor (me)
13%, but he feel s that the ri sk i s worth i t. I worry about the ri sks of
the busi nessman goi ng bankrupt and fl eei ng the country, si nce I .
have to pay you your 10%. But I fi gure i ts worth my ri sk.
We have voluntm-i~ exchanged wk. Each person i s now more
comfortabl e wi th hi s own fears. Each map gets somethi ng for hi s
troubl e. We al l bear ri sk, but we bear an amount of ri sk thats
cl oser to what we want than woul d have been possi bl e i f I , the
deal -putter-together, had not come onto the scene.
As you have probabl y recogni zed, I am the banker i n th~ ex- .
ampl e.
A bank i s not an evi l i nsti tuti on. I t i s a marvel ous i nsti tuti on
i n pri nci pl e. I t al l ows the profi tabl e exchange of i nformati on and
the profi tabl e excti ange of ri sk. Those who parti ci pate al l bel i eve
that they wi l l be better off wi th thi s i nsti tuti on than wi thout i t.
The fact i s, banki ng has been one of the cruci al i nsti tuti ons i n
the devel opment of the modern worl d. I t ful fi l l s val i d economi c
desi res. I t al l ows us al l to deal more successful l y wi th an uncertai n
(compl etel y unknown) and ri sky (parti al l y unknown) future.
Banki ng 2WOWS us to spread our tiks.
Bibhcal Banking 75
The Marks of Honest Banki ng
There must be a l ender. We cal l hi m the o!epodw. He has to
gi ve up the use of hi s money for a speci fi ed peri od of ti me. I n ex-
change, he i s offered a speci fi ed rate of i nterest, to be pai d to hi m
i n addi ti on to the return of hi s ori gi nal i nvested money when the
l oan comes due.
There must be a borrower. He i s someone who bel i eves that hi s
opportuni ti es for putti ng the capi taI to use outwei ghs the expense
(and ri sk) of havi ng to repay the pri nci pal pl us the i nterest. He
may be a producer. He may be a consumer. But he bri ngs col -
l ateral to the tabl e (hi s past performance, hi s future prospects; hi s
i dea, etc.) and promi ses to repay.
There must bean eualuatoz Thi s i s the banker. He assesses the
ri sk of not bei ng repai d. He bears the ri sk of payi ng off the depos-
i tor i f the borrower defaul ts. He must eval uate the credi t worthi -
ness of the borrower. He gets pai d for hi s troubl e by the spread the
di fference between the rate of i nterest the borrower pays hi m and
the rate of i nterest he pays the deposi tor after the transaction is over.
There i s nothi ng i mmoral about such transacti ons. The Bi bl e
nowhere prohi bi ts them, wi th one excepti on: chari ty l oans. (I
shal l cover these l ater on.) These sorts of transacti ons are ex-
pected to be benefi ci al to al l the parti ci pants, or else the participants
wouldnt enter into such transactions voluntarily.
I n the next chapter, I wi l l di scuss some hi ghl y i mmoral aspects I
of a perverted form of banki ng. But as I have outl i ned banki ng
here, there i s nothi ng wrong wi th i t. The key to bear i n mi nd i s
the questi on of theme ojthe money. The deposi tor giues up the use of
hi s money duri ng the peri od of the l oan. He cant get somethi ng
for nothi ng. I f he gets a rate of i nterest, he gets i t because he
doesnt have the use of hi s money i n the i nteri m. When he l oans i t
out, it is no longer his money. He has gi ven up ownershi p and use of
present mong i n exchange for&ture money. He doesnt get somethi ng
(a rate of i nterest) for nothi ng (no true transfer of ownershi p).
Whenever thi s fundamental transfer of ownershi p i s vi ol ated,
banki ng becomes i mmoral , as I shal l show i n the next chapter.
76 Honest Momy
What i f the deposi tor needs hi s money back earl y? That
shoul dnt be too hard. He goes to the banker and makes a l oan re-
quest. The banker knows that the busi nessman i s probabl y goi ng
to repay the l oan. The banker can make a l oan to the deposi tor
out of bank capi tal , or he can l oan hi m money from another
deposi tors account, wi th the note from the ori gi nal busi nessman
as col l ateral . .
But to get money now, the deposi tor ei ther takes a di scount
(doesnt get al l the money ori gi nal l y agreed to be repai d), or el se
he has to promi se to repay the bank extra money when the repay-
ment of the l oan fal l s due. The poi nt i s, nobody gets somethi ng for
nothi ng. The deposi tor i s aski ng for money that has been l oaned
out. I t i snt i n the bank any l onger. To get hi s money earl y, he
has to borrow i t from someone el se, for duri ng the peri od of the
l oan, it imt hti mong any more.
Al l thi s i s fai rl y easy to understand. There are no hi dden
secrets here. Banki ng fundamental s arent mysteri ous. I ts si mpl y
a method of exchangi ng present and future ri sks, present and
future goods, wi th a mi ddl eman who puts the deal s together. And
i ts al l governed by thi s rul e: You dont get somethi ng for
nothi ng.
Chari ty Loans
The Ol d Testament forbade l enders from makhg i nterest-
beari ng l oans to poueny-stricken brothers in the faith. I f you l end
money to any of My peopl e who ar e poor among you, you shal l not
be l i ke a moneyl ender [usurer KJV]; you shal l not charge hi m
i nterest [usuvKJV] (Exodus 22:25, emphasi s added). The
New Ameri can Standard Versi on reads: I f you l end money to
My peopl e, to the poor among you, you are not to act as a credi tor
to hi m; you shal l not charge hi m i nterest.
The Bi bl e i s not speaki ng here si mpl y about money l oans. I n-
terest i s a phenomenon that rel ates to al l human acti on, so thi s
prohi bi ti on appl i es on any sort of l oan. And i f one of your
brethren becomes poor, and fal l s i nto pove~ among you, then
you shal l hel p hi m. . . . Take no usury or i nterest from hi m; but
.
.,
Biblical Banking 77
fear your God, that your brother may l i ve wi th you. You shal l not
l end hi m your money for usury, nor l end hi m your food at a
profi t (Levi ti cus 25:35a, 36-37). Noti ce: i t speaks of the poor
brother. Thi s i s not a prohi bi ti on agai nst busi ness l oans.
The warni ng agai nst profi ti ng from chari tabl e l oans from
those who{shar e the fai th i s cl ear: One who i ncreases hi s posses-
si ons by usury and extorti on gathers i t for hi m who wi l l pi ty the
poofl (Proverbs 28:8). I n other words, the evi l man l ays up
treasure unjustl y, but the ri ghteous man wi l l eventual l y earn i t
back. Thi s i s i n l i ne wi th another promi se of Proverbs, the weal th
of the si nner i s stored up for the ri ghteous (13:22b).
Yes, the l ender who l ends money to a poor fel l ow bel i ever can
l egi ti matel y ask onl y for a return of the pri nci pal . He must not ask
for anythi ng extra. Thi s means that he forfei ts the i nterest that
mi ght otherwi se have been earned i n some sort of busi ness l oan.
The l ender suffers a l oss, for he forfei ts the use of hi s capi tal over
ti me, and bears the ri sk that the l oan wi l l never be repai d. But
God wi l l reward the generous l ender, Proverbs says. I n effect, God
pays the i nterest payment to the ri ghteous l ender. God becomes a
ki nd of heavenl y co-si gner of the poor mans note. Speci fi cal l y, the
generous l ender wi l l prosper at the expense of the unri ghteous ex-
,
pl oi ter i n a soci ety whi ch i s governed by the l aw of God.
Summar y
Lendi ng money at i nterest i snt i mmoral and shoul dnt be
made i l l egal . I t shoul dnt be control l ed by the State i n any way.
The Bi bl e teaches that l oans at i nterest to poor fel l ow bel i evers
shoul d not be made, but the Bi bl e i s equal l y emphati c that i t i s
God who puni shes thi s type of l oan. There i s no menti on of any
ci vi l penal ti es. I t i s a rel i gi ous matter. Someone has to defi ne
fel l ow bel i ever and poor. Thi s i s not somethi ng the ci vi l author-
i ti es shoul d concern themsel ves wi th. At most, church authori ti es
mi ght penal i ze usurers, not the State.
But most l oans i n a soci ety are busi ness l oans or l oans made to
peopl e who have credi t references and col l ateral . These are not
poor peopl e. They come wi th credit wotihiness. Thi s i s a true capital
e
78, Honest Mong
usset. A mans reputati on as an honest and effi ci ent busi nessman
who pays hi s debts (and has few of them) i s certai nl y a val uabl e
asset. I t can be borrowed agai nst under certai n ci rcumstances.
Certai nl y, by putti ng col l ateral agai nst the l oan, he adds to hi s
cr edi bi l i ty.
Why shoul d someone wi th a great i dea to serve con~umers but
wi thout enough cash on hand to fi nance the i ni ti al del i very of thi s
servi ce or product not be al l owed to seek out other peopl e to put
up the money? Why shoul dnt others be al l owed to share thi s vi -
si on and share i n the rewards? Some peopl e may want an equi t~
posi ti on: shares of ownershi p i n the busi ness, rai n or shi ne, boom
or bust. Others may not want to become entrepreneurs, but they
are wi l l i ng to forgo the use of thei r money for an i nterest return.
Jesus teaches i n Hi s parabl e of the tal ents that both ki nds of i n-
vestments are l egi ti mate: hi gher-ri sk profi t seeki ng, as wel l as
guaranteed-return i nterest seeki ng.
The fundamental s of Bi bl i cal banki ng are these:
1. The Ki ng James transl ators erroneousl y transl ated ,the
Greek word for i nterest as usury.
2. Usury i n the Ol d Testament refers excl usi vel y to i nterest
taken from a poor fel l ow-bel i ever.
3. Jesus descri bed the ki ngdom of God i n terms of profi t seek-
i ng and i nterest seeki ng: a posi ti ve rate of return.
4. I nterest i s a basi c category of human acti on; i t i s i n-
escapabl e.
5. I t ari ses from the fact that we di scount the present val ue of
future goods as agai nst what those same goods are worth to us
r i ght now.
6. I nformati on i snt a free good; someone pays for i t.
7. Some peopl e prefer to l end money at a hi gh enough rate of
i nterest, as a means of provi di ng for themsel ves i n the future.
8. Other peopl e have needs and opportuni ti es that they prefer
to sati sfy now, and pay for through i nterest owed i n the future.
9. Mi ddl emen bri ng these two sorts of peopl e together; these
mi ddl emen are cal l ed bankers.
10. Thei r i nformati on i snt free.
11. They make thei r money through the spread: the di fference
Biblical Banking
79
between i nterest promi sed to them by the borrower and i nterest
promi sed by them to the deposi tor.
12. Through l endi ng and borrowi ng, peopl e exchange degrees
of ri sk.
13. The key to honest banki ng i s the transfer of ownershi p of
the capi tal asset: what i s l ent to the borrower cannot si mul tane-
ousl y be used by the l ender.
14. Chari ty l oans to poor fel l ow bel i evers shoul d not have any
i nterest payment attached to them.
15. God rewards the generous, zero-i nterest l ender to the poor.
8
FRACTI ONAL RESERVE BANKI NG
I f you ever take your nei ghbofs garment as a pl edge, you shal l
return i t to hi m before the sun goes down. For that i s hi s onl y
coveri ng, i t i s hi s garment for hi s ski n. What wi l l he sl eep i n? And
i t wi l l be that when he cri es to Me, I wi l l hear, for I am gr aci ous
(Exodus 22:26-27).
The context of thi s verse i s the general prohi bi ti on of i nterest
takeri from a poor fel l ow bel i ever. He has been reduced to such
abject poverty that he asks the nei ghbor for a l oan so smal l that hi s
coat can serve as col l ateral . He has nothi ng el se of val ue that can
serve as col l ateral . Thi s i s not a busi ness l oan.
But thi nk about the purpose of col l ateral . I f I gi ve you a l oan,
I want some securi ty that I wi l l get somethi ng from you i f you
refuse to repay i t or are unabl e to repay i t. Perhaps I l oan you
money agai nst an automobi l e you own. I f you defaul t on the l oan,
I can repossess the automobi l e and sel l i t. Maybe I can get my
money back thi s way.
Al so, I know that you dont want to l ose that automobi l e. You
wi l l work hard to earn enough money to repay me. I know that
the pai n you wi l l experi ence by l osi ng your col l ateral spurs you on
to greater efforts. I dont have to take physi cal possessi on of the
property, i f I have taken possessi on of l egal ti tl e whi ch enti tl es me
to take physi cal possessi on, shoul d you defaul t on the l oan.
But what about a poor man who has no col l ateral besi des hi s
cl oak? I want to get hi m to pay off the l oan. Sti l l , the cl oak i s use-
l ess tome personal l y. I woul d want to use i t at ni ght, when i t gets ~
col d, but I cant. I have to return i t to hi m every eveni ng. So i t i s
usel ess to me. Or i s i t,?
80
Fractional Reserve Banking 81
Obvi ousl y, i t i s useful to hi m. He gets col d at ni ght, so, he
comes to get i t. I t i s a l ot of troubl e for hi m (and a bi t humi l i ati ng)
to have to cored to my pl ace every eveni ng to get back hi s cl oak,
He wants to get out of debt as soon as possi bl e. So i t does serve as ,
an i ncenti ve for hi m to repay, whi ch al so means that i t i s an asset
to me.
There i s another aspect of thi s sort of col l ateral whi ch most
peopl e never thi nk of. What i f the borrower i s corrupt i n hi s
heart? What i f he went out and borrowed mo~ey from a dozen
peopl e, wi th the cl oak as col l ateral ? He promi sed each l ender:
Look, i f I defaul t, you may have my cl oak. I want my cl oak, so I
surel y wont defaul t . But i f he has borrowed agai nst the cl oak
twel ve ti mes over, he may be perfectl y wi l l i ng to defaul t on that
cl oak. Let the l enders deci de who gets the col l ateral .
The corrupt debtor shouts, Tough l uck, suckers. Sort i t out
among yoursel ves. The money i s gone. Al l I have l eft i s the cl oak. I l l
be col d wi thout i t, but I had fun wi th the money. I t was worth i t!
What the Bi bl e teaches i s that i t i s i mmoral to secure mul ti pl e
l oans wi th the same pi ece of col l ateral . To reduce the possi bi l i ty of
someone i ndebti ng hi msel f several ti mes over, the Bi bl e al l ows the
l ender to take physi cal possessi on of the col l ateral dai l y. Si nce onl y
one l ender can do thi s per day, the debtor i s not abl e to i ndebt hi m-
sel f many ti mes over on the basi s of one pi ece of col l ateral .
Just because a pi ece of col l ateral i s / @s&a/ ~ useless to the
l ender does not mean that i t i s economical~ useless to hi m. I t may be
very useful to hi m economi cal l y, fi rst, to moti vate the debtor to
repay the l oan, and second, to prohi bi t the borrower from i ndebt-
i ng hi msel f several ti mes over.
Mul ti pl e I ndebtedness
I n Chapter Three I di scussed the creati on of a warehouse
recei pt for stori ng gol d or si l ver. A person bri ngs i n ten ounces of
gol d to the warehouse for safekeepi ng, and the warehouse i ssues a
.
recei pt for ten ounces of gol d. The owner pays a fee for stori ng the
money, but he presumabl y i ncreases the safety of hi s hol di ngs.
The warehouse speci al i zes i n protecti ng money metal s from bur-
82 Honest Mong
gl ars. The deposi tor pays for thi s speci al i zed servi ce. I t i s some-
what l i ke a safety deposi t box i n a bank, except that the ware-
house i ssues a recei pt.
The recei pt may begi n to functi on as money. I f peopl e trust
the warehouse, they wi l l accept a recei pt for al l or part of thi s gol d
i n payment for goods and servi ces. Why not? A pi ece of paper au-
thori zi ng the bearer to col l ect a speci fi ed amount of gol d i s just
about the same as the actual ounce of gol d. Besi des, the gol d i s
safer i n storage, and paper i s a l ot more conveni ent than pi eces of
metal .
But a probl em threatens the system. What i f the warehouse
owner recogni zes that peopl e i n the communi ty trust hi m? They
know that he has a l ot of guards watchi ng everythi ng, and that he
has al ways been scrupul ousl y honest. He then betrays thi s trust.
Qe i ssues warehouse recei pts for gol d for whi ch there i s no gol d i n
r eser ve.
He then l oans these recei pts to borrowers. The recei pts serve
as money. Peopl e accept them i n exchange for goods and servi ces.
These warehouse recei pts are consi dered as good as gol d. Why
not? They are al ways exchangeabl e for gol d upon demand. Just
take the pi ece of paper to the warehouse, and get your gol d. No
probl em!
But now there i s a probl em. There are more recei pts for gol d
than gol d i n reserve to pay al l the potenti al bearers on demand.
These demand deposi ts are now vul nerabl e to that most feared
of fi nanci al events, a bank run. Deposi tors who have recei pts come
down and demand repayment. But there i snt enough gol d i n
reserve to meet the total demand.
The warehouse has pl aced i tsel f i n a si mi l ar posi ti on as the
poor man who i mmoral l y secures l oans from a dozen l enders on
the basi s of one pi ece of col l ateral . The warehouse owner has
become a banker. He makes l oans, for whi ch borrowers agree to
pay hi m i nterest i n the future, al ong wi th a return of the pri n-
ci pal . But the money, once l oaned out, i s gone unti l the day that
repayment comes. The warehouse i s vul nerabl e to a run on the
deposi ts. The warehouse owes gol d to the deposi tors. I t i s i n-
Fractional Reserve Banking 83
debted to them. The deposi ts are l egal l i abi l i ti es to the bank. The
bank has become i ndebted many ti mes over. I t has i n reserve onl y
a fracti on of the assets promi sed to deposi tors.
There i s a name used by economi sts to descri be such banki ng
practi ces: jhctiond reserve banking. Banks do not have 100% of al l
thei r l i abi l i ti es on hand as assets agai nst those l i abi l i ti es. I n short,
thei r reserves are onl y a$kidion of thei r l i abi l i ti es (deposi ts). They
have l oaned out the money l ong term, but thei r cl i ents (deposi t-
ors, l enders to them) can demand thei r money short term. Thus,
the time jdor i ntervenes. Thi s i s the weak poi nt of al l modern
bankrng.
The Creati on of Money
Remember, I sai d that the warehouse recei pt ci rcul ated as i f i t
were gol d. Therefore, i f gol d serves as money i n that soci ety, the
pi eces of paper wi l l al so serve as money.
When these pi eces of paper are pure money-metal substi tutes,
nothi ng changes. Physi cal gol d i s taken out of ci rcul ati on and put
i nto a warehouse. A pi ece of paper (a warehouse recei pt) substi -
tutes for the physi cal gol d. No new money has come i nto ci rcul a-
ti on. No money has been taken out of ci rcul ati on. Nothi ng funci a-
mental changes, except for conveni ence.
But i f the warehouse owner wri tes up a warehouse recei pt for
gol d when there i s no new gol d on deposi t, then he has i ncreased
the money suppl y i n the communi ty. No one has come to the
warehouse and deposi ted gol d (taken i t out of the day-to-day
economy). So the warehouse recei pt i s i nescapabl y injationay I t i s
an addi ti on of money i nto the economy. (1 am defi ni ng i nfl ati on
as an i ncrease i n the money suppl y, the way di cti onari es and
economi sts defi ned i t 50 years ago. The resul t i s ri si ng pri ces, or
el se pri ces wi l l not fal l as far as they woul d otherwi se have fal l en.)
Here i s what normal l y woul d happen. The warehouse recei pt
ci rcul ates as i f i t were gol d. I f the warehouse owner i s very cauti ous,
and i ssues onl y a few extra recei pts, probabl y nobody wi l l fi nd out.
He wi l l col l ect a l i ttl e i nterest fkom borrowers, and everyone wi l l be
happy. Pri ces may ri se onl y a l i ttl e, or perhaps not at al l .
,
84 Honest Mong
But other warehouse owners hear about thei r competi tor. So
hes l endi ng out money, i s he? Wel l , two can pl ay that game. So
they begi n to i ssue thei r warehouse recei pts to borrowers. They
too get i n on the banki ng game. The money suppl y now starts to
i ncrease.
Pri ces start to ri se as denomi nated i n gol d. But gol ds pri ce
doesnt ri se i ni ti al l y, for al l the recei pts are as good as gol d and
therefore i denti cal to gol d, supposedl y. So those who hol d gol d get
hurt. They see the pri ce of other goods ri si ng, but stodgy ol d gol d
stays the same. So they do the rati onal thi ng: they start buyi ng
goods before the pri ce of these goods gets any hi gher. They go
down to the store and start buyi ng goods wi th warehouse recei pts.
Al l of a sudden, the store owners see a l ot of paper recei pts.
Where di d al l these recei pts come from? Somethi ng funny i s goi ng
on. Maybe banks are i ssui ng phony recei pts. Maybe i t woul d be
smart to cash i n these recei pts and demand del i very of gol d.
They go to the warehouses and start demandi ng gol d. Al l of a
sudden, the run on the warehouse begi ns. The warehouse recei pts
begi n to fal l i n val ue compared to gol d. Other peopl e rush down
to get thei r gol d (whi ch i s now ri si ng i n val ue compared to the
warehouse recei pts they are hol di ng). The bank col l apses. Or el se
i t i s forced to del ay repayment to recei pt owners.
I t i s si mi l ar to the wi cked cl oak owner who has i ndebted hi m-
sel f many ti mes over, and then l eaves hi s credi tors standi ng out i n
the col d.
The Shri nki ng of Money
A few days before the bank run, busi ness had been boomi ng.
Everyone seemed to have l ots of money to spend. I t was terri fi c
for busi nessmen.
A few days after the bank run, real i ty sets i n. Many deposi tors
cant get thei r money. Peopl e who have borrowed from the banks
because busi ness was so great di scover that thei r i nvestments have
gone sour. They had begun bui l di ng new factori es, but now there
i s no more demand for the goods produced by these factori es.
They-had been l ured i nto maki ng the i nvestment (borrowi ng the
Fractional Reserue Banking 85
money) because the economy seemed to be boomi ng, and i nterest
rates were ni ce and l ow.
The reason i nterest rates were so l ow i s that the banks were
counterfei ti ng money and l endi ng i t out. They di dnt have to pay de-
posi tors any i nterest, and they were taki ng i n i nterest. I t was so easy
The day of economi c judgment arri ves. Busi nesses go bank-
rupt. Others l ay off empl oyees. Everyone has to adjust to the new
condi ti ons of suppl y and demand. The i nfl ati on i s over; defl ati on
has come. Some bank notes (warehouse recei pts) are worthl ess.
They arent money any more. Peopl e who hel d them have l ost
thei r money. They stop spendi ng as much as before.
Does thi s sound fami l i ar? I t shoul d. I ts cal l ed a depressi on.
And there i s one cause, and on~ me cause, of depressi ons: jwi or nz-
jl ati om. The good days l ooked so good; the bad days l ook so bad.
Peopl e were l i ed to. The counterfei t warehouse recei pts were
promi ssory notes, and these promi ses were l i es. The real i ty of the
post-l yi ng era i s l i ke a hangover after a ni ght of revel i ng. But i t i s
real i ty. The drunk, l i ke the busi nessman, shoul d be thankful for
i t. They sel dom are.
Look, depressi ons are hard to expl ai n. Why shoul d vi rtual l y
every busi nessman i n the country.even i n the worl d (1930s) al l
make the same mi stakes at about ti e same ti me. Sure, busi ness-
men make mi stakes. Some buy when they ought to be sel l i ng.
Some wi n, and others l ose. But not i n a depressi on. Why do
al most al l of them make the same mi stake at about the same ti me?
The answer i s the money system. Al l busi nessmen are ti ed to
money and i nterest rates. I f we want to expl ai n why al most al l of
them thi nk a boom i s goi ng to conti nue when a bust i s about to oc-
cur, we need to l ook at money and i nterest rates. The busi ness-
men make the same mi stakes because interest rates are giuing thm in-
correct stgnah.
Borrowi ng rates are l ow because bankers are creati ng counter-
fei t money l egal counterfei t money and l oani ng i t out. Then
i nfl ati on hi ts, the economy booms, and then craters when ti e
bankers sl ow down the pri nti ng of money i n sel f-defense agai nst
bank runs: too many recei pts for too few reserves. Money shri nks
(or even just sl ows down), and the depressi on hi ts.
We%e seen i t before: the boom of 1964-69 turned i nto the bust
Honest Mong
of1969-71. The boom of1972-74turned i nto the bust of1975-76/
The boom of 1977-79 turned i nto the bust of 1980-82. I t wi l l hap-
pen agai n.. I t al ways does.
Thats the curse of counterfei t money.
Pu r e Cou n ter f ei t Mon ey ~
The modern banki ng system has gone a l ong way i n the l ast
fi fty years. Al l over the worl d, nati ons abandoned the gol d stand-
ard. The ci ti zens are no l onger gi ven l egal access to true ware-
house recei pts (gol d-backed money). They cant take thei r paper
recei pts to a bank or the nati onal treasury and demand a fi xed,
predi ctabl e quanti ty of gol d (or si l ver) on demand.
