Honest Money North

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HONEST MONEY


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HONEST MONEYThe Biblical Blueprint for

Money and Banking

Gary North

LvMIMISES INSTITUTE


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More informtion on biblicl economics cn be obtine fromgarynorth.com. S , Clm d Bl.

Cy Gy N, 1986, 2005Copyright 2011 y the Luwig von Mises Institute npublishe uner the Cretive Commons Attribution License 3.0.http://creativecommons.org/licenses/by/3.0/

Ld M I518 W Ml AA, Alm 36832Mises.org

ISBN: 978-1-61016-193-0


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TABLE OF CONTENTS

Id

1. T Vl My 12. T O My 173. M H My 314. D Cy 455. T C I l 556. W S Mlz My 677. Bll Bk 818. Fl R Bk 959. P C 109

10. A Bll My Sym 127

Cl 141Bly 151Id 155


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INTRODUCTION

This is ook out money, sujet tht hs efienlysis y professionl eonomists for s long s there l m. A m m, m ll-md l ky . Vy m ll-mdl l m.

I will give you n exmple. In the fll of 1985, Id Cm he conuct quick stuy of the Mexicn peso. I thoughttht the shrp inrese in shAmerin money inlm ld y M lsubstituting ollrs for pesos in Mexico. At the time tht

he begn his investigtion, the peso ws selling for bout250 dll. I d k mt the Feerl Reserve System, our ntions centrl bnk, M d dll.I suspete tht Mexin itizens were using the U.S.dll ll .

H d k dy l. T -

mists, one of whom ws speilist in the Mexineonomy, h tol him tht it ws quite unlikely thtMexicns were horing ollrs, becuse Mexicns coul


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Honest Money

tke csh ollrs to their locl bnk, exchnge their ol-l , d k ld y m .

W k, ll 500 dll.Thus, nyone who h followe the vice of the experteconomists h lost hlf of his cpitl. On the other hn, d dll d

never went ner bnk h ouble their money (pesos).I , l ll M k mout prtil eonomis in n infltionry eonomy Fdl R m k. Sm, dy dd m.

A m l, d- Am d .I d Fdl R m k people in foreign ountries re using Amerin illsinste of their epreciting ntionl currencies. So muchfor the onsistent views of eonomists. They just ontgree on muh of nything, exept the nee to keepm yll.

The Crisis We Face

T d mk. I l.Ey dl ldwrf the crisis of the 1930s. There re no pin-free solu-tions. There will be wiespre efults on scle greter

ll 2008. T l q d d : H

ll dl m? W kd dl ll ?This book sks ifferent question: Wht violtions

l Bl dd W mm


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Id

le us into this mess? It lso sks this question: Whtld ld ym ll?

There re Bilil lterntives. If we h optem 500 y , 100 y , 50 y, ld my . B dd d m, .


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1

c h a p t e r o n e

THE VALUE OF MONEY

So when the money failed in the land of Egyptand in the land of Canaan, all the Egyptians

came to Joseph and said, Give us bread, forwhy should we die in your presence? For themoney has failed.(G 47:15)

Dl D l 1719 m

ship snk, n who woun up on eserte isln for28 y. I lld Robinson Crusoe. C d l ld. H m y?He neee foo, lothing, n shelter. Fortuntely form, l l l m ; d, ld d 28 dy.

Eonomists love to use Roinson Crusoe s theirexmple when they egin n introutory textook oneonomis. Why? Beuse he ws lone initilly. In


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2 Honest Money

iscussing Crusoe, economists ont hve to begin with theiffiult prolems of the ivision of lor n voluntrytre. Only when the economist hs expline bsic prouc-, , d ll m d l d introue Friy, the ntive prtner. Tht ws Defoesy, .

The textbook Crusoe initilly hs to ecie wht his

highest priorities re. Wht is his orer of preferences? Isit fresh wter, foo, shelter, n lothing? Wht need m y ? T l illustrtion is to show tht in worl of limite resources, mk d l. H ll m m m. Hhs to ecie wht he nees to ofirst, secon, n soon, own to hunre n thirty-fifth or morenthen he hs to compre this list with his vilble resources,ld l kll d m.

One y he my pik erries. But they ont lst, d d, m l . Hcn climb tree n pick coconuts, or he cn spen severl

mk k k kk d m . B mhe spens locting suitble stick cnt be use to climbtrees n get foo iretly. The point is tht he hs togive up income (foo) in orer to get the time to prouce d l ( k).

H my . T m d

fishing pole, some line, hook, n mybe some bit. Or d . B l d (the ships wrehouse), he hs to mke it. He cnt becometoo fny, or else he will ie of mlnutrition efore he j.


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T Vl My 3

Decisions on BoardSy l d k m . H

hs put together crue n insecure rft tht he cn useto flot some goos k to shore. The ship is slowlysinking, so he hs limite time. A storm is oming up z. H y. W d

he tke? Wht is most vlule to him? Oviously, hemkes his eision in terms of wht he thinks he willd ld. H m l ll m ll, m.

The vlue of tool s fr s he is onerne hsnothing to o with the money it ost originlly. Hemight e le to pik up sophistite lok, or n

ml m, ly .He woul proly selet some inexpensive knives, m ( l ), l ( l-

l ), d dz ml l ld m d l d d.

In short, value is subjective. The economist uses fncylnguge n sys tht Crusoe imputes vlue to sre. H dd ml,d l l m lly

tool. In other wors, the vlue of the tool is ompletelyepenent on the vlue of the tools expecte future output.He mentlly lultes the future vlue of the expete l, d mk jdm

m y l d output. Then he lultes how muh time he hs untilthe ship sinks, how muh weight eh tool ontriutes,how lrge his rft is, n how hoppy the wter is. Hel l l d d dly.


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4 Honest Money

In other wors, he doesnt look to the past in order toevaluate the value to him of any item; he looks to the future.The pst is gone. No mtter wht the goos cost originlly,they re vluble now only in terms of wht income (inclu- y m) y d d future. Whtever they ost in the pst is gone forever.Bygones re bygones. The economist clls this the doctrine

of sunk costs. In the cse of Crusoes ship, thts exctly whty m: k. T y d d l y.

There re objective conitions on the isln, n the l l j, y l-te subjectively by Crusoe. He sks the question, Whtvlue is this item to me? His ssessment is the soledm m . H mymke mistkes. He my re-evlute (re-impute) everyitems vlue lter, when he better unerstns his coni-tions on the isln. He my lter wish tht he h pickeup some other item inste. The point is, its his ecisionn his evlution tht count. Becuse he is ll lone, he

d l dm y . Hoesnt sk, How much money i this item cost in thepst? He sks inste, Wht goos n benefits will itprouce for me in the future? Then he mkes his choices.He lloctes the scrce mens of prouction. He lloctessome to the rft n the rest he leves on the sinking ship.H ld -y m , d l

k .He oesnt sk himself, I woner how much money

ll ldd ? Ulhe expects to be rescue shortly, thereby enbling him toresell the item, he woulnt bother with such question.


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T Vl My 5

Wht oes he re how muh money ny item ost inthe pst? All tht mtters is wht tul servies (non-my m) ll d m .

The Function of Money

Wht hs money got to o with ll this? Absolutely noth-

ing. Crusoe doesnt use money. He simply mkes mentlm l m m he thinks it will prouce for him in the future. If whtevern item will prouce isnt worth very much to him in the, y m dy.

Am lly ll -ue. The ship is sinking. His rft is lmost sinkingelow the wter. The storm is oming. He hs to getk . A lm n onto the rft, he remembers tht the cptin of theship ws rumore to own hest full of gol oins.

Woul Crusoe run bck to the cptins room to try tod ? E d m, d

lly k , ld d ege of the ship n try to lo it onto the rft? Woulhe toss the tools into the ocen to mke wy for chest ld ? Oly .

B my l, ? Gld my. Wywoulnt he scrifice some inexpensive knives n brrelsin orer to inrese his welth (money)? The nswer is

simple: on a permanently deserted island, money isnt wealth.Therefore, gol isnt welth. Its hevy. It isplces tools.I k . I ly l; lly.

The vlue of money is etermine y wht thosewho vlue it expect tht it will o for them in the future.


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6 Honest Money

A lly m dd ld k m my ll d m . I ml l, my d m ll.

S l my ml z.

Joseph in EgyptN l k ml Bl: m in Egypt. Joseph h wrne the Phroh of the fmine m, d y, P dollete one-fifth of the hrvest n h store it in. T m . T ld. Tpeople of nery Cnn lso suffere. No one h d.

An Joseph gthere up ll the money tht d ld Ey d ld C, yought; n Joseph rought the money

P . S myfile in the ln of Egypt n in the lnof Cnn, ll the Egyptins cme to Josephn si, Give us re, for why shoulwe ie in your presence? For the money hsld. (G 47:1415)

Wht i they men, the money hs file? Theym mly md l l-grin, the money ws worth nothing. Why woul mn m lyof grin in orer to get some money? Wht goo woul


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T Vl My 7

the money o him? He wnte life, not money, n d l.

B my ld, d ll lmzero vlue. Thus, in orer to uy foo, the people h d d ll my. N y

d my.

An Joseph si, Give your livestock, nI will give you bre for your cttle, if themoney is gone. So they rought theirlivestock to Joseph: n Joseph gve themre in exhnge for the horses, theflocks, the cttle of the hers, n for theonkeys. Thus he fe them with bre in ll lk y.(G 47:1617)

Were the Egyptins foolish? After ll, ll those cttle nhorses were useful. But nimls et grin. The grin wstoo vluble uring fmine to fee to nimls. All tht

ml y ld s foo, n in Egypt, the met woulnt lst long. Denimls in esert ountry ont remin vlule verylong. Why not tre nimls for grin, whih survives ?

The only reson the Phroh h ny use for theml d my k d d

m. H k ld llyen. Thus, he woul e the owner of ll the welth ofEgypt t the en of the fmine. For him, the exchnge ws goo el, ut only euse he h the foo, n themy dd , d l d ld


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8 Honest Money

to e urte knowlege onerning when the fmineld d. J d ld m ld l y.

