Honest Money and the Economic Laws of the Bible

“Does a national government need to issue its own money in order to secure honest money?”

What is Honest Money? To even begin to answer this question we have to understand what honest money is. Money is described as the most marketable commodity, and the origin of money was determined by the people and market. The State did not just one day decide that the entire country was now going to use coins with the State seal or Queen of England stamped on it, instead, money evolved from people bartering and trading goods and services to a currency that the whole market agreed on. The use of gold as money has gone on for centuries and continues to work. Other items like seashells and cattle have been used around the world in the past, but neither of them lasted as a currency as long as gold and silver have. This is because gold and silver have the perfect characteristics of money, which are; divisibility, portability, durability, recognizability, scarcity, and continuity over time. Cattle is rather hard to divide for smaller transactions and difficult to carry to the grocery store, and seashells are not as durable as gold. The thing to remember about money, whether it’s sea shells or gold, is that money is not a measure of value but a common unit of account. Everybody has a different value for something. An item could have sentimental value for someone and therefore be worth a lot more, or someone could look at the item and think it just fills up space and should be thrown out and therefore is worth nothing.

I think honest money is money that originated from the people/market without any intervention or regulation from the State. Gold used to be honest money when we had a 100% gold standard and every piece of paper money was backed up, but the State has drifted far away from that standard and gold to fiat money and is no longer honest money. Most of the schools of economic thought lead the State away from a 100% gold standard and honest money, except for the Austrian school and the free market.

“The State removes the individual’s legal right to exchange the State’s paper notes for gold or silver coins. It then declares that the new, inconvertible fiat paper money of bank credit money is equal in value to the older redeemable notes, meaning equal to the value of the actual coins previously obtained through redemption. But the free market determines otherwise” (pg. 29, Money; A Market – Generated Phenomenon).

Carl Menger wrote Principles of Economics in 1871 and is considered to be the founder of the Austrian school of economics. 1871 is not that long ago if we are thinking in terms of when money was first created. So, by what rules were money and economics to be governed by before?

The Bible offers us rules for maintaining honest and biblical money:

• standard weights and measures and scales
• no multiple indebtedness
• competitive entry to lending – no licensing
• no legal tender laws

If we know that the original use of gold as money created by the people and not the government is honest money, we should look at how to maintain that honest money in terms of the Bible. Leviticus 19: 35-36 tells us how to maintain honest money without the use of state intervention.

Leviticus 19:35-36 ESV

35 “You shall do no wrong in judgment, in measures of length or weight or quantity. 36 You shall have just balances, just weights, a just ephah, and a just hin: I am the Lord your God, who brought you out of the land of Egypt.”

To explain this verse, it is the seller’s responsibility to have proper weights and honest scales. The seller is the one with more accurate knowledge of the product he is selling and so it makes sense for him to have the scales. However, there is a great temptation to have faulty weights and scales to sell fewer items for more money. The reputation of the seller could be ruined once his rival sellers discover he has faulty weights, but this could also tempt other sellers to also cheat their customers and one by one the whole market has faulty weights and scales.

This verse applies to the State and why gold and silver have been used as money for centuries. Gold and silver are easily tested by the sellers. If a buyer comes up with a coin the seller can easily inspect it by its colour, how much it weighs, and the image that the silversmith stamped on it. But, the State has long sought to gain control over the money and therefore over the people. When the State declares sovereignty over the money and places its own stamp on it, it becomes a monopoly money. Then the competition is eliminated and all the silversmiths die out because the State declares only government coins can be used as the nation’s currency. The public trusts the government because they use honest weights and scales to make the coins, so when warehouse receipts and paper money replace of gold and silver coins, the public has no issue with it.

There are benefits to paper money; it is easier to carry and hide and does not make noise bouncing around in your pocket. But, the State takes advantage of this trust and slowly starts counterfeiting paper money that is not backed by gold coins. This is the start of a fiat currency. There is a threat of a run on the national treasury if the public finds out that all the paper money in their wallets is worthless. The Bible says nothing about the State having legal sovereignty over the money, so there is no need for it today. If we look at history, every empire that has had sovereignty over the money eventually started counterfeiting which led to inflation and the fall of the empire. Leviticus 19 shows how a nation is to avoid this and maintain honest money by keeping honest weights and scales.

When a government is debasing money, it is a sign of moral corruption.

Isaiah 1:22 ESV

22 “Your silver has become dross, your best wine mixed with water.”

Corruption is imitated. In this verse, the silversmiths have been debasing the coins and making a bigger profit. The winemakers start to notice and also want to make more profit while still making the same amount of wine, so they debase the wine with water. It’s something for nothing. If someone caught the silversmith debasing and counterfeiting, they would be treated according to the law. Counterfeiters are criminals, something the government has forgotten.

