Lux Lucet

Bail ins.  Bail outs.  Financial repression.  NIRP,  ZIRP, and QE.  These are just a few of the puzzling terms one is confronted with in the course of reading financial journalism.  And all of them, though intellectually defended by prestigious academics and widely practiced by powerful central bankers, are the unbiblical, unchristian, immoral fruit of economic thought divorced from the authority of God’s Word.  Describing the current world monetary system,  Ronald L. Cooper put it this way,

“[T]he monetary system is a Satanic monetary system.  It’s under the kingdom of Satan. There’s no place in the bible for a central bank” (The Failure of Secular Economic Policy, Trinity Foundation Conference on Christianity and Economics, Lecture 5).

Many Christians would recognize that there are problems with our economy.  Some would even own that, yes, central banking as practiced by the US Federal Reserve (hereafter, the Fed) is the source of much misery in this nation.  But to call the current economic and monetary system of the US satanic would very likely shock even most Evangelicals.  Surely that cannot be so.

And yet there is a great deal of evidence that central banking is indeed the satanic monstrosity Cooper made it out to be.  The aim of the following essay is to make manifest the reason why this is so.

Central Banking is Idolatry 

In the first place, central banking is idolatry.  That may seem like a strange thing to say, but the case can be made from Scripture.  In short, civil government is empowered by God to do only certain things.  When the people demand and governors assent that government should engage in activities beyond the scope of what is granted to government in the Scriptures, they commit the sin of idolatry.

In Romans, the apostle Paul tells us what the limits of proper government are.  Paul writes,

For rulers are not a terror to good works, but to evil.  Do you want to be unafraid of the authority?  Do what is good and you will have praise from the same.  For he is God’s minister to you for good.  But if you do evil, be afraid; for he does not bear the sword in vain; for he is God’s minister, an avenger to execute wrath on him who practices evil (Romans 13: 4).

In this verse, we see Paul delineate two roles for the civil government:  praise the good, and execute wrath on those who practice evil.  There is nothing in this passage about manufacturing money.  Therefore, creating and managing the nation’s money supply is not a proper role for government.  When governors usurp their proper role, they commit the sin of idolatry by making a pretense to authority in a sphere where they rightfully have none.

It is worth noting that the Fed was established in 1913 during the progressive era.  Previous to that time, the call for a central bank had been resisted by presidents and by congress alike as both unconstitutional and immoral.  This low view of central banking did not arise in a vacuum, but was the result of the small-government, Christian worldview common in the US up through the end of the 19th century.  But as Christianity lost its influence on the minds of men, the door was opened for the central bankers.

Just as the unbelieving Israelites sinned when they clamored for a king, so too did unbelieving Americans sin in their call for a central bank.  In both cases, the sin was the result in a prior loss of faith in God.  Where once capitalism and free enterprise were seen not just as the means to a living, but desirable and moral in themselves, Americans began to see collectivism as the way toward a better tomorrow.  Ron Paul explains it this way,

[T]he Fed came about during a period of our nation’s history called the Progressive Era, when the income tax and many new government institutions were created.  It was a time in which business in general became infatuated with the idea of forming cartels as a way of protecting profits and socializing losses   (End the Fed, 13).

Instead of demanding a king to fight their battles as all the other nations had, despising their God-given birth right of freedom, Americans demanded cartels to bail them out like all the other socialist nations had.  The creation of the Fed was one manifestation of the socialist trend of the early 20th century.

Central Banking is Theft

Theft is a second sin attributable to central banking. Theft is simply the unjust taking of property.  And through the a bit of modern alchemy known as an elastic currency, the Fed has managed to steal what likely amounts to trillions of dollars from ordinary Americans over the past 100 years and to give the ill-gotten gains from a host of unsavory characters.

When banking experts talk about an elastic currency, they are simply using a polite word to hide the ugly reality of an enormous scam that lies at the very heart of central banking.  During the gold standard era in the US, if the government wanted to issue new currency, it first had to go out and get more gold to back the newly issued bills.  In this classical gold standard, paper bills were merely receipts for real money, which was always defined a certain weight of gold or silver.  For example, in the US the Coinage Act of 1792 established the definition of a dollar as, “371.25 grains of pure silver and/or a weight of 24.75 grains of pure gold – a fixed ratio of 15 grains of silver to 1 grain of gold”  (Ron Paul and Lewis Lehrman, The Case for Gold, 31).  If the government wanted to issue more paper bills, it first had to increase the stock of gold or silver on hand to back those new bills.  Obviously, this put significant restrain on the ability of the government to grow the money supply.  As a result, under the classical gold standard, Americans enjoyed an increasing standard of living without the evil of inflation gnawing away at their life savings.

Central banking with its elastic currency did away with all that .  With an elastic currency, no longer was there any need to obtain more gold or silver to back newly issued paper currency.  The Fed could push a theoretically  unlimited amount of currency into the banking system and the legal tender laws in place required people to use it.  These two characteristics, a currency without commodity backing and forced use through legal tender laws, are the essence of the fiat currency system in place in the US and throughout the world.