Beuse he h surplus of grin eyon meresurvivl, n becuse he h insie informtion boutthe urtion of the fmine, money n nimls werevluble to the Phroh, even though they were not vlu-l l. T, ly m

l d. T P goos tht woul gin eome very vlule in thefuture. The Egyptins gve up goos worth very little tothem in the present in orer to get bsolutely vitl presentgoos. Eh sie gve up something less vlule inexchnge for something more vluble. Ech sie improve m . E d d .

Notice here tht we re not eling with ny so-clleequlity of exhnge. This theory sys tht people d ly d ql l.I mkl, y my qlprice, but they re not of equl vlue in the mins of the

d. W ly dl voluntry exchnge is inequality of exchange. One personwnts to possess wht the other person hs more thn hewnts to keep wht he himself lrey hs. Becuse ech l m ll, ly k l.

Egypts money file. In fct, grin becme the new

form of money, lthough the Bible oesnt sy this explic-itly. Wht it sys is tht everyone ws willing to trewhtever he h of former vlue in orer to uy foo.But if some item is wht everyone wnts, then we cn sy my.


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T Vl My 9

The Properties of MoneyWy ld d my? B d l ll m mym :

1. Dly

2. Ply3. Dly4. Rzly5. Sy ( l l

lm d )

Normlly, grin oesnt funtion s money. Why not?

B m . A l d l, l m-prison to cup of imons or cup of gol coins. Theuyer thinks to himself, Theres lots more where thtme from. Normlly, hes orret; there is lot more m m. B d m.

Why ivisibility? Becuse you nee to count things.Five ounes of this for rn-new tht. Only threeounces for use tht. Both the buyer n the seller nee l mk . T ll dtht my wnt to go out n uy three other usethts in orer to sty in the tht business, so he neesm y dd m m l l.

T m dly: , m z , .

Portbility is obvious. It isnt n bsolute requirement.I d S P ld l Yuses gint stone oughnuts s money. They re too lrge


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to move. But they re sign of welth, n people rewilling to give goos n services to buy them. Actullywht re exhnge re ownership ertifites of somekin. Normlly, however, we prefer something itmll d. W mrket, we wnt to rry money with us. If it nt ed ly, ly my.

Durbility is importnt, too. If your preferre money , y k l .Tht mens troule. A rrel of fresh fish in worl

without refrigertion wont serve s money. But there reexceptions to the urbility rule. Cigrettes rent urble y ml , d money in every known moern wrtime prison mp.Their high vlue per unit of weight n volume overcomes l dly . Al, y y : lk mk l.

Recognizbility is crucil if youre going to persuenyone to tre with you. If he oesnt see tht its goo,ld, ml my, k

of whtever it is tht youre trying to uy. If it tkes long time for him to investigte whether or not its rellymoney, it ets into everyones vluble time. Investigtions , . S, up. People woul rther el with more fmilir money.I , , d .

So wht we sy is tht ny object tht possesses these

five hrteristis to one egree or nother hs thel y my. Sm y ddm d my lly: ll, l, l, l, l m, d m. (T lm m


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T Vl My 11

dly : l m m ll.)

Money as a Social Product

W ldy R C dof money on his isln. From there we went to nient

Egypt, n we foun tht society i initilly nee money,but when fmine struck, the oler forms of money file,no longer serving s money. Mybe grin took over s the my. O my ld my.

These exmples shoul give us some preliminryd my , d k. I din exhnge. Beuse Roinson Crusoe is ll lone, hehs no use for money. He oesnt inten to mke nyvoluntry exhnges. Similrly, in soiety tht is justly , d lm y m,

ll my . Ndy y dsells for money ny more. To tre wy grin is to trewy life. They ll hng onto every bit of foo they grow,

n nooy tres very muh. They my rter goosd dly, y l d y mof money. This inictes very low mount of tre. So,wiespre tre eses. When this hppens, moneyl. I d. I l y, ll d l .

If people ont tre, they cnt specilize in prouc-

. I Ey, d m . T P , d l Egypt survive, ut t very high ost: the loss of theirdm. Ty ld ml m ly orer to uy foo, for they sol their ln n their


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12 Honest Money

hilrens inheritne to Phroh (Genesis 47:1923).T y . B y d m. Ty l.

Why oes money exist? Becuse it serves people well.I y l l y up less vlule items (to them) in orer to uy morell m ( m), y d d . I

I ly l ll, d I ll d l, , I dm ll d my l, d I y d . I n pry he hsnt foun n xe to uy from someonel mm.

B ll, y. W d y, m d y ll d. A l d , ylly lly dd min orer to hol for riny y. They sell their surplusd lly - d.Why? Beuse they mke the ssumption tht people

ll d m d k, . S, they store up quntity of this goo, they will be ble tod l ll ll ll m ll goos n servies lter on. In ft, the owner of thisgoo will e le to hnge his min next week out

y, d ll ll l y .In short, n most importnt, money is the most

mrketble commoity in prticulr society. Tht is the d my m lto come up with. In Egypt, when the oler form of money

l mkl, Bl y myfile. File money is the sme s unmrketle


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T Vl My 13

money. But there is no such thing s unmrketble money.If its unmrketble, then no one wnts it. If no one wnts, l my.

Money llows us to chnge our mins inexpensively.It llows us to mke mistkes out wht we nee or

wnt, n we n still reover. Money roens them l ll ll ll

wnt. The more people who wnt money, the more peopleI ll l dl .

Furthermore, money mkes it possible for people tol mm m d d . Iont hve to compute how mny xes will buy how mnyshoes, n then ompre shoes with ttle, n sheep

with xes, n on n on. All I nee to o is to check theWeb n see ll the things I cn buy with money. So, well mk d ll meffectively. Without money, we cn chieve only primi-tive economy, becuse clculting the price of nything,let lone everything, eomes too iffiult. In ft, we d d m y

dld my ym.Money increses the ivision of lbor. It increses ouroptions of uying n selling. It therefore inreses our

l d dm . I m mgrowth. An most interesting of ll, to chieve ll this, theStte oesnt nee to prouce it. It is prouct of iniviulm , m ll.

Conclusion

Roinson Crusoe int nee money (exept perhps Fdy d ) d d


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T Vl My 15

SummaryT l l my :

1. Eonomi tion egins with n orere set of (, d, d, .).

2. A ld y d m

ll d m m.3. T , d l (l).

4. W m d l.

5. The vlue of the tool to ech person is epenenton the expecte vlue (to him) of the future output l.

6. Vlue is impute by person to goos n services; j.

7. Pst osts re eonomilly irrelevnt; presentd m ll m.

8. W m ll lly d l.

9. My l y ll l.

10. My l m.

11. T l my ( ml,

d m).12. T qly .

13. My dly, -ly, dly, zly, d y.


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14. My m mkl d.15. My .

16. Money llows us to recover more esily when we md m .

17. My d l.

18. My dy.

19. My dm.

20. Money mkes possible highly evelope economicll.

21. T S d d d

.


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c h a p t e r t w o

THE ORIGINSOF MONEY

And the gold of that land [Havilah] is good.Bdellium and the onyx stone are there.(G 2:12)

In the secon chpter of the Book of Genesis, Go, spek-

M, m ln of Hvilh. It ws plce where vluble minerls ofl . O ml ld.

W lmly ld ld -dd m . W ld ly ld y dd, dllm dd (

ws: possibly white minerl). Wht we cn rgue is tht

Moses knew tht people woul recognize the importnceof the ln of Hvilh becuse they woul recognize thel ml. O ml ld.


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Wy d I ld? Hlly, ld dmen s the longest-live form of money on recor. Silver,too, hs been populr money metl, but gol is histori-lly k my ml. T d Moses expete people to reognize the vlue of gol.We re his wors 3,500 yers lter, n we reognizethe importnce of the ln of Hvilh. If we coul locte

m, ld ld ld dy ld M dy. N k ml, I d ld ?

Money: Past, Present, and Future

You my remember from the previous chpter tht moneyppers in society when iniviuls begin to recognizetht prticulr commoity is becoming wiely cceptein exhnge. People wnt to e le to uy wht theywnt tomorrow or next week or next yer. They rentrelly sure whih eonomi goos will e in emn, y k d ll ly

y dmd. Ty y d ,put them wy, n then buy wht other goos or servicesy l . I , my m mk-l mmdy. I mkl l ll .

This isnt too ifficult to unerstn. But it rises lm. T ll my ll dy. W

ll d d y . I d, my ldy ld l m-mon unit of eonomi lultion. My lor is worthone-hunreth of unit per hour. A brin surgeons hourof lbor is worth unit. A new cr is worth twenty units.


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T O My 19

Money hs exchnge vlue toy. If it int, it woulnte money. We hve ll lerne out moneys vlue in dly . W ml .

H d k dy? W k ydy. W l dof its purchsing power. If we int know nything boutmoneys vlue in the pst, we woul not ept it s

unit of ount toy. If it hs no history, why shoulnyone expet it to hve future? But if people ont , my.

Here is the key question: How i money originte?I y d l, dd m l? A k-d- lm?

This ws the intelletul prolem fe y one of m ll m, Ld M,n Austrin sholr. In his ook, The Theory of Moneyand Credit(1912), he offere solution to this importntquestion. Money, he rgue, cme into existence becusein erlier times, it ws vlue for other properties. He

thought tht gol ws probbly one of the erliest formsof moneynot unique oservtion, ertinly. Beforeit functione s money, it must hve serve other purposes.Perhps it ws use s jewelry. Possily it ws use sornmenttion. We know tht mny religions hve usegol s prt of their ornments. It is shining, lovely tolk , d dly zd.

Gold in the BibleAnyone fmilir with the Bile woul reognize theury of Misess theory. Arhms servnt gveReekh gifts in orer to lure her into mrrige with


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T O My 21

Go escribe His love of Isrel by escribing figu-ly H d d H l. Lk d,Isrel h been given ornments, brcelets, chins rounher neck, jewel in her forehe n errings. Thus you

were orne with gol n silver, n your clothing wsof fine linen, silk, n embroiere cloth. You te pstryof fine flour, honey, n oil. You were exceeingly beuti-

l, d dd yly (Ezkl 16:13).

