Banking, Real Money, and Intrinsic Value

The great Ron Paul taught me everything I know about the immoral and unwise practice of fractional reserve banking on which our current banking system is built in his book End the Fed.  This book also opened my eyes to the Federal Reserve system and how it ultimately  benefits the banking elite.  In the book Dr. Paul also explains now he thinks a return to the gold standard would cure the problems which come along with the fractional reserve system.

How does a fractional reserve system work?  Tom Peaceworth sums it up nicely, though maybe a little too simply in his article “Credit for the Rest of Us” when he writes:

The way our current system of fractional reserve banking works, whenever a commercial bank makes a loan, it is counted as an asset rather than a liability of the bank, because ostensibly it is still deriving interest from it. But what actually happens is that the credit is created out of thin air, against a “fractional reserve” which is made up of the commercial bank’s deposits (its true liabilities).

Basically, when the bank gives you a loan, mortgage, etc. it is creating the money and then charging you interest on the money it just created.  The author calls this checkbook-credit.  The result is profits for the bank, but risks for the depositors.  Peaceworth writes, “they are socializing this shared risk but privatizing the gains from it, which accrue to the bank on interest. In the words of Wendell Berry, this process was literally ‘selling a bet on a debt as an asset.'”  We see the rotten fruit of this system in times such as in the crises of 2007.  Who paid the price?  Not the banks. 

But if, as happened in 2007, debts stop being paid back, banks very quickly call in their debts and refuse to lend any more, and the general economic trust on which the monetary system depended, collapses. The result of the use of checkbook-credit is that privately-run corporate banks can profit on all manner of risky and predatory lending projects right up until the point where they can’t get away with it anymore, and then insulate themselves from any of the consequences when it becomes apparent that the piper has to be paid somewhere (with something that doesn’t actually exist). The Joneses are the only ones who suffer from this collusion of Hudge and Gudge.

The reason I brought up Ron Paul at the beginning and how he argues bringing back the gold standard would prevent such things from happening is because Tim Peaceworth tries to show that this argument fails. Peaceworth argues that the Austrian school of economics, which Paul represents, are wrong when they argue that gold, when used as money, has intrinsic value. When you use gold as money you are depending on it being useful in further exchanges “the exact same way you would do with bank notes or checkbook-credit.”

I’m thankful for the article because it has caused me to think about the gold standard and fiat currency from a different perspective.  Many questions have persisted in my mind about the intrinsic worth of gold and other precious metals.  Will gold and silver really be valuable in the event of a terrible economic collapse?  I hope we never find out. 

Here is a link to the full article:

Credit for the Rest of Us?


Why do Christians support Trump?

First, this isn’t an endorsement of the Donald.  I haven’t made up my mind and I’m somewhere between Rand Paul and anyone but Marco Rubio.  

One thing that has been entertaining has been watching Trump upset all the right people including the neo-cons over at the National Review.  One thing that has interested is the  support from Pat Buchanan.  I haven’t seen an outright endorsement, but he certainly seems to also be enjoying his campaign.  One thing Pat Buchanan has been writing and warning about for a long time is mass immigration to America and the negative effects of it on our nation and our culture.  State of Emergency is an excellent and eye opening book on the issue.  

A few polls I’ve seen show a huge disconnect between evangelical leaders and the average evangelical (whatever that is).  I think one of the main issues is immigration and I think the article “Why are many Christians Supporting Trump?” explains it well:

Polls consistently indicate that the fundamental political concern for conservative Christians is the ­moral climate of the nation. So this argument is highly relevant for the values-based voter. And when objections to the kind of border security proposed by Trump invoke politically correct responses, as when Lindsay Graham called him a “race-baiting, xenophobic, religious bigot,” it only fuels the plausibility of such reasoning.

This is because I think there is what we might call a cultural sense among Christians that open borders means overturning values. In her highly influential study, Purity and Danger, the renowned social anthropologist Mary Douglas developed the critical connection between borders and bodies in human culture. She observed that cultural concerns about the body, such as taboo codes, ethical identity, and conceptions of purity, are frequently lived out as metaphors for larger social relationships and boundaries.[2] This last term, boundaries, is a key motif for Douglas, who theorized that each individual body within the group ‘body’ shares in the boundedness of the group, with the restrictions of the social macrocosm embodied and reflected in each individual corporal microcosm. For example, restrictions as to whom one may betroth reflect restrictions as to who may enter the society; proscriptions protecting bodily orifices symbolize preoccupations about social exits and entrances. The do’s and don’t’s regulating national boundaries are lived out personally via the moral codes inscribed on individual bodies.
If Douglas is correct, then there is a plausible cultural sense that open borders means open values. The perpetuation of unfettered immigration fulfills the political precondition for more liberal democratic social policies.

While this isn’t the only reason, I think this is a major reason for the amount of support seen among evangelicals for Trump.

“What is ‘Theonomy?'” by  Dr. Greg Bahnsen

Somehow I managed to get through seminary without ever hearing the term “theonomy.”  I don’t think I ever sat through a serious lecture or discussion on biblical law and how it applies to civil authorities, the church, the family, and the individual.  Since seminary I’ve been introduced to theonomy and one of its proponents, Greg Bahnsen.  I came across this article today by Bahnsen which is a good introduction to theonomy and why it is helpful for thinking through how the Law applies to us today.  

So what do we do with biblical law?  Are all laws still applicable?  Are any still applicable?  I’ve been taught the only parts of the law still applicable are those repeated in the New Testament, which is the opposite of how we should think.  Greg Bahnsen explains:

Theonomy thus teaches that we should presume that Old Testament laws continue to be morally binding in the New Testament unless they are rescinded or modified by further revelation. Theonomy’s methodology stands squarely against that of dispensational theology which maintains that all of the Old Testament commandments should be deemed — in advance of exegesis — to be abrogated, unless they are repeated in the New Testament.

One of the strengths of theonomy, in my opinion, is that it recognizes the wisdom found in the Law, especially for civil government.  Bahnsen writes, “So theonomy teaches that civil rulers are morally obligated to enforce those laws of Christ, found throughout the Scriptures, which are addressed to magistrates (as well as to refrain from coercion in areas where God has not prescribed their intervention).”  Bahnsen provides, in this short article, plenty of support for his viewpoint from the New Testament. Bahnsen writes, “The Apostle Paul affirmed that one of the uses of the Old Testament law which we know to be good is the restraint of criminal behavior (1 Tim. 1:8-10). Jesus endorsed the penal sanctions of the Old Testament law, condemning those who would make them void by their own human traditions (Matt. 15:3-4).”

Finally, I’ll close with this prophetic quote for those opposed to theonomy:

Those who do not favor taking God’s law as the ultimate standard for civil morality and public justice will be forced to substitute some other criterion. The civil magistrate cannot function without some standard of good and evil. If that standard is not the revealed law of God, then in some form or expression it will have to be a law of men — the standard of self-law or autonomy. Men must choose in their civil affairs to be governed by God’s law (theonomy), to be ruled by tyrants, or acquiesce to increasing social degeneracy.

Here’s the link to the full article: