St. Timothy teaches in 1 Tim 6:10 that “the love of money is the root of all evils.” In an economy as complex as ours with as many variables and systems at play, can money be the root of the evils of oppressive empire and economics? By exploring the origins and history of money and banking, money’s fall from grace at the hands of empire is vividly apparent. By understanding where we are and how we got there, it is possible to take money ad fontes to God’s original gifting intent of creation. In the light of God’s sovereignty and eternal gifting, humanity can see empire, banking, and money in their full as they indeed are — false idols. The economic powers of empire seek to enslave and impoverish humanity for a brief taste of an imagined creative act. Taking root out of God’s creative sovereignty, the value of all humanity and the need for the Body to live as one, establishing sound money and banking will set the foundation for just and thriving economies for all of God’s children.
What is Money?
“In the beginning,” as it were, there was no money. In the primitive, early state of humanity, the progeny of Adam and Eve farmed, gathered, and hunted the bounty of God’s creation for all they needed. As a single extended family, everyone shared their resources, and all had what they needed. As the generations grew from Adam and Eve through Noah after the flood, a problem arose. Coordinating production was easy on a small, family scale, but as the population grew, coordination became impossible. What is one to do, for example, when one has a surplus of eggs but needs a new basket? A family can only take on so many activities. To transition a family to the training and activities required to produce the supplies and then the labor to transform those supplies into a basket comes at a cost. Something else — corn production, chicken raising, etc. — must be given up to take on basket production.1
To resolve the issue of large-scale coordination in community, humanity begins to barter. The family that makes baskets, for example, might not have the time or knowledge required to raise chickens. For three months of a family-portion of eggs, the basket-producing family is willing to give the egg-producing family a basket. And so, barter spreads across humanity: one cow for a bushel of apples, a wheel of cheese for two chickens, a daily portion of bread in exchange for wheat-field labor. Each thing has a relative value to every other thing to each person as her or his unique situation and priorities demand.2
Barter works fairly well in a community when the diversity of needs and the surplus of production are fairly small. However, over time increased technology made for an ever-increasing diversity of complexing goods. Finding someone with a surplus of milk who needs to barter for your eggs is one thing. Finding someone with a surplus of a very specific door-hinge who also needs eggs is quite another.3 As the diversity and complexity of good increases, the matrix of individual needs also increases in complexity.4 To get a door-hinge one might have to trade her eggs for a cow, to trade with another for a pig, to eventually trade for some butter, which is, finally, what the door-hinge maker wants. Further, a door-hinge is a very costly — in labor and supplies — item to produce. Relative to butter, it is expensive. But, butter cannot be stored for a long time before it spoils. If the door-hinge maker receives a large amount butter in payment for his hinge, he will quickly need to trade the butter for something more durable if he wishes to have something to trade in his old age.5
To resolve the inefficiencies multi-step trading and durability of value in the barter system, people started looking for a “general medium of exchange.”6 For this medium of exchange to be successful, they needed to find something that had a general value against all other things, and that could retain that value over time until trade was needed. From seashells to salt, gold, and silver each culture found durable goods that could be divided, added, and saved to make trade with others more efficient and to allow for the saving of surplus for the future. The goods that solved this equation are the beginnings of money.7
In the traditional analysis of the history of money, the story stops here. Money came into being because without it trade is inefficient. Money has value because through communal agreement or fiat it was given a general value against the vast array of goods a person could value. Austrian economist Ludwig von Mises brought further insight into the history of money in the early 20th century. In Mises’ estimation, money was primarily valuable and desired because it offered a means to make future trades. Money had value because it had a future value based on its past value. But, what about money on that first day when the community declared it to have a general value? Why did anyone want it that day? The problem of why money had value on the first day is the so-called “regression“ problem.8
Mises’ contribution to the study of money is to posit a theorem to resolve the regression problem with money’s history. Mises’ theorized that money has value, not solely because the community declares it such by law, but because the day before it was money, it already had value in the community. Gold, for example, was already valued before it was money. It was rare, beautiful, and used in jewelry and other luxury goods. It would have been natural for a person in Western culture on day one of gold as money to assume that gold would have value relative to other things on day two. Not just because gold was now money, but because it had value the day before.9 Money, then, is a community’s agreed general medium of exchange. Whether abstracted by tokens — paper money redeemable for gold, for example — or not, money is based not just on fiat, but on the previous non-money value of the medium. Money, at the root, has value because it comes from a valuable source.
