Christianity and Economics, Part 3: Honest Money

Just Weights and Measures

You shall do no wrong in judgment, in measures of length or weight or quantity. You shall have just balances, just weights, a just ephah, and a just hin.

Leviticus 19:35-36

Unequal weights are an abomination to the LORD,
and false scales are not good.

Proverbs 20:23

It is not necessary to explain what unit of measurement the “ephah” or “hin” were. The point is clear: once defined, they could not be changed by individuals in the marketplace. Moses instructed the Israelites not to tamper with this constant measurement so as to defraud another person.

In Old Testament times, when an individual went to buy something, he would bring with him something valuable. At times they would have used barter (maybe trading a sack of wheat for a sheep). At other times they may have brought silver or gold as money. Either way, the use of scales and measurements were important. Their money didn’t have dollar amounts printed on it. They had to weigh out the appropriate amount.

It would have been easy for a dishonest businessman to steal from his neighbor by rigging the scales. For instance, say a man was trading one pound of wheat for a sheep. If he could make his side of the scale heavier, he might put 4/5th of a pound of wheat on the scale, and yet the scale would say that he had enough to buy the sheep. At the end of this fraudulent transaction, the thief would have the sheep plus 1/5th of a pound of wheat which rightfully belonged to his neighbor. But the law of God made it clear that tampering with the scales was wrong.

When people would bring silver or gold to the market, it became even easier for sellers to use dishonest scales. The metal money would normally be measured in weight. The dishonest man could defraud his neighbor by mixing in a less valuable metal with his gold or silver. As long as the impurity of the metal was not noticed, he could then trick his neighbor into thinking he was getting real money, when he was actually getting a watered-down version of the real thing. Meanwhile, it would appear as if the dishonest man had more money left over to buy more stuff. By diluting the silver or gold, a dishonest man could defraud anyone in the marketplace, even if the actual scales were accurate. Diluting the value of money was another form of dishonest measurement, which Isaiah specifically cites as one of the sins of unfaithful Israel when he says “Your silver has become dross” (Is. 1:22).

Why Counterfeiting is Sin

Suppose an individual in Old Testament times figured out a way to duplicate coins for himself. Perhaps he figures out a way to make coins out of cheap metal, and then coat the coin in gold so that it looks and feels like the real thing. Today we call this practice counterfeiting. In addition to breaking God’s instructions for just weights and measures, this individual is stealing. But who is the victim of the kind of theft known as counterfeiting?

The counterfeiter steals money by increasing the money supply when he spends this money in the marketplace. With each fraudulent coin he spends, he slowly dilutes the value of everyone else’s gold coins. With more money being circulated in the marketplace, goods and services cost more. Economist refer to this process as “inflation.” Counterfeiting is destructive because it slowly steals from everyone except for the counterfeiter. The counterfeiter benefits by getting to spend new money he didn’t work for, while everyone else is force to pay higher prices with the same amount of gold coins they had in the first place. For others, the cost of living simply rises and no one can provide an explanation. They are totally unaware of the counterfeiter. Counterfeiting is therefore an invisible form of theft, but it is most certainly theft and therefore breaks God’s law.

This is an important point. Counterfeiting money is not simply wrong because it breaks the laws of a country. Counterfeiting is wrong because counterfeiting breaks God’s law, regardless of the laws of a country. When sin is legalized, it is still a sin. Legal abortion is still sin. Legally recognized homosexual marriage is still sinful. If counterfeiting were legal, it would still be theft.

Thankfully, private counterfeiting has never been much of a problem in society. If anyone is caught printing new money on a private printer, the consequences are very severe. Even when private counterfeiting successfully occurs, it happens on such a small scale that the impact of the counterfeiter on the cost of living is immeasurably small.

However, when creating new money is legal, and even sanctioned by the government, this is still counterfeiting, it is still wrong, and it is detrimental to an economy.

