Is money the "root of all evil"? What is money anyway? Where did the idea originate? What about interest rates and "paper gold"? Does the Bible condemn wealth and riches? Where does wealth come from in the first place? Most important of all, what will happen to that wealth within your lifetime? What is the true source of wealth? What is your best investment? Money matters! Walk into a bank and your whole manner changes. An aura of awe makes people use hushed tones in the marbled mausoleums of Mighty Money! The building itself exudes an atmosphere of absolute confidence — if not the confidence of solid stone, brick, marble, thick polished oak, high-ceilinged basilicas of the old-fashioned banks, then it is the modern confidence of concrete, steel and glass with clinical and controlled luxury displayed in plush carpets and pieces of modern art.
As a customer you are treated with friendliness, politeness and sincerity — but always with a certain austere reserve, a certain understandable and fully expected distrust on the part of the moneylender toward the money-needer. It's something we take for granted.
You have confidence that the bank is adequate to supply your need. You hope the bank will have enough confidence in you to risk supplying your need. You know certain securities will have to be produced to bolster the bank's confidence in your ability to repay — your land, your home, your life insurance, your auto, your ability as a wage earner... all will be freely open to scrutiny, as of course will your past record of bill paying — your credit rating.
It's not that debt is not respectable. Debt is demanded. It is a red-ink society from the impossible national debt to individual insolvency.
Everybody does it!
It's hard — no, difficult, if not near impossible — to make ends meet, to live within your means. But that's all right. Nobody else can either. In fact, since the early thirties, when the government decided it would be better to mortgage the future than to pay for the present, a climate was created in which it is uncomfortable not to be in debt.
Nationally speaking, that mortgage on the future is just about due to be paid — and when all the notes come due at once we're going to discover a fantastic and horrible truth: The richest nations on earth are bankrupt! But that comes later in this article. Let's get back to you.
Does God Condemn Money? Despite some misquote of the Bible you may have heard about money being the root of all evil, let's prove unequivocally at the outset that neither God nor His Word, the Bible, condemns money. There is nothing unholy or inherently evil in money or a bank. As with all things, God's principle is: It is not the thing which is evil, but what is done with the thing; the attitude toward the thing.
What the Bible does say is, "For the love of money is the root of all evil..." (I Tim. 6:10). Even this is poorly translated in the King James Version and is better understood as rendered by J. B. Phillips: "For loving money leads to all kinds of evil, and some men in the struggle to be rich have lost their faith and caused themselves untold agonies of mind."
No, God is not against money of itself. Abraham, the father of the faithful, the friend of God (James 2:23), was a very rich man (Gen. 13:2) and was familiar with the use of money (Gen. 23). David, a man after God's own heart (Acts 13:22), during his lifetime gathered up tons of gold and silver, precious stones and costly jewels (I Chron. 29). Though there were many poor men God used in the history of this world, there were just as many, if not more, rich men in His service — if that surprises you, check your Bible and prove this truth.
The paradox of the problem of riches is solved by the principle mentioned in the same sixth chapter of Timothy quoted above. Most of the chapter talks about how to be rich. It does not condemn the wealth itself. Again in the Phillips translation, beginning in verse 17, let's read a summary of the principle: "Tell those who are rich in this present world not to be contemptuous of others, and not to rest the weight of their confidence on the transitory power of wealth but on the living God, who generously gives us everything for our enjoyment."
Remember that in the same example Jesus gave to the disciples to explain the difficulties a rich man would have in gaining the Kingdom, He also said that "with God all things are possible." (Matt. 19:23-26).
Why All the Mystery? Money is mysterious to many. It's simple enough to see that if you have enough of it you can buy anything (almost) that you want. But what is money? Why do some people have more than others? Just how complicated is the system? What's the history of the mystery?
As with nearly every major facet of our society-medicine, education, law, farming, government-banking finds its recorded beginnings in Babylon, inextricably entwined with religion because priest — kings ruled in ancient times.
In an agricultural economy, barter was sufficient as a means of exchange. As men gathered themselves into cities and began to deal with one another in many capacities, they no longer raised flocks, herds and crops. So they needed something to represent wealth — something portable, precious, protectable.
