A Tyranny of Judicial Madness Continues in Oklahoma

Recently, the Oklahoma State Supreme Court ruled that a statue of the Ten Commandments on the Oklahoma Capitol grounds was contrary to the Oklahoma Constitution because, the court held, the Ten Commandments jack-nicholson-the-shiningbenefited a religion. Which religion it was that benefited from the monument is apparently a somewhat abstract concept to the Oklahoma court. Nevertheless, even though the monument doesn’t benefit any certain religion, it must be damned because it is part of Jewish and Christian faiths. Logic is blind to its assumptions. In Oklahoma insane assumptions about religion have led to a judicial tyranny that history will characterize as madness.

Simply, a faith is not necessarily a religion. One may have a faith in a Just and Orderly Creator and seek Him by way of a variety of religions. One may even believe in the Christian Messiah and seek him in by way of variety of Christian denominations. Indeed, this last scenario was the one that the founding fathers were most concerned about. The great variety of Christian faiths that arose after the Protestant Reformation were welcomed without governmental judgment in the New World. Jefferson sheathed the sword first wielded among Christians by Constantine the Great.

A lie believed is a tyranny of the soul. A lie enforced by a government is grounds for its abolition. Legislators in Oklahoma are calling for the impeachment of all seven justices who can’t see beyond their highly elevated noses. That’s not enough. The Oklahoma legislators are also calling for judicial reformation, a reformation that bars the state bar from monopolizing judicial appointments. That might go far enough, but it’s still an open question. Attorney General Scott Pruitt spent far too much time emphasizing that the monument was historical in nature.

Arguing that the Ten Commandments are of historic importance to our legal system, a systemTen-Commandments-statue-JPG that has now ‘evolved,’ is simply inadequate to reformation. Tell the truth: the monuments to the Ten Commandments are a symbol of our common faith that a Just God rules; that from Him all justice proceeds and before Him all our human justice will be judged. This is not a religion. Catholicism is a religion. Classical Reform Judaism is a religion.

For a century, Americans and their justices have been fed on the fat of the lie that governments can exist without a soul and, like the dust beneath our feet, continue objectively on. It’s just not true. If our government loses its soul, its humanity, we, as a nation, lose ours. Every key idea from how the value of humanity contrasts with the animal kingdom, to the meaning of nature’s voice in the relationship between the genders in marriage requires a primary axiom for logical conclusions to foster laws. All of these matters require and depend on a faith that a just Creator, the God of Nature, is out there somewhere. This is not a religion. When it concerns matters of jurisprudence, it’s a philosophy. The founders called their version of this philosophy Deism.

The Deism of some of the founders was an Enlightenment view of the Divine Right of the individual and of the Creator’s limits on the rights of collective society, of government. When this faith or belief that a Just Creator is ‘out there somewhere’ changes into a belief about how people should seek Him, the faith can be named religious. Otherwise, a faith that a Just Creator reigns is the philosophic foundation for the panoply of all religions. (When Deism moves from its rational, philosophic, intelligent design ideas to worship of some sort, it, too, can be called religious; however, it is generally too disorganized to make it as a formal religion.)

For instance, apparently, the highly intelligent and well-educated Oklahoma justices ignored the claim Islam makes on the Ten Commandments. The claim is somewhat tenuous and is perhaps made by some for less than forthright TJFlag-ForceCannotDisjoinreasons, but, because of the claim on the commandments made by others in Islam, it can be fairly argued that also among Muslims, the role of the Creator as a lawgiver, One Who governs in the affairs of all people, is understood.

Apparently, a satanic church, in the firm belief that equality of outcomes is the same thing as justice, petitioned to have an idol placed along side the monument to the Ten Commandments. That idol is a summons to worship while the Ten Commandments forbid anyone from worshiping any stone monument. Hence, as a summons to worship, it does profit a religious viewpoint. Most importantly, a free people dedicated to laws and justice has no need to give equal time to a self-proclaimed god of lawlessness and evil.

Likewise, a Hindu group also wanted to place a symbol of its worship on the capitol’s grounds. If that symbol is not a call to worship, and if it is a symbol of the belief that a Creator somewhere rules and gives laws to people, put it to a vote. The Ten Commandments are genuinely elegant in appearance, eloquent in letter, and inspiring in content. Those are plenty of reasons for the electorate to favor one monument and not another. In any case, put it to the public, not to un-elected, poorly educated, elitist, shriveled heads with gavels for brains.

To make a long story short: A Hindu, a satanist, and an American walked before the bar. None got justice, but they all heard the insane laughter of evil men howling as they butchered a free nation.

Liberals Married the Arab Spring and Spawned ISIS

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Then senator Barack Obama on a visit to Kenya in 2006

It’s often claimed that the President of the United States is a Muslim and that because of secret ties to the Valerie Jarrett and Huma Abedin, he purposely supported the rise of Islamic fundamentalism among the Arab League, resulting, ultimately in the terrorist state ISIS. Indeed, the pattern of Obama’s failed foreign policies looks very much like a plan to establish ISIS. The greater traitor, the traitor that engulfed the Western media, the U.N. and the entire Obama administration was Harvard Liberalism. The elitist Liberals fell in love with the Arab Spring and spawned ISIS.

The pattern of Obama’s failures and the West’s are extraordinarily extensive. For instance, why did the administration in concert with the U.N. mount a seven-month air campaign to rid Libya of Muammar Gaddafi only to abandon post war Libyan reconstruction? While the mad-dog of the Middle East blamed Al Qaeda for what was, by all accounts, a surprisingly sudden revolution, was he wrong? Recently released emails show that Hillary Clinton was actually interested in arming the Libyan rebellion. If she managed to do this, it would certainly explain the suddenness of Gaddafi’s fall. But Gaddafi wasn’t wrong; Al Qaeda was behind large parts of the military forces supporting the revolution. Why didn’t the United States and it’s allies realize this?  They certainly should have. Wikileaks exposed a memo to the Hillary Clinton state department from the embassy in Tripoli explaining the strong Al Qaeda sympathies there.

Even more strangely, since a West Point study had identified Benghazi as an Al Qaeda hot spot, why wasn’t the U.S.hillary Consulate properly protected, and what was its purpose in the first place? Stories persist and evidence mounts that United States and their agents, at the least, monitored and didn’t stop the arming of Syrian rebels by shipments sent through Benghazi.  These are just two instances in which it appears President Obama intentionally forged policies to bring American enemies weapons. This, though, is an oversimplification. The entire administration (and the United Nations), not all of whom are Muslims,  either supported, participated in, or encouraged these ill advised policies. The Liberals in West senselessly supported the Jihadi Spring because, being senseless Liberals, they thought to themselves, ‘the Jihadi Spring are us!’ They fell in love. The result was ISIS.

Liberals had no idea what they were supporting. Sadly, even now it’s not plain that they have any idea what kind of evil they’ve fostered in the Middle East. The uprising in Egypt’s Tahir Square, for instance, was produced by long-time community organizers who met secretly for weeks and deceived both the media and the Egyptian Security forces into 450herecomesthemobthinking the riot was a genuine reaction to immediate events. This is textbook Liberalism. The New York Times simply frothed in raving praise for the Egyptian rioters who “fused their secular expertise in social networks with a discipline culled from religious movements and combined the energy of soccer fans with the sophistication of surgeons.” This quote touches on the involvement of radical Islam as “a discipline culled from religious movements.” For Kirkpatick and Sanger had no idea what they were talking about To them, it was Woodstock gone wild.

All the beloved Liberal themes were on display in Tahrir square including police brutality. The Liberal American media loved it and, some at least, still cherish the memories of that moonlit night when, “The mighty police force collapsed within an hour, fleeing into the night for fear of reprisal. I saw one officer shedding his uniform as he ran (Oh boy!). ” Elitist Liberals met their true love, and even now, at least one still reflected that she (the revolution) was “too perfect” to last.tahir

How could anyone have guessed the Muslim Brotherhood would arise from the chaos? After all, isn’t civil resistance intrinsically good? After all it’s down with “the machine”! Anarchy is freedom! But someone knew, and unless it’s hidden in Hillary’s email, that some one was not President Obama. It was, instead, Osama Bin Laden who was directing his minions to engage in the insurrection with a view towards having “the countries (in revolution) abide by the Sharia’s laws.”

Chaos never brings liberty; it always brings tyranny. That is because anarchy is a state that is by definition even worse than life under a tyrant. That’s because anarchy is, by definition, a state of affairs in which justice among mankind has been completely suspended. The civil unrest in the Middle East was not the American Revolution, but appeared to the Harvard Liberals to be their one true love, the Aphrodite of the 1960’s radicals. In their purple hazed-over love affair of the Jihadi Spring, they had no idea they were being manipulated by a repressive, cynical ideology that fully understood Liberalism and knew exactly how to exploit it.  And that is exactly the danger today. Liberals still can’t call the Islamic State radical Islam.

