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Posts Tagged ‘Money and Banking’

The_Phillip_Medhurst_Picture_Torah_122._Abraham_purchasing_Ephron._Genesis_cap_22_v_16._Hoet (2)
Abraham purchasing the cave of Machpelah from Ephron by Phillip Medhurst. Courtesy of Wikimedia Commons.

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.

  • Genesis 23:16

In his lecture “Money, Freedom and the Bible,” John Robbins argued that the manufacturing of money was not a proper function of government, because there is no warrant for this in Scripture.  The Bible charges the civil magistrate with the duty to punish evildoers and reward the good.  There is no mention of anywhere in Scripture of God granting civil governments the right to manufacture money.

The first time I heard this many years ago, I was shocked by this idea.  “But all governments manufacture money,” I thought to myself.  “If the government didn’t supply money, who would?” I continued.

Of course, my initial objection can be answered by pointing out that simply because a thing is done does not logically imply that it ought to be done.  In the 18th century, David Hume famously made this point.

Secondly, concerning who would supply money in the absence of governments, the answer to this is the market would take care of this.  As Robbins noted in his lecture, there is such an example of this in Genesis 23, where Abraham pays for the field to bury Sarah by weighing 400 shekels of silver, “currency of the merchant.”  Note that it was not the currency of Pharaoh, nor the currency of the King of the Hittites that Abraham weighed out.  It was the currency of the merchants.  That is to say, it was a unit of money that arose from the common practice of the free market.  Importantly, it was not a government issued currency, neither was it the product of a government licensed central bank.

For that reason, that it arose in the marketplace and was privately managed by the merchants who used it, the shekel weighed out by Abraham was an honest unit of money.  The same cannot be said for sovereign currencies of our day.  Not only do they fail to maintain purchasing power, but they are deliberately designed to lose value over time.  To this author’s knowledge, there is not one honest currency in use today, including, and perhaps especially, the U.S. Dollar.

Last week’s post titled “This is Going to Hurt, Part 1: Honestly Facing our National Bankruptcy,” discussed the disastrous economic numbers coming out as a result of the government’s response to the coronavirus pandemic.  Please note, I did not write, “the disastrous economic numbers coming out as a result of the coronavirus pandemic,” but, “the disastrous economic numbers coming out as a result of the government’s response to the coronavirus pandemic.” It is not the Chinese coronavirus that caused over 30 million Americans to lose their jobs in the past six weeks, it is decision, more accurately decisions, of various government officials that have led to this disaster.

But oddly, as I also noted, the stock market has rebounded even as economic activity has made record declines.  How can this be?  The short answer to this question is money printing on a mind-blowing scale by the U.S. Federal Reserve, the central bank of the United States.

My purpose in this post is to lay out in non-technical language what a central bank is and what it does.  In subsequent posts, I shall illustrate the unbiblical, immoral nature of central banking by looking in detail at the origin, the workings and the disastrous effects Federal Reserve (the Fed) policy has had on our nation.

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Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

In a recent article titled “The monetary policy endgame,” Rick Rieder argued that central banks have two ways of creating inflation – inflation in this case being defined as rising consumer prices. The first is to create increased consumer demand through demand stimulus (lower interest rates). Secondly, Rieder argues, central banks can engage in monetary debasement. Continuing with his argument, Rieder contends that he believes central banks will turn to monetary debasement to achieve their stated inflation goals.

So what is monetary debasement? As the Investopedia link puts it, “Debasement refers to lowering the value of a currency, particularly one based on a precious metal, by adding metal of inferior value.”

But even though we don’t have a precious metals based monetary system doesn’t mean that governments can’t debase their currencies. As the Investopedia article on debasement goes on to say, “[D]ebasement [in fiat monetary systems] only requires that the government print more money, or since muc hmoney exists only in digital accounts, create more electronically.”

In light of the coming central bank driven currency debasement, Rieder asks the important question, “How should one position for such an endgame?” Rieder’s answer? “[A]ll of this leads one today to consider assets that can participate in an inherent devaluation of the local currency, which is to say, real estate, and even hard assets that have historic value-relevance, such as gold.”

Rieder’s post is remarkable, not just for what he said, but also for who it is that said it. Rieder is not some tin foil hat wearing gold bug, but is a Chief Investment Officer (CIO) at BlackRock, a New York City based investment management firm that is the world’s largest asset manager with $6.84 trillion in assets under management as of June 2019. Put another way, BlackRock is Wall Street royalty. Further, Rieder’s post appeared on BlackRock’s blog, giving his statements the implicit approval of the firm itself.

Given the decades long propaganda campaign of hatred that has been directed at gold and at those who advocate for the return of gold to the financial system, Rieder’s comments are significant indeed.

There’s a lot to unpack in Rieder’s article, more than what can be discussed in this post. Lord willing, I shall return to his post at some point in the future. But I mention in today mainly to let readers know that mainstream financial analysts are quietly warning that the US dollar – and all other fiat currencies – are in trouble and likely to suffer significant devaluation in the not too distant future.

In light of warnings from Rieder and others, the application of Proverbs 22:3 to our current financial circumstances cannot be overstressed. Here we have a highly placed man at a highly respected financial firm going on record to warn us in advance that the Fed is going to debase the dollar. What is more, he provides for us sound advice on strategies savers can use to protect themselves.

In Scripture, we find several examples of men who were given advanced warning by God of coming disasters, and who, in faith, took action to save themselves and others. In last week’s installment, we looked at the case of Noah. This week, we shall continue our look at Biblical case studies in prepping with a review of Lot’s narrow escape from Sodom.

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Happy April Fool’s Day! And good April Fool that I am, I find myself hard at work once again to bring you my weekly blogging awesomeness.

Well, okay. Maybe awesomeness is a little too strong. I’ll settle for weekly blogging not-too-horribleness.

At any rate, I am kinda pumped about this week’s topic, namely the Federal Reserve. In short, I’m fed up with it.

But more than that, there are few things in life that bring joy to my heart more than the thought of dishing out a good beat down to ne’er do well boys and girls at the dear Federal Reserve.

I find it, how shall I say….cathartic. Yes, that’s it! Cathartic! And since it’s been a little while since I’ve dissed the Fed, I expect that it will prove all the more so.

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rinkeby-riots

A policeman inspects a burned out vehicle following the riots in Rinkeby, Stockholm.

Some things seem to naturally go together. Peanut butter and jelly come to mind as a natural pairing. Baseball and summertime? I’m in. Even the terms “blowhard” and “politician” evoke a certain warmth of familiarity within me.

 

But riots and Sweden??!! Surely, you jest! Nevertheless, as they say, truth is stranger than fiction…

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Money, so they say, is the root of all evil today.

– Pink Floyd

An email came to my inbox recently claiming that people who hold to the Scriptures think “money is the root of all evil.” The notion that the Bible teaches money is evil is quite common. Pink Floyd referenced this idea in their hit “Money,” and people often repeat this idea in everyday conversation.

goldBut as is the case with other popular ideas ascribed to the Bible – for example, most Americans mistakenly think “God helps those who help themselves” is a Bible verse; and how many times have you heard someone take Jesus’ words “Judge not” as a general prohibition against making necessary ethical distinctions? – this one is also wide of the mark. And it is wide of the mark in at least two ways. First, the quote itself is not accurate. And second, when the quote is presented accurately, the true meaning of this verse is seen to be quite different from what is in the popular mind.

The actual quote is found in 1 Timothy 6:18 and reads, “For the love of money is a root of all kinds of evil” (New King James). The language of the Authorized Version is “For the love of money is the root of all evil.” When comparing either of these two translations with the popular version of the quote, it becomes readily apparent that the big difference is that the Bible identifies, not money itself, but the love of money as the root of all sorts of evil.

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uncle_sam_supplying_federal_reserve_fiat_debt.jpg

Ever since the spring of 2009 when The-Powers-That-Be (TPTB) were out there claiming to see “green shoots” everywhere, the public has been treated to a non-stop propaganda campaign pushing the narrative of economic recovery.

President Obama himself proclaimed his belief in the strength of the American economy, stating for all the world to hear in his 2016 State of the Union Address that anyone who doubted everything was awesome in the main street economy was, to use his words, “peddling fiction.”