The Most Marketable CommodityGol hs een the most mrketle ommoity ford y. A ll ld d din the streets espertely begging people to consier buy- ld. I y, dd dyd k l m l ld.

Udd m S not neessrily prt of the evelopment of gol nsilver s money. There is nothing in the Bible tht inictestht gol n silver eme money metls euseArhm, Moses, Dvi, or ny other politil leer

nnounce one fternoon: From now on, gol is money!The Stte only ffirme wht the mrket h crete. Itcollecte txes in gol n silver. It thereby cknowlege l mk d md ld dl. B S dd my.

N l M m - dlm my, l my

units must hve een ommoity-se. If the unit ofccount (for exmple, gol) must hve come into populruse euse of its pst vlue, t some point we mustld ll mmdy menefit tht it rought esies serving s the most


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mrketle ommoity: money. Money h to strtm. I d mm. B my, m mmdy.

I , my lly l .

Money and TaxesT d S ly l m ml lunit of money. All the Stte hs to o is to nnoune:From now on, everyone will be require to py his txesin prtiulr unit of ount. After ll, txes re n. T m d d . (B,fortuntely, the eth rte oesnt go up every timeCongress meets.) The Stte hs power. If it sys thtpeople must py their txes in prticulr unit of ccount,there will be strong incentives for people to store up thism my.

Sll, S d lly d

l . I m l legl obligtion to py wht the people cnnot ctully , ll . I Mddl

Ages, for exmple, there were no gol coins in circultionin Western Europe until the mi-1200s. There ws no

y k m ld ml l ygol in the yer 1100 or 900 a.d., euse his sujets

ld y ld. Ty d ld y Est (Byzntium, the Estern Romn Empire) tht coul d ld.

T Bl l: S d in kin ( tithe of tul griulturl proution:


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T O My 23

1 Smuel 8:1415) n in csh, mening silver. A he qd md mm-itely before militry conflict (Exous 30:1214)theonly time tht it ws lwful for the Stte to onut , K Dd l ld (2 Sml 24:117).Solomon ollete 666 tlents of gol (1 Kings 10:14),presumly from txes, gifts from other ntions, n

from the sle of ny griulturl proue he ollete.(We rent tol where he got this huge quntity of gol.)

Triute in silver n gol ws pi to militrilyvictorious Stte. There were incients when Isrel h topy suh triute (2 Kings 15:19; 23:33) n lso whenforeign ntions pi tribute to Isrel (2 Chronicles 27:5).

The Stte lso hire militry fores with gol(II Cl 25:6). T, m y m l d ld, d y S m k m m. T oubt tht this process me silver n gol the fmilirforms of money in the ncient Ner Est. There re plentyof exmples in nient reors from other Ner Est

y kd ld d l. I mm y ld.Wht must e fully unerstoo is tht there were

no oins in this er. Coins int pper in the worluntil out 600 yers efore Christ. This woul hveeen out the time tht Juh fell to the invingByl, q l H y. S,

ym S my m other symols on the metl rs, or if there ws, noexmples of such mrkings hve survive. It is resonbly S dd m mll Il.


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This means that the State did not originate money. Al mdl (l) myoesnt nee to inlue ny referene to the Stte. TheSttes ecision bout wht to tx clerly h n influenceon the kin of money people ccepte, but tht ecision

d kd my ldybeing use by the people. In short, If it int being use,

y .This is very importnt to unerstn from the begin-

. T m ly ly dtht the Stte ws the soure of money originlly, ntht whtever the Stte esigntes s money is money.This explntion is bibliclly incorrect, historiclly incor-ret, n logilly inorret. Money is the product ofindividuals who make decisions to buy and sell. If iniviu-ls refuse to use wht the Stte esigntes s money, it my. I S mkhs esignte s money, it nt ollet txes or uyl d d. T S l l l kd my, ly

tht money, for the Stte is big buyer n seller of goosd . B S mly money n impose it on the mrket if mrket prticipntsd .

No Committee Needed

It is ifficult for mny people to unerstn tht the freemrket opertes rtionlly, even though there is no com-mittee of expert plnners or politicins to tell the mrket

d. Pl d dl l Gos worl is worl in whih iniviul people,


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T O My 25

l Gd d ll m, their ily ffirs, mking eisions, plnning for thefuture, n focusing their ttention on their own personln fmily nees, n out of ll this hustling n bustling,pushing n shoving, comes the most prouctive economy y m.

Christins n elieve tht the worl is orerly

euse it ws rete y Go. The Bile tehes thtGd , m lly l tions. As they intert with one nother, they lernthings. They fin out wht they hve to offer other peoplein orer to buy wht they wnt. They lso fin out whtother people re willing n le to offer them for the y ly . Mk m form of exhnging informtion. Free mrket tivity dd dy.

W d d mm ll dto o to stisfy other buyers. In fct, committee cnnotpossibly know ll the things tht we know s iniviuls,tken s group. Wht we lern we cn put to profitble

l .This spre of knowlege is me muh esier ythe existene of n gree-upon urreny unit. I ontmen tht we ll sit own n gree to use it. I men thtl l l ll lly -l y d d . Athis lerning proess ontinues, ertin urreny units

become fmilir. Its lwys esier for us to el with ech l m k d.The currency unit is the most importnt single source ofinformtion concerning the stte of the ctul conitions ly d dmd.


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26 Honest Money

Who eies whih urreny unit is eptle?Originlly, the people who entere into greements with y d ll. Ty ld

d m, d d lern. A currency unit becomes fmilir. We get into thehit of lulting the prie of everything in terms ofthis fmilir unit. It sves us time n effort when we

cn mentlly estimte: Lets see, I cn buy three of these, ly , y, .

W d I m?Do you wnt committee to set prices? Do you think

ommittee n sit own n eie wht everythingshoul cost in reltion to everything else? Will committeebe n intelligent, relible economic representtive of ll of? M k m m: .

Wy ld mm d jin eciing how much money to crete or estroy? If themm , y ld lld control the supply of money in which ll prices re quote?Why shoul we trust ommittee in money questions

when the committee int invent money, n when themm k ll ll lly d ld lly y?

Theres nother question. How o we know tht thecommittee will ct only in behlf of us citizens? How cn

we be sure tht the committee wont strt fooling roun my ly d -

nomi nest? Monopolies re lwys ngerous. Whyshoul some government committee hve legl monopolyover money? No ommittee invente money. No om-mittee showe the rest of us how to use money. Whyshoul ny committee possess bsolute control over money


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T O My 27

now tht the rest of us hve eie on wht kin ofmy ?

Conclusion

Money is very importnt soil institution. It ws nomore invente by government thn lnguge ws. True,

the government cn inf luence money in the sme wy thtit cn influence lnguge, but it is not the source of moneysorigins. It nnot impose its monetry eisions on thel l l dd m dthe right thing. If people chnge their mins lter on, they m lly, y, m my.

Historiclly, people hve voluntrily selecte gol s mm mdm . Sl l wiely eptle, ll over the worl. No governmentlegislte this; people simply cme to use these two metls m .

Wy d l l l m my?

Beuse they lern from experiene tht other peoplelly my . W mke better preictions n plns bout the future when

d l lly d certin currency unit in the pst. Wht people hbitullyo they ten to keep on oing. They hve right tochnge their mins, but its esier not to, t lest most of

the time. Thus, money llows us to gin ess in the d d k ll , y.

Thus, historilly it ws the free mrket whihetermine wht ws eptle to people for their


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28 Honest Money

eonomi tivities. It hppene to e gol n silver,but other commoities hve sometimes been use wiely.

The point is, people voluntrily selecte wht they wnte

to use s money. They i not nee committee to mke

d m.

SummaryThe principles of the origins of money re therefore these:

1. The Bile oesnt sy tht people shoul e

qd ld d l my.

2. The Bile oes inite tht people in Bilil

m m ld d l my.

3. Money will e selete euse people expet

.

4. To estblish wht money is worth toy, we nee

m ydy.

5. Tring this priniple kwr, we onlue

tht the money commoity must hve been use

m l lly.

6. Gol n silver were use s jewelry n

m.

7. The beuty of gol n silver probbly h some- d ly.

8. The symoli shining of gol my hve een

d l md Gd ly.


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T O My 29

9. The metllurgicl properties of gol mke it highlyl my ( ).

10. My m mkl mmdy.

11. The Stte n influene the ontinue use of my y d d m .

12. Sm m my S y .

13. The Bilil eviene points to the onlusion my mk y .

14. A mm dd my.

15. A mm dd m my.

16. A mly my d y S.


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31

c h a p t e r t h r e e

MAINTAININGHONEST MONEY

You shall do no injustice in judgment, inmeasurement of length, weight, or volume.You shall have just balances, just weights,a just ephah, and a just hin: I am the Lordyour God, who brought you out of the landof Egypt. (L 19:3536)

Its not neessry to get into ete over just extlywht unit of mesurement n ephh n hin were.T l : dd, y ld d y ddl mkl.

Who efine them? Tht isnt si. Not the Hebrew

civil government, in ll likelihoo, becuse it ws beingset up t the time the lw ws nnoune. Like the

dd ld d l, d


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32 Honest Money

m d l m dd l-untry bsis. The importnt thing ws not tht the civilgovernment me its efinitions scientific; the impor-tnt thing ws for the ivil government to enfore dd.

I ld d Gd mmdly d mmdm: H O

m Ey d. H Ld,

m . H dl Il. T d ld d ,

they h to isipline themselves. First, they h toisipline themselves y mens of honest weights nm. Sd, y d dl ml y

m Gd m ml l.We cnnot o without iscipline. It is never ques-

tion of iscipline or no iscipline. It is lwys questionof whose iscipline. Will we be iscipline by ourselves,s iniviuls uner Gos lw? Will we be iscipliney Gd dly ( ml, H d l

, H dd l m Old Tm)?

Or will we e isipline y the Stte? In our y,Stte tyrnny is the most ommon lterntive tol-dl.

