Money & Finance
If the [economic] problem is the shortage of money, why not allow private counterfeiting? Is it a form of theft? Then so is official counterfeiting. Will private counterfeiting debase the value of the currency and investments presently held by the public? Then so will official counterfeiting. Will private counterfeiting destroy the people’s faith in the existing currency unit? Then so will official counterfeiting. Will private counterfeiters lack the self-restraint needed to steal from the public slowly, and to debase the people’s holdings of money-denominated assets? Then we are arguing about time, not principle.
In short, if it is wrong and self-defeating for private counterfeiters, it is equally wrong and self-defeating for official counterfeiters. Yet the official counterfeiting still goes on. It is called progressive monetary policy.
- From Ian Hodge, Baptized Inflation: A Critique of ‘Christian’ Keynesianism (Tyler, TX: Institute for Christian Economics, 1986), p. 137.↵back
“People are more important than things because people create, use, abuse and destroy things. Furthermore, when people are treated as more important than things, there tends to be harmony and cooperation in a society. What usually follows is more voluntary sharing, justice and collaboration concerning things. This cooperation — covenanting and contracting — in turn creates more prosperity, more things. So prosperity long-term for any society rests upon having its priorities straight, placing its primary emphasis on people rather than things (and money).
“This emphasis on people rather than things is the essence of why the Bank of the People’s Labor at Mondragon, Spain has been so successful long-term. No business failures; no loan failures; the highest productivity in all of Spain, the highest profitability (nearly double that of its competitors), and the highest morale and innovation ratings possible — all characterize Mondragon. Success there has been achieved in all areas. Success is a by-product of doing things correctly. Ultimately, ideas do have consequences. Religion comes down to economics.
“Critical to the achievement at Mondragon, although unstated and possibly unrecognized even by these people, is that they have established their priorities on people systems and effectively checkmated the natural inclination to focus on the time value of money with its compounding effect. The compounding of money in a fractional reserve, debt-based, interest-sensitive society, such as ours, inevitably leads to a focus on things (and money) rather than people. The reason for this is because the challenge of compounding is a challenge which no individual or society can meet or beat long-term. The compounding of interest, money earning money on money, is relentless, ruthless, and eternal, unforgiving of mistakes and eventually is exponential. By contrast, men do make mistakes, need rest, do not forecast the future perfectly, make poor use of human and natural resources and are fortunate if they can simply achieve arithmetic economic growth. Therefore, it is no surprise that die slave-like god of debt money and compound interest eventually forces all to bow at its altar. As men are forced to serve this god of money (mammon), inescapably then money (and things) become more important than people.”
- From R.E. McMaster Jr., The Christ Within: The Church and New Age Seek Him (Phonix, AZ: A.N. International, Inc., 1995), p. 359.↵back
The idea that rent money is “dead” money has been around a long time.
What is not said so often is that interest money is dead money too. This is not realized because people are under the mistaken notion that you can recover interest that you’ve paid, but you cannot recover rent that you’ve paid. It’s a mistaken notion because this is true only in an appreciating market. In other words, you can “recover” interest only if prices rise. And when prices don’t rise, or don’t rise enough, you won’t recover all or some of the interest you’ve paid.
Imagine this: you rent a house for 25 years and pay the rent on time. The landlord pays off his home with your rental money. At the end of 25 years you do not own the house; you merely walk away when you go and leave the asset to its owner.
Once you borrow, you join all borrowers and now you have a vested interest (pun intended) in price increases in the housing market.
When you buy a home, however, you might pay double the price over 25 years because of interest. Let’s say a $200,000 home, and after 25 years you’ve paid $400,000. Now if property values were to double over those 25 years, you could sell your home for $400,000 and recover all the interest you’ve paid as well.
But what would happen if you could only sell your home for its original $200,000 purchase price? Why, the interest you paid would be “dead money” — just as dead as if you rented through those 25 years. Why is it dead money? Because you could not “recover” it in the sale price of your home.
