Conclusion

Diverse weights are an abomination to the Lord, and a false balance is not good. (Proverbs 20:23)

The question of honest money is really the question of the necessary conditions for human freedom. Honest money is the product of honest people who live and act within the framework of a public law-order that punishes fraud and violence. Honest money requires honest law and people who are self-disciplined. Let the people have what they want, just so long as it is morally valid, non-fraudulent, and non-coercive.

Defining “fraud” and “coercion” is a continuing task of social philosophers. Theologians used to work at it, too, but for the last century or more, they have tended to avoid the difficulties of this task. This is one reason why Christianity has fallen into the historical shadows.

In the past, we have seen brief periods in which relatively honest money has existed. The period of the classic gold standard, from about 1814 until the outbreak of World War I in 1914, is the best example. The wholesale price level in England was about the same in 1914 as in 1815—a remarkable period of price stability.

While monetary systems were more honest than today during earlier periods, they were not Biblical. There was fractional reserve banking. Also, Gresham’s law operated because governments established fixed prices between gold and silver, so “bad money drove out good money.” But at least the “bad” money—the artificially overvalued money—was either gold or silver, and it was not easy to mine either one. Geological limits were therefore placed on the rate of monetary expansion. Geological limits were therefore placed on monetary fraud. Governments and banks tampered with monetary weights and measaures on a minor scale only.

What does the average person need to remember in order to understand the fundamental principles of Biblical money? Not much.

1. We shouldn’t expect something for nothing, such as the depositor’s withdrawal on demand of loaned-out funds, or counterfeit money making everyone richer.

2. The State shouldn’t interfere with private non-coercive decisions (contracts).

3. It is cheaper to print paper money than it is to mine metals.

4. Money isn’t money unless people expect other people to accept it in trade later on, meaning:

5. Money requires continuity of acceptance over time.

6. Debasing money is a form of tampering with weights and measures.

7. Debasing money reduces its value in trade.

8. Debasing money therefore reduces the wealth of people who hold money.

9. Warehouse receipts should be backed 100 percent at all times by whatever is promised by the receipt.

There are other subtle distinctions that are useful, but these are the basics. Any society which enforces civil laws against any violation of fixed, defined weights and measures, and any violation of the rule against multiple indebtedness (unbacked warehouse receipts) will have honest money.

The problem comes when the State, as the enforcer, gets into the business of stamping its mark on “certified money.” This process soon becomes money creation, then a monopoly of money creation, then debasing the money, and finally elitist private control over “government” money by central bankers. We have seen this again and again. The control over “government” money by private central bankers is a universal feature of modern economies. So is unstable money.

Monopoly

Men cannot be trusted to possess monopolistic power. No human agency can safely be trusted with absolute power. An absolute monopoly over anything is exclusively God’s prerogative, for He alone has an absolute monopoly over everything. All of men’s possessions and powers are to be limited.

The so-called “natural monopoly” is very nearly mythical. Very few of them exist. Water in a desert might be one, but most people choose not to live in deserts or walk through them, so such a monopoly is not economically relevant. Almost all economically relevant monopolies are created by, granted by, and sustained by the institution that possesses God’s delegated monopoly of violence: the civil government. This is why it is necessary to have numerous competing civil governments. The Tower of Babel was the incarnation of institutional evil.

The monopoly over money is perhaps the most dangerous of all strictly economic monopolies. Money is the common link in almost all economic transactions. When monopolists tamper with the monetary unit, they send information signals to every participant in the market. When these signals are not created by competitive market forces, they misinform buyers and sellers, savers and borrowers. This misinformation can result in economic crises: mass inflation or disguised inflation (price controls), and then depression.

There is no known way to protect people from erroneous monetary information if money is controlled by the State or by any agency licensed by the State. Only competitive market forces can produce accurate, reliable information on a consistent basis, for competition will put economic pressure on the producers of false and misleading information. People who sell better information appear on the market, and the misinformers start to experience losses.

Thus, what is needed is a market-produced monetary system. Historically, gold and silver have been “the people’s choice.” This could change in the future. But it is difficult to mass-produce gold and silver. It is impossible to have mass inflation with a currency based on any metal. It costs too much to dig metal out of the ground.

In contrast, paper and ink are cheap. So are blips on computers. If something is cheap to produce, you find that people try to make profits by mass producing it. This is as true of money as it is of hand-held electronic calculators. But additional hand-held electronic calculators constitute an economic asset. Additional money constitutes a redistribution of assets, where the ignorant and vulnerable are most likely to be harmed.

Not Quite Honest Money

It is not my job or your job to tell other people what money they ought to use. It is not the State’s job, either.