On its own in its pure state as a general medium of exchange based on a durable good with previous historical value, money per se is not a subject ripe for theological inquiry. Money, however, is never far from the forces of power in the world. Money and empire go hand-in-hand, and the glue that binds the union is banking.
From a common sense perspective, banks are a warehouse to store one’s money securely. As money came into existence, its ability to be instantly exchanged for any other good made it much more valuable to thieves than non-money goods. People wanted a safe place to keep their money, so they established banks for this purpose. As history further progressed, it became common practice for banks to issue paper tokens — bills — that could instantly be exchanged for the stated value of money — gold in most cases. Bills were more easy to carry around, harder to lose, and made trade even more efficient than money alone.10
In the early days of banking, banks made their money by charging their users warehousing fees. People paid the bank for the safe-keeping of their money and the ability to use convenient paper bills and checks. At some point in history, bankers started realizing that since the majority of trade was happening with paper bills and checks, no one was asking for the physical money. Banks began issuing paper currency with no actual backing, lending those false promises against non-existent money, and taking the interest as total profit. As long as the majority of people never asked for their physical money — a bank run — the bank could remain solvent and could make a profit out of thin air.11
The system that allows banks to lend and take interest against the holdings of their customers with no monetary backing is called fractional reserve banking. At face value, any reasonable person can see that fractional reserve banking is selling a lie to the bank’s customers. The banking system sells people the idea that by putting their money into a bank they can at any given point withdraw their money on demand from the bank and it will be sitting there in her or his account. Legally what should be happening is a bailment, “hiring someone for the safekeeping of valuables.”12 In actuality, if enough people ask for their money, it will not be there because the bank has lent it out to someone else or sent it to another bank to cover for unbacked bills deposited there.
To compensate for the clear misguidance of customers, banking laws in the West slowly migrated away from the idea of a bailment to seeing the deposit of money in a bank as a debt. A deposit no longer entitled a person to her or his money, but, on deposit, the money became the property of the bank’s to do whatever it wanted to with it. The deposit was merely a debt the bank needed to repay to the depositor when asked. Whether the depositor’s original gold coin or not, as long as she got a coin when she asked, everything was legal.13
Under this system of debts, banks were legally allowed to have fractional reserves. A single coin could be on the books as a debt to person A, and that very same coin could be lent to person B. As long as both people didn’t ask for the coin at the same time or both kept using paper bills and checks, everything was okay.14
In a free market of banks working under a fractional reserve system, the system has natural limits against the damage it can do. Eventually trade happens between people banking at different institutions. As banks receive deposits in another bank’s paper bills, they will immediately ask the other bank to exchange the bills for actual currency. If a bank has printed too many unbacked bills or extended too many unbacked loans, it will go out of business, wiping out the savings of its depositors. These business and cultural pressures, keep unregulated and non-government supported fractional reserve systems within some limits.15
Modern banks, however, do not exist in an unregulated and non-government supported systems. As fractional reserve banks failed and caused damage to citizens, governments reacted not by enforcing a full reserve system and reverting to a system of bailments, but by establishing central banks.16
Central banks serve multiple functions in “resolving” the problems of unregulated fractional reserve banking. First, central banks monopolize the printing of paper bills. Without the ability to print unbacked money, there is a limit to the lending banks can do as a source of profit. Second, central banks require all banks to keep a fraction of their deposits on an account at the central bank. Central accounts limit the fraction of a bank’s reserves that it can lend and gives the central bank control over the flow of lending in the economy. Third, central banks resolve the issue of one bank or a series of customers from making a run on a bank. Banks now trade in a standard paper bill held in accounts at a central bank, so there is no need to redeem the paper for anything else. Further, if customers make a run on a bank, the central bank can quickly purchase outstanding debts giving the bank enough paper to meet its demands.17
With a central bank established, governments can make an exciting move. Bank customers and the banks themselves are now entirely doing commerce in paper bills monopolized by the central bank. Though legally paper bills could still be exchanged for money, the central bank has removed the need for anyone to do such a thing. With this empowerment, central banks remove paper bills tie to money and the paper itself, through fiat, becomes money. Unhinged from any material reality, the central bank through literal printing and “open-market operations” such as purchasing government bonds can create money out of thin air backed only by power and nothing of value.18 Through fractional reserve banking supported by a central bank and fiat money, empire gains control over the medium of exchange and the value it can hold. Controlling money and banking means that empire can wield considerable influence over all economic activity.
