As Christians it is often unseemly for us to appear to be preoccupied with money. When it comes to taxes, we are reminded of Christ's command to, "Render therfore unto Caesar the things that are Caesar's, and to God the things that are God's" (Luke 20:25). But what if Caesar steals from you, and does it in secret?
Bear with me as I develop this line of argument with some history. Because bartering required trading one item for another and was hugely cumbersome, societies needed something that could facilitate transactions. Money became the means to do that. Many things have been tried at different times and different places as money, whether seashells, gems or beads. However, in most societies, precious metals won out the competition to be used as a nation's money. Gold and silver have been particular favorites. In most situations, there was a finite supply of these precious metals, and their value was stable. Although you could carry around a bag of gold ingots, the metals were shaped into coins which were far more portable. The first sign of trouble came when a nation did not have enough precious metal to pay its debts, and what would then happen is that they would mix another metal into the coin along with the gold or silver, diluting its value, in order to make their precious metal supply go further. By reducing the base metal content of the coins, the currency became debased.
When our country was founded, the Constitiution (Article I, Section 8) allowed our government to coin money. The legal tender in this country was gold or silver coins. Our nation's precious metals were maintained by the Treasury, which coined the money. Not printed it. Our founding fathers recognized the dangers in utilizing paper money. For all practical purposes there was no paper money in this country until the Civil War, and during that time and shortly thereafter there were numerous cases that went all the way to the Supreme Court which ultimately led to the establishment of paper money. The Treasury Department issued gold and silver certificates, which initially were not legal tender but guarantees to pay legal tender. The certificates reached legal tender status in the early 20th century.
Along comes the invention of the Federal Reserve in 1913. They began issuing Federal Reserve Notes, which were not certificates. They were redeemable at the Treasury for specific amounts of gold or silver, or exchangeable for Treasury gold or silver certificates. Franklin Roosevelt's administration then got legislation passed that forbid Americans to own gold and abolished all gold clauses in domestic contracts. Gold certificates were eliminated. This Gold Reserve Act of 1934 then removed the ability to redeem a Federal Reserve Note for gold; it could still be redeemed for a silver certificate or silver. The Act now also declared the Federal Reserve note to be legal tender. By 1963, the Federal Reserve Note dropped the redemption clause, and silver certificates were eliminated. The last remaining ties to precious metals occured in the Nixon administration, when we were taken completely off the gold standard internationally, and foreign parties could not redeem their Notes in gold. What we call a dollar today, the Federal Reserve Note in your wallet, is not redeemable in anything. Its worth is entirely dependent on how many of those things are out there in circulation. That is what we call fiat currency.
When Caesar needs money, he can raise it through taxes, which are obvious. He can borrow it, and he does that by selling bonds, which is a promise to pay back the money at a later date to the bondholder. Caesar still needs money to pay back the loan. Or he can print it, and increase the number of dollars in circulation, which debases the currency and lowers the value of the dollar. As the value of the dollars drops, more dollars are required to purchase items, and the prices go up. If you believe the Quantity Theory of Money, the ultimate cause of all inflation is an increase in the supply of dollars in the economy. Sometimes, when the Federal Reserve wants to increase the money supply, it will purchase securities from other institutions, and it does that by simply crediting their accounts. They do not even need to use up paper and ink. They just create the money electronically out of thin air. When the Treasury needs money for its debt, they only need to go next door to the Fed and knock.
The problem with the government printing or creating money is that it leads to inflation, and all the money you currently hold loses its value and purchasing power. The dollar you have in your wallet today is worth half of what it was in 1988. Although it appears we have low inflation now, the inflation data that the government releases is calculated far differently than it was a decade ago, and it is much higher than you realize due to the manipulated numbers. (Serious investigators can go to the government's own Bureau of Labor Statistics website and see how the Consumer Price Index is calculated, and how it is manipulated downward by a process known as "hedonics.") And eventually, at some point in time, all of this excess money is going to lead to very real, serious inflation. Inflation is therefore known as the "hidden tax" because we do not see it out in the open, but it is a way that the government creates money by taking from us the value of the money we have.
So how does this relate to suffering? This is theft by the government from our savings, retirement plan, and whatever we hope to get from Social Security (if anything) in the future. In the best case, whatever you have saved for the future will be worth half of what it is today in twenty years' time. Although Jesus admonishes us in Matthew 6:19 not to lay up treasures here on earth, we are to be good and prudent stewards of what we are given by God. We are not to love money or hoard money, but we are to be wise in providing and planning for our future. Our government has shown no similar sense of moral restraint on its spending, and the Bible is full of condemnation of going into debt. The only hope of slowing the printing of money would be to return to the gold standard, and there is little likelihood of this happening; our leaders would have to actually want to stop spending. The people who suffer the most from inflation are the poor, whose dollars are worth less and less each year. As a Christian I am advised to not love money (I Timothy 6:10), but we are also commanded not to steal. If only Caesar humbly obeyed the Lord!
(I am indebted to Peter Schiff and his book, The Real Crash, for this history of money.)
No comments:
Post a Comment