W l-dl d Gd ld l,

there cn be no freeom. Flse weights n mesures le . Pl ll m l

must e sure tht they voi giving less thn wht isexpeterevele on the slesthrough tmpering

with the physil stnrs. In short, tmpering withsocietys physicl stnrs is sign tht men hve lreymd y ml dd.


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M H My 33

Market ScalesWhen person in Ol Testment times (inee, up until

lly md m) mk d y

m, m m ll

exchnge. In brter societies, he woul bring some home-

grown or homeme item for sle. He woul try to

exchnge it for someone elses homegrown item, or mnu-d m.

If mn rought something tht woul require

weighing (for exmple, sheep) n wnte to tre it

for some other item tht require weighing (for exmple,

k ), q l l

importnt. If something ws unerweighe for the seller,

it ws eqully unerweighe for the buyer. (Remember,

oth prties re uyers n sellers simultneously: one

buys whet n sells sheep, while the other buys sheep

n sells whet.) Dishonest weights woul e those in

which the professionl sellerthe mn who coul ffor

the sclestmpere with the weights in one hlf of the

trnsction. Tmpering in hlf the trnsction probbly y.

When people strte ringing metls to mrket in

d y m d, m ll

d l. T ml m ld -

mlly md mll (),

even less (grms), in the cse of gol. But the item beingld my ld, ld y , ly q

m (d). T m l

ld y y l my ml

l, l mk d l.


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34 Honest Money

Thus, once money metls cme into wiespre use,s they woul in n vning, high ivision of loreonomy, the opportunities to ommit fru inresedlly.

The Sellers AdvantageThe seller in the mrketplce normlly hs n vntge

over the uyers. He unerstns his tre, espeillyscles. It is esier for the professionl seller to tmper withthe scles thn it is for the buyer to tmper with the coins.This is not universl rule, however. Coin clipping is nncient prctice. People woul shve bit of the gol offthe rim. This is why coins hve those little riges rounthem: to reuce theft ( forgotten legcy of the ys when md ll ml).

There is n o exmple from Unite Sttes history.I l 1800, d ld , mrooke ttlemn nme Dn Grew here his ttlefor ys without llowing them ess to wter. Then,

j ld m, ld l m dk

ll. H ld k m kyd d llm. T m k k. Tm m l ld ml mml by corportions. Corporte officers woul print up hugequntities of ownership certifictes (stock) n sell them

whenever some outsie group woul try to tke over theompny y uying up 51 perent of the outstning

. T y d ddld d k.

On the whole, though, professionl prouce-seller l m lkly ll d. I mlly y


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M H My 35

l m. O d, k m, l l.

P m m, ll dhs ompetitors. Buyers th on when they re eingd, y l. T m m y, l m, d y l

shop. Thus, mrket competition tens to pressure proucesellers to sty honest, t lest within the generlly ccepteml mk.

Scales of JusticeGd lk l H -eignty. The mn who owns the sles is juge. Gojuges men in terms of morl stnrs. He is Juge l j.

When the evil Bbylonin king Belshzzr ws hv-ing his gret fest, in the mist of militry siege by theMeo-Persins, the hn of Go wrote the fmous worson the wll: MENE, MENE, TEKEL, UPHARSIN.

T k lld Dl l, d Dl dd :MENE: Go hs numbere your kingom, n finisheit; TEKEL: You hve been weighe in the blnces, nd (Dl 5:2527).

Weighe in the lne: this is symoli of Gosfinl jugment. Therefore, the mn who ontrols thescles of civil justice is juge. So is the mn who controls

l d m mkl.I m m d l,

y y lly Gd. His sying, in effet, tht Go res nothing for justie,tht He tips the blnce. He chets mnkin for His own


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M H My 37

T d m ld silver is the professionl sellers efense ginst fru. Thescles for prouce re the buyers protection ginst fru.

T Bl ly d l dm. T m l ml l. I d. Sm ll, d seller misuses this trust. It is esier to het trusting

person euse the ltter isnt wthing every move ofthe seller. Thus, tmpering with the scles is mjor sin.

When sellers get wy with it becuse the uthorities lookthe other wy, honest, trusting people lose, while crookeelers win. This reverses Gos stnrs for ominion,mly, dm y l . Fm, d y mk, y evote extr time n trouble in testing sellers. Go will l dly.

One reson why gol n silver me into wie-d ld y ld teste by sellers of goos n services. Toy, seller ofd (y my) ml l, -

sry, to etermine the reliility of prtiulr ingot . H ld ld,, ml ml l. B ld d lwere reognize, n euse stnrs of shpe nweight me it possible for people to test the full weight(precious metl content) of the ingots, these two metlscoul more esily function s the most mrketble com-

md y.H my y d

pure precious-metls ingot or coin economy. An ingot oroin ontins speifi quntity of gol or silver of k . I m U.S. dl


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38 Honest Money

l, $20 ld , d 1.075 younces (the stnr unit for mesuring gol), with .967 ld d , d.

For gretest ese of use, n ingot woul be stmpewith some fmilir mrk or ompny, so tht the userwoul know tht smelter or firm stns ehin they d m. T

in literte society woul nnounce its weight n fine-ness of the metl (such s one ounce, .999 fine). Perhpsthe tritionl nmes of ntionl urrenies might eretine on the coinsollr, yen, peso, etc.butto reuce confusion to minimum, it woul be better to m d. I ld mly -gol oin. With or without fmilir nme, the oin

when originlly prouce woul contin exctly wht ity ml.

T m the oin woul e like pouring wter into the grounmet t the supermrket. It woul e fruulent: them m .

Honest Paper Money

Coins n ingots re hevy n bulky. It shoul be obvi- y l my. I llor purse. Its flt. Its esily reognizle. Pper n ed y m y : 1, 5,

10, 20, 50, 100, d .The key wor is represent. The pper money, to

m , m d y my- -- . I - ld , .999 , m


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M H My 39

hve tht one-ounce coin in reserve, rey to be reeemey y lk d .

T IOU precious metls without hving 100 percent of the prom-ise metl in reserve is fruulent. It is theft. It is form m d m.

How woul suh system work? The oin owner

might eposit his oins t wrehouse. He wnts his k ly. H y k, m y y d k. T

. S m y m , , emn, the pper circultes s if it were gol, ssumingtht everyone knows n trusts the wrehouse tht issue .

Wrning: whenever someone promises to store your ml , . Y m- . E dd ym, l d. Ay ym my dtht oesnt somewhere involve fee for storge is unques-

tionly n inevitly fruulent. Keep looking untily dy m d.The pper certificte is metal substitute, sometimes

lld money substitute. B my ;it relly is money, if the metal on reserve is regarded asmoney. Its vlue in exhnge rises or flls oring to l my ml .

T lm . I l gol coin. A counterfeit coin is esier to etect. It cn be

d. A lk j lk pper. So, issuers tke cre to ientify pieces of pper by


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40 Honest Money

seril numbers, or specil wter mrks, or by using specil y dy y l.

A lly l . Sm my qd ylw to reeem the pper receipts by pying out the speci-fie quntity n fineness of gol or silver. To issue phonyreceipts plces the issuer t risk. Or, if the compny shoul

go bnkrupt n be unble to reeem the notes, it plcest risk the lst person who epte the reeipt t fel. H ld, d myhs gone bnkrupt. He is stuck with worthless wrehousereeipt, wheres the ounterfeiter hs ought vluled d . T l (m ) lguy to get stuck with the b receipt when the b newsis me public. Unquestionbly, counterfeiting is form .

One wy to protect users from counterfeit bills is for k ll d dd mk . Twy, the user hs to sign his nme t the time of purchse.

H k ( ) l . T , l , mk mk (d y ly k), md m cover his checks with gol which is hel in reservegoltht hs no wrehouse receipts issue ginst itfor this y m.

This is why heks re money, if the money metalbacking them up is money. They re metl substitutes. Anhonest check is simply nother form of wrehouse receipt.

A d d l my, if the metal backing upthe credit card is money. I, , ml . A


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M H My 41

d d mly m .

We oul ll sorts of exmples to this line of, y y d. T ky honesty of the wrehouse firm. If it issues no more receiptsthn it hs gol or silver in reserve to reeem the receipts,then the receipts cn legitimtely serve s forms of money.

If wrehouse compny issues more receipts to vlu-l my ml ml , ld l l d m.The ifferene is tht it is hrer to etet flse(unbcke) wrehouse receipt thn it is to etect coun- d m ld silver. The coin cn be mesure n weighe; the pperill nt. But the priniple is the sme in oth ses: .

Conclusion

T l my q y d-

stn. You eliver wht you sy youre elivering. If youm ld, .999 , ll,then thts wht you eliver. He cn mke n estimtion m ld m, dif he ecies tht he wnts the gol more thn he wnts

wht he hs offere for sle, then you get the item, n ld.

If either of the prties tmpers with the scles, or inny wy sustitutes something less vlule thn whthe hs gree to eliver, then he hs ommitte sin.T k Gd l j dmns soil pee. The sinner must mke oule


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42 Honest Money

restitution (Exous 22:1112): the return of the vluel, l 100 ly.

T l d d m

ly (-l) l

mmdm: T l l (Ed 20:15).

B Gd Jd, d ymlm

of His perfect jugment is the scles, honest weights n

mesures become theologicl issue s well s n economic

issue. To tmper with the scles is to efy Go in uniquewy. It is to ssert tht mn, the lw breker, being me

in Gos imge, reflets Go who is eqully lwk.

Honest money is n economic ppliction of the lw

ginst flse weights n mesures. Beuse money in Bl mll, y m

the preious metl is the equivlent of tmpering with

the scles. Counterfeiting coins is illegl. So is the coun-

terfeiting of pper money: reting more wrehouse ml ml

dm.

Summary

We fin the priniples of honest money involve thell:

1. The previling efinitions of mesurement must

be observe in ll our elings with one nother.

2. T l m d

of these stnrs, though it is suppose to certify

m.