When a central bank increases the supply of money, each unit of money at that point in time has marginally less value than it did before the supply of money increased. Modern economists call this expansion of the supply of money inflation and it is generally seen as a good thing. The idea is that the economy needs more and more money to stay fluid. If there were no inflation, the economy would come to a halt.19
Ludwig von Mises, however, counters this view of inflation. In his analysis, once something has become money, it will function adequately for the purpose it is intended no matter what the supply. As summarized by Murray Rothbard, — an economist of Mises’ school — “An increase in the supply of money causes no increase whatever in the exchange service of money; all that happens is that the purchasing power of each unit of money is diluted by the increased supply of units.”20 Mises further states in his seminal work Human Action that, “The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do.”21
In an inflationary economic system supported by central banking and a fractional reserve system, the central bank creates new money at the behest of the government all the time. In a closed system where everyone receives the new money at the same time, this, per Mises would not affect the economy. If everyone is inflating at the same rate at the same time, the marginal value of each unit of currency decreases merely resulting in an increase in prices. Inflation in this system genuinely serves no purpose.22
In a fiat-based monetary system, however, the new money is not evenly distributed. The first recipients of the new money are the banks, traders, and those of the top 1% tightly connected to empire’s banking system. These people get the money when the majority of the economy has not seen the new money and is still functioning off the older, less inflated value of the currency. They get the benefit of using the new money when the old prices are still in effect. By the time the new money has worked its way down into the economy, prices have already risen to equilibrium with the new money supply. Those at the bottom of the economy never get the benefit of new money.23 In a system that can create money out of nothing, then, the empire and its key stakeholders are enriched at the expense of the majority of people.
God’s Gifting Contrast
Kathryn Tanner presents a view of value and human interaction at odds with fractional reserve banking, fiat money, and inflation. In Jesus, Humanity, and the Trinity Tanner gives an account of a God who is the loving source of all things. Tanner presents a God that gifts humanity with all things out of pure joy and an ardent desire for union of himself with his creation.24
Money, as defined by Mises, has value because it is based on that which had a previous value. God, the creator of all things, gave humanity his25 very image and gave them dominion to be stewards over all of creation. The value, then, of all things, emanates from God’s creative power. Gold, stone, water, earth, plants all have their value because they are the loving creation of the God who wishes to gift humanity with the abundance of his triune being and provides everything his creatures need for thriving.
Money, then, that recognizes the value of God’s love in creation is sound and pure. Based on God’s sovereign, creative act, non-fiat money points to the one actual Value of all things and our dependence on him for our daily sustenance and interactions. Fiat money, instead, determines to make “value” through government power. Where God’s value in creation comes from his love, empire’s “value” comes through its force of power and ability to impose acceptance of “value” by the sword.
Fiat money, supported by empire and empire’s banking system, is an assault on God’s divine action of gifting. God’s gifting is non-competitive. As an infinite being of triune love, God knows no lacking. To gift an infinity of abundant love to one does not leave another lacking. All are gifted without limit and end from God’s bottomless stores of love.26 The inflation of fiat money brought on by fractional reserve banking is entirely competitive. For the 1% to have new money and its economic advantages, means that those on a fixed income will pay higher inflated prices without a correlating increase in money. Empire and its powerful controllers inflate money to the “detriment of the politically powerless.”0
Fractional reserve banking sells the lie that humans can create something from nothing. Only God can ex nihilo perform a creative act. For humans to aspire to this, is idolatrous and points to Eden’s original sin of wanting to be as gods. Empire banking sells Satan’s lie to the powerful that they can create their wealth with little work and without consequence. In reality, fractional reserve banking builds the profits of the bankers and empire-elite on the backs of the 99%’s savings and decreasing purchasing power. It places the government-elite, the very people who claim to be fighting for the relief of the poor, as the very people planting the seeds for the poor’s continual economic oppression and impoverishment.
