Christianity, Money, and Interest
I met Wayne Walton at the Music City Liberty Fest a few years ago. He is a great guy who has committed himself to educating people about the evils in our current monetary and banking systems, and promoting practical ideas for immediate improvements. Wayne is also an outspoken Christian and so we have that in common, as well.
However, as you will see (e.g. listen to this video), Wayne differs from the standard Austrian/libertarian views on money and banking. He views the problem with the Fed as not merely that it rests on government coercion, but that the very idea of having private institutions issuing money upon which they charge interest is dubious. As the video shows, there are numerous places in Scripture to reinforce Wayne’s interpretation of the proper Judeo-Christian view on this subject.
For a while I have been slightly uncomfortable with some of the rhetoric/arguments used by the “alternative/local currency” movement, but since I agree with these people on so much, I didn’t feel like starting a fight. Yet since this is such a crucial topic, and moreover since I’m debating Bill Still this coming Friday, I thought now was a good time to start a dialog.
Before jumping into my concerns, let me share the following interesting trivia: My dissertation at NYU was in capital and interest theory, and arguably could be described as explaining why interest would exist in a free society. (That’s not how I would have described it, but it’s a fair description nonetheless.) When it was nearing completion, and I was emailing myself a copy so I could print it out at the NYU computer lab, the file size was 666KB. Then, after defending my dissertation and filling out NYU’s exit interview forms (or whatever they called them), I had to fill in bubbles to answer their various questions. The internal code to identify the Graduate School of Arts and Sciences Economics Department was–you guessed it–666. Do with that trivia what you will.
Anyway, here are my concerns:
==> Are Wayne and his fans making the age-old distinction between usury and interest, or are those terms interchangeable?
==> Is Wayne saying that in a free society, he predicts that there would be no debt? Or is he saying yes it might happen, but that it would be immoral? Or is he saying that as long as people were free they would be economically on much stronger footing, and so the type of debt that they might voluntarily embrace would be acceptable to him?
==> Here’s a really simple example to get our thinking straight: Suppose Bill owns a new car, and John wants a new car but hasn’t saved up for it. So Bill says to John, “I will give you this car so you can begin driving it immediately, but in 10 years time I want you to pay me back two brand new cars.” Is there anything problematic with such a deal?
==> When Wayne calls for people to issue their own currencies, does he mean at the individual level? That I would issue Bob Notes, and my son would issue notes in his name, and so on? If so, doesn’t that defeat the purpose of using money in the first place? How is that different from barter with credit?
Thank you Robert Murphy for covering the essential topic of Usury! “History repeats” and we face the same enemy and solution as Moses, Joshua and Jesus did in their time. In fact this is the universal struggle which has faced humanity since money was invented to innovate barter. Universal truth: “Whoever issues the money is the sovereign”. This is true, even if no government/force exists. Private money monopoly exists as a sovereign entity historically called Mammon/den of thieves/money lenders/Usurers.
usuryFree money is issued by the producers NOT the parasitic private bankers(FRNs/gold/silver) or their minions in government(Greenbacks).
To your points:
1. Usury: 1. Elite monopoly of money issuance 2. Any interest 3. Contract fraud. Producers cannot pay exponentially growing debt with flat or linearly growing productivity. And one cannot pay P+I when only P is circulated.
2. Debt: Debt forgiveness Jubilee is LAW. Debt is not forbidden, but we are warned: “Borrower is slave to the lender”. We don’t wish to be a debt slave to private, or public bankers. Worse, exponentially compounded debt fueled by interest creates perpetual debt slaves. As debt slaves we serve Mammon rather than our Creator and our own gifts. Honest debt is born from honest money issued by a producer/sovereign.
What is money? Money is an IOU private contract between producers. It is NOT a commodity. When two producers barter their are no fees or commodities needed. Likewise with IOU contract in the form of a “gift certificate”. If a baker and wheat farmer agree to barter a loaf of bread for a bushel of wheat; they have a sovereign barter. During the winter the wheat farmer still needs bread to eat, but cannot deliver wheat until harvest in the spring. The wheat farmer then issues: “IOU 1 bushel of wheat upon the harvest”.