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M H My 43

3. T l y .

4. The Go who requires honest mesures is them Gd dld Il m d.

5. Violting these physicl stnrs is the equivlent l Gd ml dd.

6. The professionl seller in the mrketple hsm m l.

7. Mrket competitors monitor ech other, thereby

d m.

8. Gd Jd ymllly dd

l d m.

9. Money in nient Isrel onsiste of gol nl ml z d .

10. When the civil mgistrte refuses to enforce hon-

est weights n mesures, evil people temporrily

prosper t the expense of honest people. This

Gd dd dm.11. Wiespre ishonest weights lso increse every-

ones trnsction costs (costs of exchnging): time

ld k l.

12. Pper money represents specific quntities of gol

or silver (or whtever money unit whih is

mm).

13. Any issuing of wrehouse receipts to money con-

stitutes violtion of the lw prohibiting ishonest

d m.


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44 Honest Money

14. Issuing more receipts thn there is metl to reeemm m .

15. Pper bills, checks, n creit crs re ll forms ml ; y ll my.

16. Whenever some gency promises to crete ppermoney system tht oesnt require storge fees

for money metls, its mking fruulent offer.Y d m .


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45

c h a p t e r f o u r

DEBASING THECURRENCY

Your silver has become dross, your winemixed with water. (I 1:22)

The prophet Isih cme before the ntion of Juh, theSouthern Kingom of the ivie ntion of Isrel, some-

time roun the yer 750 b.c. He egn his ministrywith onemntion of the spiritul onition of thel, m m l.

T Old Tm dd j lk l ml l. Ty ld

wht the Bile tehes, tht the hert of people isreflete in their tions. Almost eight enturies lter,

Jesus si: Even so every goo tree bers goo fruit; but b tree brings forth b fruit. A goo tree cnnot berd , d d . Ey


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46 Honest Money

tht oes not er goo fruit is ut own, n throwninto the fire. Therefore y their fruits you shll knowm (M 7:1720).

Jesus lso si, A goo mn out of the goo tresure

of his hert rings forth goo; n n evil mn out ofthe evil tresure of his hert rings forth evil . . .(Lk 6:45).

Isih ws sying extly wht Jesus si so mnyy l. T l . Hd my d. W d? I

ml. I ly md

ml: l d ld. I md m -

cious metl only by melting own the ingot n purging

out the bse metl, either by het or by chemicl rection.T, , ml Bl m: y d

y l ml .

Gd k Ezkl, m

thn hunre n fifty yers fter Isih: Son of mn, Il m ll d M: ll y

re bronze, tin, iron, n le, in the mist of furnce;

y m d m l (Ezkl 22:18).The Ol Testment prophets unerstoo tht sin

serve s ross in Isrel. They knew tht if people inot purge wy their spiritul ross voluntrily throughl ml m, lld y ll, -

nomic, n institutionl morl reform, then Go woul

l . T ld , l,or fmine. Go will not tolerte morl ross inefinitely.I d Gd: I ll my

hn ginst you, n purely purge wy your ross, nk y ll y lly (I 1:25).


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D Cy 47

Weights and MeasuresWe hve lrey seen in chpter 3 tht Go requires theivil government to enfore preitle stnrs of

weights n mesures. This mkes it esier for people tomk ly m mk.Not only o we sy, s buyers n sellers, Wht you see

y , l mlly y, W I y yre getting you will get. More speifilly, Wht myl y y y ll .

Our scles re symbols of Gos justice. If we rig oursles to het our ustomers, we re impliitly sying Gd d ( H l cheter) or tht Go cnt o nything bout it (men-

H lly Gd). W y Gd Juge of ll mnkin is lir. He isnt relly Juge.T, ly jd lk y, m.

Corrupt businessmen wnt to el with civil officers qlly . Ty ll y to get them to look the other wy, to get them to turn d k l ll d y l. T I leers: they were bribe-seekers, people who i not her d l.

B y m l. Ty l mwho refuse to prosecute those who tmpere with flse

scles. Remember, the Stte in this er i not issue coins.Coins were invente out entury lter. There is noinition tht the Stte even ertifie the weight nfineness of ny ingots in irultion s money. But theStte oul proseute fru. The uthorities oul


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48 Honest Money

y d-lld l gol rs s if they were high qulity (norml mrketdd).

Centuries lter, when offiils lerne out thewoners of ese money, they me the Stte themonopolist over money. Inste of serving Go by enforc-ing lws ginst ebse money, politicins took the profits

for the Stte. They eliminte the milemen. Theyd k m my-m- d d l m l dly. O m Rm Em ll hns of the Christins roun 320 a.d. is tht the pgnemperors h estroye the Romn oinge system.Ndy d my, dy d S.

The Process of Debasement

Why woul ny privte proucer of silver ingots wnt toebse his prouct? Becuse he coul get more short-run y d .

Sy tht you re corrupt expert t smelting metls.T klld d - d ld. A ld lld m d ml my l. N my l k . Tme orruption esier, whenever the guil eie tod -m mm.

T ml ld d ll. H d mld

into whih he poure molten metl. He oul pour inpure silver, but silver ws short supply. This ws why it

ml. I l y . S, ld ml d m , d ll mly lqd l.


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D Cy 49

Who woul know? The ingot woul still look shiny.I ld lk lk l. H my l ld ccurte mesures n scles to etect the shift in weightdd y ? Hdly y.

The silver proucer coul sell the ebse silver in d d . B y dd ml (d), ld y m d

n services thn he h been ble to buy the y beforewith pure silver. People truste him. They woulntmesure n weigh his ingots. They woulnt insultm y.

But wht if the uthorities foun out? He coul bribem. Oly ll d ld lly y.

It ws simple sheme. Just pour little tin, orother chep metl, into the molten silver, pour the moltenml , d .

W ? T l l ld l . B dd:this extr silver n e trnslte into profit only y

spening it into circultionin other wors, by selling ddl d d .

Who Wins, Who Loses?

O ld ld y. I l ld Gd-md l. T l y: Y m

nothing, except s gift. This testifies to Gos mercy inreeeming us: slvtion is gift: For by grce re ye sve ; d yl: Go (Ephesins 2:8). But this gift h to e pi for:Jesus ie on the ross to meet Gos stiff requirements


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50 Honest Money

ginst sin. But Go commeneth [emonstrtes] his loved , , l y , C dd (Rm 5:8).

S m l y , melse becomes loser. It is not question of everyone win-ning euse there hs een new welth rete in theeconomy. It is profit bse on eception. No new welth

d. Sm l.The person who uys the silver ingot uses it for

m. P mk m. H ll ornment, or rters with it. But the uyer gets stukwith n ornment whih is overprie. Why? Beuse l ll ly y llthe extr silver into the mrket. Someone will mke moreornments (or whtever) with this extr silver. The supplyof silver ornments goes up; therefore, the vlue (price)of the existing supply of silver ornments will rop.T ly y d.

Wht if the heter just proues ingots, nd m l? H d dd

ingots for something he wnts. If whoever sells himwht he wnts then turns roun n sells the newlydd dd , llnot e hurt eonomilly. The seret is this: sell theingot before lot more phony silver ingots hit the mrket.In other wors, get while the getting is goo. Or tke my d d y

d .T ld

ebse ingots too long. As more n more of them floothe mrketremember, the only wy for the cheters toll d l


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D Cy 51

. F, d dl, mk ll l ll

fll: more supply, lower prie per ingot. Seon, if the

ross-fille ingots re etectble (inexpensively), then the y l ll d l

pure silver ingots. This mens tht there will e twoseprte price-quote systems in the economy: pure silver d , d d-lld l

d .In either cse, the person who is stuck with pile of

ross-fille ingots will lose when pries rise. He solgoos n services t yesterys lower price level, but hewill uy his goos n servies t toys higher prie

ll, m ll.Thus, the winners re those who get ess to the

phony money erly, n spen it fst. The losers re those y my l,

generl hve risen. Worse, wht bout the people on fixemy m, d m ll,

?

Who re these people likely to be? Pensioners. Smllusinesses tht re rely mking money, n wiows:

the very people tht Isih si were eing hrme yflse jugment. They were to be protecte, n to fil tod , lly

mong the rulers: You shll not fflit ny wiow, or

l ld. I y l m y y, d yy ll M, I ll ly y; d My

ll , d I ll kll y d;

your wives shll be wiows, n your chilren ftherless(Ed 22:2224).


63/185


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D Cy 53

7. The holers of the ebse ingots will eventullysuffer losses, s prices of other goos n services.

8. T m myis rpily to sell the money for goos n.

9. Those who re on fixe money incomes re hurt, , d.


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56 Honest Money

Consier the winemker. He spent lot of time, , d . I ktime for the fermenttion process to prouce wine. Theseretring fctors reuce the vilble quntity of wine.Thus, for people to buy it, they h to py higher pricethn they woul hve een fore y ompetition topy if there h been bunnt supplies of comprble-

qly .By the wy, we shoul not rgue tht the high cost of

wine proution is wht proue the high pries. Thishs cuse n effect bckwr. Wht we shoul recognizeis tht ll those buyers compete ginst ech other to buythe wine. Their willingness to py for it is wht lureprouers to stop prouing other prouts n strtd . By dmd ycompetitive biing; the proucers int force the buyersto uy it. In short, customers set prices, not prouers. Ifd , my m y;y ll y m l d, d - d l l.

I d y d q, m ld d much money to buy the wine. But it isnt chep to prouce l q, y d y .

Now, lets return to the prolem tht fe theprophet Isih: the morl corruption of the people. It wsnot just the silversmiths who were orrupt. It ws the

mk, . I y.How i the winemker prctice his corruption? By

proess lmost ientil to tht of the silversmith:esement. The silversmith h poure heper semetls into the molten silver, but clle the prouct silver.


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T C Il 57

This ws precisely the process of the corrupt winemker.He ws pouring ese wine (wter) into the pure

, d ll .How oul he mke his profit? The sme wy the

orrupt silversmith me his. He woul isple pure d . T dld oul then e use to pour into other wineskins long

with more wter. Then he oul tke, sy, 20 perentm k ll mk d ll m.P: 20 , l lly.