Now the bankers dont have to worry about a bank run
agai nst gol d. Nei ther do the pol i ti ci ans. The resul t has been mass
i nfl ati on al l over the worl d. You coul d buy a three-bedroom home
i n 1913 for under $3,000.
Today, the game i s pl ayed di fferentl y. Lets see how i t works.
Say that you take i n $100 cash and deposi t i t i n your bank. The
central bank (i n the Uni ted States, the Federal Reserve System)
requi res banks to keep varyi ng percentages of money on reserve
at the Fed i tsel f, i n non-i nterest-payi ng accounts. A 10% reserve
makes i t easy to compute, though for many accounts i ts under 5%.
The bank takes your $100 and i ssues you a recei pt (bank
deposi t sl i p) for $100. I t then takes $10 and wi res i t to the regi onal
Federal Reserve bank. Then i t l oans out the remai ni ng $90.
The guy who borrows the $90 deposi ts i t i nto hi s account. Pre-
sumabl y, he then wri tes a check for the $90. The person who gets
hi s check deposi ts i t. Hi s banker takes 10%, or $9, and wi res i t to
the regi onal Federal Reserve Bank. Then he l oans out the re-
mai ni ng $81. The borrower wri tes a check to someone who depos-
i ts i t i n hi s bank. Hi s banker takes 10%, or $8.10, wi res i t to the
.
Federal Reserve Bank, and l oans out $72.90.
And so i t goes, from bank to bank, merri l y mul ti pl yi ng. I n
theory, that ori gi nal $100 cash deposi t (or check) creates an addi -
ti onal $800 i n l oaned money, pl us your ori gi nal $100.
And you wonder why we have i nfl ati on?
You thi nk I m maki ng thi s up? Then take a l ook at the offi ci al
Fractional Reserve Banking 87
expl anati on of how the system works. I t was publ i shed by the
Federal Reserve System i tsel f i n 1963, on the 50th anni versary of
the creati on of the Fed (i n 1913), a book cal l ed The Federal Reseme
System: Purposes and Functions. The numbers are di fferent because
the exampl e uses a more conservati ve 20$Z0 reserve requi rement
i nstead of todays 107o (or l ower). But you can see how i t works,
accordi ng to the peopl e who run thi s countrys banki ng and mone-
tary system. Wi th a 20?I o reserve requi rement, a $100 deposi t mul -
ti pl i es by 5: the ori gi nal $100 pl us $400 i n phantom
whi ch i s real, legal mong.
MULTIPLYING CAPACITY OF RESERVE MONEY
THROUGH BANK TRANSACTIONS
(i n dol l ars)
money
Deposi ted Set asi de
Transacti ons i n checki ng Lent as
,
accounts reserves
Bank 1 . . . . . . . . . . . . . . . . . . . . . . . 100.00 80.00 20.00
2 . . . . . . . . . . . . . . . . . . . . . . . 80.00 64.00 16.00
. . . . . . . . . . . . . . . . . . . . . . . 64.00 51.20 12,80
i . . . . . . . . . . . . . . . . . . . . . . . 51.20 40.96 10.24
5 . . . . . . . . . . . . . . . . . . . . . . . 40.96 32.77 8.19
6 . . . . . . . . . . . . . . . . . . . . . . . 32.77 26.22 6.55
26.22 20.98 5.24
i ::::::::::::::::::::::: 20.98 16.78 4.20
. . . . . . . . . . . . . . . . . . . . . . . 16.78 13.42 3.36 -
1: . . . . . . . . . . . . . . . . . . . . . . . 13.42 10.74 2.68
Total for10 banks .,.... . . . . 446.33 357.07 89.26
Addi ti onal banks . . . . . . . . . . . . 53.67
242,93 . 210.74
Grand total , al l banks . . . . . . 500.00 400.00 100.00
l Assumi ng an average member bank reserve reqturement of
20 per cent of demand deposi ts.
2AdJusted to offset roundi ng i n previ ous fi gures.
.
88 Honest Money
Probl em: I f Mexi co defaul ts on i ts $100 mi l l i on i n l oans, or
Brazi l defaul ts on i ts $110 mi l l i on, what then? vat ki nd of run on
the banks wi l l we see then? And i f the Federal Reserve System i n-
fl ates money to cover these l osses, can you i magi ne what the mul -
ti pl i cati on effects wi l l be?
I snt l egal i zed counterfei ti ng wonderful ? Somethi ng for noth-
, i ng. Wel l al l be ri ch soon. Mi l l i onai res. But bread wi l J cost $40 a
l oaf.
Then wel l have a depressi on. The pol i ti ci ans wi l l bl ame busi -
nessmen. The bankers wi l l bl ame anyone. Everyone wi l l bl ame
capi tal i sm. But capi tal i sm wasnt the cause of the boom or the col -
l apse; fmcti onal reserve banki ng was: too many warehouse
recei pts wi th too l i ttl e money i n reserve.
Summar y
Banki ng as a purel y l ender and borrower operati on i s a won-
derful i nsti tuti on. Pure banki ng i s not i nfl ati onary. I f I l oan you
.$100, I cant use that $100 whi l e youre usi ng i t. I dont have a de-
, mand deposi t . I cant demand the money I l oaned you unti l the
date that repayment i s due.
Then you deposi t the $100 temporari l y i n a demand deposi t
account. But your banker cant l oan i t out or pay you i nterest.
Then you spend i t. The same $100 goes through the economy
without multiplying.
Not so i n a fracti onal reserve banki ng system. I have the ri ght
at any ti me to spend the money I deposi ted, even though 9070 of i t
(or more) was l oaned out al ready. Where does the banker get the
money to honor my check? From some deposi tor who deposi ted
hi s paycheck today.
I ts just l i ke the fel l ow who owns that warehouse. He i ssues
l ots of extra warehouse recei pts for money (gol d) because he knows
that very few deposi tors wi l l come down on any day and demand
thei r
-
gol d. I f someone does, probabl y thi s wi l l be offset by some
other deposi tor who i s deposi ti ng gol d i n the warehouse. I t al l
l ooks so easy, unti l the run occurs.
Fracti onal reserve banki ng vi ol ates the Bi bl i cal pri nci pl e
,-
Fractional Rescn-ve Banking
agai nst mul ti pl e i ndebtedness. When bankers
89
vi ol ate thi s l aw
(wi th the con~ent of the State), i t l eads to i nfl ati on and economi c
booms, fol l owed by defl ati on and economi c depressi ons. Frac-
ti onal reserve banki ng i s a form of fraud, as surel y as a borrower
who uses one pi ece of col l ateral to get a dozen l oans i s fraudul ent.
But at l east cl oak banki n< i snt i nfl ati onary. The money that
l enders l oan to the fraudul ent cl oak owner goes from them to hi m,
but i t doesnt mul ti pl y. He wi ns; they l ose. The busi nessmen who
sel l to hi m wi n; the busi nessmen who woul d otherwi se have sol d
to them l ose.
Fracti onal reserve banki ng i s i nfl ati onary. A si ngl e pi ece of
col l ateral (deposi t) i s used by the banki ng system as a whol e to
create mul ti pl e l i abi l i ti es agai nst the banks as a system.
Here i s how the system produces evi l :
1. Usi ng a si ngl e pi ece of col l ateral to borrow money and
therefore to create mul ti pl e i ndebtedness 1s prohi bi ted by the
Bi bl e.
2 A l awful warehouse recei pt must have whatever i s promi sed
on reserve for i mmedi ate del i very.
3. A warehouse recei pt to any i tem whi ch serves the commun-
i ty as money must al so be ful l y backed wi th the wei ght and fi neness
promi sed on the recei pt.
4. The i ssui ng of unbacked warehouse recei pts to a money
commodi ty i s a form of counterfei ti ng.
5. Counter fei tmg 1s an addi ti on of new money i nto the econ- ,
omy.
6.. The addi ti on of new money i nto an economy i s i nfl ati onary.
7. The new money creates an i l l usi on of prosperi ty: economi c
boom.
8. The boom l eads to further borrowi ng by busi nessmen.
9. I nterest rates stay l ow temporarily because counter fei ter s ar e
creati ng new money to l oan.
10. Pri ces ri se.
11. Peopl e get suspi ci ous of the warehouse recei pts.
12. A r un on the war ehouse occur s.
13. The publ i c l oses confi dence i n the warehouse recei pts and
the boom.
90 Honest Monev
14. The money suppl y shri nks.
15. The boom turns i nto a bust: defl ati onary depressi on.
16. The depressi on bri ngs everyone to economi c reaMy.
17. Peopl e hate pai nful real i ty.
?
18. The government i s tempted to create new money, or have
the banks do i t for them, to sti mul ate a new boom.
19. Capi tal i sm doesnt cause depressi ons; fraudul ent banki ng
and government i nfl ati on cause booms, then depressi ons.
9
PROTECTI NG LI CENSED COUNTERFEI TERS
YOU shal l do no i njusti ce i n judgment. You shal l not be parti al
to the poor, nor honor the person of the mi ghty. But i n ri ghteous-
ness you shal l judge your nei ghbor (Levi ti cus 19:15).
Three counterfei ters are di scovered. The fi rst one i s a mi ddl e-
cl ass man who owns a cheap offset pri nti ng press. He has pri nted
500$20 bi l l s and spent them i nto ci rcul ati on.
The second one i s a U.S. government offi ci al . He works for
the Bureau of Engravi ng and Pri nti ng. He has pri nted up a mi l l i on
$20 bi l l s, and the government has spent them i nto ci rcul ati on.
The thi rd i s the Chai rman of the Board of a mul ti -bi l l i on-
dol l ar New York bank. Hi s bank has l oaned a bi l l i on dol l ars of
fracti onal l y reserve bank money to Mexi cos government-owned
petrol eum company, Pemex. The pri ce of oi l has col l apsed, so
Pemex cant pay i ts bi l l s.
What happens to the three counterfei ters? The fi rst man i s
convi cted of counterfei ti ng and i s sent to jai l . The second man
wo~ks unti l age 65 and i s gi ven a pensi on.
But what about the thi rd man, the chai rman? Here i s where i t
coul d get i nteresti ng. The thi rd man goes to the nati ons central
bank, the Federal Reserve System, whi ch i n turn cal l s the Mexi can
government, whi ch i mmedi atel y pri nts a Mexi can bond for $25
mi l l i on, whi ch i s then bought by the Federal Reserve System wi th
el ectroni c money created out of nothi ng. Thi s Mexi can bond then
becomes part of the l egal reserve whi ch supposedl y undergi rds the
U.S. monetary system. (Thi s was made l egal i n the i nfamous Mone-
tary Control Act of 1980, agai nst whi ch onl y 13 congressmen voted.)
91
92 Honest Momy
The Mexi can government sends the money to Pemex, whi ch
then remi ts $25 mi l l i on to pay thi s quartefs i nterest payment to
the New York bank. Pemex pays the bank a fee for rol l i ng over
the l oan. Three months from now, another $25 mi l l i on wi l l fal l
due. The chai rman of the New York bank gets a round of ap-
pl ause from the banks board of di rectors, and perhaps even a
bonus for hi s bri l l i ant del ayi ng of the banks cri si s for another
three months.
The $25 mi l l i on then mul ti pl i es through the U.S. fracti onal
reserve banki ng system, creati ng mi l l i ons of new commerci al dol -
l ars i n a mi ni -wave of i nfl ati on.
Thi s scenari o coul d real l y take pl ace, gi ven Uni ted States l aw.
I s thi s system just? Woul d you say that the l aw respects nei ther
the mi ghty nor the poor man?
-The Federal Reserve System
I n l ate November of 1910 (probabl y November 22), a pri vate
coach carryi ng some of the nati ons l eadi ng bankers and a U.S.
Senator pul l ed out of the Hoboken, New Jersey, trai n stati on and
headed for Georgi a. Thei r ul ti mate desti nati on: Jekyl l I sl and,
whi ch was owned by some of the ri chest men on earth as a hunt-
i ng cl ub. Membershi p i n the-cl ub was by i nheri tance onl y.
On board that trai n was Senator Nel son Al dri ch, the maternal
grandfather of Nel son Al dri ch Rockefel l er. Al so aboard: Henry P.
Davi son, a seni or partner i n the powerfi d banki ng fi rm of J. P.
Morgan Co., Benjami n Strong (another Morgan empl oyee), and
a European expert i n banki ng, Paul Warburg. Representati ves of
.
two other major New York bankhg fi rms were al so present 1
The reporters who gathered at the trai n stati on were tol d noth-
i ng, except that the men were al l goi ng duck shooti ng. Si x years
l ater, Berti e Forbes, the man who founded Forbes magazi ne, re-
, ported bri efl y on the meeti ng, and most peopl e thought the whol e
story was just a yarn. Very l i ttl e has been wri tten on i t si nce 1916.
, (Probabl y the most detai l ed account i s chapter 24 of the hi ghl y
favorabl e bi ography, Nelson W Aldrich, by Nathani el W. Stephen-
son [Scri bnePs Sons, 1930; repri nted by Kenni kat Press, 1971.])
At that secret meeti ng, these men desi gned what became the
Protecting Licensed Count@eiters 93
Federal Reserve System, the central bank of the Uni ted States.
As they were returni ng, they were met by reporters at the
Brunswi ck, Georgi a trai n stati on. Davi son went to meet wi th
them, and when he returned, he i nformed the group that they
wont gi ve us away. They never di d. The press never menti oned
the meeti ng.
Senator Al dri ch, a Republ i can, was the pol i ti cal mi ddl eman.
Hi s bi ographer Stephenson reveal s thi s i nformati on:
How was the Reserve Bank to be control l ed? The experi ence of
the two Uni ted States Banks, i n our earl y hi story, poi nted a warn-
i ng. The experi ence of a l i fe ti me spoke i n Al dri chs uncondi ti onal
repl y. I t was to be kept out of pol i ti cs. I t must not be control l ed by
Congress. The government was to be represented i n the board of
di rectors, i t was to have ful l knowl edge of al l the Banks affai rs but
a majori ty of the di rectors were to be chosen, di rectl y or i ndi rectl y,
by the members of the associ ati on (p. 379).
Republ i can Al dri ch di d not succeed i n getti ng hi s versi on of
the central bank through Congress i n 1911 and 1912, but Demo-
crati c Presi dent Woodrow Wi l son got a very si mi l ar versi on passed
i n December of 1913. Thus, i n the year of the i ncome tax was al so
born the Federal Reserve System, our nati ons central bank.
A Big Bank I nsurance Company
The Federal Reserve Bank i s the most powerful i nsurance
company i n ti e Uni ted States, and perhaps i n the worl d. I ts func-
ti on i s to control the money suppl y of the U. S., i nfl ati ng or
(hardl y ever) defl ati ng at wi l l the total money suppl y. I t was cre-
ated, the founders promi sed, i n order to el i mi nate pani cs, as
recessi ons and depressi ons were cal l ed i n those days. The resul t:
The pani c of 1920-21
The depressi on of 1929-39
The r ecessi on of 1953-54
The r ecessi on of 1957-58
The r ecessi on of 1969-70
The r ecessi on of 1975-76
The r ecessi on of 1980-82
94 Horwst Mong
I t was created, we were tol d, i n order to suppl y a so-cal l ed
el asti c currency to meet the seasonal needs of busi ness. Thi s
el asti c currency has stretched i nto the hundreds of bi l l i ons, ever
upwar d.
What i t was ral l y created for was to prevent the bankruptcy of
any major commerci al New York bank, and other major banks
around the country. Ordy one major bank i n the Uni ted States
fai l ed i n the Great Depressi on, the pri vate commerci al bank wi th
the offi ci al -soundi ng name, the Bank of the Uni ted States. But
over 9,000 smal l banks suspended payments.
Even i n the case of the Bank of the Uni ted States, we can see
the hand of the bi g banks. Thi s bank was fi nanced pri mari l y by
smal l merchants, especi al l y Jewi sh merchants. I t was not an i n-
si deW bank. The Cl eari ng House banks, made up of the major
New York banks, at fi rst promi sed to al l ow the fal teri ng bank to
merge wi th more sol vent i nsti tuti ons, but at the l ast moment they
pul l ed out of the bai l -out, al l owi ng the besi eged bank to suffer
more runs by deposi tors. Thi s created a wave of runs on other
banks. Fi nal l y, i n December of 1930, the State of New York shut i t
down to prevent total bankruptcy. I t eventual l y pai d off over 83%
of i ts l i abi l i ti es after i t l i qui dated i ts assets. The questi on can at
, l east be rai sed concerni ng the reasons for the Cl eari ng House banks
refi red to hel p i t i n the moment of cri si s. Was i t thei r fear of i ts total
col l apse? Or were they si mpl y el i mi nati ng a non-tradi ti onal ? more
specul ati ve ri val that had profi ted from the boom of 1924-29?
Thi s ri val ~i mi nated, there were no more bi g-bank fai l ures
for the remai nder of the depressi on.
I n any case, thi s bankruptcy i ndi cates the Achi l l es heel of
fracti onal reserve banki ng: the money was i nvested l ong i n l ong-
term mortgages, but the banks l i abi l i ti es were short-term: cash on
demand. But the cash was gone. Such i s the real i ty of i ssui ng
more recei pts for short-term money than there i s short-term
money i n reserve.
The Fed was al so created to suppl y funds to keep a bank pani c
from spreadi ng to the major banks. The key phrase i s suppl y
funds a synonym of in)ate.
Protecting Licensed Countaj$eiters 95
The Federal Reserve Bank i s a pri vatel y owned corporati on
whose shares of ownershi p are hel d by. the member banks. I t i s
quasi -publ i c, i n that the Presi dent of the Uni ted States appoi nts
the members of the Board of Governors of the Fed, but the di rect-
ors of the 12 regi onal Fed banks, and especi al l y the powerful New
York Federal Reserve Bank, are not appoi nted by any pol i ti cal
body. There are ni ne di rectors of each regi onal Federal Reserve
Bank; si x are appoi nted by l ocal bankers,-and three by the Board
of Governors of the Federal Reserve System.
Can the government tel l the Fed what to do? I f Congress and
the Presi dent are agreed about what to do, yes. I f there i s di s-
agreement over monetary pol i cy and there usual l y i s then the
Fed does pretty much what i t wants. What the ori gi n of the Fed
i ndi cates i s that the Fed does what the major mul ti nati onal banks
want. What the House and Senate commi ttees on bank regul ati on
want i s usual l y uncl ear, and a majori ty of the members barel y
know what a central bank i s, l et al one how i t functi ons or won-
der of wonders who actual l y owns i t. They dont even ask. I ts
consi dered bad form, a breach of eti quette. I know from experi -
ence. I served as a research assi stant for a Congressman who was
a member of the House Banki ng Commi ttee.
The Moneti zati on of Debt
Thi s i s an i nventi on of the modern worl d. A government
needs money. I t fears a tax revol t i f i t rai ses taxes. I t cannot afford
to pay more i nterest, so i t cant borrow money from the general
publ i c. I t therefore goes to the central bank and says, Buy our
Treasury debt certi fi cates.
The Treasury creates the debt certi fi cates (usual l y on a com-
puter entry: l i abi l i ty). The central bank buys them by creati ng
another entry: money. The computer bl i ps are swapped.
The government has just monetz,zed some of i ts debt. I t pays a
l ower rate of i nterest inztial~ to the central bank than i t woul d
have to pay i f i t went i nto the free market to compete for borrowed
money.
Whats wrong wi th thi s? Who gets hurt? Hol ders of money
96 Honest MongJ
wi l l be hurt. The central bank creates a reserve-asset when i t buys
the government bond. The money i s then used by the government
to buy whatever i t wants (mai nl y votes). Thi s new money goes
[
through the economy. I f the banki ng system i s a fracti onal reserve
system, the money mul ti pl i es many ti mes over. Thi s i s the process
of l egal i zed counterfei ti ng we cal l i nfl ati on.
The government never gets somethi ng for nothhg. That
means that you and I arenjt goi ng to get somethi ng for nothi ng.
More l i kel y, wel l get nothi ng for somethi ng. We wi l l get hi gher
pri ces, hi gher l ong-term i nterest rat~s, and then a recessi on. We
wi l l go through the boom-bust cycl e that the i nfl ated money
creates.
The moneti zati on of debt i s the easy way out for the govern-
ment, meani ng the easy way to confi s&te o-ur capi tal .
-
The best sol uti on: no more government debt. Owe no man
anythi ng, i ncl udi ng as a taxpayer.
When the Fed purchases any asset (most of i ts assets consi st of
U.S. 90-day Treasury bi l l s), i t creates the money. But i t buys the
bonds from a favored group of about 20 major banks and secur-
i ti es tradi ng houses that deal i n U.S. securi ti es, and whi ch i n turn
col l ect corn-mi ssi ons on each transacti on. (The process i s descri bed
i n a bookl et sent free of charge by the New York Federal Reserve
Bank, O@n. Market Opendion-s. Order from 33 Li berty Street, New
York, NY 10045.)
On November 21, 1985, one day short of 75 years after that
trai n pul l ed out of the Hoboken stati on, the Bank of New York, a
pri vate commerci al bank, experi enced a computer fai l ure. That
day i t had purchased $22.6 bi l l i on i n U.S. government securi ti es
from other banks and securi ti es deal ers, to be transferred to the
Federal Reserve. The sal es orders came i n, but the bank coul dnt
get the money back out when i ts computer system crashed. The
Fed had to l oan that bank $22.6 bi l l i on over the weekend to cover
the payments i t owed to the other banks and deal ers. The Fed
pai d off the other banks di rectl y. (The bank di d have to pay the
Fed i nterest for the weekend use of the money, whi ch amounted to
several mi l l i on dol l ars. Some computer er r or !)
Protecting Licensed Countajeiters 97
Do you thi nk your l ocal bank coul d get a ti de-me-over l oan of
$22.6 bi l l i on?
Questi on: Why doesnt the Fed buy these bonds di rectl y? An-
swer: because i t woul dnt generate commi ssi ons for the favored 20
banks.
The government al l ows the central bank, l egal l y a pri vate or-
gani zati on, to mani pul ate the money suppl y of the Uni ted States.
The central banks of every nati on possess thi s same prerogati ve.
Why da the governments tol erate i t? Because they al ways Aced
money. The central banks stand as l enders of l ast resort to the
gover nment.
The government pays i nterest on the Treasury b}l s hel d by
the Federal Reserve. I t amounts to about $15 bi l l i on a year these
days. At the end of the year, the Fed sends back about 85% of thi s
money to the U. S. Treasury. I t keeps 15% for handl i ng. (I t pays
for al l check-cl eari ng transacti ons i n the U. S., for exampl e.)
The Feds Decl arati on of I ndependence ~
The Fed has never been audi ted by any agency of the Uni ted
States government. The Feds offi ci al s have resi sted every effort of
any congressman or senator to i mpose an audi t by the Govern-
ment Accounti ng Offi ce (GAO).
The Federal Reserve Board meets to formul ate U.S. eco-
nomi c pol i cy every few months. No i nformati on on the Boards
deci si ons can be rel eased to anyone, i ncl udi ng the Presi dent of the
Uni ted States, for 45 days. The Fed says so, and Congress wont
cal l the Feds bl uff. I t used to be 90 days, but Congress forced the
Fed to speed up the reporti ng date. Fed chai rman Paul Vol cker
protested strongl y. He sai d such a rel ease of i nformati on i nterferes
wi th the deci si on-maki ng abi l i ty of the Fed.
The U.S. money suppl y i s total l y regul ated by deci si ons of the
Board of Governors of the Federal Reserve System. The Fed es-
tabl i shes the reserve requi rements of the commerci al banks
(10%, 5$%, or whatever, dependi ng on where the bank i s l ocated,
and whether i ts a checki ng account or a savi ngs account). The
Fed buys or sel l s U.S. Treasury bi l l s (U.S. government debt cer -
98 Honest Monej
ti fi cates). When the Fed buys, i t i ncreases the money suppl y (mul -
ti pl yi ng because of fracti onal reserves). When i t sel l s, i t defl ates
the money suppl y (shri nki ng by thi s same mul ti pl i cati on
number).
But i t never sel l s for more than a few weeks. I t i s al most
al ways buyi ng. I t i s al most al ways i nfl ati ng.
Thus, the Ameri can busi ness cycl e (%oom and bust) i s con-
trol l ed by a handful of men who are not di rectl y control l ed by the
Presi dent or the Congress, except i n those rare i nstances when the
Legi sl ature and the Executi ve agree compl etel y and press thei r
deci si on on the Fed.
Oh yes, I forgot to menti on that the Fed owns the entire U S. gold -
stock. Legal l y, there i s no Uni ted States gol d stock. There i s onl y
the Feds gol d stock. I t i s stored, not i n Fort Knox, Kentucky, but
at 33 Li berty Street, New York Ci ty, New York. The U.S. gov-
ernment has al ways sol d i ts gol d to the Fed, begi nni ng i n 1914.
Where di d the Fed get the money to buy the gol d? I t created
i t, of course. I n short, i t cot.mtajeited it. But i ts l egal .