Gold and silver quickly came to represent, in certain weights, a given number of cows, sheep, donkeys, etc. Words you may be familiar with such as "capital," "capitalism," "fee," "rupee" are all words which derive from "cattle," or a cow-standard society. Many other forms of representation have been used — salt, feathers, dogs' teeth, fishhooks.
In today's modern world we may enjoy a laugh at someone who would think salt was money (are "you worth your salt?), until we would try to convince him that a column of figures in the electronic memory of our local bank's computer is what represents our true wealth!
Back to the Beginning As people gathered into cities and their horde of representative wealth (gold and silver) became larger, protecting it became a problem. Many a house had a secret chamber for the master's money — perhaps in a hole dug into the floor, perhaps a secret hiding place behind a tree, under a hedge, three feet deep in the earth of the little walled garden to the rear. At any rate, it was secreted in as safe a place as the master could think of — you can bank on that!
Right, you guessed it! Look up the word in the big dictionary of the local library sometime. A bank is a mound or rise of earth. One basic meaning of the word is also "to cover" — you bank a fire by covering it with ashes so it won't all burn up while you sleep. Then when you want to start the fire in the morning you remove the covering — you make a withdrawal from your fire bank. Sometimes we become ashamed of the humble beginnings of our dignified institutions — why?
These private banks (holes in the ground) were not as safe as desired. People didn't respect each other's private property, but being a superstitious lot they feared their many gods and wouldn't think of violating the temples. So, for a price, the local high priest would allow the storage of the representative wealth (money) in his temple treasury to ensure its safety. In fact, the very word "money" derives from the Latin and comes from the Roman mythology that Juno invented money.
The truth of the matter is that both Juno, with her panoply of gods and goddesses, and the invention of money came from Babylon! The Romans continued the temple-money practice in the temple of Juno moneta: So what was coined became called "money" and the place where it was coined was called the "mint"!
Back to Babylon In order to portray graphically how this whole banking system developed in history, consider the following pseudo-historic but wholly possible scenario of the past.
As the gold or other representative wealth began to accumulate in the private coffers and under the protective custody of the high priest in the temple, the priest — king (let's call him Baal Nimrud-Rude for short) put together an interesting plan (about 2200 B.C.). He noticed that at no one time did everyone call for the wealth sequestered in the safety of the temple vaults. He also noticed that intelligent and capable men who had real property (land, cattle, houses, slaves) often lacked the cold gold to finance a venture that would turn them from middle-class into rich men.
Putting these two factors together, he became a banker. He called the men aside (those whom he had first checked out to be sure of their securities) and told them the deal he had in mind for them. If they would pledge their property in lieu of the repayment of the gold he would lend them (should their venture fail), Rude would finance their plans. Rude arbitrarily picked thirty percent as the yearly amount of interest that should be paid to him for the use of the gold.
The first farmer took the gold from Rude. After pledging his property in lieu of repayment at the stipulated terms, he took the gold to a local businessman, contracting to have an irrigation system built and enough seed supplied to plant a crop. That businessman took the gold to the temple for safekeeping.
Rude then offered the same chunk of gold on the same terms to another farmer who wanted a house built. The builder brought the gold to the temple for safekeeping! Rude then offered the same piece of gold to a local merchant, on the same terms, so he could pick up enough camels to form a caravan to Egypt. The camel dealer brought the gold bar to the temple and deposited it in the safety of the sanctuary.
By this time Rude added another idea to his plan. Since the gold was heavy, cumbersome to carry — even dangerous to transport — Rude convinced his next customer (sticking to the same terms for the loan) that it would be safer for all concerned if he just issued a clay tablet receipt for the amount of worth that the gold represented. The clay was easier to carry. It bore the imprint of the high priest's own signet ring and would be accepted as if it were gold by all local businessmen.
So Rude's convinced customer took his clay receipt (which represented gold, which represented wealth) to the boat builder and had ten barges built. The boat builder accepted the receipt, gave it to a lumber supplier and in addition went to Rude and requested a loan, for expansion of his operation, of an equal amount (also indicated by a clay tablet receipt) and put his business in hock for security.
Nimrud's Pound Gained To make a long story short, Baal Nimrud found that within the year he was able to lend the same bar of gold ten times. Let's say it was a ten-pound bar. At the end of the year Rude was still in possession of the original gold bar itself. In addition he owned one farm and a half interest in a caravansary (two of his debtors didn't make it). In addition to that, he had been paid eighty pounds of gold by the eight debtors who succeeded with the help of the loan, plus of course the twenty-four pounds of gold in interest.