And surely Obama couldn’t be wrong. After all, good doctor Ben Bernanke spent several years injecting the US economy with his concoction of Zero Interest Rate Policy (ZIRP) and three rounds of Quantitative Easing (QE). How could anyone doubt but that the wise heads at the Fed have cured what ails us? The stock market just set a new record!

But if you dig down beneath the surface, you’ll find that everything is not awesome. Corporate earnings are down for the fifth quarter in a row. According to the report on Factset, “The second quarter [2016] marks the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009.” In other words, corporate earnings haven’t had a losing streak this long since the height of the last financial crisis.

Or take worker productivity, a measure of hourly output per worker, which has declined now for three straight quarters. As the Reuters article pointed out, “U.S. nonfarm productivity unexpectedly fell in the second quarter, pointing to sustained weakness that could raise concerns about corporate profits and companies’ ability to maintain their recent robust pace of hiring.” No kidding.

But why is worker productivity in the US declining? The Reuters article fails to provide a reason. So let me suggest one possibility: businesses are no longer investing in property, plant and equipment, the very things that drive productivity. As Forbes reports, “Corporate executives now shy away from capital spending. Companies are spending money to cut costs – labor cost especially, and also electricity – but few companies are increasing productive capacity.”

So what have executive been spending on if not new productive capacity? Stock buybacks that serve to boost earnings per share and increase bonuses. “Stock buybacks by big American companies are near a historical peak [as of May 2014], but the practice appears to do little to improve their underlying operations and robs them of money for research and future growth. USA Today’s John Waggoner calls stock buybacks a ‘sugar high’,” as John Morgan reports.

Morgan goes on to cite a 1999 quote from Warren Buffett, who said, “Repurchases are all the rage, but are all too often made for an unstated and, in our view, an ignoble reason: to pump or support the stock price.”

Let’s see then, we have stock markets at near record levels, while at the same time corporate earnings are on the decline as worker productivity erodes, which very likely is a consequence of businesses showing greater interest in engineering stock buy-backs rather than in capital spending. Sure sounds like a plan for long-term economic success to me.

I’ve mentioned only a few data points to illustrate that the economy, far from being robust, is in reality quite weak. But for more of the same, consider the following nine ugly charts. Obama’s term in office is highlighted in red.


Things that should be going up in a healthy economy – Labor Force Participation Rate, Median Family Income, Home Ownership – are all going dramatically down. Those items that one would expect to see going down if the economy really were as good as The-Powers-That-Be tell us – Food Stamps, Federal Debt, Money Printing, Healthcare Costs – are going straight up.

These charts tell a very different story from what Obama’s putting out. Maybe he’s the one peddling fiction.

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Please click the link below the story quoting Pippa Malmgren stating “there’s no price discovery anymore” http://www.zerohedge.com/news/2015-02-23/ex-plunge-protection-team-whistleblower-governments-control-markets-there-no-price-d

Please click the following link for Sean Gerety’s article Faith Alive http://www.trinityfoundation.org/latest.php

 

 

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Crooked Hillary

Hillary Clinton

Fairness. Such an innocent sounding word. So why do I always loath to hear politicians speak of it?

 

Very likely my trepidation has something to do with the way political hacks abuse the English language. Our public discourse has reached what could be called peak dishonesty. Whatever words our public servants use, if you understand the opposite you’re probably pretty close to catching their drift. And so it is with fairness. If some wanna-be office holder starts using that word, think “mega-ripoff” and you won’t go far wrong.

Hillary Clinton, to no one’s surprise, is the latest politician to use the oft-exploited term “fairness” as cover for more theft by government. One need only look at her proposed “fairness” tax to see this principle in operation.

According to the factsheet Investing in America by Restoring Basic Fairness to Our Tax Code,

There is essentially a “private tax system” for the wealthiest Americans that lets them lower their tax bill by billions, while working families play by the rules and pay their fair (sic) share. In 2013, the 400 highest-income taxpayers – those making more than $250 million per year on average – paid an effective tax rate of just 23 percent, in part because of tax gaming and sheltering to reduce their tax bills. Some multi-millionaires can pay lower rates than their employees.

Now there is much here that is true. The US tax code is hopelessly complex and provides ample opportunity for those who can afford top-notch CPAs and tax-lawyers to take advantage of legal loopholes to shelter vast wealth from the tax man. Ordinary Americans, on the other hand, are not so positioned. Most of us dupes on Main Street end up forking it over big-time to the IRS.

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Freedom_CapitalismFreedom and Capitalism: Essays on Christian Politics and Economics by John W. Robbins (The Trinity Foundation, Unicoi Tennessee, 650 pages, 2006), $29.95 (E-Book $10.00).

“Brevity, clarity, and profundity are three virtues missing from the modern world,” wrote John Robbins in the introduction to his commentary on Philemon, (Christianity & Slavery, 7). But while these admirable qualities are missing from the works of most contemporary writers, such is not the case with Robbins’ work.

This reviewer has long been of the opinion that one can get more sound theology and philosophy from reading a single short essay by the late Dr John Robbins that he can get from entire shelves full of books by other authors. In Freedom and Capitalism, Robbins once again displays his remarkable talent for presenting profound ideas in a compact and readable package.

Robbins, who is likely well known to followers of this blog as the founder and former president of The Trinity Foundation, held a Ph.D. in Political Philosophy from The Johns Hopkins University and worked on the staff of Congressman Ron Paul of Texas, serving as Paul’s Chief of Staff from 1981-1985.

He was also an active lecturer and writer. Concerning the latter, Robbins commented in his introduction to Capitalism and Freedom that, “Over the past 40 years, as a student (high shcool, college, and graduate) and adult, I have written hundreds of essays, articles, and letters-to-the-editor” (9). This book represents a collection of thirty-one of articles, all but four by Robbins, on the subjects of politics and economics.

The essays presented in Freedom and Capitalism concern a variety of topics within the broad fields of politics and economics and were written over a period of thirty-four years. But for all that, there is a common theme that runs through them, the Scripturalism of Gordon Clark. Robbins nicely summarizes Clark’s Christian system of thought as follows:

Epistemology: The Bible tells me so.

Soteriology: Justification is by belief alone.

Metaphysics: In Him we live and move and have our being.

Ethics: We ought to obey God rather than men.

Politics: Proclaim liberty throughout the land, unto all the inhabitants thereof.

Economics: Laissez-faire capitalism: Have I not the right to do what I will with my own? (9)

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Elisha Prophesies the End of Samaria's Siege

Elisha Prophesies the End of Samaria’s Siege by Nicolas Fontaine, 1625-1709.

 

Inflation – What it is and what it isn’t (continued)

In the last installment of this series, I mentioned that the big takeaway point was the definition of inflation. As you may recall, we defined inflation a bit differently than is commonly understood. Most people, when they talk about inflation, mean to say that prices – the amount we pay for items such as gas or bread or rent – have gone up.

The most common statistic used to report rising prices is the Consumer Price Index (CPI). The CPI measures the cost of a representative basket of goods and services, comparing the average price of these items in one period with their average price in the following period.

When the CPI shows average prices going up from one reporting period to the next, the rising prices are reported in the news as inflation. Occasionally, average prices fall. When this happens, we are told that deflation has occurred.

But the definition of inflation that was presented in Part 4 of this series did not rely on measuring the average cost of goods. Instead, inflation was defined as the increase in the supply of money. Conversely, deflation was not defined as decreasing prices, but rather the decrease in the supply of money.

But even though inflation and deflation are not the same thing as rising and falling prices, there is a relationship among them. When the money supply increases, assuming the amount of goods and services in the economy remain the same, prices go up. Conversely, when the money supply falls, prices go down. As Peter Schiff puts it, “The money supply expands and contracts. Prices go up and down. Inflation and price increases are not the same thing. One is cause. The other is effect” (Crash Proof, 69).

Now you may be asking yourself why I bother to define inflation as I do. Isn’t the common definition of inflation good enough as long as we all agree that inflation is rising prices? Why confuse things be bringing in the concept of money supply?

The best argument for defining inflation as the increase in the supply of money is that it clearly identifies the cause of rising prices: central banks creating too much money, usually in response to governments spending too much money.

If we are satisfied with the usual definition of inflation, government officials can easily fool us into thinking that prices are going up for reasons that have nothing to do with their own policies. Bad weather, profiteering by greedy speculators and lack of sufficient governmental regulations are common scapegoats for rising prices, even though prodigal politicians and the central bankers that fund their wasteful spending are the real culprits.

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