In Arab state after Arab state the elements of radical Islam blended in with the traditional ideologues of the West’s radical Left. Is it possible that elements of radical Islam have infiltrated a very Liberal far left American “regime” that, like Islamic radicals, seeks anarchy, lawlessness, and social unrest? Certainly, but it is Harvard Liberalism that calls anarchy liberty that is the real danger. Without this madness ISIS would not have reached ascendancy nor maintained it this long. Elitist, mindless Liberalism kills. Never forget!

 

 

Money is Common Sense Part III: the Complexities of Paper Money

All money is a tool for market efficiency and specialization. As efficiency and specialization occur, more production is possible. As a result, the amount of labor it takes per unit of production decreases; hence, its price, naturally decreases. A single unit of a commodity based currency with intrinsic as well as utilitarian value tends towards deflation because it purchases more and more goods and services.

Likewise, given an ethical populace, with ethical laws and standards, all economies with a healthy currency, tend toward full employment. This too is self-interest. Why should any member of the economy want to work more than is necessary? If goods and services become less and less expensive, then the incentives to invest or hire others to do work you once did increases. Moreover, a deflationary economy increases demand as the purchasing power of the monetary units increase. An efficient market is an inclusive market.

By definition, a fiat currency implies a very powerful centralized government. Since bigger, more centralized governments are less responsible, they tend toward debt. This in turn breeds inflation-ridden fiat currencies. “When governments fear the people, there is liberty. When the people fear the government, there is tyranny” (Jefferson). A less responsive government is less responsible. Hence, governments with the power to issue fiat currencies tend to be less responsive and in greater debt. Debasing the currency allows governments to extend their debt by repaying loans or by paying contracts in less valuable currency than they borrowed. This is a hidden tax.

Whether or not tyrannies have lost their fear of the people is an open question, but a strong currency is a still in every government’s self-interest. Run away inflation doesn’t benefit even the most powerfully centralized government. The power to tax and to exert authority, even over the military, is based on a steady currency. Hence, every government with a fiat currency must have a monetary policy to combat hyper inflation and to avoid deflation. It should surprise no one that today’s Federal Reserve Chairmen try to produce a “low-inflation environment,” for this is monetary policy most in the interest of every centralized government.  As the economy specializes and becomes more and more efficient, the government’s fiat policy will allow it to extort a hidden tax by scraping the first fruits of those efficiencies into its own coffers (on some of these increased efficiencies see Horwitz’s PowerPoint Table 1). This slows demand and the inclusive quality of healthy free-market economies. An inflationary fiat currency limits money’s ability allow a society to self-organize and optimize.

A centralized government will contract with Contractor Dave for X dollars of fiat currency. By the time Dave is paid, he will be paid in X minus Y where Y is the amount of inflation the government thinks the economy can bear. Not only does Dave suffer loss of Y (which he may have been able to calculate and include in his bid), but he also loses what he can’t calculate: the natural deflationary benefits he should be reaping from the greater and greater efficiency of the market of which he is a part. There is a science to keeping a fiat currency in a low-inflation environment. It is a far from perfect or complete science, but it is a study of “money supply.” Such studies endeavor  to use the illusions debt produces to generate specific results. “Money” no longer includes only what is produced (Says Law) but is a measurement of the promise of production.

 

Debt generates illusions because of the human sense of time. Almost every debtor receives a momentary euphoria when a loan is granted because he receives current benefits while responsibilities for production are in the hazy future. The greater the benefits, the greater the euphoria, and, of course the greater future responsibilities the debtor incurs. Should a debtor incur more responsibilities than he should, he will be forced into dire consequences such as bankruptcy. This is a microcosm of the boom and bust “cycle” of capitalism. A loan confers the ability to demand services in the present for a future of contracted demand. These illusions are the fundamental source of the complexity involved in evaluating economic processes and developing monetary policy.

When a laborer is paid with a fiat currency he is, essentially, a creditor. The laborer is not made whole until he makes a second transaction. In an inflationary environment he has made a bad loan. He had little say in the matter, but the government instituting the fiat currency and debasing it experiences the sense of invulnerability that generally accompanies receiving a new loan. This is a bad thing for the government of a free people to experience.

The sparkling allures of fractional banking are another branch of the illusions of debt. Monetary theorists often speak of fractional banking as expanding the money supply by “creating” money out of nothing. Of course fractional banking does no such thing; instead, fractional banking generates a bubble of demand by putting everyone in debt. Joe Farmer deposits $100.00 into Jim Fisher’s legally permitted fractional bank. Mr. Fisher then loans $90.00 of Farmer’s money to everyone else. Mr. Fisher is now in debt for $90. Not only is Fisher in debt, but others in the economy are now also $90 in debt. The economic system has $180 of debt where there was once $100 of savings. Theoretically, if Fisher’s $90 was loaned to a second, smaller bank run, by, let’s say, Mr. Angler, Mr. Angler could then loan out another $81. Hence, the increase in debt would be $180 + $171, or $251.00. A period of suddenly high demand results from this process, but its increase is with the promise of a future time of decreased demand. More importantly, every time Fisher receives $1 dollar of Farmer’s money back he can lend out almost nine more.