He ws tring on his own former reputtion. Before, d dd -qly d (j l-versmith h formerly proue). People truste hisprouts euse they truste his morls. So, he oultke vntge of this trust by pouring wter in the wine.H mly m lm.

But morl corruption being wht it is, it never stysin one ple. It gets worse. So, more n more wter

woul win up in the wine, just s more n more rosswoul win up in the silver. Pretty soon, everyone woul

begin to see tht prticulr silversmiths silver ws mostlyross, n prtiulr winemkers wine ws mostly. A , l ld d with these orrupt people, or else strt offering them ll d d .

Ul . . .Unless the existing silversmiths were cting s gint

monopoly to ebse the silver uniformly ( crtel). Unlessthe existing winemkers were oing the sme thing.Unless they controlle the mrkets (with the coopertion l) k m lld l m qly l .


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58 Honest Money

With government controls ginst honest newcomers,it woul hve been possible for corrupt sellers to mintintheir corrupt prctices n not lose their mrkets to honestnewcomers. But this woul hve require coercion ginstnewomers, either iretly (privtely hire thugs) ordly ( d y m).

This ws the very essene of eonomi oppression

in Bilil times. It still is. When orrupt prouerspture the government in orer to keep out honestprouers, the losers re ustomers. They re the ones

, j d k .

Wiespre economic oppression lwys requires the . I Gd ld, l qthe consent of the governe. Go brings oppressors ginst ly d prctice it without thret of jugment by the civil govern-ment. Go hers the ries of the fflite, n rings

jdm (Ed 22:2224).The Bible sys tht specific corrupt prctices re like

yest (wht the Bile lls leven): they orrupt thewhole lof. But, on the other hn, honest eling is lsolike yest; it, too, n spre to the whole lof. Whtetermines which yest is more powerful in ny prticulrsociety? The herts of the people. They will choose whichkin of yest they prefer, corrupt or incorrupt. In Juh,y d .

Greshams Law

Bk l 1500, l Q Elzcourt, Sir Thoms Greshm, me fmous observtion.


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T C Il 59

He si (pproximtely) tht money rives goomoney out of circultion. In short, ebse money rives my l.

But if Gos lw relly oes rule the worl, how cnthis be true? How is it tht something b (corrupt, phony,ese money) n rive goo money (pure gol orsilver) out of circultion? Is there something corrupt bout

mrket competition? Why shoul the b prouct efet d d m mk?

Economists finlly figure out the nswer. Somethingws missing from Greshms nlysis. The moneyrives out the goo money only when the governmentsys the two re equl in vlue, n enforces this ecision

m.I I l ll y l d,

n I lso hve phony, silver-looking oin tht hsonly hlf the silver, the ltter coin shoul buy only hlf lof of bre. But wht if the government sys the twooins re of equl vlue? Whih oin will I spen onthe lof of bre, the full silver coin or the phony? I will

d y d d ll l , d ll l m m ( lllly) -q l dfor it. (The re seller will keep n extr qurterlofor whtevers his profit, to ompenste him l d k.)

So Greshms lw shoul re: The oin tht is

lly ld y m ll d ll, l l llydld y m.

B l y -ment isnt free mrket price. Its form of coercion. Its


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60 Honest Money

lie whih is enfore s if it were truth. It is notherexmple of the governments violtion of Gos lw con- d m.

The Spread of Corrupt Products

L d y l -

lishe fixe prie whih equtes honest money (full-weight of gol or silver) with ishonest money (prtillygol or silver, or even zero-content of gol or silver). Them l, d l y.

We re rtionl people. We ont wnt to spen ll l d y l

l . W ld m d mm l, y l, fct only hlf silver. We will hor the full silver coin for dl l m.

W d m d? H k ll ll l ll dy. Hknows his customers will spen the hlf silver coins. Now

ld d:

1. Continue to sell his prouct for one silver coin,when he knows tht he will receive only hlf-silver?

2. Dl l , d m m l m ld?

3. Debse his prouct with cheper qulity mteri-ls, ut mintin the fition tht eh unit is

l l, ld-d, l ?


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T C Il 61

Cd q m l d:

1. Sme prie, sme prout: he gets stuk with

y . H ll d 50 -

cent of wht it ws worth before the phony coins

d l.

2. Double price, sme prouct: he risks losing sles.

Mye his ompetitors will tke the thir

pproch, n ebse their proucts. His custom-

ers, not being experts t qulity controls, my not

z . H l .

3. Sme prie, reue qulity: his ustomers re

initilly efrue (until they figure out the new

l). H ll dl -qly d

ml (-dd my) .

Y dd m d d .

The government is not enforcing the lw of honest weights

d m lm. Slmwho ont prctice corruption cnnot get the government

to step in n stop the eeption of their ompetitors.

Their ompetitors mke more profits, n the honest

ones eventully go out of usiness, or egin to imitte

lm.

One the silversmiths re ll (or mostly) orruptbecuse of the corruption of the rulers, the other prouc-

ers fce problem s iniviuls. Shoul they rise prices?

Shoul they inste ut profit mrgins, ut try to sell

high-qulity goos t the oler, fmilir price? Or shoul


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T C Il 63

Guess wht strts hppening to prices? Right: theystrt going up. So, wht o ustomers o? Some pymore for the things they buy. (Thts why prices go up.)But others strt looking for rgins: sellers who restupi who keep selling goos t oler, pre-infltionryprices. Buyers seek brgins, mening oler-price goosn servies. They wnt something (isounts) for

(l dd my jl k).

So, corrupt wine sellers ccommote corrupt buyers.Yes, sir, rn-new, 100 perent top-qulity item tlow, ol prices! Menwhile, they hve poure wter into . S d l ll.

The qulity of mny prouts strts going own.Pries sty rtifiilly low, euse in priniple peoplere violting the priniple of honest weights n me-suresll through the society. Yes, you get ten yrs of100 percent silk t lst yers low prices. Its lie. Eitherthe silk isnt 100 perent silk, or its n inferior qulitysilk, or its tully seven yrs euse the seller hs

d l m.

Price Controls

But wht if the government steps in n tells ll the othersellers except the silversmiths to mintin the ol stnrsof qulity? Then either prices will rise, or else the mount

m y ld ll dd, l qly ll d.

But wht if the government psses lw ginstrising prices? This mens tht sellers cnt cut the mountld. W ? Qly ll d.


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64 Honest Money

Wht if the government psses nother lw, mking lll qly? T my ll ll usiness, n ustomers will not e le to uy ll thed y .

Menwhile, risk-oriente proucers will strt selling d mk, m ldmk, m lk mk.

I hte to use the term blck mrket. I prefer to use m l z ly.

I lm l lld d proutmoneyn the government psses lwsginst prie rises or qulity utting, the lw-iingm d l-d d ll d.

Conclusion

I , y m myunit, n the government llows such fru to continue,the whole eonomy is thretene with progressiveebsement. It is not simply the monetry unit tht will

e ese, ut lso mny other prouts. Any selleror proucer who fins tht his customers re unwilling d d dthe sme orrupt prties s the silversmiths, just toy .

Thus, ese urreny is like gint engine ofeconomic corruption. Where the rulers llow, not to men-

l, dm, l y brought uner the tempttion of opting corrupt prctices.Becuse money is the universlly use meium of exchnge,dm my m y -ruption tht n economy fces. If governments llow this


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T C Il 65

dm, y mly money n then eginning the proess of esement,the spre of immorlity spees up. Every eonomienterprise is tempte to imitte the orrupters in orer y .

Something for nothing in the fiel of monetry policylly ld d. Gd ll mkd.

Summary

T my dm dl, y m .

1. People oul see the esement of silver, yet

.

2. T l ll d-m l.

3. The spre of monetry corruption ws not merely; l dd Jd.

4. High qulity goos normlly cost more to prouce l qly d.

5. Pd m my d.

6. Continue monetry esement requires theoopertion of government, mening oerion(iret or iniret) ginst honest moneyd.

7. Evil n goo oth spre like yest (wht theBl ll l).


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66 Honest Money

8. Bd my d d my lonly when the government equtes the two by lw.

9. T l k m l, l .

10. The puli wnts to fool sellers into selling td ( my) .

11. Sellers fool the puli y utting qulity n m d .

12. The orruption spres from employers tomly.

13. Gm-lld l

l l. Ty l d l, .

14. Government price controls reuce peoples welthy dy mk.

15. The blck mrket is simply the prouct of peoplewho re trying to espe ishonest money in

ld l.


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67

c h a p t e r s i x

WHEN THE STATEMONOPOLIZES MONEY

Show me the tax money. So they broughtHim a denarius. And He said to them,Whose image and inscription is this? Theysaid to Him, Caesars. And He said tothem, Render therefore to Caesar the thingsthat are Caesars, and to God the things thatare Gods.(M 22:1921)

By dy J, l d ld d issuing money. No longer ws money the prout ofsilversmiths or golsmiths. No longer i privte ini-viuls hve the legl right to issue ingots or other esily

reognize units me with preious metl. The Stted md my mly.


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68 Honest Money

T my . L ky m Jn the Phrisees: the fce n the inscription. The coinws Romn silver enrius. It ws speifilly tx, y Rm.

N y ld q k m lwfulness of Romn tx? To tempt Him. Either He

ld y ll y , d Rm Jlm, H

woul sy to py it, n incur the wrth of the multituestht followe Him. So, He turne the tbles on themly, m. H d ldy d l m ml (M 21:12).

Wht kin of oin i they ring Him? A triuteoin. So, they possesse triute oin? Of ourse. Thism l Rm , yh lrey me their own eision to use oins, tht

were tx coins, s currency. They were the beneficiries of wiely respecte coinge system which h been imposey l. I y d m ym, y

ld y y ym?We n lern lot y stuy of Romn oinge.The Romn Empire ws religious orgniztionll . (S ll md , most of them isguise this fct.) Incresingly, the emperorswere regre s gos, espeilly in the estern hlf ofthe Romn Empire. The oins were use s politil

d. I ll ld, nnounce religious messges, which in turn were politi-l m.

