Posts Tagged ‘Currency’

Understanding Biblical Economics is Key to Real Reformation


View at CBN News

Jay Richards warns at Townhall:

Every year, the federal government spends well over a trillion dollars more than it takes in. As a result, it has racked up seventeen trillion dollars in debt, most of it in the last decade. In seven years at current rates, the U.S. will need almost a fifth of the GDP from the rest of the world just to finance our national debt.

Just two of our federal entitlements, Medicare and Social Security, have “unfunded future liabilities” of $46.2 trillion. Total liabilities are $86.8 trillion or more. Entitlements and other mandatory spending will burden more and more of the federal budget in the coming years. At today’s burn rate, before long no realistic amount of tax revenue will be able to service the debt and fund the government’s basic functions.

We need not worry about the federal government defaulting, since, unlike U.S. states or private citizens, it can print the money it needs to pay the bills. It can and will do so if we don’t make a course correction fast. Massive monetary expansion will ultimately devalue every dollar in circulation and trigger the sort of hyperinflation that flattens entire societies in short order. That’s bad enough, but when government borrows and spends for our supposed benefit, somebody else will have to foot some or all of the bill. If our faith applies to every aspect of life, then it must have something to say about this moral outrage.

[...]  In the twentieth century, more than a hundred million people were murdered by their own governments. And that was just in communist countries. History and scripture agree: because of sin, governments with too much power become propagators of evil and destruction.

This speaks directly to government debt, since deficit spending is a symptom of government doing more than it can or should. The federal government now borrows and spends with such reckless abandon that it is careening toward a global economic catastrophe. If Christians can’t muster the courage to speak out against what Rep. Paul Ryan has called “the most predictable debt crisis in history,” we won’t deserve to be taken seriously after the collapse.

Read more at Townhall

Sadly, many Christians don’t know how to disciple our nation to turn the tide because they’ve never studied God’s design for economics or the Biblical role of government.    They can’t teach what they don’t know.   The  key to real reformation, says R.C. Sproul, Jr., is for Christians to understand and work to implement Biblical economic principles:

Christian author and teacher R.C. Sproul, Jr. told CBN News Anchor Lee Webb that he believes it’s time to return to the basics when it comes to economics.

“When we’re left arguing about whether or not we should have a marginal tax rate of 45 percent or 48 percent, and the conservative is stuck arguing for the 45 percent we’ve had an insufficient reformation in our thinking,” Sproul said.

Sproul believes that reformation will happen only when we return to scripture to see what God has to say about economics. That’s why he produced a video series called “Economics for Everybody.” It’s a compelling, even entertaining approach to a topic many find boring.

[...]   Sproul provides historical evidence that nations most influenced by biblical Christianity are nations that, by and large, have prospered. They are nations marked by decentralized governments and free markets.

But nations that reject God are marked by centralized power, tyranny, and no free markets. Unfortunately, he said he has observed some of those troubling trends in America now.

“The United States is not a free market. It’s an interventionist economy that’s been moving closer to socialism for over a century now,” he said. “I am not optimistic about our nation’s future economically.”

“We live in a country in which the state forbids me to hire a man unless I promise to pay him X number of dollars,” Sproul explained. “We now live in a country where I can’t hire 50 men unless I promise to buy them all health insurance, including access to abortion.”

“This is not economic liberty. This is not free markets,” he said. “We’re missing the fact that we’re the frog and the water is boiling.”

That’s why Sproul believes it’s not enough to think conservatively. We must think biblically and train our children biblically.

“It’s my conviction that education is always and everywhere religious,” he said.

“And it’s not a surprise that when 80 percent of evangelical parents have their children in the government’s schools that they’re going to embrace the religion of the government which is the worship of the state,” he said.

Sproul cautioned Christians to avoid despair. One way to do that is by returning to the beginning, to the Creation Mandate and begin to see that our work is part of worship.

Read more at CBN News

If you have never watched the “Economics For Everybody” series, I highly recommend it!   We cannot teach what we do not know!

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God our Provider vs. The State

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Why understanding Biblical Economics is more important than ever

Many Christians vote for politicians who support completely unbiblical economic policies because they have no idea what the Bible has to say about economics.   All they know about economics they learned in secular government schools and the talking points put forth by politicians and political activists.