All of this is the illusion of debt. Each borrower is betting on harvesting the benefits of an increasingly efficient economy. Of course, as increased borrowing hypes demand, the returns on investment seem too good to ignore. The illusion of mass debt masks the reality that the economies efficiencies are not as great as everyone thinks. This tends toward a mass irresponsibility.  Almost inevitably, like a game of musical chairs, the music stops and the bill suddenly comes due. Historically, banks go belly up. Fisher skips town. Farmer loses his savings. The money supply “contracts” because everyone is broke. In America deposits up to a $100,000 insured. If the banks that were allowed to fail in 2008 and in 2009, the FDIC would have owed the trillions our government loaned to the banks. The taxpayers would have been picking up the tab either way.

It would be ironic indeed if future historians found that Federal Reserve officers were far more responsible than the corrupt officials elected and appointed by the people. Federal Reserve banks do have an interest in a stable currency, and they have reason to continue to use their authority responsibly. However, any cursory study of the Federal Reserve Bank’s sweeping economic powers, coupled with its utter lack of accountability, reveals the tremendous potential for abuse in the current system.

Since all fiat money is debt (see Part II), the power and the dangers of debt must be factored into any monetary policy.

Fractional banking tends towards inflation. At first this seems counter-intuitive. If Mr. Fisher lends out $100, wouldn’t he want to be repaid in dollars of equal value? Well, yes, on the one hand, that’s the plan, but as long as Jim can charge an interest rate above the rate of inflation, he is more than happy with inflation. Why? Jim needs collateral on his loans. These appear on the bank’s balance sheets. If Jim lends $100,000 to Tony, Tony’s house must be worth at least $110,000, or Jim has made a bad loan. If Tony loses his job and can’t repay the bank, the bank can sell Tony’s house and get its $100,000 back plus the $10,000 Tony originally invested as a down payment (not to mention any payments of principal and interest Tony has made in the interim). That’s fair right? Well it gets even fairer with a little inflation. With a little inflation the home Tony purchased for $110,000 might be worth $135,000 by the time Tony loses his job. Mr. Fisher’s asset balance always looks great. On the other hand, if there is deflation Tony is in a strong position to ask for a restructuring of his loan. After all, if Tony defaults and the bank can only get $80,000 for Tony’s home, ol’ Jim Fisher is in a bit of a tangle. This is why the deflationary policies can cause bank runs and bank failures. That’s why when gas prices popped the housing bubble by substantially reducing demand for more expensive homes in suburban areas, the world’s banks shuttered. If the inflationary pressure on homes had continued, the bad Fannie Loans wouldn’t have mattered because the bank portfolios would have increased, not decreased in asset value.

Because all genuine demand is based on production, the illusions debt generates create bubbles in markets. The actual values exchanged are warped by the euphoria the borrower gets. The borrower typically overpays for goods or services because the actual value of the money he is exchanging is lost in the fuzzy future.

The notion of Keynesian deficit spending adds a second level to the illusion. When the government of a free people sells itself into debt, it sells its people into debt. Because of debt’s powerful illusions, the fate of the people is all but completely obscured.

The Federal Reserve Bank has the power to confer all sorts of loans. It is especially dangerous in so far as it makes loans that postpone the payment of government debt. Because the Federal Reserve Bank’s powers to confer debt are far greater than little Jim Fisher’s, its power to produce bubbles is vast. The Federal Reserve Banking System was formed to provide solutions to the boom and bust cycle caused by fractional banking. Theoretically, as centralized units of cavalry could be rushed quell violence on distant points of the frontier so also could gold be rushed to banks at which there was a run. Instead of ending the practice of fractional lending, the United States doubled down on the powerful illusions generated by debt.

The essence of all property rights is the right to the fruits of one’s labor. The fundamental fight in much political, all economic, and some literal war is over the power to separate a person from his property rights. The age old method of economic warfare is the careful crafting and wielding of debt.

Money is Common Sense Part II: All Paper Money is Debt

Money is common sense. Just because the entire 21st century world economy is completely based on valueless paper money, does not change this reality. The insanity is not money’s fault.