This is an interest free loan. This is an usuryFree(money monopoly free) economic system. The debt is very easy to pay for the wheat farmer producer as he’s likely doing what he loves for a living.
It’s essential to understand that the money/paper/IOU wasn’t the value. The products/services/commodity is the value. Money is value-less like a token, concert ticket, frequent flyer miles, coupon etc.
3. Car loan: Everyone is free to contract. However, since John doesn’t manufacture cars it will likely be very difficult to pay back a 2nd new car when he didn’t even have the first car. Why would any right thinking person wish to pay 2x for a car? Money is NOT a commodity which we rent. Money is a contract that we issue.
A better contract for John.
Say John owns a restaurant and the car is valued at $20k(1000 meals). John the food producer can issue a gift certificate/IOU for 1000 meals. Bill can redeem these gift certificates over a period of 10 years or whenever. John can easily pay this debt as it’s within his vocation of passion. As an additional benefit, John did NOT need to acquire scarce and un-necessary FRN’s/gold/silver/Bitcoin.
“Sovereigns ISSUE money; slaves earn money”
3. Money: “Barter with credit”(IOU) is money. Individuals who own businesses issue money in the form of coupons and gift certificates all the time. A PAPER Super Bowl ticket is a form of IOU/money issued by a sovereign producer. If the issuer issued SB tickets in excess of the seating capacity of the stadium they would be perping fraud. If the SB ticket issuer expands seating(produces more), they can issue more tickets. The volume of money FOLLOWS productivity.
Everyone CAN issue money. But, the market won’t value everyone’s money. Only those who provide a product/service which the market values. IOU money on a small scale works fine where everyone knows one-another. Problem: thousands of different IOU’s will become complicated. Solution?
Barter scrip: Common community coupon. Mountain Hours all look the same, but are ISSUED by the producer businesses. 1 Mountain Hour = $10 currently as a convention so that business owners know how to price their products. However, Hours can stand entirely on their own as a fixed value based upon 1 hour of unskilled labor. Skilled and highly skilled earn multiples based upon the market.
Hours are based upon the value of a human being’s commercial energy. Businesses owners issue $200(20 Hours)/ 3 months. This currency grows whenever we produce any valuable outcome. We can finance social and civil programs without violating the NAP. Rather than stealing from Peter to pay Paul we can birth brand new money to pay Paul to build a road.
We will know if we have issued too many Hours, if we are unable to attract unskilled labor for 1Hour/hour. If so, we can simply remove Hours from circulation by charging a fee for the money system. Mountain Hours is 100% free to the business just like barter or their own gift certificates. No expensive/un-necessary/scarce barrier to trade in the form of FRN’s/gold/silver/Bitcoin.
Inflation myth: Humanity is suffering from massive deflation. Our wallets and bank accounts are empty. Prices have increased due to engineered scarcity, interest costs, taxes, fees and regulation. Federal Reserve Notes are already scarce so we don’t want some form of commodity money which is even MORE scarce.
In order to achieve the Blessings of the Creator’s abundance we must recognize that humanity is the GOLD. Humanity’s commercial energy is what backs any form of money. Therefore, human beings must issue money themselves, and NOT give away their power to a “false idol”. We are the money!
“We are made in the image of the Creator”. He is king. He is the sovereign. We too can be “sovereigns without subjects” by issuing our own money. Then we “peace lovers” will hire the enforcers, politicians and judges to enforce the NAP/golden rule/thou shalt not steal. Then the money power will serve humanity instead of dominate it.
Thanks again, Bob, for being a “truth seeker” who is willing to touch on the essential topic of Usury. We must voluntarily end Usury in order to escape Usurpation.
When two producers barter their are no fees or commodities needed. Likewise with IOU contract in the form of a “gift certificate”. If a baker and wheat farmer agree to barter a loaf of bread for a bushel of wheat; they have a sovereign barter. During the winter the wheat farmer still needs bread to eat, but cannot deliver wheat until harvest in the spring. The wheat farmer then issues: “IOU 1 bushel of wheat upon the harvest”.