The world is reeling from poverty, drowning in debt, and suffering from other hardships caused by bad economic policies.   God’s Word has the answers.  Christians are called to disciple the nations to obey everything Christ commanded, INCLUDING in the area of economics, but we can’t teach hurting nations what we haven’t bothered to learn for ourselves.

That is why R.C. Sproul Jr. put together the “Economics For Everybody” DVD series to educate Christians in the basics:

A week ago, a lot of Americans received a jolt. After the election dust settled, they realized a majority of voters don’t want to lessen the role of government in their lives. If anything, they want to see government expand.

It was (and continues to be) the talk of the airwaves and Internet. As one radio host put it, in light of the election results, what we need is significant economic education. He is right – we do.

It is a pretty grave problem. The truth is that a majority of Americans in both political parties are radically ignorant of basic economics. In numerous ways, most people in the United States have been committed to some form of economic suicide for generations. They just don’t realize the extent of it.

This is one of the main reasons we created Economics for Everybody. The long-term implications of government intervention in the economy are extremely dangerous to all of us, especially to our religious freedoms. More and more people have a sinking feeling about this. But unless they take time to learn the basics of economics, nothing will change.

What is really at stake here?

If a majority of Americans are committed to the expansion of the welfare state, it will lead to increasing poverty for all. A basic economic principle is that whatever you subsidize you get more of.

If a dad offers to give money to his kids to clean up their rooms, he’ll get cleaner rooms. In the same way, if a government offers money to its citizens when they are unemployed, it will get more unemployment. Strange as it may seem, statistics consistently bear this out. And since the government offers money for all sorts of things it shouldn’t be offering money for, it’s no wonder we are where we are. We discuss this at length in ‘Lesson 10 – The Corporate and Welfare States of America.’

Next, if a majority of Americans are committed to government intervention in business through regulation, it will lead to a shrinking business sector. The basic economic principle here is that governments are unable to make accurate economic calculations.

The whole idea behind a planned economy is that central planners know better than producers and consumers what’s good for the economy. But such an idea assumes that a few people not only can comprehend, but actually direct the unique and ever-changing choices of limitless producers and consumers better than they can themselves.

It would be like a few people telling everyone else what they should buy at a grocery store. It’s functionally impossible to know all the discrete needs and desires of that many people, so the only way to attempt it is through general rules that restrict and direct consumption for all. At a business level, such a regulatory approach always ends in more and more businesses not being able to operate profitably and shutting down, ultimately resulting in the slow strangulation of an economy. We explain exactly how it happens in ‘Lesson 8 – The Basics of Government Intervention.’

Finally, if a majority of Americans don’t understand the relationship between economic freedom and religious freedom, they will inevitably lose both. The economic principle is that we are caught in a cosmic battle that has many economic aspects: God wants us to build up a godly civilization with our resources while Satan wants to prevent us from doing so.

In an economy based on Christian principles, there is economic freedom for people to use their land, labor and capital as they see fit. It is a matter of individual stewardship based on God-given ability and property. But in an economy based on atheistic principles, the government is a tool of Satan to control the lives of individuals so that they cannot steward their resources and time for God’s Kingdom. Think of the many socialist and communist economies that persecuted tens of millions of Christians.

The fact that there is a spiritual battle going on that has economic dimensions is lost on most people. But it is the reality of this, as well as the fact of sin in the world, that is so important economically.  History reveals this to us over and over again. We explain it in greater detail in ‘Lessons 6 & 7 – A Tale of Two Theologies.’

There is, of course, even more to economics. We try to explore as many basic principles as necessary in the twelve-lesson series. Our belief is that if people go through the entire Economics for Everybody curriculum, they will be in a much better place to understand what happened last Tuesday on Election Day. They will also understand what needs to happen in the future.

Read more at Economics For Everybody

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People vs. Profits?

Drop the Envy Card: Wealth Grows From Serving Others

Why is the Church Silent on Economics and Government?

God our Provider vs. The State

Myth of ‘Savior State’ That Can ‘Fix’ Economy Soon To Be Dispelled By Global Fiscal Crisis

Christians in a Post-Welfare State World

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Obama Seeks To Inflate Meat Prices To Protect Ethanol Mandates During Corn Shortage

Like food prices aren’t hurting American families enough already!