Receiving the fruit of one’s labor, community specialization, market efficiency and money are all common sense, for they are all part of a healthy human condition. Poverty, debt, freely surrendering the fruit of one’s labor to usury is more complex, and these evils impact every aspect of money’s common sense.

All fiat money is debt. This is intuitive, for money is common sense. Fiat money relies on a second transaction to make its recipient whole. If the second transaction is for goods or services, the holder of the fiat currency is a creditor. If the second transaction is to retire a debt, the holder of the fiat currency is a debtor.

Still valued as an example by Federal Reserve bankers and economists, Ben Franklin’s ingenious early colonial monetary policy provides a basis for examining the power of fiat currency under the modern Federal Reserve Banking system.

The intrinsic, commodity-like, value of a currency protects it from the need for monetary policy. If the commodity used as money is rare, it purchases more goods. If it becomes plentiful, it purchases fewer goods. If goods become more plentiful, and the value of the commodity-like currency remains the same, more goods can be purchased.

During the colonial period, Wampum, tobacco, and beaver skins were used as currency. The later were colonial exports that could easily be exchanged for metal currencies while wampum could be exchanged for both furs and tobacco. Ultimately, these commodity-based currencies vanished as their utilitarian value vanished with trade conditions. No monetary policy was necessary.

Precious metal currencies have a greater utilitarian value than other commodity-based currencies because of their ability to store monetary value over time. First, they survive the physical ravages of time more easily than beaver skins and tobacco, and, secondly, the demand for these items remains more static. Because the communist ideal is but a pipe dream told to the desperately impoverished, there will always be a leisure class of the ridiculously wealthy. This provides a constant market for gold and precious metals.

This was certainly true in the American colonial era where the great economic world powers were mercantilists led by very nervous but prolific aristocracies. Indeed, it was the scarcity of precious money currencies in the colonies that occasioned the rise in alternative commodity-based currencies.

The colonies had a trade deficit because England had a trade monopoly (The Navigation Acts p.5 see also: Wool Act and Hat Act). The British purposely (p. 4) took a form of capital from the colonies, their money: their gold, silver, or copper. Because of the British use of fractional reserve banking, they could offer an abundance of manufactured goods for colonial precious money currencies. This is because every Spanish Doubloon garnered from the colonies was worth nine Spanish Doubloons (in Pounds Sterling) of promissory notes issued from the banks of London. These promissory notes, in turn, maintained the mercantilist subsidies for domestic manufacturing (Grub 4). All of this further suppressed colonial manufacturing and trade.

Into this condition of debt and of unfair trade policies and exchange rates, enter Franklin, his printing press, and colonial monetary policy. Though those intellectual supporters of fiat currencies who would stab us with their pointy-heads may hail Franklin’s departure from gold (Grub 7), his views must be kept in the complex of debt into which the colonies had been shackled.

Franklin agreed with Part I‘s common sense explanation of the utilitarian value of money: “Money,” he wrote, “as a Currency, has an Additional Value by so much Time and Labour as it saves in the Exchange of Commodities,” (Franklin 352). and further: “MONEY, properly called a Medium of Exchange, because through or by its Means… it is, to those who possess it (if they want any Thing) that very Thing which they want…It is Cloth to him that wants Cloth, and Corn to those that want Corn…” (Franklin 345). Since British Mercantilism had reduced Pennsylvania to barter, Franklin could passionately, convincingly, and correctly argue that colonial governments should give the colonists fiat money representing future taxes due and mortgage installments payable on land held by and deeded by the government.

Secondly, Franklin instinctively recognized both who was controlling monetary policy and how that policy was directed by personal interests (Franklin 342). Americans today should be as perceptive. Franklin argued that the scarcity of money increased interest rates. He was correct  in particular but incorrect in general. He was correct that colonial paper money freed the colonial economy from the vice grip of mercantilism and, at the same time, reduced interest rates. However, this was not because of “increased money supply.”

By itself, increasing the supply of paper money does not reduce interest rates because interest rates are a matter of negotiation. If the lender has little need of the borrower, but the borrower has great need of the lender, interest rates will be higher. The mercantilists of England had the monopoly on money and lent at their leisure.

The lender becomes an investor when the lender and the borrower stand to profit mutually from, not just the interest on the loan, but on the very success of the venture itself. This was much more likely among colonists in the same land profiting from the same economy. Hence, Franklin’s elegant paper money solution changed the lender-borrower paradigm. First, it increased competition among lenders and, because there was still great money to be made at lower rates, this lowered interest rates. Secondly, the fiat money allowed greater direct, colonial, oversight and, hence, less risk for the lender; that reduced interest rates. Finally, the lenders, middle class merchants, small businessmen, recognized their own interests in the prosperity of the local economy; that also reduced interest rates.