The implication here is that this exchange is “interest” free? If so, how do you know? If some farmers had figured out how to grow wheat during the winter, you don’t think they would be able to get more from a baker for their wheat than a farmer who couldn’t deliver it until summer?
Monetary craaaaaaaank alert.
And I detect a wiff of the error of Ricardo as revived by Marx.
Hi Wayne,
When did money changers morph to money lenders?
When did money morph to evil rather than the LOVE of money as the root of all evil?
Where in the Bible does Jesus command his disciples to issue their own money?
“And one cannot pay P+I when only P is circulated.”
So this only becomes an issue if literally every single bit of money is loaned out at interest. Which would not occur in a free society, as interest itself serves an equilibrating function. The more money saved, the lower the interest rate and the higher the value of money. (If all of it is saved and loaned out, you did something seriously insane and will all starve, but the interest rate would essentially be zero.)
Further, the interest circulates as well – when I pay interest that is then used to pay something else. Interest is simply a payment. It’s not really more than “rent for money”. And no one is saying that I can’t pay rent sustainably because it won’t “circulate”.
“Money is an IOU private contract between producers. It is NOT a commodity.”
That’s not the case at all. Money is a commodity. One trades that commodity for goods and services, which are themselves commodities. It cannot be a private contract – a private contract cannot be transferred. If you give me an IOU, I cannot make a claim on someone else. If you give me money, they will take that in exchange.
“If the issuer issued SB tickets in excess of the seating capacity of the stadium they would be perping fraud.”
So airlines are constantly committing fraud? And their non-transferable tickets are money?
“Say John owns a restaurant and the car is valued at $20k(1000 meals). John the food producer can issue a gift certificate/IOU for 1000 meals. Bill can redeem these gift certificates over a period of 10 years or whenever. John can easily pay this debt as it’s within his vocation of passion.”
And if John doesn’t produce food? Say, instead he produces iron ore? Why would anyone want iron ore who doesn’t make anything directly out of it? And why would John trade his iron ore for sheet metal or some other more finished version of the iron?
Further, what if Bill is in another city, and cannot visit John’s place of business? What good would a bunch of meal tickets be for him then?
““Barter with credit”(IOU) is money.”
No, barter with credit opens a claim on an individual or organization directly. Money is not a claim, but instead an indirect tool of trade. With money, I don’t have a claim on John’s food stand in exchange for the car. I have something I can then trade to anyone for anything I need.
This article from Tom Woods came about after Woods and myself argued with Walton on Facebook. http://tomwoods.com/blog/not-all-end-the-fed-people-quite-get-it/
Yikes is exactly right.
I haven’t read Wayne’s views, but am wondering if he is making the common mistake of thinking of interest as the price of money, with the implication that since printing money costs almost nothing, if there was not some artificial restraint the interest rate would go to near zero. One way of seeing why that’s wrong, as in your example, is to consider interest rates in goods in a society without money.
The price of money is the inverse of a price index–the goods you have to give up in order to get a dollar. If dollars can be freely printed at near zero cost, the price of money goes to near zero, meaning that the price of goods goes towards infinity. The interest rate is not the price of money but the rent of money in money, with the result that the price of money cancels.
In a system with private issuers, however, the cost of issuing money isn’t near zero, because people won’t take your money in exchange for goods unless you do something to convince them they will be able to later get goods in exchange. The usual way of doing that is to guarantee to redeem your money in some commodity, such as silver or gold. If you issue an amount of money such that the value of the commodity in your money is more than the value in your redemption guarantee, people bring in the money for the commodity–a pattern described by Smith in the 18th century. Put differently (and more nearly as Smith puts it), if you issue more money than people wish to hold at the guaranteed commodity value, some of it comes back to you and has to be redeemed.
I’m afraid I don’t know anything about the textual basis for the Christian view of the subject. Islamic law forbids riba, generally interpreted as interest. Jewish law, I believe, forbids interest on loans to fellow Jews but not to others. In all three religions, a variety of ingenious devices were created to get around the ban on interest.
Apologies if my guess at his argument is wrong and my comments hence irrelevant.
And on the subject of numbers … . My cell phone number is 666-1776. By pure chance. I enjoy explaining to people the true significance of the final four digits, which has nothing to do with some disturbance in the colonies.