There are two kinds of counterfeiters: private and public. Private counterfeiters are small-time criminals who quietly and carefully counterfeit money and gradually ease it into the system. If caught they are treated like criminals should be, jailed and fined. But public counterfeiters are not deemed as criminals because they are the bureau of engraving and printing, the federal reserve, and the central bank. They are the government. The federal government increases the debt, the central bank buys this debt with fiat money, and the banking system then multiplies this money.

What the government does affects everyone, like the winemakers copying the silversmiths. When they cheat, others will copy them, and the negative sanctions that the government created will spread throughout the nation. Inflation is the outcome of moral corruption. This has been true for every empire throughout history, with the fall of the Roman empire being the greatest example. The only Roman state that did not fall because of having sovereignty over the money was Byzantium, and that was because the State kept its hands off the money as it should have. The correct government policy is to do nothing! 

The State wants control, and having sovereignty over the money is the first step to gaining total control.

When the State is in control of the monetary system and is privately counterfeiting and inflating the money, it creates the Business Cycle or the Boom – Bust cycle. The inflation of money redistributes wealth to the early spenders of the counterfeited money and those that get late access miss out. The early spenders get to buy goods and services at yesterday’s prices because the market has not caught up and changed the prices. When the economy eventually busts, it is always blamed on the free market, but what really is to blame is fractional reserve banking. A verse in Exodus 22 explains this.

Exodus 22: 25-27 ESV

25 “If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him. 26 If ever you take your neighbor’s cloak in pledge, you shall return it to him before the sun goes down, 27 for that is his only covering, and it is his cloak for his body; in what else shall he sleep? And if he cries to me, I will hear, for I am compassionate.”

The cloak is an example of collateral that was applied to a poor person who borrows money. The cloak was the only possession the poor person had, and he had to come to give it to the moneylender every morning and then come pick it up every evening. Why is this good for the lender? It means the poor person must come back every day to get his cloak and face the lender. It not only is a hassle to do this every day, but it is a strong reminder that he must pay back the loan. It would not be fun to have to look into the face of the person you owe money to every day and say don’t worry, I will pay you back soon. The cloak provides another important use, it prohibits the borrower from borrowing multiple loans with the same collateral. If the cloak is with the lender all day every day, the borrower cannot go and borrow anything else.

The job of the bank is to store money metal; gold and silver, and in exchange issue a warehouse receipt. That receipt allows the depositor to come and get his gold on demand at any time. The depositor is like the money lender and the bank is the person with the cloak. The person is lending his gold to the bank in exchange for a warehouse receipt. The bank is giving out receipts, but if they are not backed up by gold it is like pledging a cloak to multiple lenders. Prices begin to rise and a bank run ensues. Fractional Reserve Banking is a person pledging his cloak as collateral to multiple money lenders. This is fraud.

So, if when State has control over the monetary system leads to corruption, inflation, and dishonest money, what doesn’t? The Biblical rules are:

• standard weights and measures and scales
• no multiple indebtedness
• competitive entry to lending – no licensing
• no legal tender laws

The only economic system that upholds these biblical rules is the Austrian school and the free market.

• Basis of a Free Market Gold Standard:
  • private property
  • the legal right of contract
  • enforcement of contracts by civil government
  • no government licensing of banks
  • open entry of coin production
  • no government mint, currency, or coins
  • no legal tender laws

The State rejects the Biblical rules, free-market, 100% gold standard, and the Austrian school because all these things do not add to the State’s control and power of society but decreases it. The free market increases liberty and efficiency, a 100% gold standard limits how much the State can print money. The State wants control over money because then they have control over people. They seek to control individuals, what they buy, where they go, and what they do. Price controls should be called people controls, because it limits who, what, and how much a person can buy.

History has shown time and time again that the free market, a 100% gold standard, and the Austrian school works, but the public continues to put its faith and gold in the government. States have long declared their legal sovereignty over money, which ultimately results in people giving up their gold and silver coins in replace of paper money with the States emblem or a politician’s face on it. And every time a nation does this, almost no one protests. They gladly give up their freedoms. Why? People want security and do not want to be blamed if they lose everything. So, for the sake of security, they give up their God-given liberties to the government, so that when something does go wrong they can immediately point the finger at the government.

In conclusion, honest money cannot be secured by the government. Every empire and every government in the past and the present has shown that it is not possible to let the State control money and still maintain honest money. Money becomes the root of all evil when one body has complete control over it. It is bound to become corrupted, and the Bible shows how corruption spreads. The State should not have any control over the money, it is simply there to punish fraud and violence.