The author of this article is Dr. Rousas John Rushdoony. @Copyright 1981, Chalcedon. Reproduced by permission. Chalcedon Report, No. 193, September 1981, P.O. Box 158, Vallecito CA 95251 USA.
TO VIEW THE IDEA of legal tender theologically seems strange to the modern (and humanistic) mind, but it was once an important issue in the United States. The legal tender doctrine holds that the power to define legal money belongs to the state, and the state can therefore declare what constitutes legal money for the payment of all debts, public and private.
The Rev. John Witherspoon attacked the idea very early. It was unnecessary for any state to require people to accept good money. Gold and silver were always acceptable. A legal tender law simply requires people to accept bad money, and it does take civil coercion to make bad money acceptable.
The U.S. Constitution, Article I, Section 10, states that no state can make “anything but gold and silver coin a tender in payment of debts.” The Federalist, no. 44, gives us Madison’s opposition to paper money. Patrick Henry opposed paper money, and Daniel Webster argued that a legal tender law is unconstitutional.
It was the lexicographer and Calvinist, Noah Webster, who spoke most bluntly. In 1790, Webster called a tender law “the devil.” He warned, “My countrymen, the devil is among you.” Of legislators who favored legal tender laws, he said that honest men should exclaim, “You are rogues, and the devil is in you!” Legal tender laws, he pointed out, were the preliminary to adulterated money, and all those who favored them were counterfeiters, deserving of the gallows, or at least the whipping-post!
Legal tender laws allow good debts to be paid with bad money, so that a debt is paid with only a fraction of the value it was contracted for. The result is a form of legalized theft, Webster held. He declared in part,
Remember that past contracts are sacred things; that legislatures have no right to interfere with them; they have no right to say that a debt shall be paid at a discount, or in any manner which the parties never intended. It is the business of justice to fulfill the intentions of parties in contracts, not to defeat them. To pay bona fide contracts for cash, in paper of little value, or in old horses, would be a dishonest attempt in an individual; but for legislatures to frame laws to support and encourage such detestable villainy is like a judge who should inscribe the arms of a rogue over the seat of justice.”
Why did Webster see legal tender laws as the devil manifested in law? We cannot understand the legal revolution wrought by humanism unless we understand that fact.
For Webster and others, gold and silver represented natural and hence a God-given order of things, whereas legal tender creates an arbitrary value which can only stand with coercion. Values are God-created, not man or state created. The temptation of Satan in the beginning was to doubt God’s order: “Yea, hath God said?” (Gen. 3:1). Rather, the tempter suggested a new order in which man creates his own laws, values, and morality: every man shall be his own god, determining or knowing good and evil for himself (Gen. 3:5). In such a society, the state as man incarnate can set aside God’s laws and make its own laws. It can issue a legal tender law and require obedience to it. (In God’s natural order, there is no need to require the use of gold and silver; they commend themselves and are in demand.)
The essence of the theocracy as Scripture’s law presents it is that the state is at best minimal. A.J. Nock saw the Old Testament design as one for government, not a state. Repeatedly, God declares, This do, and live (Deut. 5:33), etc.). God’s law is the way of faith and life, whereas “he that sinneth against me wrongest his own soul: all they that hate me love death” (Prov. 8:36).
Legal tender laws are thus the tip of an iceberg. They represent a man-made world, one in which the state, by total coercion, seeks to overthrow God’s order and to replace it with a humanistic one. In this new order of things, the state is the new god walking on earth, and demanding totalitarian powers and command. There is a symbolic significance that, not too many years after taking a deliberately statist course with respect to money and banking, the United States, on its dollar bills, featured a new symbol and the Latin words proclaiming the new order of the ages. That new order is statist tyranny.
Legal tender laws thus cannot be viewed in isolation. Churchmen show no interest in them, although they are a clear manifestation of humanism in economics. On the other hand, economists see legal tender laws in isolation from theology, although they are a clear expression of the new established religion, humanism. Both are manifesting tunnel vision and failing to recognize the roots of the problem.