Tierius Cesrs piture ws on the enrius thty dd J. T d ly y


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W S Mlz My 69

enrii uring his reign, n by fr the most wiely circu-lte h his fce on one sie, orne with lurel wreth, sign of his ivinity. The insription re, EmperorTiberius ugust Son of the ugust Go, referring to Cesr

A, d dd m.On the bck of the coin, his mother ppers, sete

d, d ld

Olympin scepter, n in her left hn is n olive brnch, yml . P El S, -login n numismtist, ommente onerning thecoin: It is symbol of power. For it is the instrument ofRm ml ly.

Romn coins from Augustus on, nnounce ivinem, ld. Y y y 300, l, l d md,d m m . T m md dl, y m.T l k m, d sustitute. Professor Stuffers ook, Christ and theCaesars(1955), tells the story of the collpse of the pgn

Romn Empire through stuy of its progressively ebse. A Em lld, dd .

A Sign of Sovereignty

Politicl rulers lerne very erly just how powerful coinsld yml ll d l

uthority. They oul serve s unifition evies, justs flgs serve moern men. The users were reminely ( S) d person who me the Stte possible (the politicl-religiousld).


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70 Honest Money

It is not surprising tht the first coins ever issue wereissue in orer to strengthen the Stte. While Greek coinsin the ncient worl were in prt use to expn commerce, lly d ll m

were eqully s importnt s economic motives. The rightto issue oinge ws sign of ity-sttes politil nlegl inepenene. In other wors, the Sttes offiils

m zlyly m.

B yml m ly . T S ld m l-l . I S d ml , ld ll . T md ktx reors, n politiins lwys like to simplify txolleting! The Stte oul uy goos n servies,ld m, d .

Where coul the Stte get the precious metls? Fromm, m l , m -nessmen who were involve in tre. One the Stted my, ld ld

emn for certifie money. After ll, the Stte collecteits txes with its own money. This woul hve retedmd my j l.

Eventully, the politicins lerne bout the short-termbenefits of ebsing the currency. They lerne quite erly,in ft. When the Stte took in gol n silver, it thenissue oins tht were pure. But s time went on, n

people becme ccustome to the coins, the ol ebsementk m m l .

People ont like to py txes. They never hve.Pl l d my. Ty ly . S,politicins long go figure out wy to increse spening


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W S Mlz My 71

without incresing irect tx collections. If they just tookout some of tht molten gol or silver, n poure insome cheper metl, they coul prouce more coins withthe extr gol or silver. You hve her ll this efore.(Tk l , y k. Yhve in your hn tngible proof tht politicins hventd l d y .)

T m d irultion. It mkes little ifferene in the long run

whether its the government or privte silversmith whod . T l m l. P

ll lly . T k d ddmy y l d k ll.

T lm, . T l mytrust the Stte more thn they trust privte silversmiths.They think tht the Stte is honest. In the ol ys, theythought the Stte ws ivine. Thus, when the Stte strtsproucing ebse money, it thretens peoples confiencein lw n orer. In the nient worl, it me people

d y d.We re bck to Gos lws regring honest weightsd m. I Gd Jd, H ll -resenttives in the civil government shoul not chet. To ll q lly d y Gd.

T S my l y d-

ment proess longer, sine people trust the Stte. Butoins re oins, n if more of them re oming intoirultion, people re uiling up supply in reserve.

Why not spen some of the extr ones? As they re spent,prices begin to climb, compre to lst yers prices, which


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72 Honest Money

were proue y n eonomy with fewer oins inl.

Ultimtely, it oesnt mtter who prouces the coins.Pl ll d d lyn emn for money. If there is greter supply ofmoney, the price (exchnge vlue) of the money will rop.Hld ll .

A New Form of Debasement

The troule with money metls from the politiins y ml ml.If user cn mesure it n weigh it, he cn tell if someonehs e heper metl to the preious metl. The ll . I l ls more n more bse metls re e. Then everyoned . Pl l .

But pper money overcomes this inherent wekness.O lk lk y .

They ll weigh the sme. How n the user etermine y? H .How oes the Stte get people to ept piees of

pper s money? By mking them convertible on emn l ld. T S j mpper notes thn it hs gol in reserve. Most people ontctch on. They ccept the Sttes pper s if it were honest

money. After ll, these re our leers. They woulnt .

Yes they will . . . if they think they cn get wy withit. They cn, too. They lrey hve: in the Unite Sttes 1933 (ld) d 1967 (l).


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W S Mlz My 73

As more n more pieces of pper come into circul-, d . T ld price of gol or silver. Now, if piece of pper clle oneollr entitles the erer to ollet n oune of silver, my l dll, y of pper to go the tresury n get n ounce of silver with

dll.Guess wht he then oes with the oune of silver?

H k mk l dl d ll two ollrs. Then he tkes two ollrs to the tresuryn gets two ounces of silver. Then he sells it to the public dll. T . . .

You get the piture. The tresury will run out ofl. I , ll l m mrket prie hits two ollrs n oune. It will run outy m dll d , ly.

So, the politicins either hve to stop printing more my, l y d l dll l.

T y dd Ud S 1967.T ll y, l dld.Why int they stop printing pper ollrs?

(Atully, the Feerl Reserve System ought U.S.Tresury ebt with newly crete moneychecksn m my ly k.) D lly. I y d d

reting money, they woul hve h to rise txes(unpopulr) or ut k government spening (evenm l). S, y d my d. S,pries of goos n servies hve risen y more thn6.5 1, 1967 2010.


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74 Honest Money

Will the Public Revolt?Not very often. The puli eies tht fit money ismoney, not pieces of shiny metl. If fit money is ccept-l y d , ? Wcres if prices go up, yer fter yer? Whts little pricel? W ll d , ?

The troule is we re ll thinking short term. We l my purhsing power eroes yer fter yer (tht is, prieskeep going up). Wht hppens if you retire n re force l d my m? Y l y l,y y.

Look t the explntion on the next pge. Pik

yer. See wht hppens to your money t vrious rtes of l.

Infltion cnt hurt nyone too bly is elusionof fully employe younger workers. It cn hurt everyonewho isnt stying he of it with py inreses, n Im - y .

Higher Tax Brackets

Thts nother reson why governments like infltion.Governments since the er of Worl Wr I hve convincevoters to violte the Bilil priniple of the tithe, nimpose higher rtes of txtion on people with higher

m. T d m mly.I d m j.

A , ly l d dt these higher rtes. Thts wht the politicins promise.C d d. I 1913, y


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W S Mlz My 75

income tx ws psse in the Unite Sttes, the tx rtes 1 d 7 . T 1perent rte ws pplie to ll inome over $20,000 yer, n the 7 perent tx ws on ll inome over$500,000 yer. This ws in n er in which the vergemly d $1,000 y. Alm dy y.

Then, in 1917, the bottom brcket ws roppe from$20,000 yer to $2,000. The politiins swept lotm l . Ad lk y dd the top brckets: 1913, 7 percent; 1916, 15 percent; 1917,67 percent; 1918, 77 percent. In short, they chnge thel. Ty ly d.

Here ws their pln: lower the level of txble income,d y k. N,inflte the money supply, so tht everyone is pushe intohigher n higher txle rkets. The higher yourmoney income, the lrger the percentge of your income lld y S.

The grute inome tx (lso lle the pro-

m ) mmdd y Kl M,the founer of Communism, in his 1848 ook, TheCommunist Manifesto. He unerstoo tht suh txsystem woul help to estroy privte property. He forgotto mention tht it woul ple mjor tempttion infront of politicins to inf lte the currency, increse every- my m, d y

k.The lure of greter tx revenues from grute

income tx mkes inflting the currency look too prouc-tive. It mkes the immorlity of hnging weights nmesures look like goo ie. It mkes the estruction


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76 Honest Money

of peoples economic futures too populr. The governmentegins to inflte, n lmost never in history hs theproess stoppe until the vlue of the urreny flls tozero. It my tke hunre yers, ut t the en, thepeople lose wht they h neee: relile, generllydl my ym.

Infltion is n invisible tx. Inste of txing people

irectly, the politicins fool people. They increse gov-ernment spening ut they ont ollet enough tx y . S, y my mke up the ifferene n spen it into irultion.T m (l d my m ) ldm k d m.Ty lm l d , l.

B lly y l dd m.They re book like this one. They get ngry. Infltion y d y l. Tl y l.

Two Kinds of CounterfeitersT y d d l. T m my d d l.

P -terfeiters o it fst enough n long enough. Government

counterfeiting rises prices if the government oes it fst l .

The privte counterfeiter oesnt gree to eliver speifie weight n fineness of gol or silver to theperson who cshes in his pper note. The government


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W S Mlz My 77

d m ld l , lly k m.

T l d my.T l d m my, lest for long time, until peoples trust is totlly betrye(m l).

W d l

d m ? N.Wht is the ifference economiclly? Only the ben-

efiiries: privte ounterfeiters who uy up goos n, l y d, , d.

W d llly? P -feiters etry peoples trust in riminls. Government y l m.

If government counterfeiters n privte counterfeit-ers both issue pper n cll it money, then on wht legl m . Tonly thing I n think of is tht its violtion of them dmk l.

Conclusion

Fm 600 500 b.c., m gol, silver, gol-silver, n copper coins. This becme n y l m. C (

were city-sttes) clime politicl monopoly over money.

S dd Rm Em l l.The coinge system ws both religious n politi-

cl phenomenon. It ws lso economic. As people begnto use the oins of prtiulr government euse of mly , m ld


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78 Honest Money

front of the government: to ese the urreny. Thegovernment coul buy extr goos n services for itselflly, d y d (ese) money into irultion. All it h to o wsm d ml ml. I ,coins me it esier for corrupt governments to stel from z.

Eventully, people ught on, n people strtesking higher pries. After ll, the eonomy is gintuction, n if people re given more money by the Stte,they cn ffor to bi prices higher thn before they got my.

Rising prices eventully estroy peoples confience my ym. T l d llyl l d S. I Sttes responsibility to protect the integrity of the money, S d d m.

