Money By Decree

This is a discussion about money which references Scripture and is addressed to Christians. Because the argument can be made from other starting points, the principles will stand for any thinking person, but the Scriptural basis will only be valid for those who hold Scripture to be the written word of God, as do I.

The Bible tells us that we must not use differing weights and measures because these are an abomination to God. With a little study we find that the use of differing weights and measures is a violation of the eighth commandment.

Exodus 20:15 “You shall not steal. NASB95

Let's begin by describing how one would use "differing weights and measures."

Imagine that I am a merchant who purchases grain from farmers. I own the baskets and the scales.

If my basket is marked as a bushel, but is actually a bit larger than a bushel, then you have to give me too much grain before I agree that you have supplied a bushel of grain.

If I were buying by weight, then I would have a metal disk that is marked one pound, but actually weighs more than one pound. With this setup, you have to put too much grain on the scale before I agree you have supplied a pound of grain.

In each case I will pay you as though you gave me one bushel or one pound..

In each case you will have given me more than one bushel or more than one pound.

You will have been cheated. After all, if the advantage were yours, it would be a gift, which I would want you to know about.

Following is Scripture which addresses this particular form of fraud and theft.

Leviticus 19:35 ‘You shall do no wrong in judgment, in measurement of weight, or capacity. NASB95

Deuteronomy 25:13-16 “You shall not have in your bag differing weights, a large and a small. “You shall not have in your house differing measures, a large and a small. “You shall have a full and just weight; you shall have a full and just measure, that your days may be prolonged in the land which the Lord your God gives you. “For everyone who does these things, everyone who acts unjustly is an abomination to the Lord your God. NASB95

Proverbs 11:1 A false balance is an abomination to the Lord, But a just weight is His delight. NASB95

Proverbs 20:10 Differing weights and differing measures, Both of them are abominable to the Lord. NASB95

Proverbs 20:23 Differing weights are an abomination to the Lord, And a false scale is not good. NASB95

Micah 6:11 “Can I justify wicked scales And a bag of deceptive weights? NASB95

Money and Differing Weights and Measures

There is a concept known as legal tender law which controls how we use money. Basically legal tender laws state that a certain money unit must be used and accepted at face value. (This is not good or right...)

So here is how this bit of positive law plays out:

Imagine that you have a gold coin which is marked "10" and was originally "coined" with ten units of gold having a given purity.

There are four basic things that can happen to this coin to change its gold content relative to the stamped or engraved quantity.

1. It may be worn over time which is a natural process and which is harmless if the coin (more properly the unit of gold) is traded by weight.
   (See Money and Scripture)
2. It may be clipped, which is to say a bit of the coin is scraped or shaved off and collected by the person doing the clipping.
3. It may be diluted by melting the coin, mixing in a cheaper base metal and then recasting a new coin with less gold, but the same markings.
4. It may be a consistent weight of gold, but be melted down and then given a larger nominal value stamped on the outside.

Now imagine that I owe you 1000 units of gold. I deliver to you 100 coins marked "10", but all of these coins have only 90% of the gold indicated by the markings.

By law you have to accept these coins as though I paid 1000 (100 X 10 = 1000) units of gold, when in fact I have only paid 900 (100 X 9 = 900) units of gold.

Fundamentally, what has happened is this:

The government has issued a decree that states the coins which contain nine units of gold actually have ten units of gold. In essence they have claimed to have created ex nihilo (from nothing) a unit of gold.

The government has decreed, with the stroke of a pen, the existence of an extra unit of gold.

Decree: an order, usually having the force of law

Anyone else would have to own property and operate a mine in order to bring new gold to market. The government simply decrees its existence.

The decree of gold by government is a critical point because in all cases fiat and fractional currencies depend, for their very existence, on an original commodity which was voluntarily accepted by the market for use in indirect exchange. The US Dollar began as 371.25 grains of fine silver and eventually was tied to gold. This tie was damaged in 1933 and broken in 1971. But the dollar could never have been introduced to market except by being relative in value to a natural money (like gold or silver) or something which ties historically back to a natural money.

The decree of gold by government is also a critical point because what is actually decreed is a quantity of natural money. This logic holds true all the way through today, in 2009, with fiat and fractional currency.

The government never decrees value of money tokens or even sound money (well, when they try the market smashes them in the ground and laughs). They can only decree quantity.

Decree of quantity affects value because of the law of supply and demand.

The greater a quantity of a commodity, the less valuable each unit is. Therefore by creating more units of money by decree, the value of each unit declines.

For a simple example, imagine the hottest toy with which you have ever had any experience. Maybe a few marbles or an X-Box. Without thinking about money or purchasing, imagine a room of 20 kids; in that setting three or four marbles or a couple of X-Boxes would be in high demand.

However, imagine if there were hundreds of thousands of marbles of all sizes or tens of thousands of X-Boxes. The same kids who would fight over one or two, in a room with thousands would go home happy while leaving nearly all of the excess units in the room.

As supply increases, the marginal value of each additional unit decreases.

Decree of Quantity

Therefore we can make some observations and draw some conclusions.

1. Through inflation and bailouts, the government is decreeing a quantity of money tokens which tie back to gold, silver or some other commodity; i.e. natural money.
2. By decreeing a quantity of money tokens, government is actually decreeing a quantity of natural money; i.e. decreeing gold or silver out of thin air.
3. Commodity money provides a productivity filter, i.e. requires productive labor to be expended in order to introduce the commodity to market.
4. Therefore the government is actually decreeing a quantity of productive labor. (See Purchasing Power and Productivity)
5. Therefore the government is decreeing a particular kind of productive labor, i.e. profitable labor which produces more than it consumes.
6. Therefore the government is, by decree, laying claim to the labor and creativity of the most productive members of society.

Summary

Natural money which actually exists provides, by its nature, a productivity filter. Government fraudulently claims to create, by decree, a quantity of natural money; however, only costless new money tokens are produced. Bypassing the productivity filter, this fraudulent costless money filters out loss and transfers only profits from producers to the favored groups who receive and use the additional quantity of costless money first.

(See The Purpose of Inflation)