Noah Webster saw the issue; it is a moral and theological issue. Webster saw, and again and again called, legal tender laws “the devil.” He saw that these laws represented, “as deliberate act of villainy,” a contempt for God’s justice, the legislation of theft into law, and the deliberate conversion of the state into an instrument for theft and evil. He was right.
- A similar clause appears in Section 115 of the Australian Constitution — IH↵back
“Your silver is no longer pure, your wine is watered down.” (Isa.1:22 CJB)
Every time I read the book of Isaiah I cannot help but appreciate how relevant his words are to contemporary culture. Here, in this indictment against Israel, the prophet lists the sins of Israel. They were not just ‘spiritual’ in content, but it came down to practical realities and two of the most cherished items in any society, money and wine.
In Isaiah’s time, though the prophet spoke, he was ignored. Did that make his indictment any less real? In God’s providence, Isaiah received his call in about the year 740 B.C. It was no coincidence that at same time the city of Rome was born. God’s prediction of judgement delivered through the prophet was thus in preparation for an event yet over 800 years away. For not until the year 70 A.D. did the Romans bring an end to everything that Israel attempted to stand for. Not only the destruction of the Temple, but the disbursement of the people to other locations. The city of Jerusalem was laid waste.
The government itself has solicited and obtained the assistance of the population to jointly debase the money supply.
In our own time, it may be that we are not seeing the debasement of wine with water. Competition and government watchdogs keep an eye on this. But, in the words of Henry Hazlitt, “No subject is so much discussed today—or so little understood—as inflation.”
In the case of money it is an entirely different story than that of wine, for the government itself has solicited and obtained the assistance of the population to jointly debase the money supply.
For too many people the words of Isaiah on the debasement of money are a curiosity. We do not have silver as our currency any longer. We have, in its place, pieces of paper (or in Australia, pieces of plastic) and token coinage that are a substitute for silver (or gold). At least, that’s how the paper currency came into existence in the first place, as ‘promissory notes’ redeemable in hard metal. But once the redemption option was removed, paper currency was free to be manipulated at the whim of whoever controls the manufacture and issuance of that currency.
- Henry Hazlitt, The Inflation Crisis and How to Resolve It (Kindle edition,  2011, Loc. 89).↵back
The Responsibilities of Lenders
Thus far our discussion has centered on those who borrow, and those who can benefit from debt, the sellers of goods. But there is yet another person who benefits from debt, and that is, naturally, the lender. Interestingly, the Bible also has some comments to make to the lender. The passage in Deuteronomy 15:1-11 places limitations on the actions of lenders. First, they are to cancel all debts to a brother in the seventh year. At the end of every seven years, the creditor is to cancel any outstanding debt. Second, this limitation did not apply to foreigners. Third, the requirement to cancel debts was no excuse not to lend to a brother in need. Fourth, the fact that the sabbath year was drawing close was likewise no reason to withhold assistance to a brother.
The sabbath year laws, interestingly, put a restraint upon the lender, not the borrower. This passage gives no encouragement for debt, even the limited use of debt. What it does do is put a strict limitation on lenders. The debt was not to be collected in full. At the end of the seventh year whatever remained unpaid was to be canceled. It is expressly stated that the Sabbath year’s imminence should not be used as an excuse to withhold funds from those in need.
If nothing else, this provides an indication that long-term lending is to be avoided. By long-term is meant longer than seven years. And if long-term lending is to be avoided, this naturally abolishes any notion of long-term debt.
The importance of this Old Testament requirement has been captured by Rushdoony:
[F]orgiveness is a basic aspect of the sabbath. The grace of God unto the remission of sins is the covenant of man’s sabbath. It means rest, release from the burden of sin and guilt. The Lord’s Prayer, which looks forward to the great sabbath (“Thy kingdom come”), has as a central petition the jubilee release: “And forgive us our debts, as we forgive our debtors” (Matt. 6:12). Lenski translated this, “And dismiss for us our debts as we, too, did dismiss our debtors.” The translation “trespasses” is good, in that it points more clearly to our sins; but the word “debts” has a broader connotation often, as it definitely does here. As Lenski observed, “So great are our debts to God that we can never hope to pay them, and our only help is that God will remit them gratis, by way of gift, for Christ’s sake.”