From the Washington Examiner:

Campaigning in Missouri Valley, Iowa, yesterday, President Obama announced yet another government spending program — this time designed to inflate meat prices in Midwest swing states. “Today the Department of Agriculture announced that it will buy up to $100 million worth of pork products, $50 million worth of chicken, and $20 million worth of lamb and farm-raised catfish,” Obama explained to reporters in front of a drought-stricken cornfield.

“Prices are low, farmers and ranchers need help, so it makes sense,” Obama explained. “It makes sense for farmers who get to sell more of their product, and it makes sense for taxpayers who will save money because we’re getting food we would have bought anyway at a better price.”

None of this makes sense. In fact, Obama’s move only harms American consumers while protecting a corrupt federal program.

A drought is currently driving down corn production. The shortage of feed is forcing livestock producers to slaughter animals early, putting downward pressure on meat prices in the short run and guaranteeing shortages and higher prices next year. But nature is not the biggest factor in this crisis — the government is. Specifically, the federal government’s ethanol mandate, which requires that 13.2 billion gallons of corn-based ethanol be produced in 2012.

Thanks to the ethanol mandate, more than 40 percent of the nation’s corn crop now goes into the production of a useless fuel that hardly anyone would buy if the government didn’t require it. That’s up from just 17 percent in 2005, before the mandate went into effect. Only 36 percent of the corn crop now goes for feed, and 24 percent goes for food.

Obama could solve this problem instantly by suspending the federal ethanol mandate — something his EPA actually can do unilaterally and legally. Instead, Obama will buy up meat — a move that meat producers say won’t help them much anyway. “It doesn’t solve the problem of having enough affordable corn next summer,” industry analyst Steve Meyer told Reuters. “Without changing the ethanol program, nothing can be done,” he said.

The higher corn prices caused by the mandate and the drought have also driven up the price of ethanol by 33 percent since May, which means — again, thanks to the mandate — higher gas prices at the pump.

Read more at the Washington Examiner

Corn should be used for food, not fuel

Global food crisis looms as corn prices surge

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Corn should be used for food, not fuel

For years, the US Dept. of Agriculture has subsidized corn to keep the price artificially low, which is why so many products use High Fructose Corn Syrup and so many farmers use it for livestock feed (as opposed to grasses, which they are naturally designed to eat instead).   It’s why grass-fed beef and other natural foods cost so much more than those that have become dependent on corn.   If not for federal interference in the the corn market, many farmers and companies would have already moved towards alternatives and would not be so vulnerable to the current shortage.

The federal mandates for ethanol only exacerbate the problem further.

C. Larry Pope writes at the Wall Street Journal:

This has been a cruel season for America’s agricultural economy. It was partly unavoidable, as our nation’s farmers are being devastated by this summer’s brutal and worsening drought. The farm economy has withered along with the crops, and the American consumer, once again, will pay for it with higher food prices.

One of the hardest-hit commodities, corn, plays a critical role in our food chain. This year’s crop yield could be the worst in 15 years, and corn prices have already hit record high levels.

But aggravating the problem and adding to the crisis is the U.S. government’s Renewable Fuel Standard (RFS), which requires that a certain volume of ethanol (15.2 billion gallons in 2012, mainly derived from corn) be blended into gasoline. This is an arbitrary figure, set irrespective of market supplies, demands or price. It applies to corn that’s desperately needed for livestock feed and food for consumers.

The RFS has diverted so much corn as a questionable substitute for gasoline that in the face of this drought-depleted harvest, major food-producing companies such as Smithfield are being forced to seek alternative markets for grain to meet the demands of their livestock and at more affordable prices. Ironically, if the ethanol mandate did not exist, even this year’s drought-depleted corn crop would have been more than enough to meet the requirements for livestock feed and food production at decent prices.

To give you some idea of the magnitude of the problem, look at Smithfield. We’re the world’s largest pork producer. We purchase roughly 128 million bushels of corn and corn equivalents a year from U.S. farmers to feed our 16 million pigs on farms across 12 states. This makes us one of the largest consumers of corn in the country. In addition, we contract with about 2,135 U.S. hog producers.

This year, the double whammy of a drought that’s ravaging crops and ethanol demand has pushed corn prices to what are now record-high levels of over $8 per bushel, a quadrupling of prices in less than a decade. This has compelled food producers like Smithfield to find ways to control skyrocketing feed costs. For the first time in memory, corn is cheaper when it’s delivered to the U.S. from abroad than if it’s purchased from domestic suppliers. Smithfield was forced to take the unfortunate but absolutely necessary step of buying corn from Brazil—spending money that under normal circumstances would have gone to U.S. farmers.