Rude's ten pounds had gained him one hundred four — not bad! Of course the original ten-pound bar was not really his — it was only left there for safekeeping by a merchant from Ur, but he hadn't called for it in the course of the year. And if that merchant ever did call for his bar, Rude figured he could talk him into taking a clay receipt for it, leaving the actual bar in safekeeping (?) in the temple!
The ten ten-pound bars (plus a little) that Rude now actually owned were not worth just ten times the original bar he had speculated with — to Rude they were worth much more! He had already learned by observation that only about one out of ten of the people who had money in the temple for safekeeping ever actually requested to have their gold back at any one time. This meant he could use nine-tenths of the money at any one time any way he wanted.
And now that the idea of accepting clay receipts was catching on, there was no way to tell how far he could bluff his way. As long as the people had confidence in the clay receipts, he could continue to amass great wealth at very little actual risk or expenditure.
Good for the Economy Rude even talked himself into thinking he was performing a real public service in the process of gathering all the real wealth of the people into his own coffers. There were more jobs. Every type of shop and industry had been given a shot in the arm. There was bustling activity everywhere.
Rude began to see that he could control the entire economy. If his system began to destroy itself because people couldn't any longer sustain the exorbitant interest rate of 30 percent, he could postpone the ultimate day of reckoning by lowering the rate, say to 20.
Baal Nimrud realized, of course, that sooner or later the economy would collapse. In order to pay their debts, the society as a whole would become sellers, and there would unfortunately be no buyers. They would storm the temple in angry protest when the word leaked out that the clay receipts couldn't be redeemed for gold; that they weren't worth the mud they were written on. The people would lose their confidence, their faith in him (or his sons or grandsons), in the clay money, in the temple. But if he exercised just a little caution he could make it work during his lifetime — and that is what counted to him!
History shows plainly what did happen. Not just to Nimrud's economy, but to all those who followed in his footsteps. Usually the economy collapsed in 100 to 150 years. The economy slipped from gold-backed to silver-backed to lead-backed money. Whatever metal was the backing was hoarded until there was not enough of it available to conduct the economy (tight money). So a cheaper, more available metal or medium of exchange (easy money) would be substituted, etc., etc., until ultimate collapse.
Babylon went this way. Assyria, the Greeks in their time, and the Romans all trod the same road. Numberless other economies: ditto.
The key to the downfall was the exorbitant (though exhilarating at the time) interest rate.
Confidence According to the Federal Reserve Bank: "Money is the confidence people have that they will be able to exchange such money for real goods and services whenever they choose to do so." This is why money becomes a god to many people — money becomes that in which they have their trust, their confidence. It's really very simple: Money is confidence. This is why the words "trust" and "fidelity" are often used as part of the very names of banks!
Money is what people mutually agree it is at a given time. If they all agree that it is gold, then money is gold! Gold is certainly the dominant money idol in the pages of history. Many is the man, or whole society of men, who has striven greedily and died for the sake of gold! But the gold is not to blame. Just as much suffering has gone on in the process of the greedy getting of stones and bones, silver and lead. It doesn't make much difference whether you call it "Federal Reserve Note" or "rusty nails" (which have been used for exchange purposes) — whether you term it "Special Drawing Rights" (the "paper gold" currently being used to settle international debts) or whether you agree to settle for elephant tails as they readily did in the past in Portuguese West Africa.
As long as the people you do business with agree to accept your "money," it doesn't matter what it is. And equally important, when the people you trade with no longer have confidence in your medium of exchange, you can become a "rich" bankrupt. Confidence is the important key!
There are two schools of thought at the extremes of money theory. One feels that only a solid (which word comes from a Latin coin, solidus) gold-backed monetary system can bring stability to the financial world. Their confidence is in gold. At the other pole of thought is the basic thesis upon which the Western world has its confidence — the productive capacity of the society itself. This school has been followed diligently since the early thirties.