It is the State’s job to enforce honest weights and measures, and also to prohibit the issuing of warehouse receipts that are not immediately backed by whatever is promised by the receipt. If the warehouse promises to redeem the receipt on demand, there must be an asset on reserve for every such receipt.

If the State does these two tasks, society will have honest money. If it doesn’t, society can have only semi-honest money. A traditional gold standard is an example of semi-honest money: fractional reserve banking with full redemption of gold coins on demand. This also involves the government’s pledge to buy or sell gold coins at a specified (definitional) price. But bankers cheat, and governments cheat, and the traditional gold standard survived for only about a hundred years, 1815–1914.

The one monetary power that the State legitimately possesses is its right to specify a form of payment for taxation purposes. To that extent, the State can influence the selection of monetary units. But the State does not want to be paid in debased money, so it becomes a watchdog for the public because of its own self-interest in protecting itself from unscrupulous counterfeiters.

For decades, small conservative groups have campaigned for a return to the traditional gold standard. These campaigns have been about as successful as promoting a national treasure hunt for pots of gold at the end of rainbows. They have been futile. They are the equivalent of campaigns to get prayer back into the public schools. They miss the point.

What is the point? Simple: a government-imposed gold standard is not a long-term answer. It didn’t work well in the past, and it won’t work well in the future. It is still a government standard. Our political goal should not be a government-imposed gold standard; it should be the abolition of fractional reserve banking and the enforcement of fixed weights and measures. The goal is to remove the monopoly of money from the civil government and its licensed agents. Nothing else will work to restore honest money. Every other recommendation is a half-way measure. Why devote our lives to half-way measures?

Campaigning for a government-imposed gold standard is impractical anyway. Such a campaign faces tremendous obstacles. First, even a tiny handful of professional economists who favor the gold standard do not agree about which kind of gold standard should be imposed. There are several competing versions. The better versions have fewer promoters.

Second, there is no agreement among the advocates concerning the single most important practical issue: What price should the government set as the official, permanent price of gold? If we adopt a gold price in terms of today’s money supply and today’s prices, how can we expect the official price of gold to be economically rational when the inflation stops, banks collapse, and prices drop? Will the government have to lower the official price later on—that is, will it have to redefine the currency unit repeatedly? What kind of fixed gold standard is that? But if the price is kept at the original level, it will be high and rising in purchasing power compared to all other goods. Everyone will then go to the Treasury to sell gold to the government in exchange for paper money, thereby removing gold from circulation and creating a huge hoard of gold in the government’s warehouse. Is this wise, placing the nation’s gold supply in the care of the State? Isn’t this what got us in trouble in the past?

Third, there is no political constituency for any kind of gold standard. The topic is too confusing, and the effects of dishonest government money are not understood by the average voter. The voters are uninterested. It would take a fortune to educate them, and a fortune would probably not be sufficient.

A New Constituency

Since there is virtually no hope of getting even a halfhearted gold standard back into operation, why waste any further resources in promoting one? Why not assume that there will be a new constituency that will accept and promote a true free market Biblical money system? Why not aim our appeal at this coming constituency? Why not promote the best alternative rather than a compromise that has failed in the past to produce the monetary stability we want?

How will this new constituency come into existence? I would suggest the following scenario. First, the bankers and the politicians will continue to try to make the present system work. This will make the present system worse. Second, there will be a collapse in stages: inflation, then mass inflation, then price controls, then tyranny, and finally a worldwide deflationary depression. At that point, there will be new demand from the voters for answers.

Third—and this is my hope and my prayer—people will at last decide that they have had enough moral and legal compromise. They will at last decide to adopt a simple system of honest money, along with competitive free market principles throughout the economy. They will stop stealing from each other. They will stop trying to get something for nothing politically.

If voters don’t experience this sort of repentance, then we will go through the same destructive business cycles again: inflationary boom and deflationary bust. We will be like the fools described by Peter: “But it has happened to them according to the true proverb: ‘A dog returns to its vomit,’ and, ‘a sow, having washed, to her wallowing in the mire’” (II Peter 2:22).

There is always one other possibility. Voters will change their minds and demand that politicians change their ways before some grim inflationary-deflationary scenario takes place. I think this is unlikely, but the possibility does exist. Voters could look at the arguments of this book and accept them. They could see that something principled is the only way out. They would then bite the deflationary bullet and not let loose until we have honest money. This seems like a remote possibility, but we can hope, and we can pray. Better to go through a principled economic wringer now and thereby avoid the coming unprincipled wringer that is far, far worse in its effects.

We have never had honest money. We have also never had a society fully committed to Biblical law. When we do, we will have at least an opportunity to attain honest money. As the old advertisement said: “Accept no substitutes!”