If you want to know the truth, the whole currency thing is the phoniest setup you ever saw in your life.  I’m not being a wise guy about it.  I really mean it.

Here is what they did.  They took the gold — actual gold, the kind you can hold, the kind George Washington and those guys insisted on — and they swapped it for paper.  Just paper. Paper with pictures of dead Presidents and some other men on it with the sincere assurance of a government that has not balanced a checkbook since approximately the Eisenhower administration.  They called this progress some even call themselves progressives.  Like lemmings they always call it progress when they’re leading us off a cliff.

The founders, who were not dumb, said gold.  The Federal Reserve, which is neither federal nor a reserve in any meaningful sense of either word, said trust us.  And the country, being a trusting country, said okay, sure; why not?

(I should say upfront that I have nothing against paper per se.  Paper is fine. Paper is great for letters, for books, for the occasional apology note.  It makes a terrible monetary standard.  It’s closer to Kleenex and toilet paper as currency.  That’s all I’m saying.)

Proverbs 11:1 (NKJV)

Dishonest scales are an abomination to the LORD, but a just weight is His delight.

A just weight.  That’s the thing. Gold is a just weight.  You can’t print more of it at three in the morning because the Treasury is embarrassed about its credit card bill.  You cannot manufacture it in a building in Washington and distribute it to your friends at Goldman Sachs and then act wounded when the grocer wants fourteen dollars for a chicken.

But, they did print it.  They do print it.  They printed so much of it that they had to invent a new word — quantitative easing — which means the same thing as counterfeiting except with better parking and a government salary in they’re new 2 billion dollar building.

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The Friends-First Discount

Here is how it works, and pay attention because nobody explains this part and they are very happy that nobody explains it.  When the new money gets printed, it doesn’t land on your kitchen table.  It doesn’t show up in your mailbox with a little note saying, sorry about everything, here’s your share. No.

It goes first to the banks.  Then to the institutions.  Then to the people who already have enough money to buy stocks and land and goods — which they immediately do, at the old prices, before the inflation has eaten through to your neighborhood.  By the time the new dollars trickle down to you, the prices have already adjusted upward to swallow them. You got the dollars late.  You paid the new prices.  The banks got the dollars early.  They paid the old prices.  Sooo, it’s the first come first serve rule in play.

This is called the Cantillon Effect, named after an economist who noticed it in the 1700s, which means we have known about this particular swindle for over three hundred years and have continued doing it anyway.  That tells you something. I’m not sure what, exactly. Nothing good.

Proverbs 22:7 (NKJV)

The rich rules over the poor, and the borrower is servant to the lender.

The borrower is servant to the lender.  That’s you, by the way.  That’s your mortgage, your car, your student loan, your credit card, your government — which borrowed thirty-nine trillion dollars in your name without asking and would very much appreciate it if you didn’t make a big deal out of having to pay interest through taxes for it.

(Thirty-nine trillion.  I want you to sit with that number for a second.  If you spent a million dollars a day, every day, starting from the birth of Christ, you would not yet have spent thirty-nine trillion dollars.  You wouldn’t be close. I don’t know why everyone isn’t walking around with their hair on fire about this.  People are very calm about it.  It’s one of the things I find most baffling about being alive right now.  I guess the numbers are so big there’s nothing we can equate it to.  So, let’s Divide thirty nine trillion debt by 330,000 USA people equals approximately 118 million per person since half don’t work, double that to 236 million an actual worker.  Still feel like you’re part of the wealthiest county in the world?)

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The Wicked Borroweth:

Here is my favorite part.  My absolute favorite.  When the government borrows a dollar and then inflates the currency so that the dollar they pay back is worth fifty cents, they hand you back your fifty cents with a completely straight face and inform you that your debt has been repaid.  In full.  As promised.  Thank you for your business.

The Psalms have a word for this kind of person: Psalm 37:21 (NKJV) says: “The wicked borrows and does not repay, but the righteous shows mercy and gives.”

The wicked borrows and does not repay with the same value currency.  I don’t know how to put it more plainly than that.  Psalm 37 got there long before the Bureau of Labor Statistics, and it did it in one sentence, which is the kind of economy of language I genuinely respect.

What the government does is a touch more sophisticated than your average deadbeat, in the sense that they repay the nominal amount while destroying the actual value, which is technically not the same as not repaying, in the same way that handing someone a bag of sawdust labeled food is technically not the same as handing them nothing.  Technically if your a termite .

(There is a whole class of people, very well-educated people, who will explain to you at considerable length why this is all perfectly normal and responsible monetary policy.  These people have good jobs and strong opinions and I notice they don’t live downstream from any of this because they own assets not currency.  Just an observation.)

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The Cruelest Tax Has Always Had a Name:

Milton Friedman called inflation the cruelest tax.  He meant it in an economic sense — it hits the poor harder because the poor can’t buy land and gold and equities to hedge against it.  The poor buy groceries.  Groceries go up.  That’s it.  That’s the whole ballgame for a lot of people.

But there’s a Biblical word for a system that systematically transfers wealth from the poor to the rich through mechanisms too complicated for the average person to track.  It isn’t a flattering word.

Amos 8:4–6 (NKJV)

Hear this, you who swallow up the needy, and make the poor of the land fail, saying: “When will the New Moon be past, that we may sell grain?  And the Sabbath, that we may trade wheat?  Making the ephah small and the shekel large, falsifying the scales by deceit, that we may buy the poor for silver, and the needy for a pair of sandals — even sell the bad wheat?”

Making the ephah small and the shekel large.  The ephah is what you’re selling.  The shekel is what they owe you.  Shrink what you give.  Inflate what they pay.  This is not a new idea.  This is an eight-hundred-BC idea.  Amos was not writing speculative fiction.

