Thursday, May 5, 2011

The State and Money

by John W. Robbins

In his book Honest Money, The Biblical Blueprint for Money and Banking, Gary North makes an excellent point: “There is nothing in the Bible that indicates that gold and silver became money metals because Abraham, Moses, David, or any other political leader announced one afternoon: ‘From now on, gold is money!’...the State didn’t create money.”(1) This is quite true. The Bible is the oldest and most reliable history book we have, and there is nothing in it to indicate that the State originally created money. Rather, the evidence is that money originated in the market, when merchants offered their own coins and weights of metal in trade.

Those who think that the use of gold or silver as money evolved relatively late in human history might learn something from the history of Abraham. About two thousand years before Christ, he paid for a field by weighing out 400 shekels of silver. The account is given in Genesis 23.(2)

Honesty. From this example of Abraham we see that money in the Bible is a weight of metal. Talents were certain weights of silver. Now this historical fact does not require modern money to be a weight of silver or even of metal. But it does lead to another major teaching of the Bible on money: If money consists of weights, and throughout history it usually has, then the money must be full-bodied; less than honest weight constitutes fraud. There are several passages on this point in the Bible:
You shall do no injustice in judgment, in measurement of length, weight, or volume. You shall have just balances, just weights, a just ephah, and a just hin: I am the Lord your God, who brought you out of the land of Egypt [Leviticus 19:35-36].
The Lord abhors dishonest scales, but accurate weights are his delight [Proverbs 11:1].
The Lord detests differing weights, and dishonest scales do not please him [Proverbs 20:23].
Do not have two differing weights in your bag – one heavy, one light. Do not have two differing measures in your house – one large, one small. You must have accurate and honest weights and measures, so that you may live long in the land the Lord your God is giving you [Deuteronomy 25:13-15].
Any use of fraudulent weights was subject to the penalties imposed for theft: at least double restitution, with the ultimate penalty being required for recidivism. The dishonesty of fraudulent weights is a case of the broader principle that nothing is to be misrepresented.

Fractional Reserves. If modern money does not consist of weights of metal, and it need not, it must nevertheless not misrepresent itself. The Biblical requirement is not for metal money and one hundred percent gold reserves, but for honesty. So long as private (not government) paper money is not misrepresented by its owners, it is clearly acceptable. Government paper money, on the other hand, even when backed by gold or silver, is always wrong, for government has no authority to print money.

Retribution, not Regulation. There is another principle besides honesty underlying these rules. It would seem that there were no regulatory police in ancient Israel; buyers and sellers and their agents were responsible for making sure that they were not being cheated, and if detected in fraud, a person was subject to stiff penalties. Biblical law follows the principle of punishing wrong-doers rather than trying to regulate everyone in the hope of preventing wrongdoing. That is why Paul writes in Romans 13 that the purpose of civil government is to punish evil-doers.

Legal Tender. Another thing that follows from the restricted Biblical role of government with regard to money and banking is the absence of legal tender laws. I wish to make clear what I mean by “legal tender,” since it seems to have at least two different meanings. Of course, if a government is to collect taxes or payments of any sort, it must specify acceptable forms of payment. This is one meaning of “legal tender.” In the early years of the American republic, this problem was solved by the government publishing a list of monies in which it would accept payment. It did not restrict payment to one form of money, but published a broad list of acceptable means of payment. The constitutionality of this form of legal tender was not challenged.

But there is another meaning of the phrase “legal tender”: Usually it means that a creditor is compelled to accept whatever the government has declared to be tender as payment for outstanding debts. Each Federal Reserve Note bears the words, “This note is legal tender for all debts public and private.” Those words mean that a private creditor must accept them in payment for a debt. It makes little difference that the creditor may have a contract calling for payment in something else, for the courts do not, as a rule, order specific performance of contracts. Perhaps at one time they did. But today a creditor is compelled to accept the government paper as payment.

There is no warrant in the Bible for this sort of legal tender. Rather, the clear implication is that the parties to a contract may set the terms of the contract, so long as they are not illegal in themselves, and those terms must be obeyed. The Bible praises the man who makes a promise and keeps it, even though he might be injured by keeping it. It condemns the man who defaults on a deal, or seeks to substitute something of lesser value for that which he promised to deliver. Legal tender laws are an institutionalized form of defaulting on debts.

Mammon. Finally, there is another aspect of money and the Bible that we ought to consider: money as mammon. Everyone knows that the Bible strongly condemns mammon, and many people equate mammon with money. The two, however, are not the same. Mammon is money worshiped. That is why Christ said, “You cannot serve God and mammon.” Mammon is money become an idol, and even beneficial things can become instruments of destruction if they are regarded more highly than they ought to be. The Bible condemns all forms of idolatry, including the idolatry of money. Ayn Rand did not understand this when she wrote her books, but perhaps she has a better understanding of it now.

This Biblical view of money and banking is reflected in Dr. Sennholz’s 1986 book, Money and Freedom, in which he advocates the repeal of compulsory tender laws and concludes:
Sound money and free banking are not impossible; they are merely illegal. That is why money must be deregulated…. In freedom, the money and banking industry can create sound and honest currencies, just as other free industries can provide efficient and reliable products.(3)  

     [1] Gary North, Honest Money, The Biblical Blueprint for Money and Banking, 22.

     [2] It is bizarre but not surprising that secular economists rely on fables about the origin of money while ignoring a reliable history book like the Bible.
     [3] Hans F. Sennholz, Money and Freedom, 83.

The Trinity Review, July, August 2010
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