What i s real l y choi ce i s that i n 1933, the U. S. government out-
l awed the pri vate ownershi p of gol d. I t bought al l the gol d i t coul d
forci bl y col l ect from the publ i c, payi ng the goi ng pri ce of $20.67
per ounce. Then i t sol d i t to the Fed at $20.67 per ounce. The
next year, the government rai sed the pri ce of gol d to $35 an
ounce. Net profi t to the Fed: 75ZO.
Thi s rai sed the l egal reserves for banks, and tl i e money suppl y
(so-cal l ed M-1) zi pped upward by 30%, 1933 to 1935.
No! you say to yoursel f. I t coul dnt be true. The government
confi scated our gol d i n 1933 so that a pri vate corporati on owned by
the member banks coul d buy i t at a di scount? I mpossi bl e!
AN ri ght, my skepti cal fri end, pi ck up a copy of any Fri day ,
edi ti on of The Wall Street J ournal. Somewhere i n the second secti on
(they al ways shi ft i t around) you wi l l fi nd a tabl e cal l ed Federal
Reserve Data. Check the l i sti ng under Member Bank Reserve
Changes. You wi l l see a quotati on for Gol d Stock. I t never
changes: $11,090,000,000. They dont sel l i t, and i ts kept on the
books at the meani ngl ess arbi trary pri ce of $42.22 per ounce.
Protecting Licensed Count~eiters 99
Whose reserves? Member banks. Who hol ds ti tl e? The Federal
Reserve System. Who owns the Federal Reserve? Member banks.
Thi s l eads me to concl ude that i f youre goi ng to become a
counterfei ter, you mi ght as wel l become an audaci ous one. The
backyard operators ri sk goi ng to jai l . Central bankers dont.
Sure, by l aw, Congress and the Presi dent coul d demand that
the Fed sel l the gol d back at $42.22 per ounce. By l aw. Have you
ever seen anyone propose such a l aw? Has Congress ever brought
i t up for consi derati on si nce 1913? Have you seen anyone di scuss
the wi sdom, or even the possi bi l i ty, of such a l aw, except for
kooks who wri te newsl etters and paperback books? Have you
ever heard of a Ph.D.-hol di ng uni versi ty economi st recommend-
i ng i t? No? Nei ther have I .
Sure, Congress control s the Fed. Legal l y, the Fed must report
to Congress. Just as the Pol i tburo i n the Sovi et Uni on must report
to the Russi an peopl e.
Congress can get i ts gol d back any ti me i t wants to. Just as an
al cohol i c can qui t dri nki ng any ti me he wants to. Just as Ameri can
pri vate ci ti zens can get the-i gol d back from Congress at $42.22 per
ounce (or even at a market pri ce), any ti me we want to.
I f you bel i eve thi s, I ve sti l l got that New York bri dge to sel l
,
you.
The Deposi tors I nsurance
The Federal Deposi t I nsurance Corporati on came i nto exi st-
ence i n 1934, the year after the government confi scated the
publ i cs gol d. The FDI C i s promoted as a government-guaranteed
i nsurance program for pri vate ci ti zens bank accounts. Wel l , as
they say, yes and no.
No, i t i snt an agency of the Federal government. No, the gov-
ernment has never promi sed to bai l i t out i f i t gets swamped wi th
banks that are goi ng bankrupt. No, the Joi nt Resol uti on of Con-
gress i n 1980 to i nsure every bank account up to $100,000 i snt a
-
l aw. The Presi dent never si gned i t, so i t i snt a l aw. There has
never been any such l aw.
Yes, i f the FDI C real l y di d l ook as though i t was about to go
100 Honest Money
bankrupt, ei ther the Fed or Congress woul d al most certai nl y act
to bai l i t out. The Fed woul d pri nt the money, just as i t di d when
the Conti nental I l l i noi s Bank al most went under i n 1983, and i t
had to pump about $4.5 bi l l i on i nto i t. The bankers dont want a
bank run.
Coul d the FDI C bai l out the banks i n a pani c? Of course not.
I t has about $1 on reserve for every $100 i n deposi ts. Thi s reserve
i s i n fact nothi ng except U.S. Treasury bi l l s: government bonds,
i n other words. To get the cash, the FDI C has to cash i n these
bonds and get the U.S. Treasury to pay cash. Two bankruptci es
the si ze of Conti nental I l l i noi s woul d depl ete the FDI CS reserves
to zero, or cl ose to i t.
The FDI C i s an i l l usi on whose purpose i s to cal m down
deposi tors who mi ght otherwi se make runs on weak banks and
crash the economy i nto a depressi on. The FDI C was created to
reduce ri sks for bankers, so that at l east the bi ggest banks dont face
such cri ses. Then the bankers can go out and l oan hundreds of ~
I mi l l i ons of the deposi tors dol l ars to Thi rd Worl d nati ons that
never i ntend to pay back any of the money.
I n a gol d-standard country none exi sts any more the peo-
pl e can put the pressure on banks and the government to stop
i nfl ati ng the currency, si mpl y by goi ng down to the bank or the
Treasu~ and buyi ng gol d at the fi xed, government-defi ned pri ce.
Pretty soon the government has to stop i nfl ati ng. Pretty soon, a
bank whi ch has i ssued too many phony warehouse recei pts gets
threatened by a pani c run.
Then one of two thi ngs happens:
1. The bank (or Treasury) stops creati ng unbacked paper
money, or l oans, or checks. (Recessi on usual l y fol l ows.)
2. The bank (or Treasury) cl oses the wi thdrawal wi ndow. No
more gol d on demand. (I nfl ati on usual l y fol l ows.)
The second event happens at the begi nni ng of every major
war. I t di d i n the Uni ted States i n December of 1861, when the
North i nvaded the South. I t di d duri ng Worl d War I when the
U.S. entered the war that Presi dent Wi l son had promi sed to keep
Protecting Licensed Countqj+eiters 101
us out of i n the el ecti on of 1916. They just change the rul es. No
* more gol d on demand.
Then they i nfl ate the currency to pay for the war wi thout rai s-
i ng visible taxes to cover al l expenses.
Si nce 1933, the Uni ted States hasnt been on a gol d standard
for U.S. ci ti zens, and si nce 1971, i t hasnt been on a gol d standard
for forei gn central banks. Thi s keeps embarrassi ng runs on banks
from occurri ng as often.
But some day, Mexi co or Brazi l or some huge-debt forei gn na-
ti on wi l l defaul t, and the bi ggest banks i n the country wi l l become
offi ci al l y bankrupt. The runs wi l l begi n. Then the Fed wi l l step i n
and create the cash to stem the runs. Fed offi ci al s wi l l i nfl ate thei r
way out of the cri si s. On that day, you had better own gol d, si l ver,
and other si mi l ar non-paper assets. The dol l ar wi l l di e.
Summar y .
As the system of fracti onal reserve banki ng has become uni -
versal throughout the worl d, and as the banks have become more
vul nerabl e to bank runs, governments have changed the rul es i n
order to reduce ri sks for bankers, at l east the bi ggest bankers.
The central banks gai ned the power to establ i sh reserve re-
qui rements: the money that banks must keep on hand agai nst
deposi ts. Then the Fed l owered these reserve requi rements. The
Federal government abol i shed the gol d standard i n 1933. The
FDI C was created as an i l l usi on of government-guaranteed bank
deposi ts i n 1934. The i nternati onal gol d standard was abol i shed i n
1971, to reduce the pressure pl aced on the Fed by forei gn central
banks to gi ve up the gol d i t hol ds, supposedl y i n the name of the
Federal government.
And wi th each reducti on i n ri sk for bi g bankers, they have
made wi l der and ri ski er l oans. Today, the i nternati onal commer-
ci al banki ng system has l oaned over one tri l l i on dol l ars to nati ons
and major debtors. The Eurodol l ar market (a gi ant, unregul ated,
al most zero reserve requi rement debt market) i s over a tri l l i on
dol l ars now. I t was under a bi l l i on dol l ars i n 1959.
Thus, the worl d faces a cri si s: ei ther more debt to i nsol vent
.
102 Honest Mong
debtors, or a defaul t. Ei ther more i nfl ati on to make the l oans, or a
gi ant i nternati on~ bank run. And al l of i t has come about
because the masters of fi nance and the pol i ti ci ans they buy refuse
to honor basi c Bi bl i cal pri nci pl es of debt, honest wei ghts and
measures, and zero mul ti pl e i ndebtedness.
Economi c judgment i s comi ng.
.
,.
10
A BI BLI CAL MONETARY SYSTEM
Owe no one anythi ng . . . (Remans 13 :8a).
I n Chapter Seven of i nheri t the Eati h, another book i n the Bi bl i -
cal Bl uepri nts seri es, I deal wi th debt bondage. The Bi bl e regards
debt as a form of servi tude: The borrower i s servant to ,the
l ender (Proverbs 22:7b).
No monetary system whi ch i s based on debt i s Bi bl i cal l y l egi ti -
mate. Such a system ensl aves the economy to those who set the
monetary rul es of the game. I f money were not debt money, the
Federal Reserve System and other central banks coul d not exi st.
The profi t-seeki ng el i tes that control a nati ons monetary pol i ci es
coul d not exerci se any power at al l . The market woul d determi ne
what i s money and what i snt. The market woul d determi ne what
the prevai hng rates of i nterest shoul d be.
The Bi bl i cal pri nci pl es of money are qui te si mpl e:
1 Standard wei ghts and measures, wi th penal tl es i mposed bv
the ci vi l government agai nst those who tamper wi th the scal es.
2. A prohi bi ti on on al l forms of mul tl pl e i ndebtedness by
banks, meani ng fracti onal reserve banki ng
3. Competi twe entry i nto the si l versmi th, gol dsmi th, or any
other smi th busi ness.
4. No one i s to be compel l ed by l aw to accept any form of
money. (Thi s i s not stated i n the Bi bl e, but i t fol l ows from the fi rst
three pri nci pl es, whi ch are based on vol untari sm.) Thi s means no
l egal tender l aws (compul sory acceptance).
The Bi bl i cal vi ew i s cl ear: the State is not to be tmstea! uxth the tight
to issue mung.
.
103
.
104 Honest Money
Thi s i s a radi cal vi ew of money today. I t woul d have been
equal l y radi cal i n any of the anci ent empi res. They were States
that demanded fbl l soverei gnty. They central i zed power. They
cl ai med to be di vi ne orders. They therefore cl ai med a monopol y
over the i ssui ng of money.
The State that cl ai ms the authori ty to i ssue money, and
especi al l y the sol e ri ght to i ssue money, i s cl ai mi ng the ri ght to
mi suse the peopl es trust. Furthermore, throughout hi story, few
States have been abl e to mai ntai n thi s ri ght wi thout defraudi ng
thei r ci ti zens. I n fact, there i s onl y one exampl e i n human hi story
of l ong-term stabl e money: Byzanti um (the Eastern Chri sti an
Roman Empi re: 800 years of gol d coi ns).
Besi des, the fracti onal reserve bankers al most al ways succeed
i n gai ni ng from the State the power of money creati on. Central
bankers eventual l y repl ace the State as the domi nant i nfl uence
over money. The pol i ti ci ans are too busy buyi ng votes wi th tax
money to pay much attenti on to the subtl eti es of central banki ng.
So State money becomes bankers money eventual l y.
Si l ver or Gol d?
One of the common mi stakes that amateur, sel f-taught
economi sts tend to make i s to i magi ne that the val ue of anyxi ng
i s fi xed. Gol d doesnt change i n val ue; everythi ng changes i n
rel ati on to gol d. I have read too many pamphl ets that say thi ngs
l i ke thi s;
Onl y one thi ng has fi xed val ue: the Bi bl e, the Word of God.
But even i t doesnt have fi xed market val ue.
Peopl e di scover gol d. They al so fi nd cheaper ways to get more
gol d out of ore. Peopl e di scover si l ver, too. Therefore, the suppl y
of gol d changes, and so does the suppl y of si l ver. Demand al so
changes for both metal s. So how coul d they possi bl y not change i n
val ue? They change i n val ue every day on the worl ds commodi ty
markets, and thei r pri ces change i n rel ati on to each other. Any so-
cal l ed 16-to-one rati o between si l ver and gol d i s a fi gment of peo-
pl es i magi nati on; i ts a l egacy of an earl y pri ce control of the U.S.
government i n the l ate 1700s a l egacy that cal l ed Greshams l aw
A Biblica[MonetaV System 105
i nto effect, al ternatel y dri vi ng out of ci rcul ati on ei ther si l ver or
gol d, dependi ng on whi ch one was arti fi ci al l y underval ued by the
Federal government at any poi nt i n U.S. hi story.
The probl em i s, peopl e thi nk there has to be onl y one
supreme money, defi ned i n val ue by the government. Yet we
vol untari l y use paper money, checks, credi t cards, and token
coi ns: penni es, ni ckel s, di mes, etc. We used to use si l ver coi ns,
and before that, gol d coi ns. We once used pri vate banknotes, be-
fore the Federal government started taxi ng them, and the banks
swi tched to checks (untaxed).
Why do we thi nk we need one supreme form of Stute-dg%ed
money? The onl y State-defi ned form of money that i s l egi ti mate i s
tax money. The government has the authori ty to determi ne what
i t wi l l accept as paymentfi om among the uanous @pes ofpnvate~ pro-
duced moneys that become established through market competition. But the
State cannot be trusted to establ i sh i ts own money. I t al ways
betrays thi s trust. I t counterfei ts i ts own currency. I t i nfl ates.
The U.S. Consti tuti on speci fi es that gol d and si l ver al one may
be i ssued by the state governments as l egal tender currency (AI -&
cl e I , Secti on 10). The Foundi ng Fathers cl earl y recogni zed the
l i mi ts that metal moneys pl ace on governments. Unfortunatel y,
they negl ected to pl ace the U.S. government under a si mi l ar re-
stri cti on. The fi rst great pol i ti cal battl e of the Federal government
after the Consti tuti on was over the establ i shment of a pri vatel y
owned central bank, whi ch Al exander Hami l ton wanted and
Jefferson opposed. Hami l ton won, and the U.S. began i ts l ong,
though i ntermi ttent, hi story of fracti onal reserve central banki ng.
The i mportant poi nt i s that the State must not be al l owed to
establ i sh any fi xed pri ce between any two forms of money. I am
not speaki ng here of warehouse recei pts that functi on as a substi-
tute for metal money. I f a warehouse recei pt promi ses to pay one
ounce of gol d, i t must have one ounce of gol d i n reserve. I am
speaki ng here of the exchange pri ce between two market-created
moneys: gol d vs. si l ver, copper vs. si l ver, dol l ars vs. yen, etc. The ,
government must not enforce pri ce control s on anythi ng, i ncl ud-
i ng money.
106 Honest Mong
To fi x a pri ce between si l ver and gol d bri ngs Greshams l aw
i nto operati on. The arti fi ci al l y overval ued currency wi l l dri ve out
of ci rcul ati on the arti fi ci al l y underval ued currency. Gol d and si l -
ver arent i mmune from thi s l aw. of pri ce-control l ed moneys. Gov-
ernments, i ncl udi ng the U.S. government, have tri ed to di scover
the pri ce between gol d and si l ver, and i nvari abl y thi s has l ed to
the di sappearance of one of the two metal s. One of them wi l l be
arti fi ci al l y underval ued i n compari son to what the free market de-
termi nes. Fi xi ng the exchange val ue between two forms of money
i s just another fi -ui tl ess exampl e of government pri ce control s.
Never forget, theres no such thi ng as a pri ce control . There
are onl y Peopl e contro/ s. Pri ce control s i n fact restri ct what peopl e
are al l owed to do. I t i nterferes wi th thei r freedom.
Si mi l arl y, the government i s not to set up pri ce control s over
i nterest rates. I nterest rate cei l i ngs restri ct the vol untary agree-
ments between borrowers and l enders. The State shoul d enforce
al l moral , l egal contracts, and there i s nothi ng i n the Bi bl e that i n-
di cates that any parti cul ar rate of i nterest i s i mmoral .
The Gol d Standard
The gol d standard i s not theoretically preferabl e to any other
honest money standard. The onl y standard that matters i s the no
fractional resemes stanalwd, coupl ed wi th the nofabe bakmces standard.
Gol d historically has been one of the two most preferred stand-
ards, al ong wi th si l ver. I t has al l the characteri sti cs of money: di -
vi si bi l i ty, transportabi l i ty, durabi l i ty, recogni zabi l i ty, and scarci ty
(hi gh val ue i n rel ati on to wei ght and vol ume). I t has been a
money standard.
Most i mportant, gol d i s a rare metal . I t i s therefore expensi ve
to mi ne. Not much new gol d comes i nto ci rcul ati on every year.
Thi s keeps i ts pri ce rel ati vel y stabl e but normal l y appreci ati ng i n
rel ati on to mass-produced goods and servi ces. Pri ces of goods de-
nomi nated i n gol d shoul d normal l y be sl owl y fal l i ng i n a produc-
ti ve, growi ng economy.
Governments shoul d probabl y col l ect taxes i n gol d. Gol d i s
conveni ent. I ncome i n other moneys can be computed (wi th
A BtblicalMonetary System 107
market pri ces day by day, or month by month) i n terms of gol d.
Governments shoul d pay i n gol d, too.
I f the State begi ns to i ssue tax coi ns, i t has begun that sl ow,
gri m process of recapturi ng soverei gnty over money. Better for
the State si mpl y to speci fy so many ounces of pure gol d, and al l ow
the taxpayer to sel ect the form. I f some fi rm i s cheati ng, the gov- ,
ernment then has a hi gh i ncenti ve to prosecute. I ts good for the
government to prosecute those who vi ol ate the requi rement of
honest wei ghts and measures.-
For the State to say that onl y gol d shoul d ci rcul ate i s a @ri c-
ti on on i ndi vi dual l i berty. For the State to say that onl y gol d i s
l egal tender (a l egal l y mandatory form of money) i s al so a vi ol a-
ti on of i ndi vi dual l i berty. Let peopl e deci de how and what they
use as money, provi ded that no fracti onal reserves are i nvol ved.
A tradi ti onal gol d standard requi res the State to defi ne i ts offi -
ci al currency i n terms of wei ght and fi neness of gol d, and then to
buy and sel l gol d at thi s defi ned pri ce. Thi s gets the State i nto the
money busi ness. There i s no warrant for thi s practi ce i n the hi s-
tory of Ol d Testament I srael . The New Testament exampl e i s the
Roman Empi re not a moral l y upl i fti ng exampl e.
A tradi ti onal gol d standard i s better than a fi at (unbacked)
money standard, but i t transfers too much soverei gnty to the
State. I t al so al l ows the State to change the rul es at i ts own con-
veni ence, that i s, to redefi ne the currency uni t (usual l y by de-
fraudi ng present hol ders of the paper currency: l ess gol d per cur-
rency uni t), or to cease al l owi ng ci ti zens to make wi thdrawal s.
Better to have the State pol i ci ng pri vate i ssuers of gol d and ware-
house recei pts to gol d, and then to col l ect i ts taxes i n a speci fi ed
form of pri vate currency. Under such an arrangement, the pol i ti -
, ci ans have a greater i ncenti ve to pol i ce the States source of tax
revenues than they do to pol i ce the States own monetary practi ces.
What freedom produces i s parallel standardr. Vari ous forms of
money compete wi th each other. The State i s to establ i sh no fi xed,
bureaucrati c pri ce between moneys. The deci si ons of free men
can then determi ne whi ch form or forms of money become most
acceptabl e. There i s nothi ng magi c about money. I t i s si mpl y the
,
108 Honest Mang
most marketubk commodity. The market establ i shes thi s, not the coer-
ci ve power of the State. Mong is the product of voluntary human action,
not of bureaucratic daign. Money i s the product of freedom, and i t
-
rei nforces freedom.
Banki ng
What woul d 1009I o reserve banki ng l ook l i ke? We cannot be
sure. Busi nessmen are creati ve. They wi l l fi nd ways to cheat, too.
But we can sketch the basi c outl i nes.
Most i mportant, there woul d be no state or Federal charters ~
for banks. The State-granted monopol y of money creati on woul d
end. Do-i t-yoursel f banki ng woul d become the model . Onl y one
l egal rul e woul d restri ct banki ng: no fracti onal reserves.
What woul d thi s mean? Fi rst, every deposi tor wi l l have
choi ces. Fi rst, he can deposi t hi s money i n a bank for safekeepi ng,
and pay a fee for the servi ce. Presumabl y, thi s woul d be an exten- .
si on of the safety deposi t box functi on. The bank woul d segregate
these accounts and not al l ow the money
-
to be l oaned out. Not
onl y woul d no i nterest be pai d on these accounts, but a fee woul d
al so be i mposed. A free servi ce i ndi cates theft somewhere i n-the
system: a vi ol ati on of the 1007o reserve rul e. The onl y way for the
bank to profi t on such deposi ts woul d be through chargi ng the
user for servi ces rendered. An obvi ous servi ce woul d be check-
wri ti ng pri vi l eges.
Second, there woul d be another type of deposi t from whi ch
l oans coul d be made. These l oans woul d be of a speci fi ed peri od at
an agreed-upon rate of i nterest. The deposi tor mi ght be gi ven a
choi ce: a hi gher rate of i nterest, but wi thout the banks guarantee-
i ng repayment from the l ender, or a bank guarantee of repay-
ment, at a l ower rate of i nterest.
The l oans woul d be true l oans. There woul d be no provi si on
for earl y wi thdrawal by the deposi tor. The l oaned-out money i s
gone. Two peopl e cannot wri te checks on the same deposi t,
deposi tor and borrower. I f the deposi tor needed money before the
l oan came due, he coul d borrow the money from the bank, usi ng
hi s note as col l ateral .
A BzblacalMoneta~ System 109
Both si des of the l oan woul d be of equal ti me l ength. Thi s way,
bankers woul d not be abl e to l end l ong and %orrow short. They
.
woul d not be abl e to l oan out money for l ong peri ods, yet al so
guarantee to return deposi ts on demand. Thi s i s what corrupt
warehouse owners do when they i ssue more recei pts for gol d than
they have gol d on reserve, and then use gol d deposi ted by one
- person to pay off the gol d wi thdrawer. Every transacti on woul d be
ti me-speci fi c. There woul d be no l ong-term l oans wi thout l ong-
term l enders.
Thi s ,woul d protect the banki ng system from bank runs. I t
woul d al so protect the communi ty from counterfei t money bei ng
created by fracti onal reserve bankers.
Government bank exami ners woul d check the banks i n the
same way that they check scal es of retai l sel l ers. They woul d see to
i t that every l oan had a corresponding deposit. Al though the bank woul d
be al l owed to pool l oans of the same l ength of maturi ty (i n order to
decrease the ri sk to a deposi tor that hi s debtor mi ght defaul t on
the l oan), no lending deposi tor woul d have cheek-wri ti ng pri vi l eges.
Check-wri ti ng pri vi l eges woul d be offered onl y to those peopl e who
put thei r money i n a fee-for-servi ce safekeepi ng account.
Thi s may sound confusi ng, but i ts not nearl y so confusi ng as
central banki ng, fracti onal reserve requi rements, - the moneti za-
ti on of debt, and other horrors of the modern banki ng system.
A 100% reserve banki ng program i s si mpl e i n pri nci pl e: some-
thi ng for somethi ng, and nothi ng for nothi ng. No free anythi ng.
No i mpossi bl e promi ses: You can wri te checks at any ti me
agai nst money that we al ready l oaned out, so that we can pay you
i nterest. When you are promi sed the use of money that has been
l oaned out, you know youre getting conned. When they al so pay you
i nterest on the money you can use any ti me, you real ~ know
youre getti ng conned.
I f Bl ondi e comes to Dagwood and asks to borrow money from
hi m so that she can buy some new hats, but she al so promi ses hi m
that he can have hi s money back at any ti me, pl us shel l pay hi m
i nterest on i t, he woul d probabl y know better. Even Dagwood
i snt that stupi d. But hel l deposi t hi s money i n an i nterest-payi ng
110 Honest Mong
NOW account. Why? Because the bank. promi ses hi m that there
are 5,000 other Dagwoods just as stupi d as he i s, so they offset
each other, and the deal wi l l work.
Just as i t worked i n 1930-33, when 6,000 banks fai l ed i n the
U.S. Or just as i t worked i n the mass i nfl ati on of Germany i n
1923, when a dol l ar at the end bought el even tnllion German
marks on the bl ack market.
Banks and Domi ni on
The Bi bl e says to owe no man anythi ng (Remans 13:8). Thi s
i s a good rul e for Chri sti ans. But i t al so says that the si gn of a
God-prospered nati on i s that peopl e wi l l l oan to forei gners,
thereby bri ngi ng them under some degree of submi ssi on.
The Hebrews were al l owed to l oan money ~o strangers i n the
l and and forei gners, and sti l l col l ect payment beyond the seventh
year. Why? Because debt i s a means to bri ng other peopl e under
your authori ty. The Bi bl e teaches that evi l peopl e shoul d be under
the authori ty of Gods l aw, as admi ni stered by God% peopl e. Ex-
tendi ng l oans to others was a means of domi ni on.
I n ti mes of Gods bl essi ngs, I srael was to l end abroad. The
Lord wi l l open to you Hi s good treasure, the heavens, to gi ve the
rai n to your l and i n i ts season, and to bl ess al l the work of your
hand. You shal l l end to many nati ons, but you shal l not borrov/
(Deuteronomy 28:12).