Yes, during the Free Banking era in Scotland currency issue was kept in check by the threat of redemption by other banks.
There is well over a 100 years of successful note issue by private banks there. No inflation or deflation of note, no bank runs, no crises, and no panics when a bank failed. Not to mention Scottish banking being the major app the Scottish Enlightenment was built on.
And all of this with far less than 100% reserves.
So eat it, 100% reservists and Greenbackers!
What is the significance of 1776 then?
I’d guess that he’s referring to the publication year of Wealth of Nations.
Impostor! Fetz gave up commenting!
“Quitting is easy. I’ve done it dozens of times.”
666-1776
Symbolic of the dual nature of man, mankind and humanity. Slavery or freedom…
Wow! Thanks to Free Advice, I can now call up and chat with David Friedman whenever I’d like!
Would be great if the GOP nominee’s convention speech in 2016 is based on that video.
Are you just making a general joke, joe, or are you saying that because it’s important to you that the Democratic candidate win in 2016?
I watched the 11 mistakes video linked at the end of the youtube clip and the #10 mistake was preparing for a zombie apocalypse after overdosing on Alex Jones “fear mongering.” Everyone should watch the video.
Bob – I assume you’re aware of Keynes’s take on the Church’s issues with usury?
I used to be aware of it but I have since forgotten. (For real.)
Oh he just thinks they were on to some of his ideas (same with the mercantilists and their views on money). Keynes is not alone in claiming the latter. I’m not sure how creative he was getting with the Church, though.
He spent a little time explaining in Ch. 23 (his sort of history of thought chapter) that when they were bending over backwards to actually allow interest after it became pretty clear how draconian a prohibition was, the distinctions they were trying to make were genuine attempts to separate out the rate of interest itself from the marginal efficiency of capital.
Bob, before even getting to something like interest, where does God even stand on private property? Ask the people of Jericho about property rights (and talk about noise pollution!).
Yhwh owns everything
My understanding (somewhat sketchy) of Muslim banking is that it works along these lines. Islam has always outlawed usury and never relented on that, but various designs of hire purchase arrangement seem to have been declared acceptable, yet they do make a profit for the person who had money to begin with.
The main difference is that the risk of failure is somewhat borne by both parties. It forces the loan to be tied to a tangible asset, thus preventing some of the problems we see with out of control credit card debt and stuff like that.
The “Christmas and the 100th Anniversary of the Fed” video is based on faulty assumptions:
1. It is written in the Bible that: Money is root of all evil. This is false, what is actually written is:
1 Timothy 6:10 “For the LOVE of money is the root of all evil”. Yes, love of money is root of all evil.
This is like someone would blame his spoon for making him fat.
If we follow the passage then:
“For the love of money is the root of all evil: which while some COVETED after, they have erred from the faith, and pierced themselves through with many sorrows.”
Remember what was the 10th commandment?
Exodus 20:17: “Thou shalt not covet thy neighbour’s house, thou shalt not covet thy neighbour’s wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbour’s.”
2. Money lenders were attacked by Jesus because they were lending money.
First they were not money lenders, but money CHANGERS. You see Jerusalem was under Roman occupation and Roman money was generally used, but the priests required the Temple tax to be paid in Hebrew money. So money lenders were allowed to set their business in the Temple( along with other related business like selling of doves)
Second: It is written why they were attacked:
John 2:15 “He(Jesus) said, “Take these things away; stop making My Father’s house a house of merchandise.””
So money lenders were allowed to set their business in the Temple( along with other related business like selling of doves)
Should be:
So money changers were allowed to set their business in the Temple( along with other related business like selling of doves)
The Romans were no saints either because they often changed money. Romans changed the precious metal content to copper and other less desirables.
At the end of the day, Thou Shall Not Steal.
So according to Wayne Walton, 1 hour of unskilled labor is universally worth 10 FRN?
http://www.youtube.com/watch?v=ajlEBxyYjWM
I am surrounded by all of these uber smart people here at free advise and nobody is wiling to tackle 1 hour of unskilled labor is equal to 10 FRN?