Falsifying the scales by deceit.  That’s the thing about an unbacked currency — it is, by its nature, a falsified scale.  You don’t know what it weighs because the weights keep changing and the people changing them work for the entity that also decides how much it weighs.  If your butcher also owned your scale and set its calibration each morning according to his mortgage payment, you would call him something.  You would not call him a central banker.  You would call him something more accurate.

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The Branch Situation

So here is the branch situation, since that’s what we came to talk about.

You are sitting on a branch.  The branch is the dollar.  Below the branch is the whole complicated thing — the debt, the deficit, the entitlements, the military, the forty-seven agencies nobody can name, the interest payments on the interest payments.  The branch is what holds it all up.  The branch is what you’ve been told is the most reliable branch in all of branchdom, the world’s reserve currency, the envy of every other branch-sitter on earth.

And the guys in charge of the branch have been sawing it.  Not maliciously, exactly — or not only maliciously.  Partly out of short-term thinking. Partly because the saw is right there and using it solves this quarter’s problem even if it creates next decade’s catastrophe.  Partly because they will be retired on government pension, or dead, or conveniently blame the next administration by the time the branch gives way, those termites!

Proverbs 13:22 (NKJV)

A good man leaves an inheritance to his children’s children, but the wealth of the sinner is stored up for the righteous.

A good man leaves an inheritance to his children’s children. We are leaving our children’s children thirty-nine trillion dollars in debt and a dollar that buys what thirty cents bought in 1970 and 4 cents in 1913 when the Federal Reserve and income tax started.  That’s their inheritance.  That’s the estate. Hope they like it.

(You will notice that the people most enthusiastic about what they call legacy and heritage and the future of our great nation are, in many cases, the same people voting yes on the continuing resolutions that add another trillion to the tab.  I’ve noticed this like Esau selling our birthright for their porridge.  You’ve noticed this too.  We all just sort of agree not to say it out loud at Thanksgiving.)

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What the Founders Actually Said

The founders — Madison, Jefferson, the whole distinguished crowd — were not confused about this. They had just lived through the Continental currency, which was paper money unbacked by anything, which inflated into worthlessness with such speed and thoroughness that it gave the English language a new phrase: not worth a Continental.  They were not subtle about what they thought of paper currency.

They put gold and silver in the Constitution.  Article I, Section 10: no state shall make anything but gold and silver coin a tender in payment of debts.  Not paper.  Not printer ink on linen.  Gold and silver.  They had tried the other thing.  They knew how it ended.

Isaiah 1:22 (NKJV)

Your silver has become dross, your wine mixed with water.

Your silver has become dross.  Dross is the waste, the slag, the worthless byproduct.  When you debase the currency — which is what every empire eventually does, the Romans shaved the silver from their coins, we just print more paper — the silver becomes dross.  The wine becomes water.  The thing that was valuable becomes the thing that merely resembles the thing that was valuable.

We are currently holding a lot of dross and calling it a portfolio.  Some of us are starting to notice the weight is wrong.

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A Brief Word on Crocodile Tears

Every two years or so, a politician stands in front of a camera and says something very concerned about inflation and the struggling American family and the rising cost of eggs.  They look worried.They furrow the brow.  They mention their own grandmother, who worked very hard and lived frugally and would not recognize these grocery prices.

This performance is — and I want to be charitable here, I really do — complete kabuki theater nonsense.

The same people giving this speech voted for the spending.  Voted for the debt ceiling increase.  Voted for the bill that funded the thing that required the printing that caused the inflation they are now so publicly distressed about.  This is not a Republican or Democrat observation.  This is a both observation.  It is perhaps the most bipartisan thing in Washington: the willingness to spend money that doesn’t exist to stay in office and then act surprised when the best has no sleeves, it doesn’t exist.

Jeremiah 9:8 (NKJV)

Their tongue is an arrow shot out; it speaks deceit; one speaks peaceably to his neighbor with his mouth, but in his heart he lies in wait.

One speaks peaceably to his neighbor with his mouth, but in his heart he lies in wait.  I’m not saying every politician is consciously lying.  Some of them genuinely don’t understand the monetary system, which is its own category of problem.  But, the ones who do understand it — the ones in the room with the Fed, the ones who read the briefings — those people’s tears about inflation are, as the man wrote, the crocodile’s tears not authentic.

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The Only Actual Conclusion

I don’t have a twelve-step plan for fixing the Federal Reserve.    I’m not that kind of writer. But I’ll tell you what I think, and you can do what you want with it.

I think an honest scale is not a conservative idea or a liberal idea.  It is a human idea that every civilization that lasted more than a few centuries figured out and every civilization that wanted to live beyond its means eventually abandoned.  The Book of Proverbs is not an economics textbook.  It just has the same conclusions.

I think when you can create money from nothing, you will.  And when you do, you will give it to your friends first.  And your friends will buy the hard assets — the land, the gold, the energy infrastructure, the things that hold value when paper doesn’t.  And by the time the new money filters down to the people buying groceries and gas and electricity, the game will already be over, and the branch will be a little thinner, and everyone will blame each other, and the people with the saw will be on television looking very concerned.  Then the trickle down ain’t worth a nickel round.

Ecclesiastes 5:10 (NKJV)

He who loves silver will not be satisfied with silver; nor he who loves abundance, with increase.  This also is vanity.

He who loves silver will not be satisfied with silver.  The machine is hungry and it does not stop being hungry.  That is not an argument for despair.  It is an argument for not being the last one on the branch when they finish sawing.

Or, if you insist on staying on the branch — which is your right, it’s a free country, sort of — at least know which direction the saw is moving.  That seems like the minimum.

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— Brother Bill