I n ti mes of Gods cursi ngs, I srael woul d fal l i nto debt to
forei gners: The al i en who i s among you shal l ri se hi gher and
hi gher above you, and you shal l come ti own l ower and l ower. He
shal l l end to you, but you shal l not l end to hi m; he shal l be the
head, and you shal l be the tai l (Deuteronomy 28:43-44).
The pattern i s cl ear: extendi ng credi t i s a tool of oppressi on i n
the hands of evi l men, but extendi ng credi t i s a tool of domi ni on
i n the hands of Gods peopl e. Gods ki ngdom i s to be extended
over ethi cal rebel s. Ethi cal rebel s are snared and brought under
Gods authori ty by means of debt.
But Chri sti ans must not be fool i sh. They must not l oan to
those unwi l l i ng to repay. That woul d trap them. Thei r represen-
A Biblical it40netaV System
111
tati ves, profi t-seeki ng bankers, wi l l be more careful i n sel ecti ng
credi t-worthy bondsmen i f the State and State-chartered banki ng
monopol i es do not i nsure bad banks at the expense of the taxpayers.
Chri sti ans shoul d be wi l l i ng to deposi t money i n 100% reserve
banks, thereby al l owi ng non-Chri sti ans to l earn servi ce through
debt bondage. Li ke apprenti ce, debt-burdened pagans can l earn
what i t means to work hard for a demandi ng taskmaster. They
wi l l thi nk twi ce before goi ng i nto debt agai n.
(
Summary
The Bi bl i cal case for freedom i n money i s the same as the Bi b-
hcal case for freedom i n general . The State i s to prohi bi t fraud
and vi ol ence. The rest i s up to i ndi vi dual s.
Fracti onal reserve banki ng i s fraudul ent. I t i s a vi ol ati on of,the
Bi bl i cal pri nci pl e of honest wei ghts and measures. Debasi ng .
metal coi nage i s fraudul ent. I t i s al so a vi ol ati on of the pri nci pl e of
honest wei ghts and measures. Government-i ssued money i s a vi o-
l ati on of consumer soverei gnty i n money. I t i s a power that the
State i nvari abl y vi ol ates eventual l y.
.
Wi thi n these general gui del i nes, anythi ng goes. Si l ver
money, gol d money, pl ati num money, sal t, wampum, anythi ng.
Let the buyer deci de, and l et the buyer beware. Contracts shoul d
be wri tten i n any way chosen by the parti es i nvol ved, i n whatever
form of currency they agree to use.
The devel opment of a Bi bl i cal monetary system i s based bn
these concepts:
1.
2.
3.
4.
l aw.
5.
6.
7.
The borrower i s servant to the l ender.
Debt i s to be avoi ded.
Money must not be based on debt.
Honest wei ghts and measures are to be enforced by State
Mul ti pl e i ndebtedness i s fraudul ent, and therefore i l l egal .
Fracti onal reserve banki ng revol ves mul ti pl e i ndebtedness.
No one shoul d be compel l ed to accept any form of currency
(no l egal tender l aws).
8. The State can l egi ti matel y establ i sh the form of pnuate~
/
112 \ Honest Mong
issued curren~ i t wi l l accept as payment of taxes.
9. The bi g banks eventual l y capture thecontrol over govern-
ment monet-&y pol i cy, so get government out of the money busi -
ness.
10. There i s no fi xed val ue of gol d or si l ver.
11. The State must not fi x the pri ce of anythi ng, i ncl udi ng the
exchange rati os between moneys.
12. Many moneys can exi st i n an economy.
13. A gol d standard has been popul ar i n hi story.
14. Gol d and si l ver are expensi ve to mi qe; hence, they mai n-
tai n thei r val ue rel ati vel y wel l .
15. Tradi ti onal gol d standards are neverthel ess State standards.
16. Freedom of money l eads to paral l el standards: no fi xed
pri ce between any two moneys.
17. Bank char ter s i nter fer e wi th fr eedom.
18. For every l oan there must. be a deposi t of correspondi ng
matur i ty.
19. Banki ng can become a means of Chri sti an domi ni on.
20. Chri sti ans extend credi t; non-Chri sti ans borrow.
,\, -
CONCLUSI ON
Di verse wei ghts are an abomi nati on to the Lord, And a fal se
bal ance i s not good (Proverbs 20:23).
The questi on of honest money i s real l y the questi on of the nec-
essary condi ti ons for human freedom. Honest money i s the prod-
uct of honest peopl e who l i ve and act wi thi n the fFamework of a
publ i c l aw-order that puni shes fraud and vi ol ence. Honest money
requi res honest l aw and peopl e who are sel f-di sci pl i ned. Let the
peopl e have what they want, just so l ong as i t i s moral l y val i d, ~
non-fraudul ent, and non-coerci ve.
Defi ni ng fraud and coerci on i s a conti nui ng task of soci al
phi l osophers. Theol ogi ans used to work at i t, too, but for the l ast
century or more, they have tended to avoi d the di ffi cul ti es of thi s
task. Thi s i s one reason why Chri sti ani ty has fal l en i nto the hi s-
tori cal shadows.
I n the past, we have seen bri ef peri ods i n whi ch rel ati vel y hon-
est money has exi sted. The peri od of the cl assi c gol d standard,
from about 1814 unti l the outbreak of Worl d War I i n 1914, i s the
best exampl e. The whol esal e pri ce I evel .i n Engl and was about the
same i n 1914 as i n 1815 a remarkabl e peri od of pri ce stabi l i ty.
Whi l e monetary systems were more honest than today duri ng
earl i er peri ods, they were not Bi bl i cal . There was fracti onal
reserve banki ng. Al so, Greshams l aw operated because govern-
ments establ i shed fi xed pri ces between gol d and si l ver, so bad
money drove out good money. But at l east the bad money the
arti fi ci al l y overval ued money was ei ther gol d or si l ver, and i t
was not easy to mi ne ei ther one. Geol ogi cal l i mi ts were therefore
113
114 Honest Mong
pl aced on the rate of monetary expansi on. Geol ogi cal l i mi ts were
therefore pl aced on monetary fraud. Governments and banks
tampered wi th monetary wei ghts and measures on a mi nor scal e
onl y.
What does the average person need to remember i n order to
understand the fundamental pri nci pl es of Bi bl i cal money? Not
much.
1. We shoul dnt expect somethi ng for nothi ng, such as the de-
posi tors wi thdrawal on demti d of l oaned-out funds, or counterfei t
money maki ng ever yone r i cher .
2. The State shoul dnt i nterfere wi th pri vate non-coerci ve
deci si ons (contracts).
3. I t i s cheaper to pri nt paper money than I t i s to mi ne metal s.
4. Money i snt money unl ess peopl e expect other peopl e to ac-
cept i t m trade l ater on, meani ng:
-5. Money requi res contzm@ of aaeptance over ti me.
6. Debasi ng money i s a form of tamperi ng wi th wei ghts and
measur es.
7. Debasi ng money reduces i ts val ue i n trade.
8. Debasi ng money therefore reduces the weal th of peopl e who
hol d money.
9. Warehouse recei pts shoul d be backed 100% at al l ti mes by
whatever i s promi sed by the recei pt.
There are other subtl e di sti ncti ons that are useful , but these
are the basi cs. Any soci ety whi ch enforces ci vi l l aws agai nst any
vi ol ati on of fi xed, defi ned wei ghts and measures, and any vi ol a-
ti on of the rul e agai nst mul ti pl e i ndebtedness (unbacked ware-
house recei pts) wi l l have honest money.
The probl em comes when the State, as the enforcer, gets i nto
the busi ness of stampi ng i ts mark on certi fi ed money. Thi s proc-
ess soon becomes money creati on, then a monopol y of money cre-
ati on, then debasi ng the money, and fi nal l y el i ti st pri vate control
over government money by central bankers. We have seen thi s
agai n and agai n. The control over government money by pri -
vate central bankers i s a uni versal feature of modern economi es.
So i s unstabl e money.
Conclusion 115
Monopol y
Men cannot be trusted to possess monopol i sti c power. No
human agency can safel y be trusted wi th absol ute power. An ab-
sol ute monopol y over anythi ng i s excl usi vel y Gods prerogati ve,
for He al one has an absol ute monopol y over everythi ng. Al l of
mens possessi ons and powers are to be l i mi ted.
The so-cal l ed natural monopol y i s very nearl y mythi cal .
Very few of them exi st. Water i n a desert mi ght be one, but most
peopl e choose not to l i ve i n deserts or wal k through them, so such
a monopol y i s not economi cal l y rel evant. Al most al l economi cal l y
rel evant monopol i es are created by, granted by, and sustai ned by
the i nsti tuti on that possesses Gods del egated monopol y of vi o-
l ence: the ci vi l government. Thi s i s why i t i s necessary to have
numerous competi ng ci vi l governments. The Tower of Babel was
the i ncarnati on of i nsti tuti onal evi l (Genesi s 11).
The monopol y over money i s perhaps the most dangerous of
al l stri ctl y economi c monopol i es. Money i s the common l i nk i n
al most al l economi c transacti ons. When monopol i sts tamper wi th
the monetary uni t, they send i nformati on si gnal s to every parti ci -
pant i n the market. When these si gnal s are not created by compe-
ti ti ve market forces, they mi si nform buyers and sel l ers, savers and
borrowers. Thi s mi si nformati on can resul t i n economi c cri ses:
mass i nfl ati on or di sgui sed i nfl ati on (pri ce control s), ati d then
depr essi on.
There i s no known way to protect peopl e from erroneous mon-
etary i nformati on i f money i s control l ed by the State or by any
agency l i censed by the State. Onl y competi ti ve market forces can
produce accurate, rel i abl e i nformati on on a consi stent basi s, for
competi ti on wi l l put economi c pressure on the producers of fal se
and mi sl eadi ng i nformati on. Peopl e who sel l better i nformati on
appear on the market, and the mi si nformers start to experi ence
l osses.
Thus, what i s needed i s a market-produced monetary system.
Hi stori cal l y, gol d and si l ver have been the peopl es choi ce. Thi s
coul d change i n the future. But i t i s di ffi cul t to mass-produce gol d
116 Honest Money
and si l ver. I t i s i mpossi bl e to have mass i nfl ati on wi th a currency
based on any metal . I t costs too much to di g metal out of the
ground.
I n contrast, paper and i nk are cheap. So are bl i ps on comput-
ers. I f somedi ng i s cheap to produce, you fi nd that peopl e try to
make profi ts by mass pr~duci ng i t. Thi s i s as true of money as i t i s
of hand-hel d el ectroni c cal cul ators. But addi ti onal hand-hel d el ec-
troni c cal cul ators consti tute an economi c asset. Addi ti onal money
consti tutes a redi stri buti on of assets, where the i gnorant and vul -
ner abl e are most l i kel y to be harmed.
Not Qui te Honest Money
I t i s not my job or your job to tel l other peopl e what money
they ought to use. I t i s not the States job, ei ther.
I t i s the States job to enforce honest wei ghts and measures,
and al so to prohi bi t the i ssui ng of warehouse recei pts that are not
i mmedi atel y backed by whatever i s promi sed by the recei pt. I f the
recei pt promi ses to redeem the recei pt on demand, there must be
an asset on reserve for every such recei pt.
I f the State does these two tasks, soci ety wi l l have honest
money. I f i t doesnt, soci ety can have onl y semi -honest money. A
tradi ti onal gol d standard i s an exampl e of semi -honest money:
fracti onal reserve bati l ng wi th ful l redempti on of gol d coi ns on
demand. Thi s al so i nvol ves the govemmen~s pl edge to buy or sel l
gol d coi ns at a speci i i ed (defi ni ti onal ) pri ce. But bankers cheat,
and governments cheat, and the tradi ti onal gol d standard sur-
vi ved for onl y about a hundred years, 1815-1914. I
The one monetary power that the State l egi ti matel y possesses
i s i ts ri ght to speci fy a form of payment for taxati on purposes. To
that extent, the State can i nfl uence the sel ecti on of monetary
uni ts. But the State does not want to be pai d i n debased money, so
i t becomes a watchdog for the publ i c because of i ts own sel f-
i nterest i n protecti ng i tsel f from unscrupul ous counterfei ters.
For decades, smal l conservati ve groups have campai gned for a
return to the tradi ti onal gol d standard. These campai gns have
been about as successful as promoti ng a nati onal treasure hunt for
co?l ch.mo?l 117
pots of gol d at the end of rai nbows. They have been futi l e. They
are the equi val ent of campai gns to get prayer back i nto the publ i c
school s. They mi ss the poi nt.
What i s the poi nt? Si mpl e: a government-i mposed gol d stand-
ard i s not a l ong-term answer. I t di dnt work wel l i n the past, and
i t wont work wel l i n the future. I t i s sti l l a gowrmn.ent standard.
Our pol i ti cal goal shoul d not be a government-i mposed gol d
standard; i t shoul d be the abol i ti on of fracti onal reserve banki ng
and the enforcement of fi xed wei ghts and measures. The goal i s to
remove the monopol y of money from the ci vi l government and i ts
l i censed agents. Nothi ng el se wi l l work to restore honest money.
Every other recommendati on i s a hal f-way measure. Why devote
our l i ves to hal f-way measures?
Campai gni ng for a government-i mposed gol d standard i s i m-
practi cal anyway. Such a campai gn faces tremendous obstacl es.
Fi rst, even the ti ny handful of professi onal economi sts who favor
the gol d standard do not agree about whi ch ki nd of gol d standard
shoul d be i mposed. There are several competi ng versi ons. The
better versi ons have fewer promoters.
Second, there i s no agreement among the advocates concern-
i ng the si ngl e most i mportant practi cal i ssue: What pri ce shoul d
the government set as the offi ci al , permanent pri ce of gol d? I f we
adopt a gol d pri ce i n terms of todays money suppl y and todays
pri ces, how can we expect the offi ci al pri ce of gol d to be economi c-
al l y rati onal when the i nfl ati on stops, banks col l apse, and pri ces
drop? Wi l l the government have to l ower the offi ci al pri ce l ater on
that i s, wi l l i t have to redefi ne the currency uni t repeatedl y?
What ki nd of fi xed gol d standard i s that? But i f the money pri ce of
gol d i s kept at the ori gi nal l evel , i t wi l l be hi gh and ri si ng i n pur-
chasi ng power compared to al l other goods. Everyone wi l l then go
to the Treasury to sel l gol d to the government i n exchange for
paper money, thereby removi ng go)d from ci rcul ati on and creat-
i ng a huge hoard of gol d i n the governments warehouse. I s thi s
wi se, pl aci ng the nati ons gol d suppl y i n the care of the State? I snt
thi s what got us i n troubl e i n the past?
Thi rd, there i s no pol i ti cal consti tuency for any ki nd of gol d
118 Honest Money
standard. The tqpi c i s too confusi ng, and the effects of di shonest
government money are not understood by the average voter. The
voters are uni nterested. I t woul d take a fo~une to educate them,
and even a fortune woul d probabl y not be suffi ci ent.
.
A New Consti tuency
Si nce there i s vi rtual l y no hope of getti ng even a hal f-hearted
gol d standard back i nto operati on, why waste any further
resources i n promoti ng one? Why not assume that there wi l l be a
new consti tuency that wi l l accept and promote a true free market
Bi bl i cal money system? Why not ai m our appeal at thi s comi ng
consti tuency? Why not promote the best al ternati ve rather than a
compromi se that has fai l ed i n the past to produce the monetary
stabi l i ty we want?
How wi l l thi s new consti tuency come i nto exi stence? I woul d
suggest the fol l owi ng scenari o. Fi rst, the bankers and the pol i ti -
ci ans wi l l conti nue to try to make the present system work. Thi s
wi l l make the present system worse. Second, there wi l l be a col -
I apse i n stages: rnfl ati on, then mass i nfl ati on, then pri ce control s,
then tyranny, and fi nal l y a worl dwi de defl ati onary depressi on. At
that poi nt, there wi l l be new demand from the voters for answers.
Thi rd and thi s i s my hope and my prayer peopl e wi l l at
l ast deci de that they have had enough moral and l egal com-
promi se. They wi l l at l ast deci de to adopt a si mpl e system of
honest money, al ong wi th competi ti ve free market pri nci pl es
throughout the economy. They wi l l stop steal i ng from each other.
They wi l l stop tryi ng to get somethi ng for nothi ng pol i ti cal l y.
I f voters dont experi ence thi s sort of repentance, then we wi l l
go . through the same destructi ve busi ness cycl es agai n:
i nfl ati onary boom and defl ati onary bust. We wi l l be l i ke the fool s
descri bed by Peter: But i t has happened to them accordi ng to the
true proverb: A dog returns to hi s own vomi t; and, a sow, havi ng
washed, to her wal l owi ng i n the mi re (2 Peter 2:22).
There i s al ways one other possi bi l i ty. Voters wi l l change thei r
mi nds and demand that pol i ti ci ans change thei r ways bgfore some
gri m i nfl ati onary-defl ati onary scenari o takes,pl ace. I thi nk thi s i s
Conclusion 119
unl i kel y, but the possi bi l i ty does exi st. Voters coul d l ook at the
arguments of thi s book and accept them. They coul d see that
somethi ng pri nci pl ed i s the onl y way out. They woul d then bi te
the defl ati onary bul l et and not l et l oose unti l we have honest
money. Thi s seems l i ke a remote possi bi l i ty, but we can hope, and
we can pray. Better to go through a pri nci pl ed economi c wri nger
now and thereby avoi d the comi ng unpri nci pl ed wri nger that i s
far, far worse i n i ts effects.
We have never had honest money. We have al so never had a
soci ety ful l y commi tted to Bi bl i cal l aw. When we do, we wi l l have
at l east an opportuni ty to attai n honest money. As the ol d adver-
ti sement sai d: Accept no substi tutes!
Part II
RECONSTRUCTION
11
A PROGRAM OF MONETARY REFORM
I f My peopl e who are cal l ed by My name wi l l humbl e them-
sel ves, and pray and seek My face, and turn from thei r wi cked
ways, then I wdl hear from heaven, and wi l l forgi ve thei r si n and
heal thei r l and (2 Chroni cl es 7.14).
What I propose here can be done. I t wont be done unl ess
there i s a major revi val , one whi ch i s better i nformed than any we
have seen i n the past, but i t can be done. I assure you, however, i t
cant be done at zero co~t. Thats why i t wont be done wi thout a
spi ri tual revi val .
I m not a pol i ti cal revol uti onary. I t i snt my i ntenti on to pro-
mote a program of reform that wdl l ead to a pol i ti cal revol uti on.
On the other hand, I m unquesti onabl y a theol ogi cal , soci al ,
and economi c revol uti onary. I thi nk that the enti re ci vi l i zati on of
the West needs to be reconstructed, from bottom to top (though
not from top to bottom). I thi nk the rest of the worl d needs the
same thi ng. But because I m not a pol i ti cal revol uti onary, I
bel i eve that thi s transformati on must take pl ace i n the hearts and
mi nds of Chri sti ans before i t can be successfi -dl y preached to the
worl d. I f Chri sti ans refuse to honor thei r God, why shoul d they
expect the God-hati ng pagan humani st worl d to honor Hi m?
Yet i t mi ght happen just thi s way. The pagans mi ght repent
before the Chri sti ans do. The peopl e of Ni neveh repented, and
God gave I srael i nto thei r hands a generati on or two l ater. The
mi ni stry of Jonah to Ni neveh was successful ; the mi ni stry of the
other prophets to I srael wasnt. -
I t i s si gni fi cant that Jonah preached to the peopl e before he
123
124 Honest Mong
preached to the ki ng. So the peopl e M Ni neveh bel i eved God,
procl ai med a fast, and put on sackcl oth, from the greatest to the
l east of them. Then word came to the ki ng of Ni neveh; and he
arose from hi s throne and l ai d asi de hi s robe, covered hi msel f wi th
sackcl oth and sat i n ashes (Jonah 3:5-6),
The ki ng wi sel y asked: Who can tel l i f God wi l l tu~ and
rel ent, and turn away from Hi s fi erce anger, so that we may not
peri sh? Then God saw thei r works, that they turned fmm thei r
evi l way; and God rel ented from the di saster that He had sai d that
He woul d bri ngupon them, and He di d not do i t (3:9-10).
Where We Want to End Up
The economi c poi nt of vi ew takes ti me to devel op. Most hu-
mani st economi sts have yet to devel op i t, so dont feel di scour-
aged. I t takes ti me.
The fundamental pri nci pl es of Bi bl e monetary theory are si m-
pl e enough:
1. Standard wei ghts and measures, wi th penal ti es i mposed by
the ci vi l government agai nst those who tamper wi th the scal es.
2. A prohi bi ti on on al l forms of mul ti pl e i ndebtedness by
banks, meani ng fracti onal reserve banki ng. ~
3. Competi ti ve entry i nto the si l versmi th, gol dsmi th, or any
other smi th busi ness.
4. No one i s to be compel l ed by l aw to accept any form of
money. (Thi s i s not stated i n the Bi bl e, but i t fol l ows from the fi rst
three pri nci pl es that are based on vol untari sm.) Thi s means no
l egal tender l aws (compul sory acceptance).
I n short, the Bi bl e decl ares freedom under Gods moral l aw. I t
decl ares freedom without)aud orphysikal coercion. Men may do pretty
much what they pl ease economi cal l y, so l ong as they avoi d fraud
and physi czd vi ol ence. There are onl y a few prohi bi ti ons i n the
Bi bl e agai nst vol untary exchange; these refer to i nherentl y i m-
moral transacti ons: (My favori te exampl e of a cri me whi ch a vast
majori ty of ci ti zens i mmedi atel y recogni ze as i mmoral amd i l l egal
i s a homosexual who gi ves heroi n to an ei ght-year-ol d boy i n ex-
change for sex. I f you thi nk the State has nothi ng to say about thi s
A Program oJ Monetary Rejorm 125
vol untary transacti on, or vi cti ml ess cri me, you are a real l y ser-
i om phi l osophi cal l i bertari an!)
Thus, i n monetary affai rs, we shoul d seek to avoi d a monop-
ol y over money, i ncl udi ng the States monopol y over money. We
al so shoul d oppose the States transfer of a monopol y over money
to a central bank that i s owned and operated by representati ves of
pri vate commerci al banks.
The Traditional Gold StandaTd
Thus, our l ong-term goal shoul d not be wi th the return to a
tradi ti onal gol d standard, i n whi ch the State i ssues both gol d coi ns
and paper money, promi si ng to buy and sel l gol d at a fi xed pri ce
for paper money i ssued by the State.
I t has been a major mi stake of conservati ve economi sts to
thi nk that a tradi ti onal gol d standard i s anythi ng more than a
temporary stop-gap. I t i s easy for the State to destroy the gol d
standard by i ssui ng ei ther of these announcements:
1. Henceforth, the new pri ce of gol d (new defi ni ti on of the na-
ti ons currency uni t) i s [such and such more per ounce]. Thi s
means an i ncrease i n the pri ce of gol d an overni ght depreci ati on
of the monetary uni t.
2. Henceforth, the government no l onger wi l l redeem i ts
paper notes wi th gol d on demand.?
The second edi ct ends the so-cal l ed gol d standard. I n short,
the tradi ti onal gol d standard i s i n fact a PaPer standard: the paper ,
of government promi ses. Hi stori cal l y, these promi ses have not
been worth the paper theyre wri tten on.
The Fi rst Target: Central Banki ng
The goal i s to el i mi nate al l central banki ng, meani ng an i n-
sti tuti on opsrated by and for fracti onal reserve bankers, but
granted a monopol y over money by the State.
Obvi ousl y, thi s i s today a utopi an dream. But, coul d we begi n
a program of sal ami -sl i ci ng a steady cutti ng away at the Federal
Reserve System? I thi nk we can. Step by step, we shoul d pressure
126 Honest Money
the pol i ti ci ans i n Wash@ton to take these, steps.
Fi rst, the Federal government, as a symbol i c gesture, shoul d
i ssue to the Federal Reserve System exactl y $11,090,000,000
worth of zero-i nterest-payi ng, speci al good as gol d~ Treasury
bi l l s, and demand that the Federal Reserve System return the real
gol d i t bought wi th i ts counterfei t money. Thi s wi l l not change the
total reserves of the Fed, and therefore wi l l not be i nfl ati onary.
The Uni ted States government wi l l take every i ngot of the Feds
reserves out of the vaul t i n the New York Federal Reserve Bank
and transfer the gol d to Fort Knox, Kentucky, where it belongs.
Now, this gol d shoul dnt stay there l ong. The government
shoul d then begi n to sel l off every ounce of thi s confi scated (1933)
gol d i n the form of smal l gol d coi ns. Anyone who wants to buy
them at the market pri ce can do so. Al l profi ts on thi s transacti on
shoul d go to reduce the Federal debt. But the i mportant thi ng i s to
get the nati ons gol d out of the hands of the Federal Reserve Sys-
tem, i f onl y as an asserti on of nati onal soverei gnty.
I am assumi ng here that there real l y i s gol d i n the offi ci al
storage centers Fort Knox and the New York Federal Reserve .
Bank-and that i t hasnt been ,i l l egal l y sol d off qui etl y. Thi s
assumpti on may be total l y i naccurate. There has been no offi ci al
audi t of the U. S, gol d reserve, si nce the gol d i s now supposedl y i n
the possessi on of the Federal Reserve, and there has never been
an offi ci al audi t of the Federal Reserve System. That i s another
part of my proposed pl an: mul ti pl e audi ts conducted by the Gov-
ernment Accounti ng Offi ce, the Comptrol l er of the Currency, and
the Treasury Department.
Another possi bi l i ty for getti ng the gol d back i nto the hands of
the publ i c: si mpl y take the 265 mi l l i on ounces of gol d, mel t the
gol d i nto one-quarter ounce gol d coi ns, and send four per person
to every U.S. ci ti zen. Any coi ns l eft over coul d then be sol d.
I f the Fed protests, you wi l l know why I say that the Fed now
owns the nati ons gol d, not the Federal government.
Second, Congress shoul d pass a l aw that requi res the Federal
Reserve System to submi t to an annual audi t by the Government
Accounti ng Offi ce and/or any other government-pol i ced audi ti ng
A Program of Monetary Rejorm 127
agency. Furthermore, al l past fi nanci al records of the Fed shoul d
be audi ted, wi th the money for thi s task bei ng col l ected from the
Feds i nterest-rate returns on the Federal debt i t now hol ds.
Third, al l meeti ngs of the Board of Governors of the Federal
Reserve System must be opened to representati ves of the press, to
members of the Cabi net, and to members and staff economi sts of
the House and Senate commi ttees that are requi red by l aw to
supervi se the U.S. banki ng system..
I n the case of emergency meeti ngs that requi re cl osed-door
heari ngs; the Presi dent of the Uni ted States, the Secretary of the
Treasury, the Speaker of the House, the House mi nori ty l eader,
any member of the U.S. Supreme Court, and the majori ty and
mi nori ty l eaders of the Senate must be i nvi ted to attend.
Al l deci si ons of the Board of Governors wi th respect to mone-
tary pol i cy must be made publ i c i mmedi atel y after each meeti ng,
not 45 days l ater.
Foutih, the Federal Reserve System must cease buyi ng or sel l i ng
any further debt certi fi cates or assets of any ki nd. A permanent
moratori um on such purchases and sal es must be i mposed. The
Fed wi l l not be al l owed to i nfl ate or defl ate the nati on i nto a cri si s,
and then demand that we turn everythi ng back over to them.
Ffth, the assets and l i abi l i ti es of the Federal Reserve System
wi l l be transferred to the U.S. Treasury, and the Fed wi l l cease
operati ons enti rel y. Thi s i ncl udes the pensi on fund of the Board of
Governors of the Fed, probabl y the onl y ful l y funded pensi on sys-
tem i n Washi ngton.
There may be some steps that I have mi ssed. Neverthel ess, I
woul d settl e for any program of Fed-removal . But the program
must l ead to Step Fi ve: the abol i ti on of the Fed.
I ncreased Reserve Requi rements
Once the assets of the Fed are back i n the hands of the Treas-
ury, control over banki ng must al so resi de i n the Treasury. The
Treasurys task at that poi nt wi l l be to bri ng the banki ng system
i nto conformi ty to the pri nci pl e of zero fracti onal reserves, or
10070 reserve banki ng.
128 Honest Mong
To requi re an i mmedi ate return overni ght woul d be to destroy
the banks, create a massi ve i mmedi ate defl ati on, and pl unge the
worl d i nto depressi on. I t woul d be a vi ol ati on of contract: banks
made l oans i n terms of a di fferent set of rul es. We shoul d not seek
r e v ol u t i on .
The government shoul d pass a l aw requi ri ng the Treasury to
enforce a steady i ncrease i n reserve requi rements for al l forms of
deposi ts. I t necessari l y i s an arbi trary numberas arbi trary as
zi l l owi ng peopl e to vote at age 18. We need gui del i nes, even arbi -
trary gui del i nes, i n order to make deci si ons.
Let us assume that an i ncrease of fi ve percentage poi nts per
year i s sel ected. I n l ess than two decades, al l banki ng i n the
Uni ted States wi l l be conducted wi th 100% reserves. Banks and
other l endi ng i nsti tuti ons wi l l be requi red to shi ft thei r l oan port-
fol i os out of automati c wi thdrawal on demand, accounts i nto
l oan my money, and I l l do wi thout i t i n the,meanti me sort of ac-
counts, or el se fee for safekeepi ng and check-wri ti ng accounts.
Thi s wi l l shti .nk the money suppl y, just as the abol i ti on of
phony warehouse recei pts woul d shri nk the money suppl y. Thi s i s
moral l y and Bi bl i cal l y mandatory. We are today vi ol ati ng Gods
l aw. We are usi ng counterfei t money. We need to return to honest
money. We need to cease usi ng counterfei t money as the basi s of
our economy. There i s no choi ce: we must return to honest, un-
adul terated money.
Borrowers had better pl an on fal l i ng pri ces. Lenders had bet-
ter pl an for the same thi ng. Loans wi l l be a l ot tougher to pay off.
The l oan market wi l l eventual l y i mpose a pri ce dg?ator ti ed to the
consumer pri ce i ndex. (Loans these days have had i mpl i ci t i nfl at-
ors bui l t i nto them by the l oan market.) The l endi ng rates wi l l
di scount the expected decrease i n pri ces. Short-term i nterest rates
mi ght get back to where they were i n 1933: under 1,910.
Defl ati on wi l l al so persuade borrowers to ask for shorter-term ,
l oans. Thi s, too, i s basi c to a Bi bl i cal soci al order: no l oans to the
fai thful for over seven years (Deuteronomy 15:1-2).
Every bank and l endi ng i nsti tuti on, i ncl udi ng money-market ,
funds, wi l l come under thi s rul e: no check-wri ti ng from accounts
A Program of Monetay Rejotrn 129
that have al ready l oaned out the money. The l ength of maturi ty of
the deposi t wi l l match the l ength of maturi ty on the l oan. There
wi l l no l onger be a substanti al penal ty for earl y wi thdrawal , as
the bank adverti sements say today, because there wont be any ear~
withdrawal. There wi l l be onl y borrowed money wi th the ori gi nal
deposi t and i ts i nterest pl edged as col l ateral .
Buying Of the Bankers ,
Wi l l the banks scream bl oody murder? You can i magi ne just
how l oud. One of the most effecti ve pol i ti cal l obbi es i n the worl d
wi l l go i nto acti on. So we offer them a deal . We buy them off.
We tel l the bankers, Al l ri ght, boys, we al l know the messJ
youre i n. You are si tti ng on top of a mountai n of bad debts. You
want out. The U.S. government i s here to hel p you weather the
storm. We wi l l do a swap. You sel l us your pi l e of Mexi can and
Brazi l i an bonds, and we wi l l gi ve you ni ce, safe 90-day Treasury
bi l l s i n exchange. You get your portfol i os l i qui d agai n. We wi l l
take al l that l ousy debt youre si tti ng on, whi ch you know wi l l
never be pai d off, and you get i n i ts pl ace i nterest-payi ng T-bi l l s.
You can even sel l them i f you want theres a market for them,
unl i ke those Mexi can bonds youre si tti ng on.
That woul d bai l out the bi g banks. I t woul d defuse the Thi rd
Worl d debt cri si s. I t woul d re-l i qui fy the banki ng system. And i t
woul d cost the taxpayers onl y the i nterest that the Fed now pays
on the T-bi l l s i t owns. They woul d go for i t.
What about the smal l rural banks? Whats i n i t for them? Gi ve
them the same deal wi th any remai ni ng T-bi l l s. Swap thei r l ousy
farm mortgages for ni ce, l i qui d T-bi l l s.
I n short, use the reserves of the Fed (.$175 bi l l i on) to
strengthen the banks. Then force the banks to start substi tuti ng
honest money for counterfei t money.
What woul d i t cost the U.S. taxpayers? Onl y what they get
back from the Fed each year. I f the Fed owns $175 bi l l i on i n
T-bi l l s, and they are payi ng the Fed 7% per annum, then the Fed
takes i n a l i ttl e over $12 bi l l i on a year. Of th~i s, the Fed wi l l repay
85%, or about $10.4 bi l l i on. Thats money that the Treasury wi l l
130 Honest Mong
have to come up wi th to pay the banks thei r i nterest.
Not bad. For thi s money more or l ess, dependi ng on where
i nterest rates go the Federal government can bai l out the U.S.
banki ng system, wi pe out the Federal Reserve System forever,
and recei ve i n trade over two decades the re-establ i shment of
honest, 100% reserve banki ng.
Freedom to Buy and Sell
Defl ati on wi l l unquesti onabl y cause many more cri ses, but at
l east we get started on the road to honest money. I f we dont get
started, events wi l l force a seri es of economi c cal ami ti es on us.
To keep defl ati on from creati ng a total depressi on, every gov-
ernment pri ce restrai nt must be abol i shed. Freedom i s a package
deal . I t wi l l do l i ttl e good to shri nk the money suppl y i f peopl e are
not compl etel y free to offer thei r goods and servi ces at any pri ce
they choose. The government-created cartel s that exi st today
shoul d l ose thei r pri vi l eged status. Peopl e must be l eft free to bar-
gai n as best they can, to sel l thei r servi ces at whatever pri ce they
can get, and to avoi d arrest or fi nes for tryi ng to get the best deal
they can. At the very mi ni mum, thi s means no more mi ni mum
wage l egi sl ati on.
I f the voters arent ready for thi s ki nd of freedom, they arent
ready for honest money. They had better be ready for a catas-
trophi c i nfl ati on, fol l owed by a defl ati onary depressi on, because
thats what the al ternati ve i s to honest money and honest competi -
ti ve pri ci ng.
Summar y
I have al ready sai d that the Feds gol d shoul d be transferred
back to the U.S. Treasury. The Treasury shoul d then sel l off every
ounce of thi s gol d to the general publ i c i n smaJl , affordabl e gol d
coi ns. The money recei ved shoul d go excl usi vel y for debt reducti on.
There must be a moratori um on al l new Federal debt. There
must be a bal anced budget, starti ng now. But there neednt be a
gol d standard. Wi th respect to a government standard, there
neednt ~be a gol d standard ever agai n. ,
A Program ofMonetaty Reform 131
I f we get honest wei ghts and measures,, and we al so get the
banki ng equi val ent, 100% reserves, then we wi l l get honest
money. I t wi l l be a system that al l ows gol d, si l ver, pl ati num,
beads, copper, or anythi ng el se to serve as money, si de by si de.
The mai n thi ng i s thi s: we get the government out of the money
busi ness. We end the i nvi si bl e tax of i nfl ati on.
There has been far too much debate i n conservati ve ci rcl es
about restori ng the gol d standard. I f we have fracti onal reserve
banki ng, we cant get and keep a tradi ti onal gol d standard. We
never know what i s the proper pri ce of gol d to re-establ i sh as the
offi ci al pri ce. None of the pro-gol d economl l sts has ever come up
wi th a sol uti on to thi s probl em.
I f we dont have fracti onal reserve banki ng, and i f we do have
enforcement of l aws prohi bi ti ng fal se wei ghts and measures, we
dont need government-suppl i ed money. I f we dont have govern-
ment-suppl i ed money, we dont need a gol dl standard.
Why not the best? Why not Bi bl i cal money? Why confuse the
i ssue by argui ng about the re-i mposi ti on of a tradi ti onal gol d
standard? Si nce we dont have the pol i ti cal cl out to get a tradi -
ti onal gol d standard anyway, why not go for the best possi bl e
deal ? Why not push for market-produced honest money?
, We wont get ei ther, i n my vi ew at l ei ~st not before we get
mass i nfl ati on, pri ce control s, rati oni ng, and ,a col l apse of the i n-
ternati onal monetary system. But we can try. I f men refuse to
l i sten, then God, by way of i nescapabl e market forces, wi l l
destroy the present fi at money, fracti onal reserve banki ng system.
One way or another, i ts days are number eci .
u
THE POLI TI CS OF MONEY
Therefore the Lord says, The Lord of hosts, the Mi ghty One of
I srael , Ah, I wdl rl d Mysel f of My adversari es, And take ven-
geance on My enemi es. I wi l l turn My hand agai nst you, And
thoroughl y purge away your dross, And take away al l your al l oy. I
wi l l restore your judges as at the fi rst, And your counsel ors as at
the begi nni ng. Afterward you shal l be cal l ed the ci ty of ri ghteous-
ness, the fai thful ci ty (I sai ah 1:24-26).
The probl em wi th di scussi ng money i s that peopl e wi th onl y a
smatteri ng of knowl edge about monetary theory or practi ce Wi nk
they know al l they real l y need to know. They hol d strong opi ni ons
i n many cases. Economi sts are i nsufferabl e; everyone el se i s
merel y i ntol erabl e.
Peopl e who woul d never thi nk of voi ci ng an opi ni on on r
organi c chemi stry have fi xed vi ews on money. The number of rec-
ommendati ons concerni ng the reform of money i s l egendary: the
recommendati ons go al l the way back to the anci ent worl d.
The anci ent worl d di dnt come to any cl ear concl usi ons,
ei ther .
But what about the Chri sti an church? What has i t sai d about
money? Not much. I t has l egi sl ated agai nst usury (i nterest) for a
mi l l enni um and a hal f, fortunatel y wi th l i ttl e success. So far as I
know, the onl y peopl e who cl ai m to preach a Chri sti an vi ew of
money are a mi nori ty of adherents of the i nfl ati oni st group cal l ed
the Soci al Credi t movement, an i ntel l ectual hei r of the ol d green-
back movement of l ate-ni neteenth-century Ameri ca. (The
greenbackers were proponents of green-backed paper money,
132
The Politics of Mon~ 133
meani ng the green col or of the paper, i n contrast to gol d-backed,
fi .dl y redeemabl e paper money, the tradi ti onal gol d standard.)
I have several shel ves of thei r poorl y wri tten and poorl y
pri nted tracts, stretchi ng back to the 1920s. They are worthl ess as
economi c documents. Al l they cal l for i s government-i ssued un-
backed fi at money, to sti mul ate busi nesi and stabi l i ze pri ces.
They preach a crude versi on of the academi cal l y popul ar defenses
of fi at money.
The basi c debate boi l s down to thi s: I s the State a rel i abl e i n-
sti tuti on to control money, or i s the unhampered free market? The
mi l d i nfl ati oni sts are al ways on the si de c)f government-i ssued
money. So are the stabl e pri ces advocates. Onl y those who
bel i eve that market pri ces shoul d be market pri ces are advocates of
market-produced money.
Thus, those who favor freemnarket money do not get a hear-
i ng,. not i n academi c ci rcl es, monetary crank (greenback) ci r-
cl es, or pol i ti cal ci rcl es. Those who advocate the removal of mon-
etary power from any known speci al -i nterest group, especi al l y the
State, fi nd few supporters. Everyone wants hzs group tb control
money for the good of the nati on, of course.
The Ameri can Chri sti an Pol i ti cad Heri tage
A century of confusi on has mi sl ed Chri sti ans i n the Uni ted
States. The l ast sel f-consci ousl y Chri sti an Presi dent was Presby-
teri an Grover Cl evel and, who favored a gol d standard, l ow taxes,
free trade, and who vetoed more bi l l s i n two terms than any other
Presi dent i n hi story. (He had been known as the veto mayor of
Buffal o, New York.) He served two terms, 1885-89 and 1893-97.
From that poi nt on, Chri sti an pol i ti cs sl i d down the road toward
modern stati sm.
Another theol ogi cal l y conservati ve Presbyteri an, but a
pol i ti cal and economi c radi cal , Wi l l i am Jl enni ngs Bryan was ,
nomi nated three ti mes to be the Democrati c Partys candi date for
Presi dent, and he owed i t al l to hi s famous cross of gol d speech
of 1896. Al most si ngl ehandedl y, Bryan converted the Democrati c
Party from a gol d standard, l ow-tari ff, free-market pol i ti cal party,
134 Honest Mong
whi ch i t had been si nce @e days of Andrew Jackson (a forceful op-
ponent of central banki ng), i nto a pro-State radi cal party. He ran
for the l ast ti me i n 1908; the next Presi denti al el ecti on saw Wood-
row Wi l son, al so a Presbyteri an but anythi ng but a conservati ve,
el ected Presi dent. Wi l son gave us the graduated i ncome tax and
the Federal Reserve System.
Bryan was an i nfl ati oni st. He procl ai med the si l ver standard
as the means for debt-ri dden farmers to-pay off thei r debts i n l ess
val uabl e money. (Just for the record, defraudi ng credi tors i s
never a wi se l ong-term pol i cy. ) Later, he hel ped promote the crea-
ti on of the Federal Reserve System, and onl y publ i cl y apol ogi zed
l ater when he found that i t was owned and operated by the very
Wal l Street and New York banki ng i nterests that he had al ways
hated. He was nai ve, as wel l as an i nfl ati oni st.
Bryan radi cal i zed a substanti al segment of Chri sti an voters i n
the Uni ted States. Then hi s devastati ng humi l i ati on i n 1925 at the
hands of evol uti oni st l awyer Cl arence Darrow at the famous
Scopes tri al (the monkey tri al ) i n Dayton, Tennessee l ed to hal f a
century of pol i ti cal hi bernati on by fundamental i sts and conserva-
ti ve evangel i cal . (Bryan di ed a few days after the tri al . )
Thus, Ameri can Chrkti an thi nki ng on economi cs i s muddl ed.
Chri sti ans popul i st
i nsti ncts are anti -bank, yet pro-paper
money. Chri sti ans are patri oti c, but wi th thi s has come a suspi -
ci on of forei gners and forei gn i mports. They are more l i ke Bryan
than Cl evel and.
Who Wants the Reform of Money?
Many peopl e want a reform that wi l l favor thei r speci al -i nterest
group. The probl em i s, nobody wants a reform that wi l l remove
power over money from al l known speci al -i nterest groups.
Men want the State to control money, for they bel i eve that
thei r speci al -i nterest group can eventual l y gai n a heari ng before
the money managers, or perhaps even become the money manag-
ers. Everyone has the hope that somehow, someti me he and hi s
associ ates wi l l capture the monopol y of money. Then the worl d
wi l l at l ast be rul ed wel l .
The Politics of Mon~ 135
What nobody takes seri ousl y i s that al l of us, acti ng as produc-
ers i n a competi ti ve free market, are capabl e of sel ecti ng the form
of money we want. The speci al -i nterest groups dont trust the
deci si ons of the l argest economi c group of al l : consumers. Consum-
ers just dont have the wi sdom, or the col l ecti ve power, to force the
worl d to accept what i t real l y needs (i f peopl e just understood
how the worl d real Zy works).
Market Knowledge and Bureaucratic Knowledge
The troubl e i s, nobody knows exactl y how the worl d real l y
works. We are al l fal l i bl e peopl e wi th l i mi ted knowl edge. I t i s onl y
through Bi bl i cal revel ati on from the One who knows how the
worl d real l y works because He made i t and acti vel y sustai ns i t
that anyone can come to a competent understandi ng of the worl d.
God has graci ousl y reveal ed the judi ci al rul es that produce
soci al order, i ncl udi ng the i nsti tuti on of the free market. He has
establ i shed as Hi s standard a l aw-order whi ch favors the devel op-
ment of competi ti ve markets. Then, through the vol untary ex-
change of i nformati on, and vol untary cooperati on among market
parti ci pants (you and me), we fi nd that we benefi t from knowl -
edge that we never even knew exi sted. Each man bri ngs hi s best
knowl edge and ski l l s i nto the market, and through vol untary co-
operati on, these ski l l s and i nformati on are assembl ed i n ways that
meet the needs of consumers.
God therefore has created a system whi ch gi ves us vast quanti -
ti es of useful i nformati on, yet because i t i s God-gi ven, man cannot
retai n thi s knowl edge when he tri es to i mi tate God and control thi ngs
from the top as a cosmi c tyrant. We can possess the frui ts of our
many i nsi ghts onl y when we cooperate wi th each other vol untari l y.
Thi s i s as true of monetary affai rs as i t i s of any other hi ghl y
,
devel oped i nsti tuti on. We dont know how everythi ng works as a
whol e. We dont need to. To try to understand i t al l i s to pl ay at
becomi ng God. What we know i s that i f we restrai n fraud and
coerci on, the best sol uti ons to our probl ems of producti on and ex-
change wi l l be brought i nto bei ng. We dont know what these
sol uti ons are. Al l we know i s that we dont have them now, and
136 Himest Mong
that i f we refhse to honor Gods gui del i nes (bl uepri nts), we have
no hope of di scoveri ng them.
The Grab for Power
Men i n rebel l i on agai nst God need to fi nd a substi tute source
of authori ty. The State i s the pl ace they begi n to l ook, for i t has
the greatest vi si bl e power of any earthl y i nsti tuti on.
When they want money, they thi nk to themsel ves, Someone
i s keepi ng the money I need away from me. Lots of peopl e have
money, but I dont have enough, I need to get i nto control of the
money machi ne.
, Now the fact i s, as a nati on, we dont need more money. We
need more per capi ta producti vi ty. Goods and servi ces make us
weal thy, not pi eces of paper wi th pol i ti ci ans pi ctures on them.
But as i ndi vi dual s, we see that we need more money. What we
real l y mean i s: I need more money, but wi thout my competi tors
l ayi ng thei r hands on more money.
The way to get more weal th, the Bi bl e says, i s by covenantal
fai thful ness to Gods l aw, and producti ve servi ce to other men. I n
short, the Bi bl e teaches the doctri ne of consumer soverei gnty.
Serve the other persons needs, and you wi l l prosper.
But thi s i s too di ffi cul t for peopl e to accept. They want a short
cut. The pri nti ng press seems to be a short cut. Capture the State,
and you capture the pri nti ng press.
Karl Marx wrote i n hi s Communfit A4anfesto that one of the ten
thi ngs a. successful Communi st revol uti on must do i s to create a
central bank. He saw what the pri vate bankers who had setup the
Bank of Engl and had accompl i shed i n the way of central power
over the economy, and he wanted prol etari ans to i mi tate them, or
more to the poi nt, the el i ti st party membe~s who woul d act i n the
name of the prol etari at.
Marx wanted the reform of money. Leni n wanted i t, too.
Every speci al -i nterest group wants i t. Money i s power; control
over money i s away to get power.
l - i
i%e Politks of Mony 137
A Pol i ti cal Program for Chri sti ans
The average person i n the pew i s not goi ng to remember al l
the subtl e arguments of a set of books l i ke Bi bl i cal Bl uepri nts.
Neverthel ess, anyone can grasp the fundamental pri nci pl es of a
God-feari ng soci al order:
1.
2,
3.
4.
5.
6.
Sel f-di sci pl i ne under Gods reveal ed l aw
Avoi di ng the centrfl l zati on of power (l ocal i sm)
Servi ce as the pri nci pl e of domi ni on
Personal responsi bi l i ty for ones acti ons
,,
The fami l y as the pri mary agency of wel fare
Sal vati on by grace not knowl edge, or power, or l aw (State
l egi sl ati on)
7. Compound growth over l ong peri ods of ti me (anti -revol u-
ti on)
8. Nei ther i ndi vi dual i sm nor col l ecti vi sm- cownantahsm i n-
stead
Whenever a Chri sti an begi ns to thi nk about vari ous speci fi c
soci al , mi l i tary, pol i ti cal , educati onal , or economi c probl ems, he
has to thi nk through these fundamental s, and then appl y them to
the speci fi c fi el d of study. Thi s i s as true of monetary theory as i t i s
i n the other fi el ds.
. ,
We have l i ttl e hope of reconstructi ng the monetary order
stri ctl y or pri mari l y through pol i ti cal reform. Unti l we can begi n
to shri nk the State as a matter of pol i cy, wi th the support of the
vast majori ty of the States present corrupted benefi ci ari es, we wi l l
not see a Bi bl e-based monetary reform.
Wi l l men vol untari l y gi ve up the States percei ved benefi ts?
Not wi thout a moral reform whi ch i s gui ded by Bi bl i cal knowl -
edge (such as i n the Bi bl i cal Bl uepri nts books), or not wi thout a
near-revol uti onary cri si s (the judgment of God). God much pre-
fers moral reform and a steady commi tment by men to i mpose
Hi s pri nci pl es i n every area of l i fe. That, and on~ that, i s the basi s
of avoi di ng the judgment of col l aps,e mi l i tari l y, economi cal l y,
and perhaps even medi cal l y (AI DS). The di sasters descri bed i n Deu-
temnomy 28:15-68 ean be avoi ded onl y by moral transformati on.
138 Honest Mong
But God wi l l not be mocked. The reform wi l l come. I t may
have to come through economi c col l apse, whi ch wi l l i nvol ve the
destructi on of the present worl d monetary system. Then, out of
the rubbl e of broken contracts, broken hopes, and broken State
currenci es, somethi ng better wi l l ari se, i f ChrMi ans know what to
recommend, and i f they are i n a posi ti on to get a heari ng.
The ,best thi ng about the Bi bl i cal pri nci pl es of money i s that
the State doesnt have to do much. I t can just l eave thi ngs al one.