Fiat money inevitably results in price inflation.  And price inflation is the direct result of the irresistible temptation for central banks and governments to take advantage of the amazing power of the money printing press.  Price inflations is really an insidious  wealth extraction system designed to take wealth from ordinary Americans  and transfer it to the government and to the government’s favored groups.  Among those favored groups are the bankers themselves.  One way in which the bankers benefit is that the Fed insulates them from their own mistakes.  Ron Paul explains it this way,

They [the big banks during the progressive era] were very unhappy that there was no lender of last resort that they could depend on to bail them out in times of crisis.  With no bailout mechanism in place, they had to sink or swim on their own merits…

The banking industry has always had trouble with the idea of a free market that provides opportunities for both profits and losses.  The first part, the industry likes.  The second part is another issue.  That is the reason for the constant drive in American history toward the centralization of money and banking, a trend that not only benefits the largest banks with the most to lose from a sound money system, but also the government, which is able to use an elastic system as an alternative form of revenue support.  (End the Fed, 13, 15).

The 2008 Wall Street bailout known as TARP was not some strange thing out of left field.  It was simply the Fed responding to a 911 call from its client banks.  The Fed did exactly what the Fed was set up to do, save the big banks whatever the cost.  And you and I, dear reader, were left to pick up the tab.  All for our own good, of course.

To put it another way, unlike the Lord, the Fed is and most assuredly always has been a respecter of persons.  There is no place in capitalism for bailouts.  There is no such thing in capitalism as Too Big to Fail.  To the extent bankers unjustly take the wealth of Americans by inflation, all euphemisms aside, they are guilty of the sin of theft.

Central Banking is False Witness      

Since its inception, the Fed has functioned as a secret cabal. Commenting on its penchant for secrecy, Ron Paul writes, “From its founding in 1913, secrecy and inside deals have been part of the way the Fed works” (End  the Fed, 13).  Even today, the Fed fights tooth and nail any attempt by congress or the public to find out what goes on behind its closed doors.  As a recent article in the Hill reported, “Federal Reserve Chairwoman Janet Yellen said she is prepared to “forcefully” argue against efforts to advance Audit the Fed legislation in the next Congress.”

In a laughable, or perhaps more accurately, disgusting example of bureaucratic double-speak, when asked about Rand Paul’s “Audit the Fed” bill, Yellen responded that she, “‘strongly’ supports ‘transparency and openness on the part of the Fed ‘but does not support any proposal that would ‘diminish’ its independence.”  So on one hand she supports openness and transparency but on the other will do nothing to foster it and in fact pre-empt any serious attempt to hold the Fed accountable by darkly warning about the need for independence.  Of course, the way she and other Fed governors define independence is such that no serious investigation into the Feds activities is ever permitted.

In addition to the use of secrecy, the Fed bears false witness by it use of deceptive language.  Quantitative Easing (QE) is one charming example of this.  QE is simply a euphemism for money printing.  The Fed creates money out of thin air to buy government bonds and other junk assets from the big banks and does so with money created out of thin air.  QE is counterfeiting.  QE is theft. QE has no place in a capitalist economy.  On one hand, the refusal of the central bankers to describe what they do in honest terms is understandable.  Who wants to admit he’s a thief?  But on the other hand, it is their dishonest behavior that has put them in the unfortunate spot in which they find themselves.  And that is their own fault entirely.

Central Banking is Murder

Have you ever wondered how it is that the US can wage multiple foreign wars of choice simultaneously, have more wars planned and in the pipeline, and yet still not raise taxes?  The this all gets back to that modern marvel, the elastic currency as discussed above.  The US is able to maintain its enormously disproportionate military budget because the Fed is able through QE to ensure that all the debt issued by the federal government is purchased on the open market.

Were it not for QE, were it not for central banking, the federal government would have to live within its means.  Among other things, this would require a curtailment of foreign adventurism.  The historic and Christian foreign policy stance of the US has been one of strategic independence, perhaps best summed up in the saying, “peace, commerce, and honest friendship with all nations, entangling alliances with none.”  It is no accident that the American imperialism and central banking both arrived on the scene at about the same time.

Conclusion

The Fed was born in monetary sin and in financial iniquity its founders conceived it.  For over 100 years, it has been among the leading institutions in the destruction of our republic.  It has destroyed our money through inflation. It has destroyed our commerce though the business cycle.  It has facilitated unjust wars of choice, making it an agent of murder.  It has lorded it over the American people, making decisions that affect the lives of every man, woman and child in this country and has done so with almost no accountability to congress, let alone to the general public.  Since the Fed has been in business, it has destroyed, by deliberate policy, over 96% of the value of the dollar.  It is high time for it to open its books.  It is high time to end the Fed.