B d mregring money if the enforerspolitiins n rul-

ersre profiting from the cheting? Tht is the problem y l l. Gmmy lly m my.

I l d : I m dd l it is to mine gol two miles eneth the erth. Beingcheper, it becomes too gret tempttion for politicins

, l m. Ty unrestrite y the geology of gol mining. All theyd d k.

When the voters hve lrceny in their herts (some-thing for nothing from the government), they eventully


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W S Mlz My 79

get stuk with nothing for something: they sell theirgoos n services to the government, n get eprecit- my . W y y d ,they fin out they hve been robbe by the robbers theyld. Gd ll mkd.

SummaryAll l Stte grnts itself monopoly over money. The politicinsviolte Biblicl principles, but noboy protests. The Sttesmy ym lly dyd. S m dd .

T S y l l:

1. The Stte t most is suppose to certify the hon-y my: d .

2. The Stte then violtes the principle of economicfreeom: llowing people to buy n sell on their m: mk lll.

3. The Stte clims for itself n economic monopoly d .

4. T S ld d dz l (l l).

5. T S m l.

6. The Stte becomes n officil ebser of the metloinge: ing hep metl (ross) to the ml.

7. T , d dd m my .


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80 Honest Money

8. People then bi up the price of goos n services, y m my d.

9. Prie infltion egins to eroe peoples fith in my.

10. The moern Stte uses pper money to hie, n d , dm .

11. T S md l : l.

12. Economiclly n morlly, there is no ifferenceetween privte ounterfeiting n puli.


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81

c h a p t e r s e v e n

BIBLICAL BANKING

Therefore you ought to have deposited mymoney to the bankers [money exchangers],

and at my coming I would have received backmy own with interest. (M 25:27)

The trnsltors of the King Jmes Version of the Bile(1611) ld Gk d k y. B

oesnt men usury in the Greek; it mens interest.T md l l . T d y d .

How i the King Jmes sholrs mke suh nerror? Becuse they ssume tht the concept of interestin the Bile lwys mens usury. The Herew wory m m. Uy d ly interest tken from poor fellow believer, in other wors,interest seure from hritle lon. Suh usury is


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82 Honest Money

prohiite y Bilil lw. But interest s suh isntd.

Before I ttempt to prove this from the Ol Testment, l m l l,

J m m dy d. I l Gd kdm, H ll yof rich mn who goes wy, but before he goes, he clls

d d m my (l),eh oring to his ilities (Mtthew 25:15). Onereeives five tlents; one reeives two tlents; n one l.

The first two oule their money through tre(25:16, 17). The thir one burie his tlent in the groun.U m , m lhis ccounts. The mster ws most plese with the firstm, dld l m l. H lplese with the secon, who ouble smller mountof cpitl. To both he si, Well one, goo n fithful; y l , I ll mkyou ruler over mny things: enter into the joy of your

ld (. 21, 23).But to the thir mn, who burie his tlent becuseof his fer of losing it in tre, the owner ws furious. Atl ld ld my my d d k .

Jesus ws ffirming the legitimy of oth profitthrough tre n the norml rte of return whih is

secure by lening money. The two forms of ctivity renot the sme, s the prle inites, ut oth relm.

P d ky. T y dmn ws fri to ttempt it: An I ws fri, n went


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Bll Bk 83

d d y l : l, [which] is thine (v. 25). He thought it woul be best just l.

The owner ritiize him. Why? Beuse he hd l. T ly yforfeits the use of money is to get greter mount ofmoney in the future. Otherwise, why not just spen it

ll y dy? Wy ? T, y m . I l.

Waiting

T y y l y m , l m y ml.

First, ssume tht I run ntionl contest. You hvejust won the grn prize, brn-new Rolls-Royce uto-mobile. I hve pi ll the txes on it. You cn either keep ll . I y.

But I ome to you n sk you to mke hoie.Y k dly dy, y k

elivery three yers from now. Becuse Rolls-Royce stylesont hnge very often, n euse the r proly d l, y d l ldly. B y m , .S, d y d, k dly l?

Obviously, you tke elivery of it immeitely. Why?

W d I d y ? I y , l m l. My I ll in smll sen t the en of three yers, or extr money.B y dly, I my, mk y m .


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84 Honest Money

N, l k ml. T m, ythe buyer of something from me. You wnt to buy piece y. I y y gol per yer net profit from this ln, simply by renting . Y d d y. Fm, both gree tht the ln will probbly be ble to proucethis profit for thousn yers without mge to the

ld. T I k y y m d ld ld.

You, of ourse, protest. It isnt worth thousnounces. I counter by showing you tht you lrey greetht the ln will prouce thousn ounces of gol, so

why shoulnt I be entitle to thousn ounces? We ll: ql ql, ?

W my m ? I d l y dy ld. Im sking you to give me gol, oune for oune, ind. B d , dd y m , lly y? Wll y ld dy (d ll ll y)

for tht thousnth ounce in the istnt future for somemd y? I d k .You pply iscount to tht future income. An ounce

of gol thousn yers own the ro isnt worth sm y y dy. (I ,plese contct me immeitely. Do I hve el for you!T d N Yk Cy I k yll

y.) Y jy .But think out this priniple. An oune of gol

fifty yers from now, or twenty yers from now, isntworth n ounce toy. It lso is iscounte in your min.So is n oune yer from now. We hve therefore


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Bll Bk 85

iscovere lw of humn ction (which pplies in every m): l d lwys isounte in omprison with the immeitel m d.

W d lld? Ill y ldyd . I lld .

Y d l y y d

ompre to wht tht sme goo is worth to youimmeitely, whether its tht Rolls-Royce or n ounce ld m y. F m yto hn over the present goo toy (money), I hve topromise to return it to you in the future, plus extrmy . I d, I yy .

I l l, m y l d d ly m k l . A y l, msi, he oul hve lent it to the money hngers, n d k m .

Banks, Risk, and InterestIm . Sm y it. You my be given it s gift (Let me give you pieceof my min, frien!), but people selom vlue such freevie (Buy, I ont think you n spre piee ofy md!) S, lly y . Ndy

ml y m ll.Sy tht you hve lot of csh. Youre frugl person

n onerne out your future. You wnt to hve nest egg for the future. So, youre intereste in loning m my.


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86 Honest Money

I come to you n tell you tht I know businessmn d l m. H prtner to put up the money. He will py the prtner 25percent of the profits. But if he goes bnkrupt, the prtnerloses the investment. No, you think to yourself, thts ky.

Y : m

m k 10 my my, j k .T Ill l m my.

Wht o I o? First, I go to the usinessmn. Hethinks he will be ble to mke 30 percent on the money.

Sd, I k myl m q: W it for me? For my trouble in putting the el togetherthtis, for my informtion of where the money is (you) nwhere the profit opportunity is (the businessmn)I shoul m. S, I k m, y ll y 13 my? I y y, I m k y d my m y.

T m my d

mking lot more. You get your 10 percent rte of return(your iscount of future goos s ginst present goos),d I 3 dl my l.

Thts honest bnking. It is the exchnge of inform-tion. It is lso the exchnge of risk. Youre worrie bouty k . Y m l dl

with those risks. The businessmn worries bout the risks

of gurnteeing the creitor (me) 13 percent, but he feelstht the risk is worth it. I worry out the risks of theusinessmn going nkrupt n fleeing the ountry, I y y y 10 . B I

my k.


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Bll Bk 87

We hve voluntrily exchnge risk. Ech person isnow more comfortble with his own fers. Ech mn getsm l. W ll k, n mount of risk thts loser to wht we wnt thnwoul hve een possile if I, the el-putter-together,d m .

A y ly zd, I m k

ml.A k l . I ml

institution in principle. It llows the profitble exchngeof informtion n the profitble exchnge of risk. Thosewho prtiipte ll elieve tht they will e etter off .

The ft is, nking hs een one of the ruil dlm md ld. Ifulfills ruil funtion. It llows us ll to el moresuessfully with n unertin (ompletely unknown)n risky (prtilly unknown) future. Bnking llows us d k.

The Marks of Honest BankingT m ld. W ll m d. Hhs to give up the use of his money for specifie perioof time. In exhnge, he is offere speifie rte ofinterest, to e pi to him in ition to the return of l d my l m d.

There must e orrower. He is someone whol l (d k) ythe principl plus the interest. He my be proucer. Hemy m. B lll l


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88 Honest Money

(his pst performnce, his future prospects, his ie, etc.)d m y.

T m l. T k. Hssesses the risk of not being repi. He bers the risk ofpying off the epositor if the borrower efults. He mustl d . H pi for his trouble by the spre: the ifference between

the rte of interest the borrower pys him n the rte ofinterest he pys the epositor fter the trnsction is over.

T mml .T Bl m, :y l. (I ll l .) T of trnstions re expete to e enefiil to ll the, l ld lly.

In the next hpter, I will isuss some highlymml d m k. B I hve outline nking here, there is nothing wrong

. T ky md q my. T d

money uring the perio of the lon. He cnt get some- . I , euse he oesnt hve the use of his money in them. W l , l my.H d my my. H d m ( ) ( -

ship). Whenever this funmentl trnsfer of ownershipis violte, bnking becomes immorl, s I shll show in .

W d d my k ly?Tht shoulnt e too hr. He goes to the nker n


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Bll Bk 89

mkes lon request. The bnker knows tht the business-m ly y l. T k mke lon to the epositor out of bnk cpitl, or he cnlon him money from nother epositors ount, with m l m lll.

B my , d k d (d ll my lly d

e repi), or else he hs to promise to repy the nk my ym l ll d.The point is, nooy gets something for nothing. Thed k my ld .I k y l. T my ly,he hs to orrow it from someone else, for uring thed l, my y m.

All this is firly esy to unerstn. There re nohien secrets here. Bnking funmentls rent mysteri-ous. Its simply metho of exchnging present n futurek, d d, mddlm puts the els together. An its ll governe by this rule:Y d m .

Charitable Loans

The Ol Testment forbe leners from mking interest-ering lons to poverty-striken rothers in the fith

Honest Money North

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