An increase in money supply, can, of course, lead to price inflation. Inflation should lead to higher interest rates, interest rates designed to recoup the loss of value in the currency returned to the lender.

Franklin argued for, as we would term it today, a strong dollar. He argued that money based on gold resulted in inflation (!) while money based on land, land sold in the colonies, could never be inflationary. The money based on gold was inflationary because, even then, the banks of England practiced fractional reserve banking (Franklin 347). However, Franklin’s analysis of real estate values in the colonies was absolutely correct. Since no one of Franklin’s adversaries, the moneyed mercantilists, dared admit the evils of fractional reserve banking, and because Franklin’s analysis of real estate values was undeniable, Franklin’s argument stood invincible. The Pennsylvania colony vigorously reissued their paper currency. And, oh yes, the young printer Benjamin Franklin, age 23, got the commission to provide the inky paper.

Because the money Franklin printed could be used to pay taxes or mortgages, it had a limited, commodity-like value. Was this currency the perfect solution? What if you had a ton of the fiat currency because you worked for the government and couldn’t find someone who needed this medium to pay taxes or mortgages? There was still an element of barter involved. Nevertheless, it was genius. The British mercantilists would have no interest in a colonial currency. Hence, they would be shut out of the colonial economy as expressed in Franklin’s dollars. Of course, because the fiat currency of the colonies did not have much utilitarian value in foreign exchange compared to precious metal currencies had. it would tend to become devalued over time compared to hard money.

The type of currency Franklin advocated and printed, called flat currency or “bills of credit,” if issued money only according to a government’s actual annual income, maintained a natural, publicly regulated monetary policy as the supply of bills was retired with the payment of taxes each year (Grub 6). Hence, Franklin’s vision was antithetical to fractional reserve banking. Unlike a bank with only a fractional reserve, a government would not issue more money than could be bought back at any one time. Hence,Franklin argued, when the point at which trade did not support the money in circulation, in which the utilitarian value was less than the promised commodity-like intrinsic value, the money would, of nature be retired and the money supply contracted and corrected.  Franklin’s notion of money involved an ethical, responsible government. In such an instance, again, monetary policy was organic. Money was tied to intrinsic value and money that has intrinsic, commodity-like value needs no monetary policy.

However, what would happen if a colonial government issued more paper money than the taxes and mortgages it was owed? While Franklin preached against inflation, in reality, colonial flat money was so continually debased that Adam Smith railed against it. Because the nature of government is so evil it must be fettered with systems of checks and balances, out of control governments as the source of paper money are always inflationary.

Summation:

The ability of the Federal Reserve Banking system to maintain the value the fiat reserve currency of the world comes from King Debt. As long as the debt owed by governments and individuals can be paid in dollars, the dollar has a commodity-like value as well as a utilitarian value.

All fiat currency involves stated or unstated monetary policy. Honest monetary policy is intuitive and common sense. Honest policy can be plainly stated and publicly evaluated. Of course, unstated, or impossibly complex monetary policy, or monetary policy that fluctuates, are policies less likely to be honest.

Exchange based on money that has an intrinsic commodity value requires no monetary policy.

Money is Common Sense Part I: Definitions

Money is common sense. Anyone who tells you differently is a huckster or has been fooled by a huckster. Nevertheless, it takes a little consideration. For starters, it might be good to begin with a few questions such as:

  • What is money?
  • Does the value of money exist in its utilitarian economic benefits, or must money have intrinsic value?

There is an abyss quite close to my home. It best viewed, like the Grand Canyon, by a slow walk along its edges. Those of you that know this discussion extremely well, please don’t spoil the view by asking us to sprint from thought to thought. Instead, please walk with us, enjoying the relaxed pace of this peripatetic exercise with its gradual increments. Today we’ll see but the distant ridges of the abyss near my home, but we should be able to see them quite clearly.

  • Commodity currencies require no government involvement.
  • The value of an efficient currency far exceeds its value as a commodity.
  • As soon as Caesar’s image is on the currency, it becomes a fiat currency, a promissory note. Its represented commodity value will deflate, prices will inflate, and Caesar takes his cut.

The Primary Value of Money

Perhaps the freest economic form of exchange is the barter system. Imagine trading three lambs for a year’s supply of seed corn, or a pig for a measure of firewood for the winter. No money is used. The exchange requires no government agency or regulation, and the price was determined by the purest movement of supply and demand. Moreover, such an exchange is beyond taxation since the government is excluded entirely (That is not to say that some ancient publican would not have found a way to assess a tax on the land or livestock before the exchange).