A fellow by the name of Keynes (pronounced Cain's) put this theory into words in an essay entitled Auri Sacra Fames: "Almost throughout the world, gold has been withdrawn from circulation. It no longer passes from hand to hand, and the touch of the metal has been taken away from men's greedy palms. The little household gods, who dwelt in purses and stockings and tin boxes, have been swallowed up by a single golden image in each country, which lives underground and is not seen. Gold is out of sight — gone back into the soil. But when gods are no longer seen in a yellow panoply walking the earth, we begin to rationalize them; and it is not long before there is nothing left."
While succinctly pointing out the fallacy of trusting in and worshiping gold as the money god of the past, Keynes didn't seem to realize that he was substituting a new god for the old god! And so today's money worshipers bow down before the image of nothing, whereas their predecessors bowed down to the image of gold!
Since the Keynesian theory is what we are living under, let's examine it briefly. Perhaps the key is provided by the highly respected international advisor on finances, Dr. Harry Schultz. In his circular letter of October 30, 1969, he states: "Once man introduced money he introduced speculation." In other words, while man remained on a barter system, speculation was nearly impossible. If you had ten head of cattle, you had ten head of cattle, and there was no way to make ten head of cattle appear to be a hundred head!
But a piece of metal was substituted as a representation of real wealth. A piece of metal was acknowledged as being worth so many head of cattle. Speculators could then "play the market" with the metal, since the decision as to how many head of cattle it was worth was arbitrary and decided by men in common agreement. Men could agree at a different worth for it at one time than at another; this is speculation!
At each stage of the money game you get further away from a total grasp of real wealth. "It becomes more — and more abstract, until it reaches the highly sophisticated form of our money, which consists primarily of numbers on the ledgers of the banks that maintain our checking accounts. Although we still use some currency (worth, in reality, no more than the paper it is printed on) and some coins, most of the money we spend moves from buyer to seller through the checks that order the banks to debit one account on their books and credit another. Thus most of our money has no real value and no tangible existence: we can't see it or feel it or smell it. This is one of the reasons why its quantity is so difficult to regulate" (A Primer on Money, Banking and Gold, by Peter L. Bernstein).
Funny Money So we find ourselves in a rather ludicrous situation. If you have any money in your pocket, take it out and take a look at it. Since American currency is the hinge of international financing, let's see what it says on American money. On the top of one side of the paper money you will notice that it says, "Federal Reserve Note." I am now looking at the face of what we call a five-dollar bill. It also says, "This note is legal tender for all debts, public and private."
But what does that mean?
"The trick in the Federal Reserve Notes is that the Federal Reserve Banks lose no cash when they payout this currency to the member banks. Federal Reserve Notes are not redeemable in anything except what the government calls 'legal tender' that is, money that a creditor must be willing to accept from a debtor in payment of sums owed him. But since all Federal Reserve Notes are themselves declared by law to "be legal money, they are really redeemable only in themselves! To put it briefly, they are an irredeemable obligation issued by the Federal Reserve Banks" (A Primer on Money, Banking and Gold).
A few more quotes from this basic book will help us understand the money we use a little better. " In short, the money we use every day, the money that we are all happy to accept in payment for goods sold, services rendered, and debts incurred, is intrinsically worthless: It has no tangible backing, in the strict sense of the word" (p. 105).
"When we look back over the ground that we have covered and ask what the dollar is really based upon, we would have to say that it exists essentially 'on promises and bookkeeping machines" (p. 107).
"These trends have had another curious corollary. Whereas the public has been feeling more liquid, the banks have actually been moving into an increasingly illiquid condition .... This partially reflects sufficient confidence on the part of the bank officers that the American economy is now so stable that wholesale withdrawals of cash from the banking system, as happened in the 1930s, are highly unlikely. But it also reflects the belief of bankers that most of the money in time deposits will stay there instead of moving into demand deposits where the odds are much greater that it will soon be withdrawn.... Of course, none of these trends need lead to difficulty so long as current patterns prevail. They suggest, however, that a reversal of current patterns, prompted, perhaps; by rising demand for money occasioned by an inflationary cycle, could ultimately cause a monetary crisis as intense as anything witnessed in our earlier history" (p. 154).
"To return to the point from which we have started: money and gold have no use or value in themselves. On the contrary, their value derives only from what we can buy with them" (p. 166).
And today your hard-earned dollar or pound is buying precious little by comparison. The concluding installment of this article will show you your best investment in this era of shrinking currencies.