A team of bank exami ners wi l l have to see to i t that the banks and
other fi nanci al i nsti tuti ons are not creati ng money by i ssui ng the
equi val ent of unbacked warehouse recei pts, but that i s just about
i t. I am not cal l i ng for a top-down i mposi ti on of a new monetary
order. I am cal l i ng onl y for a bottom-up devel opment of as many
monetary al ternati ves as peopl e are capabl e of devi si ng and i m-
pl ementi ng.
Too Easy . . . or Too Hard?
The pri nci pl ed program i s al ways easy to speci fy. I t i s not easy
to i mpose. That i s the probl em: imposing a program. A top-down
transformati on of the soci al order just i snt possi bl e. Peopl e rebel .
They l earn how to cheat, gum up the works, beat the system. The
State spends an i ncreasi ng amount of i ts dwi ndl i ng resources i n
just gai ni ng mi ni mal compl i ance, l et al one acti ve cooperati on.
There i s onl y one way to gai n l ong-term Soci al reform: to con-
vi nce the average ci ti zen of the moral correctness of a gener al approach
to h~e, as wel l as the blessingsforadherence to thi s general approach to
l i fe. That i s why God i ncl uded Deuteronomy 28 i n Hi s Word:
bl essi ngs and cursi ngs. That i s why He commanded the readi ng
of the whol e l aw every seven years (Deuteronomy 31:9-13): to
rei nforce mens understandi ng of the general pri nci pl es of Bi bl i czd
l aw and the case-l aw appl i cati ons i n dai l y l i fe.
The l aw must be simple enough for si mpl e peopl e to understand,
and comprehensive enough for judges to appl y to any and every di s-
pute among men. The Bi bl e provi des such a l aw-order.
A successful l ong-term reform of any i nsti tuti on must gai n the
understandi ng and cooperati on of those who wi l l be affected by i t.
The Politics ofMoney 139
I t must be kept si mpl e. I t must al so work. What we need to un-
derstand i s that Godk principles work. They sati sfy equal l y the
desi res of the moral man and the pragmati c man, the theori st and
the acti vi st.
The Bi bl i cal pri nci pl es of money are easy to understand
much easi er to understand than the graduate-school textbooks i n
monetary theory. After al l , the textbooks try to expl ai n a moral l y
corrupt system i n terms of i ts supposed l ong-term benefi ts, a
super-ri ch el i te-control l ed system i n the name of democracy, and
an engi ne of i nfl ati on i n terms of hi stori c monetary stabi l i ty. They
try to tel l us that there i s no reason to repay debt, si nce we owe i t
to oursel ves, and besi des, the Federal Reserve can. moneti ze i t.
Compared to the task of the economi sts, the Chri sti ans task i s
easy. Al l he has to promote i s a si mpl e truth: Dont cheat .
I f the Present System Conti nues
We can l ook at the i nescapabl e numbers and make some rea-
sonabl e guesses.
Debt
The worl ds mountai n of debt i i growi ng rel entl essl y. There i s
onl y one answer gi ven by Thi rd Worl d l eaders, i nternati onal
l endi ng agenci es, economi sts, and fi nanci al col umni sts: extend more
credit. Rol l over the l oans. Make the tei ms of payment easi er. I n
short, delay.
Del ay i s not a vi abl e answer. I t i s a non-answer. Hal f of the
tri l l i on dol l ar i nternati onal debt i s owed to Western banks by i n-
sol vent Thi rd Worl d soci al i st nati ons that have no i ntenti on of re-
payi ng, and no means of repayi ng even i f thei r hearts werent evi l .
They bl ame us for thei r debt, because we l oaned them the money
to buy our products, whi ch by now they have squandered i n
waves of soci al i st pyrami d-bui l di ng. Too bad for us, they say. The
stupi d gri ngos l ose agai n. But thats why God made gri ngos, i n
thei r vi ew, the same way He made sheep.
1*U
I nzation
The
1.
2.
3.
4.
5.
6.
Honest MOngJ
.
defaul t i s comi ng. The questi ons then are:
How can the pol i ti ci ans di sgui se the defaul ~?
How can they bl ame someone who i s pol i ti cal l y weak anyway?
How can the banks keep thei r doors open?
How can the system be kept goi ng l onger?
How can ci ti zens be pushed i nto hi gher tax brackets? -
What i s more acceptabl e to voters: outri ght defaul t wi th d&z-
tionary depressi on, or di s&i sed defaul t wi th an~ationaty depressi on?
Most peopl e are i n debt: Most peopl e are more concerned
about muddl i ng through i n the present than i n the future. So i n-
fl ati on i s the preferred sol uti on. They dont get evi cted from thei r
homes; they pay thei r l oans wi th worthl ess money. They may not
be abl e to buy another home, nor wi l l thei r chi l dren be abl e to
afford to, but thg keep what they have.
Thi s i s a no-growth, short-future, pagan vi ew of l i fe, but i t i s
the vi ew whi ch debtors want. I t i s the worl d whi ch i nfl ati on even-
tual l y produces.
We wi l l therefore get defaul t through i nfl ati on.
Price Controls and Rationing
To hi de the eJ?ects of monetary i nfl ati on ri si ng pri ces gov-
ernments i mpose pri ce control s (meani ng Pee@ control s). Short-
ages wi l l appear i n the cruci al market areas: pri ce competi ti ve,
mass-produced goods. Thi s means that peopl e wi l l be forced to go
i nto the bl ack market to survi ve (gui l t-mani pul ated, fearful peo-
pl e are easi er for the State to control i n other areas), or that they
wi l l suffer a reducti on i n thei r standard of l i vi ng (makhg them
even more dependent on the State).
The State wi l l probabl y i mpose pri ce control s.
Summar y
Peopl e i n debt fi nd i t di ffi cul t to cal l for the end of i nfl ati on
and a steady reducti on i n the money suppl y. They fear cal l i ng for
.
The Pohtics of Money , .
141
an end to State-enforced (and mythi cal ) bank account i nsurance
schemes. They fear bei ng vi si ted by the repossessor. I n short, i f
you are i n debt, you are hampered i n fi ghti ng the good fi ght.
But practi cal l y al l Chri sti ans are i n debt. Thei r busi nesses are
i n debt. Thus, I dont expect strong Chri sti an support for my pro-
posed reforms. I expect i nstead a devastati ng destructi on of the ~
present humani st money system and the worl d trade system based
on i t.
The reconstructi on i s more l i kel y to emerge from the rubbl e.
Buy some gol d and si l ver coi ns, some basi c tool s, some durabl e
consumer goods, some dehydrated foods, get out of debt, and
pray. I f you can, move out of hi gh-ri sk urban areas. A cri si s i s
l oomi ng. When the wel fare checks dont buy anythi ng of val ue,
where wi l l you be l i vi ng, and what wi l l you be produci ng?
13
THE REFORM OF DEBT
At the end of every seven years you shal l grant a rel ease of
debts. And thi s i s the form of the rel ease: Every credi tor who has
l ent anythi ng to hi s nei ghbor shal l rel ease i t; he shal l not requi re i t
of hl s nei ghbor or of hi s brother, because i t i s cal l ed the Lords re-
l ease. Of a forei gner you may requi re i t; but your hand shal l
rel ease what i s owed by your brother (Deuteronomy 15:1-3).
The odds agai nst a Bi bl e-based pol i ti cal reform of money are
monumental . I t woul d mean scrappi ng the nati o~s monetary sys-
tem. I t woul d mean abandoni ng 500 years of tradi ti onal banki ng
practi ce. Because of the huge unpayabl e debt structure, publ i c
and pri vate, nati onal and i nternati onal , a reform of banki ng
al ong Bi bl i cal l i nes woul d toppl e the enti re credi t structure.
Understand, this credit structure is going to topple anyway. The pol -
i ti cal questi on i s thi s: Who will get blamed? Todays mountai n of
debt cannot be pai d off, and no one i ntends to pay i t off. Thats
the geni us of modern economi cs: there is not a single school of aca-
&mtial@ respectable economtits that views the entire repayment of all gov-
ernment debt m a moral necessity. I n fact, there i s no school of econom-
- i cs that even bel i eves i n moral necessi ty.
Everyone wants hfi debtors to pay him off. That i s the onl y
commi tment to debt repayment that I can fi nd. But when any
group i s excused from thi s obl i gati on, then every group i s i n pri n-
ci pl e excused.
The Sabbati cal Year
The Bi bl e understands men. God set forth l aws that woul d
cut debt off at the pass, i n the l anguage of the ol d cowboy
movi es. He put a seven-year l i mi t on al l debt.
142
The R~orm of Debt 143
The seventh year i n I srael was the sabbati cal year. There was
no pl anti ng or harvesti ng i n that year; the l and was to recei ve i ts
rest. Si x years you shal l sow your l and and gather i n i ts produce,
but the seventh year you shal l l et i t rest and l i e fal l ow, that the
poor of your peopl e may eat; and what they l eave, the beasts of
the fi el d may eat. I n l i ke manner you shal l do wi th your vi neyard
and your ol i ve grove (Exodus 23:10-11).
I n that same year, al l Hebrew i ndentured servants were to go
free, and they were to be gi ven capi tal to hel p them get started
agai n (Deuteronomy 15:12-15). (Thi s apparentl y di d not appl y to
convi cted cri mi nal s who had been sol d i nto bondage i n order to
pay resti tuti on to thei r vi cti ms.)
Fi nal l y, and perhaps most i mportant, the whol e of Bi bl i cal l aw
was to be read publ i cl y to every i nhabi tant (Deuteronomy 31:10-13).
The seventh year was a year of rel ease from debt, work (agri cul -
ture), bondage, and si nful i gnorance of Gods l aw.
-
Debt Bondage
The ri ch rul es over the poor, And the borrower i s servant to
the l ender (Proverbs 22: 7). The man who mortgages hi s future
has i n pri nci pl e become a sl ave. He has publ i cl y announced some
versi on of the fol l owi ng statement:
I know the future. The future for me wi l l bri ng more weal th. ,
Wi th thi s weal th I wi l l pay off my debts. I can therefore i ncrease
my l i festyl e today by assumi ng a debt. I know the future so wel l ,
that I can say that for X number of years, I wi l l not make a mi s-
take that wi l l bankrupt me.
Thi s i s a form of arrogance. The Bi bl e says, For now we see
through a gl ass, darkl y . . . (1 Cori nthi ans 13:12a). The New
Ki ng James versi on reads: For now we see i n a mi rror,
di ml y . . . I n other words, we dont see the future very cl earl y.
What i f a person l i vi ng i n Ol d Testament I srael coul dnt pay?
He coul d be sol d i nto sl avery. Onl y i n the seventh year coul d he
get free, unl ess he coul d somehow work off hi s debt. They were
commanded by God to take debt very seri ousl y. I n pri nci pl e, the
debtor was a servant (sl ave) to the l ender.
144 Honest Along
The New Testament pri nci pl e i s eved more ri gorous: Owe no
man anythi ng . . . (Remans 13:8a). Emergency debt was tol era-
bl e i n the Ol d Testament. I n the New Testament, God sets fohh a
standard of personal i ndebtedness whi ch i s desi gned to keep Hi s
peopl e out of bondage.
Why thi s concern wi th debt freedom? God wants Hi s peopl e
to be mobi l e. I f a new opportuni ty to serve Hi m comes al ong, we
are to be ready to wal k. I f we are i n debt, how can we wal k i nto a
l ower-payi ng form of servi ce?
God wants us to be abl e to exerci se domi ni on. I f we are gi ven
an opportuni ty to start a new busi ness, or get a better educati on,
how can we do thi s i f we are ti ed to a debt? We serve the l ender
pri mari l y, not God. Someti mes we need to reduce our expendi -
tures today i n order to have greater i ncome and responsi bi l i ty
l ater on. How many mi ddl e-management workers are l ongi ng to
break free and start thei r own busi nesses, but
of thei r debts?
Thi rd Worl d Debt
The Hebrews were al l owed to l oan money
are afrai d because
to strangers i n the
l and and forei gners and sti l l col l ect payment beyond the seventh
year. Why? Because debt i s a means to bri ng other peopl e under
your authori ty. The Bi bl e teaches that evi l peopl e shoul d be under
the authori ty of Gods l aw, as admi ni stered by Gods peopl e. Ex-
tendi ng l oans to others i s a means of domi ni on.
I n ti mes of Gods bl essi ngs, I srael was to l end abroad. The
Lord wi l l open to you Hi s good treasure~ the.heavens, to gi ve the
rai n to your l and i n i ts season, and to bl ess al l the work of your
hand. You shal l l end to many nati ons, but you shal l not borro#
(Deuteronomy 28:12).
I n ti mes of Gods cursi ngs, I srael woul d fal l i nto debt to for~
ei gners: The al i en who i s among you shal l ri se hi gher and hi gher
above you, and you shal l come down l ower and l ower. He shal l
l end to you, but you shal l not l end to hi m: he shal l be the head,
and you shal l be the tai l (Deuteronomy 28:43-44).
- The pattern i s cl ear: debt i s a tool of oppressi on i n the hands of
1
The l?~orm of.Debt 145
evi l men, and a tool of domi ni on i n the h~ds of Gods peopl e.
Gods ki ngdom i s to be extended over ethi cal rebel s. Ethi cal rebel s
are snared and brought under Gods authori ty by means of debt.
But what about the modern worl d?
The Book-Value Game
The i nsol vent deadbeat governments to whi ch our banks l oan
offi cers have l ent your money and mi ne are now i n the dri vers
seat. They cal l the shots. We see today the truth of that ol d
sl ogan:
I owe you $10,000. Youve got me.
I owe you $10,000,000. I ve got you.
!-
Onl y they dont owe us $10 mi l l i on. They owe the Wests banks
about $500 bi l l i on. Not onl y do they have us, they have us i n a
death gri p. They can bri ng down the Wests economi es overni ght,
or cl ose to i t.
The banks have begun to stop l endi ng to them. The banks do
al l ow them to restructure thei r debt; meani ng the banks extend
the day of repayment. Why? Because they expect to be repai d?
Nonsense; they know the money wi l l never be repai d. They are
pl ayi ng the bi g banks most i mportant game, the book-ualue game.
Woul d you pay $100 cash for a Mexi can bond wi th a face val ue
of $100? Not i f youre smart. You woul d di scount i t by 50% or
more, si nce you know i ts a hi gh-ri sk bond. Wi th oi l at $15 a bar-
rel , you mi ght di scount i t by 7570. They cant repay. They have
sai d so publ i cl y,
But i f you area bank, and you are si tti ng on top of $100 mi l -
l i on i n Mexi can bonds, the government al l ows you to keep those
bonds on the books at whatever you pai d for them ori gi nal l y. The
regul ators al l ow you to keep them l i sted at the pri ce you put down
i n your account books, back when there was a hi gh market val ue
for those bonds (when oi l was at $30, and before the Mexi can gov-
ernment nati onal i zed the banki ng system and al l owed the peso to
fal l from 8 cents to one-seventh of a cent). I n other words, when
you l ent them the money before August of 1982. (Less than four
146 Honest Mong
years: thats how fast Mexi cos economy, col l apsed.)
I f the government requi red the bi g New York banks to l i st
thei r assets at true market val ue, every one of them woul d be
l egal l y bankrupt: more l i abi l i ti es than capi tal assets i n reserve. So
the government doesnt requi re them to do i t.
But to keep the game goi ng, there has to be an i l l usi on that the
bonds are sti l l good. Banks have to get some i nterest payments oc-
casi onal l y. I f ever there were an outri ght defaul t by the Thi rd
Worl d debtors, the game woul d end or, better put, i t woul d have
to be changed very fast, wi th ful l government cooperati on. Once
the forei gn nati on says, We qui t. We arent payi ng, the bonds
fal l to zero val ue. Then the banks do have to wri te them down to
market val ue. Then there i s a true banki ng cri si s.
So the bankers pl ay the game as l ong as they can. The Thi rd
Worl d debtors al so pl ay al ong, just as l ong as they dont real l y
have to sacri fi ce, stop i nfl ati ng, and turn thei r nati ons i nto pro-
ducti ve non-soci al i st soci eti es.
But someday they wi l l get ti red of pl ayi ng the game. They wi l l
get ti red of bei ng tol d by the West to get your economi c houses i n
order, you deadbeats! And they wi l l say, i n SCE many words,
Adi os, gri ngos! Then the bankers wi l l have to scurry around and
fi nd a new sol uti on.
Some Qui ck Fi xes
I assume that the Fed has some taxpayer-fi nanced aces up i ts
sl eeve. The game can go on a bi t l onger. Let me di scuss a coupl e
of them that even I can fi gure out, and the Feds economi sts are
empl oyed ful l -ti me to thi nk of even better schemes.
The Debt Swap
The Federal Reserve System i s si tti ng on top of about $175
bi l l i on i n 90-day Treasury debt certi fi cates, the most safe and
secure debt i nstrument i n the worl d (the U.S. government. keeps
tel l i ng us). So, i f i t l ooks as though a major defaul t i s comi ng, the
Fed coul d si mpl y swap some of i ts $175 bi l l i on i n i nstantl y sal abl e
T-bi l l s for the near-dead Thi rd Worl d bonds that the pri vate com-
The Reform of Debt 147
mer ci al banks are hol di ng. Of course, the Fed wi l l swap them at
the book-value of the Thi rd Worl d bonds, not the market val ue.
Presto! The commerci al banks now own the best assets on the
market. The Fed owns an equal dol l ar amount of worthl ess Thi rd
Worl d debt. But thi s debt i s sti l l on the Feds books at ori gi nal pur-
chase pri ce book val ue. No probl em!
I s thi s l egal ? Sure. The i nfamous Monetary Control Act of
1980 l egal i zed the Feds purchase of any form of debt certi fi cate i n
the worl d to serve as a reserve for the U.S. money suppl y. The
Fed can buy Thi rd Worl d debt, corporate bonds, or anythi ng.
The banks then own the Treasury debt. Al l i nterest payments
for thi s debt wi l l go to the banks rather than the Fed. The banks,
unl i ke the Fed, do not return to the Treasury 85?Z0 of thei r T-bi l l
i nterest payments each year. Thus, the real debt of the U.S. tax-
payer wi l l have gone up by a factor of .85 for every dol l ars worth
of U. S. debt transferred from the Fed to the commerci al banks.
Yet the account books of the commerci al banks, the Fed, and the
U.S. Treasury wi l l show zero change.
As I suggested i n Chapter El even, why not abol i sh the Fed
and l et the Federal government do, the swap, i n order to get the
banks to agree to a sl ow i ncrease i n reserve requi rements? At l east
we shoul d get some l ong-term reform out of the deal .
Using an I ntennediap (the Bag Man Approach)
The Fed buys debt certi fi cates from the I nternati onal Mone-
tary Fund and/or the so-cal l ed Worjd Bank (the I nternati onal
Bank for Reconstructi on and Devel opment), the two bi ggest i n-
ternati onal forei gn ai d boondoggl es i n the West. These outi ts
then l end the money to the dead-bat Thi rd Worl d governments.
They i n turn repay thi s quarters i nterest payments (but never any
pri nci pal ) to the Wests banks. The two-bi t, ti n-horn di ctators
who run these deadbeat soci al i st nati ons wi l l of course pocket a
few mi l l i ons for themsel ves, and therefore agree to pl ay the game
a bi t l onger.
What weve got here i s a ki nd of mul ti nati onal bank-fi nanced
and U.S. taxpayer-fi nanced retirement program for dictators. I ts a l ot
148 Honest Mong
better than your reti rement program, I assure you. I ts tax-free.
Unl ess, of course, the di ctator gets shot fi rst. Then your program
may turn out to be a better deal .
The End of the Rohd
These qui ck fi xes onl y del ay the day of fi nanci al reckoni ng.
The Thi rd Worl d debt keeps getti ng l arger. I t compounds up-
ward. Thi rd Worl d countri es sel dom repay any pri nci pal . They
borrow the money needed to pay the i nterest. Today, we defi ne .
nati onal bankruptcy as not bei ng abl e to borrow enough money
to make the i nterest payments for a ful l year.
I t cant go on forever. Yet the experts have offered no sol u-
ti on except to keep maki ng more l oans. They ~ave no sol uti on.
There i s no sol uti on. The debtors will a%jault.
So we are back to my ori gi nal asserti on: l ong-term debt i s i m-
moral , and God al ways bri ngs judgment on those who extend i t.
We have made bad l oans to bad governments for stupi d uses. By
we: I mean our pol i ti cal representati vesand our fi nanci al repre-
sentati ves, the mul ti nati onal banks.
But, you say, my l ocal bank hasnt mahe l oans to Thi rd Worl d
nati ons. Maybe not, but does your l ocal ~ank buy the CDs (certi -
fi cates of deposi t) of the bi g mul ti nati or@ banks? A l ot of l ocal
banks do. I f the bi g banks go down, so do a l ot of l ocal banks.
There wi l l be a defati l t. There must be a defaul t. God wi l l not
be mocl ed. We have del i beratel y subsi di zed evi l . We have poure~
money i nto forei gn gouewnent boondoggl es, and we have bought
forei gn gow-rmnent debt. We have not ai ded the future-ori ented
producti ve busi nessmen of the Thi rd Worl d. We have fi nanced
the soci al i st bureaucraci es that oppress them. We have not p,ut
our money i nto se~-[iquidating loans. We haye fi nanced deadbeat
governments wi th thei r deadwei ght projects. We wi l l pay the pri ce
for our fool i shness.
Debt and Mass I nfl ati on
But everyone i s i n debt. The government even subsi di zes i t by
al l owi ng us to wri te off mortgage i nterest payments agai nst our
i ncome when we cal cul ate our i ncome taxes. There has been an
orgy of debt over the l ast generati on.
:,
I
Th Rejorm of Debt 149
Look at the chart, publ i shed by the Federal Reserve System. -
I n 1950, total househol d debt was l ess than 35% of di sposabl e
(after-tax) personal i ncome. Today, i t i s over 85% of di sposabl e
i ncome. Thi s i s over a two-to-one i ncrease i n one generati on. I t
represents a radi cal shti t i n Ameri cans atti tudes toward debt.
HOUSEHOLD DEBT OUTSTANDING
PERCENT OF DISPOSABLE PERSONAL INCOME
AMOLWT OUTSTANDING. END OF YEAR. f9S0-Sti SEASONALLY ADJuSTEO, END OF QUARTER, 19.S2-
AATIO SCALE
( I I I r I I I I I I I I I I I I I I 1 1 I I I I 1 I I I I lwmmlw-
100
TOTAL LIABILITIES
60
- s o
/
CONSUMER
INSTALLMENT CUEDIT
- 20
ALL OTHER
&llll,, J,,,,,,,l,l,,,l l,ll,,l,,,lU

8
6
1950 1955 1960 1965 1970 !97s 19s0 fms
Because peopl e are so far i n debt, they thi nk they cant afford a
reducti on i n money i ncome, even to get a reducti on i n thei r
monthl y expenses. Thei r debts are fi xed i n terms of money. A
decrease i n thei r money i ncome woul d l ead to personal fi nanci al
destructi on. They fear bei ng evi cted from thei r homes. Thus, pol -
i ti cal l y speaki ng, there L m comti tuency~or a return, to honest, zeroj-ac-
tiorud reserue Ynon.9. There i s no pol i ti cal consti tuency for defl ati on.
God wants i t, but the voters dont. They want a l i ttl e i nfl ati on,
to hel p them pay off thei r debts.
But a l i ttl e i nfl ati on keeps on growi ng, and anythi ng that
150 Honat Money
keeps on growi ng becomes i ncredi bl y l arge eventual l y, the so-
cal l ed exp-onenti al growth probl em: Th~ money Su-ppl y wi l l
bal l oon. Pri ces wi l l skyrocket. But thi s i s what peopl e thi nk they
need. By destroyi ng the val ue of money, the government enabl es
l ong-term debtors to escape. They defraud thei r credi tors wi th
l egal i zed counterfei t money.
At the end of the great German hyperi ni l ati on i n November of
1923, the mark fel l i n the bl ack market to el even tri l l i on to the dol -
l ar. One economi st cal cul ated that the enti re debt of pre-War Ger-
many mortgages, reti rement obl i gati ons, commerci al bonds
coul d have been enti rel y pai d off wi th the German marks you
coul d have purchased wi th one-ei ghth of one Ameri can penny.
Summar y
There wi l l be a defaul t. The rel evant questi ons are: (1) When?
and (2) By what means? I predi ct: (1) before the end of the twen-
ti eth century; and (2) through mass i nfl ati on.
Then we wi l l al l be forced to fi nd a new currency and a new
currency system. We wi l l be forced to bui l d a new banki ng sys-
tem. We wi l l have an opportuni ty to create, for the fi rst ti me i n
modern hi story, a system of trul y honest money: rnurket-produced
momes coupl ed wi th 100% reseroe banking.
I t i s unl i kel y that we wi l l see peopl e vol untari l y turn to Gods
pri nci pl es, for they woul d be requi red to reduce thei r personal
and corporate debt to zero, and al so al l ow the government to cut
al l spendi ng programs and use the money to repay the debt. They
woul d have to avoi d al l debts beyond seven years. They woul d
have to requi re the banks to shri nk the money suppl y i n response
to the i mposi ti on of 1007o reserve banki ng.
No one wi l l repay debts wi th, money of todays purchasi ng
power personal , corporate, or State debts. The personal and
pol i ti cal costs woul d be too hi gh, starti ng rzght now, and too vi si -
bl e, starti ng ti ght now. Peopl e woul d rather suffer the horrors of
mass i nfl ati on, shortages, and bankruptcy Z&r. They prefer to
take the atti tude of pagans, the one whi ch Eccl esi astes consi dered
bri efl y and abandoned i n hi s search for true wi sdom:. . . a man
The Rejorm of Debt 151
has nothi ng better under the sun than to eat, dri nk, and be merry
. . . (Eccl esi astes 8:15b). I n short, eat, dri nk, and be merry, for
tomorrow we di e. I t i s the counsel of bankers and pol i ti ci ans. I t i s
the counsel of despai r.
But God wi l l not be mocked. There wi l l come an opportuni ty
for a new begi nni ng, after an i nternati onal fi nanci al cri si s of hi s-
tori cal y unprecedented proporti ons. The Chri sti ans job i s to
begi n obeyi ng Gods l aws i n advance, to show good fai th. A man
deepl y i n debt can be onl y hal f-hearted i n hi s commi tment to hon-
est, debt-free money. Now i s a good ti me to begi n getti ng out of
debt, so that you can i n good consci ence and ful l devoti on pro-
cl ai m the Bi bl i cal pri nci pl es of honest money.
BI BLI OGRAPHY
Grosecl ose, El gi n. Mong and Man: A Survg of MonetaV Experience.
4th edi ti on; Norman, Okl ahoma: Uni versi ty of Okl ahoma
Press, 1976.
Hol zer, Henry Mark. Government% Mong Monopo@ New Yor k:
Books I n Focus, 1981.
Mi ses, Ludwi g. The TheoV of Mong and Credit. Ori gi nal l y pub-
l i shed i n 1912. New Haven, Connecti cut: Yal e Uni versi ty Press,
1953. Repri nted by the Li berty Press, I ndi anapol i s, I ndi ana.
Phi l l i ps, C. A., McManus, T. F., and Nel son, R. W. Banking and
the Busi ness Cycl e: A Study of the Great Depression in the United States.
New York: Macmi l l an, 1936. Repri nted by Arno Press, New
Yor k.
Rothbard, Murray. Ameriea3 Great Depression. Pri nc&on, New Jer -
se y: Van Nostrand, 1963. Repri nted b y Sheed & Ward, Kansas
Ci ty, Kansas.
. Man, Econom~ and State. Chapter 11: Money and
I ts Purchasi ng Power. Pr@ceton: Van Nostrand, 1962. Re-
pri nted by New York Uni versi ty Press, New York Ci ty.
The Mystery of Banking. New York: Ri chardson&
Snyder, 1984.
. Mat Has Government Done to Our Mong? Ori gi -
nal l y publ i shed i n 1964. Di stri buted by the Foundati on for Eco-
nomi c Educati on, I rvi ngton-on-Hudson, New York.
. The Austri an Theory of Money, i n Edwi n G.
Dol an, edi tor : The Foynabtions of Modern Austrian Economics.
Kansas Ci ty, Kansas: Sheed & Ward, 1976.
153
154 Honest Money
. The Case for a 100 Per Cent Gol d Dol l ar, i n
Lel and B. Yeager, edi tor: I n Search of a Moneta~ Constitution.
Cambri dge, Massachusetts: Harvard Uni versi ty Press, 1962.
. Money, the State, and Modern Mercanti l i sm,
i n Hel mut Schoeck and James W. Wi ggi ns, edi tors: Central
Planning and Neornercantzlism. Pri nceton, New Jersey: Van Nos-
trand, 1964.
Rushdoony, R. J. Money and Soci ety i n the Bi bl e, i n Hans
Sennhol z, edi tor: Gold I s Money. Westport, Connecti cut: Green-
wood Press, 1975.
Sennhol z, Hans. Mung and Freedom. Spri ng Mi l l s, Pennsyl vani a:
Li bertari an Press, 1986.
Skousen, Mark. The Economics of a Pure Gold Stanakrd, Auburn
Uni versi ty; Auburn, Al abama: Ludwi g von Mi ses I nsti tute,
1986.
Stauffer, Ethel bert. Christ and the Caesars. Phi l adel phi a: Westmi n-
ster Press, 1955.
Tayl or, E. L. Hebden. Economics Mong and Banking. Nutl ey, New
Jeri ey: Crai g Press, 1978.
SCRI PTURE I NDEX
Ck?sesi s
212
24.53
47:14-17.
47:15
47:19-23
Exodus
3.22
20:15
22:11-12
22:22-24
22:25
22:26-27
23.10-11
30.12-14
Levtticus
1915
19.35-36
25:35-37
Deu&ronom>
15.1-2
15:1-3
15:12-15
17:6
28:1-14
28:12
2815-68
2843-44
319-13
19
21
-
11
7
15
21
37
37
46, 52
76
80
143
23
91
29
76-77
128
142
143
41
41
110, 144
41, 137
110, 144
9-13
OLD TESTAMENT
31.10-13 143
I Samuel
8. 14- 15 23
I I Samuel
24:1-17 23
I Kings
6 21
7:48-51 2 1
10:14 23
I I Kzn@
1519 19
23:33 23
I I C/ uontc&.s
7:14 123 \
25:6 23
27:5 23
.
Proverbs
13.22 77
20:23 113
22:7 143
22: ?b 103
28:8 77
Ecc[estites
8:15b 150-51
155
156
Honest Mong
I sai ah
1:21
1:22
1:23
1.24-26
1:25
E.zekael
1:4
16:13
22:18
Daniel
5.25-27
41
39, 49
41
132
40
21
22
40
32
Matthew
7:17-20 39
21:12 59
22:19-20 59
25:15-17 70
25.27 70
L u k e
6:45a 39
14:28-29 6
R e m a n s
5:8 45
13:8a Ki3, 144
Hosea
1:1
Amos
1:1
J onah
3:5-6
3:9-1o
Mzcah
1:1
NEW TESTAMENT
\ Ronums
13:8
41
41
124
9-1o
41
110
Z Corinthizm
3:13-15 4 0
13:12a 143
EPhesims
2:8 45
I I Peter
, 2:22 118
Revelation
20:15 40
SUBJECT I NDEX
AIDS, 137
Aldrich, Senator, 92-93
Ba b y l o n , 3 2
Bank of New York, 96
banki ng (central ), 125-27; see al so
Federal Reserve System
banks
brokerage, 73-74
charters, 108
deposi ts, 75, 76, 108
fai l ures, 94
runs, 82, 84, 86
warehouses, 36
Bl bhcsd l aw, 138
bl ack market, 56
bl uepri nts, 135-36
book value, 145-46
bribes, 41
Brasdia, 4
Brazil, 88
Bryan, William Jennings, 133-34
Byzatmum, 23, 104
Caesar, 59-60
calculation, 16, 25
Calvary, 40
capital, 8
Capitol I-iiU, 42
charity, 70
Christ, see Jesus
church, 132
Cleveland, Grover, 133
cloak, 80-81
coercion, 124
coin clipping, 31
corns, 42,59, 61-62, 104
collateral, 80-81
committee, 24-26
commodity money, 15
cornpetmon, 25, 103, 124
computer fadure, 96
Constitution, 105
consumers, 52, 135
contracts, 106, 111, 114
corruption, 41-42, 47, 49-50, 52,
55, 57
counterfeiting, 35-36, 66-67, 86-88
aeation, 25
crime, 41
three kinds, 91-92
Crusoe
calculating, 16-17
economists, 7
money, 10
death, 23, 41
debasement, 54-55, 57, 61, 111;
see also corruption, inflatlon
debt
bondage, 143-44
default, 150
emergency, 144
getting out, 151
mflatlon, 148-50
multiple, 81-83, 89, 103, 124
swaps, 129, 146-47
Thwd World, 4-5, 129, 139, 144-45
Tiwasury, 95, 97, 129
default, 148, 150
157
.
158 Honest Mong
deflation, 84-85, 128, 130
Defoe, Damel, 7
depression, 85
dictators, 147-48,
dlsclpline, 29-30
Drew, Dan, 31
dross, 39, 44, 46,
economists, 3, 5,
Egypt, 11-12, 15,16
elastlc currency, 94
exchange, 11-12,,25, see also trade
FDIC, 99-100
Federal Reserve
abolmon, 127
audit, 97-98, 1126
g o l d , 1 2 6
ongms, 92-93
ownership, 95 i
food, 11-12, 14-15
Forbes, 92
fractional reserves, 86-87
fraud, 31, 33, 43,, 113, 124
freedom & dlsci@ne, 30
future, 17
gift, 45
glory cloud, 21
God,
all-knowing, 135
blessings, 144
creation, 25
glory cloud, 21
Judge, 32,37,43
scales of, 32
social order, 135
gold, 82, 98, 104-5, 126
Crusoe, 10
Havilah, 19
money, 21
properties
-
gold coins, 104
gold stanpard, 100-1, 106-8, 116-18,
125, 130-31
Great Depression, 94
greenbacks, 132-33
Greshams law, 52-54, 104, 105
Havilah, 19
hermn, 124
income, 71
inflation, 45-46, 64, 83-84, 94, 140
debasement, 51-52
debt, 148-50
tax, 66, 101 I
information, 25, 73, 115, 135-36
insurance, 99-100
interest, 71-73
interest rates, 85, 96
rows, 4
Jackson, Andrew, 134
Jekyll Island, 92-93
Jesus, 46,49,59-60, 71
Jews, 94
Jonah, 123
Joseph, 11-12
Judge, 32,37
JustIce, 32,43
knowledge, 25, 135-36
land, 72
larceny, 68
law, 138
LDCS, 4
leadership, 5
legal tender, 103., 107, 124
leaven, 52, 57
loan, charitable, 80-81
loans
charitable, 76-77
charq, 70
forqner, 110
Subject I ndex
159
gwing up money, 75-76
time-specific, 109
risky, 101
Mareos, President, 4
market, 24
Marx, Karl, 66, 136
Mexico, 88, 91-92, 145
Middle Ages, 23
middleman, 73-74
Mlses, Ludwig, 20
mobdity, 144
monetary theory, 124
money
Biblical, 131
calculation, 16, 25
Commodity, 2!2
debt, 103
fraud, 35
freedom, 16
fume, 20
future accesslbdity, 27
monopoly, 26, 43, 59-67,
105, 115-16
most marketable commod]ty, 15
not invented, 26
ongm of, 20-21, 24
paper, 34-36, 63-64
prmc]ples, 114, 124
prmclples of, 138
properties, 13-14, 21
socml product, 14-16
sohtude vs., 10
State-affirmed, 22
State-created?, 24
substitute, 35
trade, 15, 17-
use of, 75-76
voluntary, 27
warehouse receipt, 36
weight, 33
yesterday, 20
monopoly, 59-67, 105, 115-16,
.
Moses, 19
murder, 41
Ni neveh, 123
Ol d Testament, 5
oppressi on, 52, 144-45
paral l el standards, 107
Pemex, 91-92
peso, 3-4, 34
pol mcs, 137-38
preferences, 7-8
pri ce control s, 56, 105-6, 140
pri ces, 55-56, 68, 113
prlmltive econ omy, 16
principles of money, 114, 138
priorities, 7-8
profit, 71, 78
prophets, 41, 47
purging, 40,
pyramids, 4
quality, 54-56
quick fixes, 146-47
rationing, 140
recession, 93, 96
reputation, 77-78
revolution, 123, 137
risk, 74
Robinson Crusoe (see Crusoe)
Rockefeller, Nelson, 92
Rolls-Royce, 71-72
Rome, 59-60
Sabbatical year, 1+2-43
Satan, 32
scales, 30-32, 43
self-deception, 55
ship, 8-9
silver, 23, 44-45, 47, 63, 104-5
salver corns, 42
160
Honest Mong
silversmiths, 51-52, 54, 62
slavery, 143-44
Social Credit, 132
socml order, 137
Solomon, 23
somethmg for no+ing, 55-56, 96,
114, 118
sovereignty, 60-61, 107
special interests, 134
standards, 30
-
State
a.t%rming money, 22
certified money, 114
monopoly, 59:67
substitute God,, 136
trust, 62
subjective value, 9
Swltzerlanci, 4
talents, 70
taxes, 22-23, 61, 64-66, 101
tax revolt, 95
temple, 21
theologians, 5
Tiberms Caesar, 60
tools, 8-9
trade, 15
Treasury
assets, 127
debt, 95, 97, 129
tribute, 23
trust, 104
usury, 70
value, 12
future, 9, 17, 20
subjective, 9
vomit, 118
wages, 55
Warburg, Paul, 92
warehouse receipt(s), 36, 82, 83-84,
88, 114, 116
Washington, D. C., 42
watered stock, 31
wealth, 136
weights and measures, 29, 43-44,
103, 116, 131
widow, 41, 46
Wilson, Woodrow, 134
wine-making, 50-51
withdrawal, 129
withdrawals, 108-9
yeast, 57
I ,!, .
I
WHAT ARE BI BLI CAL BLUEPRI NTS?
by Gary N&h
How many ti mes have you heard thi s one?
The Bi bl e i snt a textbook of. . .
Youve heard i t about as many ti mes as you ve heard thh one:
The Bi bl e doesnt provi de bl uepri nts for . . .
The odd fact i s that some of the peopl e who assure you of thi s
are Chri sti ans. Neverthel ess, i f you ask them, Does the Bi bl e
have answers for the probl ems of l i fe? youl l get an unqual i fi ed
yes for an answer.
Questi on: I f the Bi bl e i snt a textbook, and i f i t doesnt provi de
bl uepri nts, then just how, speci fi cal l y and concretel y, does i t pro-
vi de answers for l i fes probl ems? Ei ther i t answers real -l i fe prob-
l ems, or i t doesnt.
I n short: noes the Bible make a d@rence?
Lets put i t another way. I f a mass revi val at l ast hi ts thi s na-
ti on, and i f mi l l i ons of peopl e are regenerated by Gods grace
through fai th i n the savi ng work of Jesus Chri st at Cal vary, wi l l
thi s change be vi si bl e i n the way the new converts run thei r l i ves?
Wi l l thei r pol i ti cs change, thei r busi ness deal i ngs change, thei r
f&rni l i es change, thei r fami l y budgets change, Wd thei r church
membershi p change?
I n short: Wi l l conversi on make a vi si bl e di fference i n pur per-
sonrd l i ves? I f not, why not?
(
Second, two or three years l ater, wi l l Congress be voti ng for a
di ferent ki nd of defense pol i cy, forei gn rel ati ons pol i cy, envi ron-
mental pol i cy, i mmi grati on pol i cy, monetary pol i cy, and so forth?
161
162
I
Honest Mong
-
Wi l l the Feder bl budget change? I f not, Why not?
I n shoti wi l l conversi on to Chri st make a vi si bl e di fference i n
our ci vi l i zati on? I f not, why not?
The Great Commi ssi on -
1
What the Bi bl i cal Bl uepri nts Seri es ~ attempti ng to do i s to
outl i ne what some of that vi si bl e dl fferen~e i n ow cul ture ought to
be. The autho~s are attempti ng to set forth, i n cI ear l anguage,joz-
o?anental Bzblicc# Printifiles in numerous speci fi c areas of l i fe. The
authors are not content to speak i n vague general i ti es.. These
books not onl ~ set forth expl i ci t pri nci pl es that are found i n the
Bi bl e and deri ~ed from the Bi bl e, they al so offer speci fi c practi cal
-
suggesti ons a~out what thi ngs need to, be changed, and how
Chri sti ans can begi n programs that wi l l produce these many
changes.
The autho$s see the task of Ameri can Chri sti ans just as the
Puri tans who t+ame to North Ameri ca i n the 1630s saw thei r task:
to establish a ci~ on a hill (Matthew 5:14). The authors want to see a
Bi bl i cal recond~mcti on of the Uni ted States, so that i t can serve as
an exampl e toi be fol l owed al l over the worl d. They bel i eve that
Gods pri nci pl es are tool s of evangel i sm~ to bri ng the nati ons to
Chri st. The B~bl e promi ses us that these pri nci pl es wi l l produce
such good frui t that the whol e worl d wi l l marvel (Deuteronomy
4:5-8). When nati ons begi n to marvel , they wi l l begi n to soften to
- the message o! the gospel . What the authors are cal l i ng for i s com-
, prehensive reuiutd a revi val that wi l l transform everythi ng on
ear th.
I n other w~rds, the authors are cal l i ng Chri sti ans to obey God
and take up tl +e Great Commi ssi on: to discijlZe (di sci pl i ne) al l the
nati ons of the earth (Matthew 28:19).
What each author argues i s that there are God-requi red pri n-
ci pl es of thought and practi ce i n areas that some peopl e today be-
l i eve to be outsi de the ar ea of rel i gi on. What Chri sti ans shoul d
know by now i s that notrbng l i es outsi de rel i gi on. God i s judgi ng al l
of our thoughts and acts, judgi ng our i nsti tuti ons, and worki ng
through humdn hi story to bri ng thi s worl d to a fi nal judgment.
What Are Biblical Blue~rints? 163
We present the case that God offers comprehensive salvation r e-
generati on, heal i ng, restorati on, and the obl i gati on of total soci al
reconstructi on because the worl d i s i n comprehenszue sin.
To judge the worl d i t i s obvi ous that God has to have stand-
ards. I f there were no absol ute standards, there coul d be no
earthl y judgment , and no fi nal judgment because men coul d not
be hel d accountabl e.
(Warni ng: these next few paragraphs are very i mportant.
They are the base of the enti re Bl uepri nts seri es. I t i s i mportant
that you understand my reasoni ng. I real l y bel i eve that i f you un-
derstand i t, you wi l l agree wi th i t.)
To argue that Gods standards dont appl y to everythi ng i s to
argue that si n hasnt affected and i nfected evtyythi ng. To argue
that Gods Word doesnt gi ve us a revel ati on of Gods requi rements
for us i s to argue that we are fl yi ng bl i nd as Chri sti ans. I t i s to
argue that the? are zoms of moral neutrality that God wi l l not judge,
ei ther today or at the day of judgment, because these zones some-
how are out.nb!e Hfijur&dz2tion. I n short, no l aw-no juri sdi cti on?
But i f God does have juri sdi cti on over the whol e uni verse,
whi ch i s what every Chri sti an bel i eves, then there must be uni ver-
sal standards by whi ch God executes judgment. The authors of
thi s seri es argue for Gods comprehensive judgment, and we decl are
Hi s comprehensive salvation. We therefore are presenti ng a few of
Hi s comprehensive blue@ints.
The Concept of Bl uepri nts
An archi tectural bl uepri nt gi ves us the structural requi re-
ments of a bui l di ng. A bl uepri nt i snt i ntended to tel l the owner
where to put the furni ture or what col or to pai nt the rooms. A
bl uepri nt does pl ace l i mi ts on where the furni ture and appl i ances
shoul d be put l aundry here, ki tchen there, etc. but i t doesnt
take away our personal opti ons based on personal taste. A bl ue-
pri nt just speci fi es what must be done duri ng constructi on for the
bui l di ng to do i ts job and to survi ve the test of ti me. I t gi ves di rec-
164 Honest Money
ti on to the contractor. Nobody wants to be on the twel fth fl oor of a
bui l di ng that col l apse?.
Today, we are unquesti onabl y on the twel fth fl oor, and maybe
even the fi fti eth. Most oftoda~s bui l di ngs (i nsti tuti ons) were de-
si gned by humani sts, for use by humani sts, but pai d for mostl y by
Chri sti ans (i nvestments, donati ons, andtaxes). These %ui l di ngs
arent safe. Chri sti ans (and a l ot of non-(l mi i ti ans) now are hear-
i ng the creakhg and groani ng of these totteri ng bui l di ngs. Mi l -
l i ons of peopl e have now concl uded that i ts ti me to: (1) cal l i n a
total l y new team of foundati on and structural speci al i sts to begi n
a compl ete renovati on, or(2) hi re the ori gi nal contractors to make
at l east temporary structural modi fi cati ons unti l we can al l move
to safer quarters, or (3) cal l for an emergency hel i copter team
because ti me has just about run out, and the el evators arent safe
e i t h e r .
The wri ters of thi s seri es bel i eve that the fi rst opti on i s the wi se
one: Chri sti ~s need to rebui l dl he foundati ons, usi ng the Bi bl e as
thei r gui de. Thi s vi ew i s i gnored by those who sti l l hope and pray
for the thi rd dpproach: Gods hel i copter escape. Fi nal l y, those who
have fai th i n mi nor structural repai rs dont tel l us what or where
these hoped-for szke quarters are, or how humani st contractors
are goi ng to bui l d them any safer next ti me.
Why i s i t ~that some Chri sti ans say that God hasnt drawn up
any bl uepri nts? I f God doesnt gi ve us bl uepri nts, then who does?
I f God does~t set the permanent standards, then who does? I f
God hasnt any standards to judge men by, then who judges man?
The hum@sts answer i s i nescapabl e: man does autonomous,
desi gn-i t-yoursel f, do-i t-yoursel f man. Chri sti ans cal l thi s man-
gl ori fyi ng r el i gi on the rel i gi on of humani sm. I t i s amazi ng how
many Chri sti ans unti l qui te recentl y have bel i eved humani sms
fi rst doctri nal poi nt, namel y, that God has not establ i shed per-
manent bl ue@nts for man and mani i nsti tuti ons. Chri sti ans who
hol d such a vi ew of Gods l aw serve as humanism% chaplains.
Men are ~Gods appoi nted contractors. We were never sup-
posed to draw up the bl uepri nts, but we are supposed to execute
them, i n hi story and then after the resurrecti on. Men have been
I ,, I 1,
What Are Bibhcal Blueprints? . 165
gi ven domi ni on on the earth to subdue i t for Gods gl ory. So God
created man i n Hi s own i mage; i n the i mage of God He created I
hi m; mal e and femal e He created them. Then God bl essed them,
and God sai d to them, Be fi -ui tful ,and mul ti pl y; fi l l the earth and
subdue i t; have domi ni on over the fi sh of the sea, over the bi rds of
the ai r, and over every l i vi ng thi ng that moves on the earth
(Genesi s 1:27-28).
Chri sti ans about a century ago deci ded that God never gave
them the responsi bi l i ty to do any bui l di ng (except for churches).
That was just what the humani sts had been wai ti ng for. They i m-
medi atel y stepped i n, took over the job of contractor (Someone
has to do i t !), and then announced that they woul d al so be i n
charge of drawi ng up the bl uepri nts. We can see the resul ts of a
si mi l ar asserti on i n Genesi s, chapter 11: the tower of Babel . Do
you remember Gods response to that parti cul ar humani sti c pub-
l i c works project?
Never Be Embarrassed By the Bi bl e
Thi s sounds si mpl e enough. Why shoul d Chri sti ans be embar-
rassed by the Bi bl e? But they are embarrassed . . . mi l l i ons of
them. The humani sts have probabl y done more to sl ow down the
spread of the gospel by convi nci ng Chri sti ans to be embarrassed
by the Bi bl e than by any other strategy they have adopted.
Test your own thi nki ng. Answer thi s questi on: I s God mostl y
a God of l ove or mostl y a God of wrath? Thi nk about i t before
you answer.
I ts a tri ck questi on. The Bi bl i cal answer i s: God i s equal l y a
God of l ove and a God of wrath. But Chri sti ans these days wi l l
general l y answer al most automati cal l y, God i s mostl y a God of
l ove, not wrath.
Now i n thei r hearts, they know thi s answer cant be true. God
sent Hi s Son to the cross to di e. Hi s own Son! Thats how much
God hates si n. Thats wrath wi th a capi tal V.
But why di d He do i t? Because He l oves Hi s Son, and those
who fol l ow Hi s Son. So, you just cant tal k about the wrath of God
wi thout tal ki ng about the l ove of God, and vi ce versa. The cross i s
166 HonestMong ~
the best proof we have: God i s both wrathful and l ovi ng. Wi thout
the fi res of hel l as the reason for the cr@s, the agony of Jesus
Chri st on the ~ross was a mi stake, a case of drasti c overkfl l .
What abou~ heaven and hel l ? We know from Johns vi si on of
the day of judgment, Death and Hades [hel l ] were cast i nto the
l ake of fi re. Thi s i s the second death. And anyone not found wri t-
ten i n the Book of Li fe was cast i nto the l ake of fi re (Revel ati on
20:14-15). ~
Those whose names are i n the Book of,Li fe spend eterni ty wi th
God i n thei r perfect, si n-free, resurrected bodi es. The Bi bl e cal l s
thi s the New I #eaven and the New Earth.
Now, whi ch i s more eternal , the l ake of fi re, or the New
Heaven and ti p New Earth? Obvi ousl y, +ey are both eternal . So,
Gods wrath i s equal l y ul ti mate wi th Hi s l ove throughout eterni ty.