Likewise, consider a primeval farmer’s market in which all the goods and produce were on display. Such a place might easily attract tradesmen with their wares. Garments of woven wool are bartered for the fleece of that years sheep. Primitive iron works are traded for bushels of grain. Money would be not necessarily be required at all. Instead, every good, service, or product could be exchanged with the immediacy of supply and demand. Or would they? Finding the precise deal would take effort. It is reasonable to assume that every deal for a desired commodity would include and exchange for other unwanted items. Suppose you wanted to trade a mule, but the best buyer had only asparagus with which to barter?

Enter the ability to barter with gold. One can vary purchases and exchanges tempering each more precisely to one’s need. Gold was easy to carry and desired by all for use in making glistening gods to adorn one’s home and garden. This universally accepted medium of exchange adds efficiency to the market. Now the laws of supply and demand can work more exactly. There are far fewer odd combinations of one merchant’s carrots and another’s ducks to hit on the correct exchange rate for the man trading in saddles.

From this model comes an example of the primary value of money: economy and efficiency in exchange. In an agrarian society this efficiency might be measured in man hours; in an industrial society the utilitarian value of money to the economy is inestimable. While it is a function of its value in the agrarian model, the utilitarian value of money increases exponentially as societies specialize and develop industry.

Now enter the gold coin. It’s even easier to measure, even easier to carry, and is still desired by all for use in making their glistening gods to adorn their homes and gardens. The laws of supply and demand work much more exactly. Specialization increases and with it quality and abundance. There are far fewer odd combinations of one merchant’s carrots and another’s ducks to hit on the correct exchange rate for the man trading in saddles.

It’s not until there is a coin of the realm that people start calling a commodity currency “money.” Whether there is a king, a Caesar, or a wealthy man who produces the coin, the coin changes economic realities significantly. The benefits of the coin is, first and foremost, confidence. Despite their being a seemingly inexhaustible demand for gold, or tobacco, or whatever the commodity currency might be, that commodity is of different value to each individual. The advent of the coin standardizes the value of the means of exchange to a significant extent. This added efficiency is worth it’s weight in gold. Well, actually, the increased market efficiencies are worth far more that the commodity value of the currency itself.

The Intrinsic Value of Money and the Money Supply

Of old, gold, silver, and copper each had an intrinsic value that assured their utilitarian value in facilitating the exchange of goods. This intrinsic value was based on supply and demand. If gold was scarce, then it would purchase more bushels of wheat. If silver was in great supply, it might purchase fewer chickens. In either case, the intrinsic value of money was determined by supply and demand relative to the supply and demand of the goods for which it facilitated exchange. The intrinsic value of the medium of exchange, the money itself, is never absolute. It also is subject to supply and demand.

Notice that when money has intrinsic value the money supply expands and contracts organically. No monetary policy is necessary.

Biblical Money

Work is as much a part of living as is breathing, and human labor is naturally most profitable under conditions of specialization and market efficiency. Unlike human labor, debt, lending, and living by usury are not part of a biblical economy and they are not, of themselves, beneficial to society. Debt, lending, and living by usury are kinks in the hose, donkeys in the well, and cracks in the cistern of a society’s prosperity.

The practice of usury is frowned on in the Bible. All debts were forgiven, or should have been forgiven, every seven years. Every seven years the land, or the essential means of production, reverted even to the most failed capitalist in Israel. These ethical premises also allowed for national prosperity to be renewed and financial blessings to flow freely. Even today, a bankruptcy is scrubbed from one’s credit rating after seven years.

There is, however, one record of successful creditors in the Bible. This is Matthew 25’s Parable of the Talents. The unfaithful steward hides his talent while the faithful stewards lend or invest their talents and repay their master with interest. What is important is that the faithful stewards put the actual weight of their money to work. They did not write promissory notes using the talent as a fractional reserve.

Once the discussion of money enters into the calculus of usury and debt, the subject becomes a house of cards. Monetary Policy and related definitions increasingly become a shell game more vicious than anything on the streets of the South Bronx. For the immediate future though, you need only watch you toes. Well only be playing with the sand sharks.

Keeping it simple, then, when a commodity currency is the sole currency, only bankers and those who take loans can wreck the simplicity and prosperity that comes to those who work when they can exchange their goods and services freely.

That pit in front of my house is that once a commodity currency becomes money, governments begin to affect monetary policy. Often, because they are governments, they affect the economy so irresponsibly that they bring down their own houses as well as the society upon which they’ve leached. At other times, governments ‘responsibly’ cull hidden taxes by keeping the rate of inflation at fixed levels. It’s still monetary slavery.