Modern Money

In one sense, modern money has become invisible. It moves electronically from one computer to another, and does not even have a physical form. A vast majority of money used today is simply numbers in a computer on someone’s account balance. But at some point this electronic money is converted back into paper cash and coins.

If you examine a dollar bill from your wallet, you will find the words “This note is legal tender for all debts public and private.” In other words, this dollar bill is legal money. Yes, we can pay for things using checks or credit cards or Venmo, but ultimately, these can be turned back into paper dollars.

You will also find the words “Federal Reserve Note.” In other words, these paper dollars are created and distributed by the Federal Reserve, the central bank of the United States. The green piece of paper is very obviously money because it has official and authoritative images in the right places. These images indicate the full faith and strength of the United States Government.

Prior to 1957, dollar bills looked very similar to how they look today, but with a few slight differences (click here for an image). Dollars at this time contained the words “Silver Certificate.” The also included the following words: “This certifies that there is on deposit in the treasury of the United States of America… One Dollar in silver payable to the bearer on demand.”

That tiny difference is significant. To be perfectly clear, there is nothing backing modern currency. At one point in time, a United States dollar could be traded for a silver dollar on demand. But this convertibility was gradually removed. Evidence of this can be seen in coins. If you are lucky enough to find a quarter from before the year 1964, you will notice that it is made of 90% pure silver. Now days quarters are made of much cheaper metal.

Although you might find this interesting, you might also be wondering “what’s the big deal? People still accept the dollar. Just as long as people are honest, how is paper money wrong?” To be clear, there is nothing immoral with paper money, just as long as the measurement of value is held constant and just. The problem with unbacked paper money is that it can be created at almost no cost. When paper money is not backed by something of value, this enables individuals (governments, big banks, and their buddies) to enter the marketplace with newly created, counterfeit money, which is in direct opposition to what the Bible teaches about just weights and measures.

What Is the Right Quantity of Money?

Without a fixed measure of value (such as gold or silver) backing the dollar, there is no longer any limit on how much new money can be created. In 1971, Richard Nixon officially removed the dollar from the gold standard, and ever since then the supply of money created by the Federal Reserve has dramatically increased (especially in the year 2020). This new money has been literally created out of thin air. It is dishonest money that contradicts God’s prescription for honesty in trade. If this was done by a shady guy in a basement with a fancy printer, he would be thrown in jail for a very long time.

Someone might object that allowing the Federal Reserve to create money isn’t the same thing as a private individual printing up 100’s in his basement. Not only do they have the proper legal authority, but there are times of economic crisis (such as in the year 2020) when there just isn’t enough money to go around. During such times, wouldn’t there be an economic benefit to having a more elastic money supply? Can we really say that the Biblical standards for “honest money” apply in such a situation?

In other words, if new money is created legally, with only the very best intentions of creating wealth and preventing poverty, is it still wrong?

To answer this objection, imagine you had the ability to create a new can of peas out nothing (or turkeys, or watermelons, or cattle). Would this help the poor? Of course it would! The increased supply of goods per person would mean everyone can consume more, and the standard of living would go up for everyone. But creating new money provides no benefit for society at all (except for the dishonest counterfeiter).

Why not? Because money itself cannot be eaten or consumed. Money is used only as a medium of exchange. Once we have enough money for the use of exchange, no more money is needed. So while increasing the number of cattle or cars or cell phones or houses would be beneficial, increasing the supply of money only dilutes its value because there is more of it floating around.

To put it simply, if the number of cars suddenly doubled, twice as many people could own cars. But if the supply of money were doubled, the only result would be that we would have the same number of goods and services for double the price (at least on average). Now if everyone saw their bank accounts double, they might feel richer, at least in the short term, and go buy houses, vacations, or new cars. But once prices went up to compensate for the increased demand, reality would set in, and people would realize that they are not better off at all. In fact, they might be worse off because they were encouraged to buy things that they really couldn’t afford.

Counterfeiting money does more than just drive-up prices. It causes people to make foolish decisions with their money (“malinvestment” is the economic term). Dishonest money has no societal benefit at all.