Christians all a~mit this, but someti mes onl y under extreme pres-
sure. And tha~ i s preci sel y the probl em. ,
For over a hundred years, theol ogi cal l i beral s have bl athered
on and on about the l ove of God. But when you ask them, What
about hel l ? ~ey start danci ng verbal l y. I f you press them, they
eventual l y deny the exi stence of eternal ,judgment. We must un-
derstand: they; have no doctri ne of the total l ove of God because
they have no doctri ne of the total wrath of God. They cant real l y
understand what i t i s that God i s Hi s grace offers us i n Chri st
because they refuse to admi t what eternal judgment tel l s us about
the character pf God.
The doctri ne of eternal fi ery judgment i s by far the most unac-
ceptabl e doctri ne i n the Bi bl e, as far as hel l -bound humani sts are
concerned. T~y cant bel i eve that Chri sti ans can bel i eve i n such
a horror. But we do. We must. Thi s bel i ef i s the foundati on of
Chri sti an evai gel i srn. I t i s the moti vati on for Chri sti an forei gn
mi ssi ons. We shoul dnt be surpri sed that the God-haters woul d
l i ke us to drop thi s doctri ne. When Chri sti ans bel i eve i t, they
make too much troubl e for Gods enemi es.
So i f we bel i eve i n thi s doctri ne, the doctri ne above al l others
that ought to embarrass us before humani sts, then why do we
start to squi rm when God-hati ng peopl e ask us: Wel l , what ki nd
What Are Biblical Blueprints? 167
of God woul d requi re the death penal ty? What ki nd of God woul d
send a pl ague (or other physi cal judgment) on peopl e, the way He
sent one on the I srael i tes, ki l l i ng 70,000 of them, even though
they had done nothi ng wrong, just because Davi d had conducted a
mi l i tary census i n peaceti me (2 Samuel 24:10-16)? What ki nd of God
sends AI DS? The proper answer: The God of the Bi bl e, my God.
Compared to the doctri ne of eternal puni shment, what i s some
-
two-bi t judgment l i ke a pl ague? Compared to eternal screami ng
agony i n the l ake of fi re, wi thout hope of escape, what i s the death
penal ty? The l i beral s try to embarrass us about these earthl y
down payments on Gods fi nal judgment because they want to
ri d the worl d of the i dea of fi nal judgment. So they i nsul t the char-
acter of God, and al so the character of Chri sti ans, by sneeri ng at
the Bi bl es account of who God i s, what He has done i n hi story,
and what He requi res from men.
Are you ti red of thei r sneeri ng? I know I am.
Nothing in the Btble shbuld be an embawassment to any Christian. We
may not know for certai n preci sel y how some Bi bl i cal truth or hi s-
tori c event shoul d be properl y appl i ed i n our day, but every hi stori c
record, l aw, announcement, prophecy, judgment, and warni ng i n
the Bi bl e i s the very Word of God, and i s not to be fl i nched at by
anyone who cal l s hi msel f by Chri sts name.
.,
We must never doubt that whatever God di d i n the Ol d Testa-
ment era, the Second Person of the Tri ni ty al so di d. Gods counsel
and judgments are not di vi ded. We must be careful not to regard
Jesus Chri st as a sort of uni ndi cted co-conspi ratofl when we read
the Ol d Testament. For whoever i s ashamed of Me and My
words i n thi s adul terous and si nful generati on, of hi m the Son of
Man al so wi l l be ashamed when He comes i n the gl ory of Hi s
Father wi th the hol y angel s (Mark 8:38).
My poi nt here i s si mpl e. I f we as Chri sti ans can accept what i s
a very hard pri nci pl e of the Bi bl e, that Chri st was a bl ood sacri fi ce
for our i ndi vi dual si ns, then we shoul dnt fl i nch at accepti ng any
of the rest of Gods pri nci pl es. As we joyful l y accepted Hi s sal va-
ti on, so we must joyful l y embrace al l of Hi s pri nci pl es that affect
any and every area of our l i ves.
168 Honest Mony
The Whol e Bi b~e
I
,,
When, i n; a cour t of l aw, the wi tness puts hi s hand on the Bi bl e
and swears to~tel l the truth, the whol e ~th, and nothi ng but the
truth, so hel p hi i n God, he thereby swears on the Word of God
the whole Word of God, and nothing but the Word of God. The
Bi bl e i s a uni t. I ts a package deal . The New Testament doesnt
overturn the Ol d Testament; i ts a commentary on the Ol d Testa-
ment. I t tel l s us how to use the Ol d Testament properl y i n the per-
i od after the death and resurrecti on of I srael s messi ah, Gods Son.
Jesus sai d; Do not thi nk that I came to destroy the Law or the
Prophets. I di d not come to destroy but to ful fi l l . For assuredl y, I
say to you, ti l l heaven and earth pass away, one jot or one ti ttl e
wi l l by no means pass from the l aw. ti l l al l i s ful fi l l ed. Whoever
therefore breaks one of the l east of these commandments, and
teaches men to do so, shal l be cal l ed l east i n the ki ngdom of
heaven; but whoever does and teaches them, he shal l be cal l ed
great i n the ki ngdom of heaven (Matthew 5:17-19). The Ol d Tes-
tament i snt a di scarded fi rst draft of Gods Word. I t i snt Gods
Word emeri tus.
Domi ni on Chri sti ani ty teaches that there are four covenants
under God, meani ng four ki nds of vows under God: personal (i n-
di vi dual ), and the three i nsti tuti onal covenants: eccl esi asti cal (the
church), ci vi l (governments), and fami l y. AU other human i nsti tu-
ti ons (busi ness, educati onal , chari tabl e, etc.) are to one degree or
other under the juri sdi cti on of these four covenants. No si ngl e
covenant i s absol ute; therefore, no si ngl e i nsti tuti on i s al l -power-
ful . Thus, Cl @ti an l i berty i s l i berty under God and God!s / aw.
Chri sti ani ty therefore teaches pl ural i sm, but a very speci al
ki nd of pl ural i sm: pl ural i nsti tuti ons under Gods comprehensi ve
l aw. I t does not teach a pl ural i sm of l aw structures, or a pl ural i sm
of moral i ti es, I for as we wi l l see shortl y, thi s sort of ul ti mate pl ural -
i sm (as di sti n~i shed from institutional pl ural i sm) i s al ways ei ther
pol ythei sti c or humani sti c. Chri sti an peopl e are requi red to take
domi ni on over the earth by means of al l these God-ordai ned i nsti -
tuti ons, not just the church, or just the state, or just the fami l y.
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W$at Are Biblical Bluefirznts? 169
The kingdom of God include-s every human institution, and every aspect of
lfe, for all of lfe is under God and is governed by His unchangmg@nci-
Pies. Al l of l i fe i s under God and Gods pri nci pl es because God i n-
tends to @dge al l of l i fe in terms of Hi s pri nci pl es.
I n thi s structure ofpl ural governments, the i nsti tuti onal churches
serve as aduisors to the other i nsti tuti ons (the Levi ti cal fi -mcti on),
but the churches can onl y pressure i ndi vi dual l eaders through the
~ threat of excommuni cati on. As a restrai ni ng factor on unwar-
ranted church authori ty, an unl awful excommuni cati on by one
l ocal church or denomi nati on i s al ways subject to revi ew by the
others i f and when the excommuni cated person seeks membershi p
el sewhere. Thus, each of the three covenanta.1 i nsti tuti ons i s to be
run under God, as i nterpreted by i ts l awful l y el ected or ordai ned
l eaders, wi th the advi ce of the churches, not the compul si on.
Majori ty Rul e
Just for the record, the authors arent i n favor of i mposi ng
some sort of top-down bureaucrati c tyranny i n the name of
Chri st. The ki ngdom of God requi res a bottom-up soci ety. The
bottom-up Chri sti an soci ety rests ul ti matel y on the doctri ne of
se~-government under God. I ts the humani st vi ew of soci ety that
prpmotes top-down bureaucrati c power.
The authors are i n favor evangel i sm and mi ssi ons l eadi ng to a
wi despread Chri sti an revi val , so that the great mass of earths i n-
habi tants wi l l pl ace themsel ves under Chri sts protecti on, and vol -
untari l y use Hi s covenantal pri nci pl es for sel f-government. Chri s-
ti an reconstructi on begi ns wi th personal conversi on to Chri st and
sel f-government under Gods pri nci pl es, then spreads to others
through revi val , and onl y l ater bri ngs comprehensi ve changes i n
ci vi l l aw, when the vast majori ty of voters vol untari l y agree to l i ve
under Bi bl i cal bl uepri nts.
Lets get thi s strai ght: Chri sti an reconstructi on depends on
majori ty rul e. Of course, the l eaders of the Chrrsti an reconstruc-
ti oni st movement expect a majori ty eventual l y to accept Chri st as
savi or. I f thi s doesnt happen, then Chri sti ans must be content
wi th onl y parti al reconstructi on, and onl y parti al bl essi ngs from
170 Horuxt Money
God. I t i snt possi bl e to ramrod Gods! bl essi ngs from the top
down, unl ess ~oure God. Onl y humani sts thi nk that man i s God.
Al l were tryi ng to do i s get the ramrod away from them, and mel t
i t down. The ~l ted ramrod coul d then ,be used to make a great
grave marker for humani sm: The God That Fai l ed.
The Conti nui ng Heresy of Dual i sm
Many (of course, not al l !) of the objecti ons to the materi al i n
thi s book seri e~ wi l l come from peopl e who have a worl dvi ew that
i s very cl ose to an anci ent church probl em: dual i sm. A l ot of wel l -
meani ng Chri sti an peopl e are dual i sts, al though they dont even
know what i t i s.
Dual i sm teaches that the worl d i s i nherentl y di vi ded: spi ri t vs.
matter, or l aw VS: mercy, or mi nd vs. matter, or nature vs. grace.
What the Bi bl e teaches i s that thi s worl d i s di vi ded ethically and &r-
sondy: Satan vs. God, ri ght vs. wrong. The confl i ct between God
and Satan wi l l end at the fi nal judgment. Whenever Chri sti ans
substi tute some other form of dual i sm for ethi cal dual i sm, they fal l
i nto heresy and suffer the consequences. That% what has happened
today. We are sufferi ng from revi ved versi ons of anci ent heresi es.
Marc~on~ Dua~tim
The Ol d Testament was wri tten by the same God who wrote
the New Testament. There were not two Gods i n hi story, mean-
i ng there was no dual i sm or radi cal spl i t between the two testa-
mental peri ods. There i s onl y one God, i n ti me and eterni ty.
Thi s i dea ~has had opposi ti on throughout church hi story. An
anci ent two-Gods heresy was fi rst promoted i n the church about a
century after Chri s~s cruci fi xi on, and the church has al ways re-
garded i t as just that, a heresy. I t was proposed by a man named
Marci on. Basi cal l y, thi s heresy teaches that there are mo compl etel y
di fferent l aw systems i n the Bi bl e: Ol d Testament l aw and New
Testament l ay (or non-l aw). But Marci on took the l ogi c of hi s
posi ti on al l the way. He argued that two l aw systems means two
Gods. The God of wrath wrote the Ol d Testament, and the God of
mercy wrote the New Testament. I n short: two l aws-two Gods.
What Are Bzb[ical Bhieprmts? 171
Many Chri sti ans sti l l bel i eve somethi ng dangerousl y cl ose to
Marci oni sm: not a two-Gods vi ew, exactl y, but a God-who-
changed-al l -Hi s-rul es sort of vi ew. They begi n wi th the accurate
teachi ng that the ceremoni al l aws of the Ol d Testament were ful -
fdl ed by Chri st, and therefore that the zmch.angzkgprinc@les of Bi bl i - P
cal worshi p are apphed dz$erent~ i n the New Testament. But then
they erroneousl y concl ude that the whol e Ol d Testament system
of ci vi l l aw was dropped by God, and nothing Biblical was put an i ts
@zce. I n other words, God created a sort of vacuum for state l aw. ,
Thi s i dea turns ci vi l l aw-mti i ng over to Satan. I n our day,
thi s means that ci vd l aw-maki ng i s turned over to humani sts.
Christians have unwitting~ become thephdosophical allies ojthe hurnanzsts
with respect to civd law. Wi th respect to thei r doctri ne of the state,
therefore, most Chri sti ans hol d what i s i n effect a two-Gods vi ew
of the Bi bl e.
Gnostictim3 Dualism
Another anci ent heresy that i s sti l l wi th us i s Gnosti ci sm. I t
became a major threat to the earl y church al most from the begi n-
ni ng. I t was al so a form of dual i sm, a theory of a radi cal spl i t. The
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gnosti cs taught that the spl i t i s between evi l matter and good
spi ri t. Thus, thei r goal was to escape thi s materi al worl d through
other-worl dl y exerci ses that puni sh the body. They bel i eved i n re-
treatfiom the world of human conzd-s and responsibzhp. Some of t~ese
i deas got i nto the church, and peopl e started doi ng ri di cul ous
thi ngs. One sai nt sat on a pl atform on top of a pol e for several ,
decades. Thi s was consi dered very spi ri tual . (Who fed hi m? Who
cl eaned up after hi m?)
Thus, many Chri sti ans came to vi ew the worl d as somethi ng
permanentl y outsi de the ki ngdom of God. They bel i eved that thi s
hosti l e, forever-evi l worl d cannot be redeemed, reformed, and re-
constructed. Jesus di dnt real l y di e for i t, and i t cant be heal ed. At
best, i t can be subdued by power (maybe). Thi s dual i sti c vi ew of
the worl d vs. Gods ki ngdom narrowl y restri cted any earthl y man-
i festati on of Gods ki ngdom. Chri sti ans who were i nfl uenced by
Gnosti ci sm concl uded that Gods ki ngdom refers onl y to the i nsti -
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;Honest Money
tuti onal chur~. They ar~ed that the i nsti tuti onal church i s the
ody mani festati on of Gods ki ngdom. )
Thi s l ed tol two oppqsi te and equal l ~ evi l concl usi ons. First, I
power rel i gi oni sts (saki ti on through pol i ti cal power) who ac-
cepted thi s defi ni ti on of Gods ki ngdom tri ed to put the i nsti tu-
ti onal church i n charge of everythi ng, si ~ce i t i s supposedl y the
onl y mani fest~ti on of Gods ki ngdom on earth. To subdue the
supposedl y unredeemabl e worl d, whi cti i s forever outsi de the
ki ngdom, the i nsti tuti onal church has to rul e wi th the sword. A
si ngl e, monol i thi c i nsti tuti onal church then gi ves orders to the
state, and the ~state must wi thout questi on enforce these orders
wi th the sword~. The hi erarchy of the i nsti tuti onal church concen-
trates pol i ti cal ~and economi c power. What then becomes of liberty?
Second, escape rel i gi oni sts (sal vati on; i s excl usi vel y i nternal )
who al so accepted thi s narrow defi ni ti on of the ki ngdom sought
refuge from the evi l worl d of matter and pol i ti cs by fl eei ng to hi de
i nsi de the i nsti tuti onal church, an excl usi vel y spi ri tual ki ngdom,
now narrowl y defi ned. They abandoned the worl d to evi l tyrants.
Mat then becomes of l i beny?<what becomes~of the i dea of Gods pro-
gressi ve restorati on of al l thi ngs und~r Jesus Chri st? What,
fi nal l y, becomes of the i dea of Bi bl i cal domi ni on?
When Ch~i sti ans i mproperl y narroti thei r defi ni ti on of the
ki ngdom of G~d, the vi si bl e i nfl uence of thi s comprehensi ve ki ng-
dom (both spi ri tual and i nsti tuti onal at the same ti me) begi ns to
shri vel up. Th+ fi rst heresy l eads to tyranny by the church, and the
second heresy l eads to tyranny over the church. Both of these nar-
row defi ni ti ons of Gods ki ngdom destroy the l i berty of the respon-
si bl e Chri sti an man, sel f-governed under God and Gods l aw.
Zoroaster Dualism
The l ast ati ci ent pagan i dea that sti l l l i ves on i s al so a vari ant
of dual i sm: matter vs. spi ri t. I t teaches that God and Satan, good
and evi l , are forever l ocked i n combat, and that good never tri um-
phs over evi l . The Persi an rel i gi on of Zoroastri ani sm has hel d
such a vi ew for over 2,500 years. The i ncredi bl y popul ar Star
Wars movi es were based on thi s vi ew of the worl d: the dark si de
of the force agai nst i ts l i ght si de. I n modern versi ons of thi s an-
What Are Biblical Blueprints? 173
ci ent dual i sm, the force i s usual l y seen as i tsel f i mpersonal : i ndi -
vi dual s personal i ze ei ther the dark si de or the l i ght si de by pl ug-
gi ng i nto i ts power.
There are mi l l i ons of Chri sti ans who have adopted a very pes-
si mi sti c versi on of thi s dual i sm, though not i n an i mpersonal
form. Gods ki ngdom i s battl i ng Satans, and Gods i s l osi ng. Hi s-
tory i snt goi ng to get better. I n fact, thi ngs are goi ng to get a l ot
worse external l y. Evi l wi l l vi si bl y push good i nto the shadows.
The church i s l i ke a band of sol di ers who are surrounded by a
huge army of I ndi ans. We cant wi n boys, so hol d the fort unti l
Jesus comes to rescue us!
That doesnt sound l i ke Abraham, Moses, Joshua, Gi deon,
and Davi d, does i t? Chri sti ans read to thei r chi l dren one of the
chi l drens favori te stori es, Davi d and Gol i ath, yet i n thei r own
l i ves, mi l l i ons of Chri sti an parents real l y thi nk that the Gol i aths
of thi s worl d are the unbeatabl e earthl y wi nners. Chri sti ans
havent even pi cked up a stone.
Unti l very recentl y.
An Agenda for Vi ctory
The change has come si nce 1980. Many Chri sti ans thi nki ng
has shi fted. Dual i sm, Gnosti ci sm, and God changed Hi s program
mi dstream i deas have begun to be chal l enged. The pol i ti ci ans
have al ready begun to reckon wi th the consequences. Pol i ti ci ans
are the peopl e we pay to rai se thei r wet i ndex fi ngers i n the wi nd to
sense a shi ft, and they have sensed i t. I t scares them, too. I t shoul d.
A new vi si on has captured the i magi nati ons of a growi ng army
of regi stered voters. Thi s new vi si on i s si mpl e: i ts the ol d vi si on of
Genesi s 1:27-28 and Matthew 28:19-20. I ts cal l ed domi ni on.
Four di sti nct i deas _must be present i n any i deol ogy that ex-
pects to overturn the exi sti ng vi ew of the worl d and the exi sti ng
soci al order:
A doctri ne of ul ti mate truth (permanence)
A doctri ne, of provi dence (contl dence)
Opti mi sm toward the future (moti vati on)
Bi ndi ng comprehensi ve l aw (reconstructi on)
1 7 4 Honest Mony
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The Marxi sts have had such a vi si on, or at l east those Marx-
i sts who dont l i ve i nsi de the bureaucrati c gi ants cal l ed the Sovi et
Uni on and Red Chi na. The radi cal (pl e+e, not fundamental i st)
Musl i ms of I ran al so have such a vi ew.
Now, for the fi rst ti me i n over 300 years, Bi bl e-bel i evi ng
Chri sti ans havp redi scovered these four ~oi nts i n the theol ogy of
C~i sti ani ty. For the fi rst ti me i n over 300 years, a growi ng num-
ber of Chri sti ~ns are starti ng to vi ew themsel ves as an army on
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the move. Thi s army wi l l grow. Thi s seri es i s desi gned to hel p i t
grow. And groti tougher.
The author s of thi s seri es are determi ned to set the agenda i n
worl d affai rs for the next few centuri es. We know where the per-
manent answers are found: i n the Bi bl e, and onl y i n the Bi bl e. We
bel i eve that we have begun to di scover at l east prel i mmary an-
swers to the key questi ons. There may be better answers, cl earer
answers, and more orthodox answers, but the y must be found i n
the Bi bl e, not at Harvard Uni versi ty or on the CBS Eveni ng
News.
We are se~-consci ous~ Jr i ng the opening shot. We are cal l i ng the
whol e Chri sti an communi ty to joi n wi th us i n a very seri ous de-
bate, just as Luther cal l ed them to debate hi m when he nai l ed the
95 theses to the church door, over four and a hal f centuri es ago.
I t i s through such an exchange of i deas by those who take the
Bi bl e ser i ousl ~ that a nati on and a ci vi l i zati on can be saved.
There are now 5 bi l l i on peopl e i n the worl d. I f we are to wi n our
worl d (and these bi l l i ons of soul s) for Chri st we must l i ft up the
message of Chri st by becomi ng the ci ty on the hi l l . When the
worl d sees the I bl essi ngs by God upon a nati on run by Hi s pri nci -
pl es, the mass conversi on of whol e nati ons to the Ki ngdom of our
Lord wi l l be the most i ncredi bl e i n of al l hi story.
I f were correct about the God-requi red nature of our agenda,
i t wi l l attract a dedi cated fol l owi ng. I t wi l l produce a soci al trans-
formati on thaf coul d dwarf the Reformati on. Thi s ti me, were not
l i mi ti ng our cal l for reformati on to the i nsti tuti onal church.
Thi s ti me, we mean busi ness.
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Jesus sai d to Occupy ti l l I come. But i f Chri sti ans dont
control the terri tory, they cant occupy i t. They get tossed out i nto
cul tural outer darkness, whi ch i s just exactl y what the secul ar
humani sts have done to Chri sti ans i n the 20th century: i n edu-
cati on, i n the arts, i n entertai nment, i n pol i ti cs, and certai nl y i n
the mai nl i ne churches and semi nari es. Today, the humani sts are
occupyi ng. But they wont be for l ong. Backward, Chrtstian
Soldiers? shows you why. Thi s i s must readi ng for al l Chri sti ans as
a suppl ement to the Bzblzcai Blueprints Serzes. You can obtai n a copy
by sendi ng $1.00 (a $5.95 val ue) to:
I nsti tute for Chri sti an Economi cs
PO. BOX 8000
Tyl er, TX 75703
name
address
Cl(y, Sldte, Zlp
area W& and phone numkr
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Dr. Gary North
I nsti tute for Chri sti an Economi cs
I ?O. BOX 8000
Tyl er, TX 75711
Dear Dr. North:
I read about your organi zati on in your book, Honest Mung. I
understand that you publ i sh several newsl etters that are sent out
for si x months free of charge. I woul d be i nterested i n recei vi ng
them:
1 Biblical Economics Today
Christian Reconstruction-
and Dominion Strategies
Pl ease send any other i nformati on you have concerni ng your
pr ogr am.
addltzd
area code and phone number
K Enclosed is a tax-deductible donation to help meet expenses.
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The Biblical Blueprints Seriks i s a mul ti -vol ume book seri es that
gi ves Bi bl i cal sol uti ons for the probl ems faci ng our cul ture tbday.
Each book deal s wi th a speci fi c topi c i n a si mpl e, easy to read styl e
such as economi cs, government, l aw, cri me and puni shment, wel -
fare and poverty, taxes, money and banki ng, pol i ti cs, the envi ron-
ment,- reti rement, and much more.
Each book can be read i n one eveni ng and wi l l gi ve you the
basi c Bi bl i cal pri nci pl es on each topi c. Each book concl udes wi th
three chapters on how to appl y the pri nci pl es i n your l i fe, the
church and the nati on. Every chapter i s summari zed so that the
enti re book can be absorbed i n just a few mi nutes.
As you read these books, you wi l l di scover hundreds of new
ways to serve God. Each book wi l l show you ways that you can
start to i mpl ement Gods pl an i n your own l i fe. As hundreds of
thousands joi n you, and mdl i ons more begi n to fol l ow the exam-
pl e set, a ci vi l i zati on can be changed.
Why wi l l peopl e change thei r l i ves? Because they wi l l see Gods
bl essi ngs on those who l i ve by Hi s Word (Deuteronomy 4:6-8).
Each ti tl e i n the Bzblical Blueprints Saies i s avai l abl e i n a del uxe
paperback edi ti on for $6.95, or a cl assi c I eatherbound edi ti on for
$14.95.
The fol l owi ng ti tl es are schedul ed for publ i cati on i n 1986:
G Introduction to Dommion: Blbhcal Blueprints on Dominion
G Honest Money Blbhcal Blueprints on Money and Banking
G Who Owns the Farmly?: Blbhcal Blueprints on the Family and the State
G In the Shadow of Plenty Bibhcal Blueprints on Welfare and Poverty
G Liberator of the NatIons Blbhcal Bkreprmts on Polmcal Action
G Inherit the Earth: Blbhcal Blueprints on Economics
G Chariots of God. Biblical Blueprints on Defense
G The Children Trap Blbhcal Blueprints on Education
G Entanghng Alliances Blbhcal Blueprints on Foreign Pohcy
G Ruler of the Nations: Blbhcal Blueprmte on Government
G Protection of the Innocent Blbhcal Blueprints on Crime and Punishment
Addi ti onal Vol umes of the Bi bl i cal Bl uepri nts Seri es are sched-
ul ed for 1987 and 1988.
Pl ease send more i nformati on concerni ng thi s program.
name
addrw
City, slat% Zlp
Dominion Preee. F!O. Box 8204. Ft. W6rth, TX 76124