Lux Lucet

Monetary inflation, the increase in the supply of money, tends over time to lead to price inflation.  The relation between the two is not clear to the general public, and so when price inflation does hit, merchants often are blamed for increasing prices rather than the real culprits, the special interests, politicians and central bankers who lobby for and practice debasing the currency through monetary inflation.  Currency debasement is, of course, immoral and nothing short of institutionalized theft.  Both those who practice it and those who support it with intellectual arguments are guilty of breaking the eighth commandment, you shall not steal.   

Inflation transfers wealth from savers to debtors.  Gordon Clark understood this when he wrote,

But if life is an equal value to all, there is something strange, when war comes and large military expenditures are necessary, in requiring the person who has saved for a life insurance policy to lose half its buying power by inflation, while the spendthrift loses nothing and enjoys high wages to boot. 

 – A Christian View of Men and Things, pp. 101-102

Unlike Gordon Clark, those who set monetary policy in our country demonstrate utter contempt for savers while bailing out their friends among the too-big -to-fails.  The Fed’s announcement Wednesday of the ex nihilo creation of 600 billion dollars, while good for the politically connected, is a frightening and naked abuse of power that bodes ill for the value of our savings, our retirement and our paychecks.    

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Then Ben said, “Let there be cash”; and there was cash.  And Ben saw the cash, that it was good; and Ben divided the cash for his mandate.  Ben used some to inflate and the rest to stimulate.  So in the evening and the morning there was QE2.   

  – The Keynesian Bible, Revised Federal Reserve Version

Today the Federal Reserve Bank publicly announced the long-awaited fraud popularly known as QE2.  “QE” being short for Quantitative Easing – a euphemism for monetary inflation, which in more honest language is called theft – and “2” indicating that it’s the second round of this Keynesian nonsense.  You see, the intellectual and political leadership in our country is so corrupt, so foolish, so arrogant that those in charge think, or at least want you to think, that by fiat they can create money out of nothing and cure all that ails us.  

Now I don’t intend to take the time to debunk QE2 or the Keynesian economics that serves as the theoretical basis for this action.  You can find good articles to this effect all over the web.  But I want to point out one thing that is often overlooked when it comes to the Federal Reserve and its acts of money creation:  it’s a form of idolatry.  The God of Abraham, Isaac and Jacob created all things of nothing by the word of his power.  In the English Bible, the first spoken words are, “Let there be light,”  which in the Latin Vulgate translation reads, “fiat lux.”  Fiat is simply Latin for “let there be.” And this word “fiat” is the same word is used to describe our current monetary system.  Our dollars have monetary value, not because they are backed by something valued by the free market such as gold or silver, but because the government says they have value.  And when the Federal Reserve Bank, an agency of the federal government, decides the problem with our economy is that there’s simply not enough money in circulation, it creates more by fiat, in effect saying “let there be cash.” This certainly seems very impressive.  But unlike God’s act of creation, the Fed’s act of money creation is a fraud.  For while the Fed can create hundreds of billions of new dollars, it can do nothing to make us wealthier.  In fact, the more money the Fed creates, the less value of our savings and paychecks have. 

God and God alone creates out of nothing.  His creation alone is good. And when mere men at the Federal Reserve claim that they can create money by fiat and that this is a good thing, they put themselves in the place of God and act, not as ministers come to serve, but as idols to be worshipped.

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Dishonest scales are an abomination to the LORD, but a just weight is His delight.  (Prov.11:1)

Diverse weights and diverse measures, they are both alike, an abomination to the LORD. (Prov.20:10)

This past Wednesday, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would begin a new program of buying treasury debt.  There are two things remarkable about this program: its size and its method.

According to Bernanke, the program calls for the purchase of up to $1.2 Trillion of government debt instruments.  This is unprecedented.

What is more, these purchases will be made directly from the Treasury Department, not on the secondary market, as has been the practice in the past.  This will enable the Fed to directly underwrite the massive defict spending of the Obama administration.

Some, praising Bernanke’s decision, have described this program as a bold move.  Others have expressed concerns that it is inflationary.  But a man with a Christian understanding of economics would describe it using this word:  theft.  Let me explain.

In the Bible money is a weight of some commodity.  For example, when Sarah died, Abraham bought a field from Ephron the Hittite so he could bury her.  According to Genesis 24:16, Abraham, “weighed out the silver for Ephron which he had named in the hearing of the sons of Heth, four hundred shekels of silver, currency of the merchants.” Since Abraham paid for the field with a weight of silver, he had to have scales to weigh it with.  And  God required those scales to be honest.

For in a monetary system that depended on commodity weight, an unscrupulous merchant could cheat his customer by using heavy weights as counterbalances to buy and light ones to sell.  God explicity condemned this practice several times in the Old Testament.  In Duteronomy25:13-16 we read, “You shall not have in your bag differing weights, a heavy and a light.  You shall not have in your house differing measures, a large and a small.  You shall have a perfect and just weight, a perfect and just measure, that your days may be lengthened in the land which the LORD your God is giving you.  For all who do such things, all who behave unrighteously, are an abomination to the LORD your God.”  Here we see God condemning false units of account and approving true ones.  For more on this see Lev.19:36; Prov.16:11, 20:10,23 and Mic.6:11.

The US Dollar, like the Shekel of Abraham’s time, was originally defined as a weight of silver, but this is no longer the case.  Today the Dollar is a fiat currency, meaning it’s money because the government says it’s money.  As a result, tracking the value of the dollar is more difficult than simply looking at how much silver it can be exchanged for,  yet it is still possible to track the value of the dollar over time.  When economists do this, they find that since 1913, the year the Federal Reserve was established, the dollar has lost something like 96% of its value, or approximately 1% per year.  The result of the dollar’s devaluation is what we call inflation.  Or to put it in biblical terms, the Fed has, since its inception, persisted in using lighter weights every year, defrauding the American people.  Thus, Bernanke’s “bold move,” when considered in the light of Scriptures, far from being praiseworthry, is, in fact, a breaking of the eight commandment prohibiting theft and an abomination to God.

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