The forgiveness of debt in the seventh year is thus an indication of the release that God provides from the condemnation of our sin. This requirement, therefore, is of very special significance and should be kept.
- R.J. Rushdoony, The institutes of Biblical Law, Volume One (Nutley, NJ: Craig Press, 1973) p. 144.↵back
Managing Money With A Crystal Ball
No one knows the future with any certainty. The future is known to God alone, and we must live each day in ongoing dependence for His daily provision during the circumstances in which we find ourselves. Ecclesiastes 11:6 says, “In the morning sow your seed, and in the evening do not withhold your hand; for you do not know which will prosper, either this or that, or whether both alike will be good.” Although God is our heavenly Father and promises never to leave us nor forsake us (Heb. 13:5-6), this does not mean we have a trouble-free life. Christians get sick; they are killed in battle; and their businesses can flounder.
When we take on debt, however, we are saying that we know the future with enough certainty that we can guarantee payment of the loan. The Sabbath year debt cancellation, however, places a limit on how far we can safely make these kinds of assumptions about the future. The person who takes on a 25-year mortgage is, in effect, saying to the lender that he is sufficiently knowledgeable about the next 25 years that he can guarantee to make the repayments. Our choice is whether we accept God’s limitation on debt or whether we substitute our own standards for those which He has given us in the Bible.
Is There a Valid Connection Between Debt and Greed?
There is another argument against debt — or if not against debt as such, it at least requires a very careful self-analysis to make sure we are not guilty of simple greed. Debt can do at least two things for people. First, it permits them to buy goods for which they do not have sufficient cash right now. They don’t have the funds right now and don’t want to wait until they can save it. Or they think they’ll never be able to save the required amount, and don’t want to miss out on the goods. This has nothing to do with sound management at all. Rather, it is the manifestation of greed in the heart of man. This impatience, a refusal to wait until the funds are saved, is founded on an attitude of laziness and lack of self-discipline, often an inability to save for the future. Neither attitude provides a proper excuse to borrow money.
The desire for goods we cannot afford right at this moment is, I suspect, a reflection of the attitude towards the wealth that other people have. It is the “keeping up with the Joneses” syndrome (better spelled sindrome). However, time and time again we are told not to covet or desire the wealth of our neighbor. We should be content with that which God has given to us in His providence (Heb. 13:5). We break this command by desiring, for wrong reasons, to have a similar amount of wealth to our neighbor.
In the first three chapters on this topic of debt, I described the wealth creation process. Mankind was created with the mandate to be fruitful, to be innovative, to be productive, to look after God’s garden, preserve it, husband it, and in so doing create wealth for all to enjoy.
More importantly, however, it was seen that the process of putting aside for future use (savings) was the necessary step for economic advancement. Without savings there can be no process of ongoing economic development.
Debt is the opposite to the idea of saving. Continue reading
Living Debt Free is the Biblical Model
The first argument against the use of debt is that the Bible tells us very plainly to avoid it. In a passage in Romans 13:8, the apostle Paul, writing under the inspiration of the Holy Spirit, tells us that we should “owe no one anything except to love one another” (Rom. 13:8a).
There are some, however, who argue that this passage is not referring to financial debt. Commentators are divided on the matter, and when the scholars disagree it is often difficult for the layman to form an opinion. Their position, however, is usually presented as a statement without supporting evidence. Mostly, it comes down to the fact that the commentator thinks it is not referring to financial debt, but rarely offers evidence to show why this is so. Commentators, however helpful, are not our ultimate guide to life. Only God and the Bible can hold that position in our lives. Therefore, we need to turn to the biblical text, and not the commentators, for guidance.
In order for us to understand the text, there are several things we should note about this verse to make sure the words are not taken out of their context and misused.