As the people are impoverished by empire banking’s inflation, money creation fuels endless war for empire and empire’s powers while providing luxuries and complete diversion to the elite. Under an inflationary system of fiat money both bread and butter can be had at the same time for the 1% with seemingly no consequence. Like the Hebrews under the Egyptians, the 99% suffer the increasing pressures of empire’s drive to limitless expansion. The 99% experience higher costs with wages that don’t keep up and an empire that does not seem to care about their flourishing.
What started as a common need for more efficient coordination and sharing to the benefit of all has been corrupted by the empire and the powers that control her to be a force for division and suffering. God gifts abundantly and infinitely to all of his creation. Empire presents paper as gold by the effect of her sword and funds war and luxury for the 1% at the expense of everyone else. Empire’s economy is at odds with God’s plan for humanity and the natural order of his good creation. At the very root of its economic system — money and banking — the empire is corrupt and in need of salvation. Looking to God as revealed in the Incarnation, solutions need to be found.
God or Mammon?
Jesus makes it clear that we cannot serve two masters at the same time. Humans must either serve Jesus as Lord or Mammon — money, empire, and power. The present economic realities of the majority of people on Earth are apparent. People labor too long, with too little control, for powerful forces that keep all the surpluses.
Many pages have been written detailing various systems of economic reform. From free market capitalism to socialism, distributism, communism, and every other idea under the sun systems have been critiqued, reviewed, reformed, and presented as solutions to the economic woes of modernity. To my analysis, though many good ideas are present across the board, no system with a corrupted base can affect change. Without addressing the rotten core of fiat money, central banks, and fractional reserve banking, no economic system stands on solid ground.
While the world discusses how best to make an apple pie, we stand together amidst rotten apples that, regardless of the crust or baking technique, will result in a spoilt dessert. Jesus countered the Roman empire not by attacking its bureaucracy and oppressive military rule. Jesus countered the Jerusalem religious authorities, not by replacing the head priests. Instead, in both cases, Jesus struck the very core. To empire and Caesar, Jesus said he was Lord and that he was establishing the Kingdom of God that superseded Rome and would last eternally. To the priests, Jesus gave new light to what the temple was and where sacrifice was really to take place. Jesus took their temple and their texts and recast them in light of the cross and resurrection. The temple was indeed destroyed not be Rome, but when “this is my Body” and “this is my Blood” took on their full meaning in the Resurrection.
Like Jesus, the Church must attack the corrupt core of economic oppression. How can we care for the widows and poor when we know our monetary system actively oppresses them and robs them and other vulnerable people of their very life’s savings through inflation? How can we support a banking system that funds endless wars and leads to luxurious excesses at the expense of the masses? How can we stand before golden chalices filled with the most valuable holy bread and wine and not fight to restore that holy value to our economic interactions with each other?
Money is only real when it points to God as its source. Trade is only righteous when it is between equals sharing like values for the benefit of the whole. Economics should look to God’s abundant providence for his creation. We should not be use economics as a tool for empire and suffering.
Our path forward as a Church and as a people who care for all of humanity should be to dismantle the fractional reserve banking system and the central banks. Restore money based off created value and not fiat. Allow the establishment of laws that protect depositors and see banks as warehouses rather than inflationary engines of the economy. With sound money and sound banking established on principles of honesty and transparency, we can found new economies taking root out of God’s creative sovereignty, the value of all humanity, and the need for the Body to live as one.
Rothbard, Murray Newton. The Logic of Action One: Method, Money, and the Austrian School. Economists of the Twentieth Century. Cheltenham, U.K. ; Brookfield, Vt: Edward Elgar, 1997.
Tanner, Kathryn. Jesus, Humanity and the Trinity: A Brief Systematic Theology. 1st Fortress Press ed. Minneapolis, MN: Fortress Press, 2001.
Von Mises, Ludwig. Human Action: A Treatise on Economics. Auburn, Ala: MISES, 2008.
Woods, Thomas E. The Church and the Market: A Catholic Defense of the Free Economy. Studies in Ethics and Economics. Lanham, Md: Lexington Books, 2005.