When Money has no Intrinsic Value

Such a thing is almost unimaginable at first blush. However, consider this model. The state, by taxation, and lets say, as in ancient Egypt under Joseph, by way of a miraculous windfall, owns tremendous amounts of goods and, by fiat or command, provides tremendous quantities of labor. Now, if the government issues an intrinsically valueless currency, it has the economic wherewithal to guarantee delivery of goods and services according to the contract the valueless currency has promised. All legal tender becomes a note of promise based on the financial wherewithal of the government to make good. This, of course, is where the United States currency must currently be categorized.

Historically, it has been the case that certain lending practices have also produced a variety of intrinsically valueless currencies. The bank offers a promise for the delivery of goods and services, and the promise itself becomes the basis of exchange. As long as the promise remains in circulation as a means of exchange, the goods promised by the bank (often a hard currency of intrinsic value) never gets delivered. It never gets delivered because the utilitarian value of the promise is of greater value than the intrinsic value of the promised goods or currency. When this balance of value changes, bank runs happened. Banks would go belly up and people would lose all their money. Historically, when this happens, there is a negative impact on the economy beyond the immediate inability to exchange goods and services. Some economists euphemistically describe this negative impact as a contracting money supply.

This contraction of the money supply is the bust portion of the boom and bust cycle. While the boom and bust cycle often is laid at the feet of “capitalism,” the cycle is not the product of free markets, or property, or property rights. The boom and bust cycles, at least in United States history, have all been, primarily, the consequence of runaway usury and the practice of fractional lending1. If banks were permitted to loan only the actual gold in their vaults, rather than to promise gold on a fractional basis, the boom and bust cycles would not have occurred with such violence.

When money has no value

When money cannot be exchanged for any good or service it is no longer money. Hence, from a strictly tautological standpoint all money has value, however infinitesimal.

Consider the inflation in the Weimar Republic between WWI and WWII. Although, certainly the Treaty of Versailles exacerbated the disaster, the root of the problem was the 1914 decision to go to an intrinsically valueless currency. Money not only lost its value so that it could not be used in place of barter, its small positive value was accompanied by a secondary negative economic value. Its failure to work as a medium exchange destabilized the state, disrupting, to some extent, even the opportunity for barter. At a certain point, money without intrinsic value will have both an infinitesimal microeconomic utilitarian value while having an inestimably large negative macroeconomic value.

This is enough for immediate consideration. Can you see that distant ridge on the far side of the abyss? It’s beautiful in its symmetry, is it not?

Corollary questions arise:

  • How like our semi-fictional example of Joseph’s Egypt is the U.S.economy?
  • What of a government able to procure goods and services enough to insure most of the promises of its valueless currency based on international debt?
  • Who should abhor an intrinsically valueless currency more, the political elites or the common man?
  • Can a debtor nation that owes its debt in an intrinsically valueless currency transition to an intrinsically valuable currency? What would be the effects?
  • If it can make a transition to a currency with intrinsic value, how should that value be chosen?

How can a bank lend me money it does not have, that I must repay by the sweat of my brow? (Indeed, if I repay only two or three times the amount the bank didn’t have to lend me, then I count myself fortunate and prosperous!) What is the name of this miracle of human stupidity? Answer: trolianfc nelngid

1. From Random History’s fairly standard A History of the U.S. Economy: Depressions (or Panics) of 1873 and 1893 were actually caused in large part by unrestrained development and financial over-speculation, … The Panics devastated small businesses.

… While the precise causes of the Great Depression are both numerous and challenging to pinpoint, the economic effects were disastrous. At its peak, unemployment was nearly 25 percent of the workforce as hundreds of banks failed (about 40 percent) and hundreds of millions of deposits were lost (Ferguson 2008).

And from Real Clear Markets on the panic of 1921: The storm broke in May of 1920 and arrived as these things usually do – almost everyone at the opera was caught napping when the lights suddenly came on. Bank failures, which numbered 63 in 1919, spiked to 506 by 1921. By June of the latter year, the money supply had dropped 9%, GNP 17%, and the index of wholesale prices collapsed from 247 in May of 1920 to 141 by July of 1921

2. Again from Random History: The 1917 War Revenue Act raised taxes while the government sold bonds to the general public and the newly founded Federal Reserve. … Taxes were lowered after the war, but remained higher than before it. The Federal Reserve assumed a more dominant role as New York became the financial center of the world. The federal government, in short, showed it could be a dominant force in the American economy. Notice the increased monetary power of the federal government after the institution of the Federal Reserve Banking system and the income tax.