Addendum A: Pronouns for God; An Explanation
I am presently working through the ordination process of the Anglican Diocese of Pittsburgh in the Anglican Church in North America (ACNA). As a to-be priest I am already expected by my bishop and the greater church to uphold the covenants I will make with God and to his Church in my ordination vows. One of my vows will be to “reverently obey [my] Bishop […] according to the Canons of the Church.”27 The canons of the ACNA include the Articles of Religion,28 the Prayer Book of 1662, the proposed texts of the ACNA Prayer Book of 2019,29 the catholic creeds,30 and the ACNA catechism,31 among others. By vow, by personal choice, by adherence to my Anglican tradition, and out of a faithful desire to serve my community, I hold to these standards in all my theological work.
In the liturgy of my tradition and by teaching in the catechism, the first person of the Trinity is named God the Father. Further, the second person of the Trinity, named God the Son, through the Incarnation took on the human form as the male human being, Jesus Christ. Further still, the catechism teaches that because Jesus Christ called God “Abba, Father”, used masculine language for God, and taught his disciples to do the same (Matt 6:9, Rom 8:15-17, Gal 4:4-7) Anglicans, to remain faithful to apostolic teaching and the catholic tradition of the Church, are to do the same.32
By using masculine language for God I do not desire to imply a superiority of the biological sexes. Scripture clearly teaches the equality of gender in the Body of Christ (Gal 3:28). I do not intend to set a general rule for the universal Church to follow or reject fellowship with those who do not follow my practice or the Anglican tradition. For me, the use of masculine language for God is a sign of faithfulness to my community and a matter of integrity so that I can with clear conscience make the vows I will be required to make at my ordination.
- Thomas E. Woods, The Church and the Market: A Catholic Defense of the Free Economy (Studies in Ethics and Economics. Lanham, Md: Lexington Books, 2005), 87-89. [return]
Ibid., 87-89. Murray Newton Rothbard, The Logic of Action One: Method, Money, and the Austrian School (Economists of the Twentieth Century. Cheltenham, U.K. ; Brookfield, Vt: Edward Elgar, 1997), 298-299.[return]
- Ibid. [return]
- Rothbard, The Logic of Action One, 299. [return]
- Woods, The Church and the Market, 87-88. [return]
- Rothbard, The Logic of Action One, 298. [return]
- Woods, The Church and the Market, 87-89. [return]
- Rothbard, The Logic of Action One, 304-306. [return]
- Ibid. [return]
- Woods, The Church and the Market, 89. [return]
- Ibid. [return]
- Ibid., 99. [return]
- Ibid. [return]
- Ibid. [return]
- Ibid., 89-90. [return]
- Ibid., 90-92. [return]
- Ibid. [return]
- Ibid., 92. [return]
- Rothbard, The Logic of Action One, 309-311. [return]
- Ibid., 310-311. [return]
- Ludwig von Mises, Human Action: A Treatise on Economics (Auburn, Ala: MISES, 2008), 418. [return]
- Rothbard, The Logic of Action One, 310-311. [return]
- Woods, The Church and the Market, 94-95. [return]
- Kathryn Tanner, Jesus, Humanity and the Trinity: A Brief Systematic Theology. (1st Fortress Press ed. Minneapolis, MN: Fortress Press, 2001). [return]
- Please see addendum A at the end of this essay for a full explanation of my use of masculine language for God. [return]
- Tanner, Jesus, Humanity and the Trinity, Chapter 3. [return]
- Anglican Church in North America, Texts for Common Prayer: Containing Forms for Daily Morning Prayer, Daily Evening Prayer and the Holy Communion, as Approved by the College of Bishops for Use within the Province ; Together with the Ordinal of the Anglican Church in North America A.D. 2013 (Newport Beach, Calif.: Anglican House Publishers, 2013), 128. [return]
- Articles of Religion of the Church of England (London, England: 1571). [return]
- Texts for Common Prayer. [return]
- Nicene, Athanasian, and Apostles’ [return]
- Anglican Church in North America and Catechesis Task Force, To Be a Christian: An Anglican Catechism (Ambridge, PA Anglican House Pub Inc, 2014). [return]
- Ibid., 39. [return]