This is what happens when the corn market, which already has to count on the whims of Mother Nature and is governed by the laws of supply and demand, is victimized by the whims of Washington and the unintended consequences of the diversion of food to fuel.

Read more at the Wall Street Journal

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The Ethanol Chickens Come Home to Roost

Corn for Food, Not Fuel

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Biofuels vs. Oil: which is really “greener”?

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Happy 100th Birthday, Milton Friedman!

Without a doubt, this is one of my favorite clips of Milton Friedman schooling Phil Donahue on Capitalism, Socialism and greed:

View on YouTube

The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.” ~ Milton Friedman

Stephen Moore at the Wall Street Journal pays tribute to “The Man Who Saved Capitalism“:

It’s a tragedy that Milton Friedman—born 100 years ago on July 31—did not live long enough to combat the big-government ideas that have formed the core of Obamanomics. It’s perhaps more tragic that our current president, who attended the University of Chicago where Friedman taught for decades, never fell under the influence of the world’s greatest champion of the free market. Imagine how much better things would have turned out, for Mr. Obama and the country.

[...]  In the 1960s, Friedman famously explained that “there’s no such thing as a free lunch.” If the government spends a dollar, that dollar has to come from producers and workers in the private economy. There is no magical “multiplier effect” by taking from productive Peter and giving to unproductive Paul. As obvious as that insight seems, it keeps being put to the test. Obamanomics may be the most expensive failed experiment in free-lunch economics in American history.

Equally illogical is the superstition that government can create prosperity by having Federal Reserve Chairman Ben Bernanke print more dollars. In the very short term, Friedman proved, excess money fools people with an illusion of prosperity. But the market quickly catches on, and there is no boost in output, just higher prices.

Next to Ronald Reagan, in the second half of the 20th century there was no more influential voice for economic freedom world-wide than Milton Friedman. Small in stature but a giant intellect, he was the economist who saved capitalism by dismembering the ideas of central planning when most of academia was mesmerized by the creed of government as savior.

Friedman was awarded the Nobel Prize in economics for 1976—at a time when almost all the previous prizes had gone to socialists. This marked the first sign of the intellectual comeback of free-market economics since the 1930s, when John Maynard Keynes hijacked the profession. Friedman’s 1963 book “A Monetary History of the United States, 1867-1960,” written with Anna Schwartz (who died on June 21), was a masterpiece and changed the way we think about the role of money.

More influential than Friedman’s scholarly writings was his singular talent for communicating the virtues of the free market to a mass audience. His two best-selling books, “Capitalism and Freedom” (1962) and “Free to Choose: A Personal Statement” (1980), are still wildly popular. His videos on YouTube on issues like the morality of capitalism are brilliant and timeless.

Read more at the Wall Street Journal

Renown economist Thomas Sowell remembers his former teacher:

In being able to express himself at both the highest level of his profession and also at a level that the average person could readily understand, Milton Friedman was like the economist whose theories and persona were most different from his own — John Maynard Keynes.

Like many, if not most, people who became prominent as opponents of the left, Professor Friedman began on the left. Decades later, looking back at a statement of his own from his early years, he said: “The most striking feature of this statement is how thoroughly Keynesian it is.”

No one converted Milton Friedman, either in economics or in his views on social policy. His own research, analysis and experience converted him.

As a professor, he did not attempt to convert students to his political views. I made no secret of the fact that I was a Marxist when I was a student in Professor Friedman’s course, but he made no effort to change my views. He once said that anybody who was easily converted was not worth converting.

I was still a Marxist after taking Professor Friedman’s class. Working as an economist in the government converted me.

[...]  Although Milton Friedman became someone regarded as a conservative icon, he considered himself a liberal in the original sense of the word — someone who believes in the liberty of the individual, free of government intrusions. Far from trying to conserve things as they are, he wrote a book titled “Tyranny of the Status Quo.”

Milton Friedman proposed radical changes in policies and institution ranging from the public schools to the Federal Reserve. It is liberals who want to conserve and expand the welfare state.

Read more at Real Clear Politics

Milton Friedman: Socialism is Force

View on YouTube

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9 Unforgettable Quotes From Milton Friedman

Taxmageddon and Obamacare: What Would Milton Friedman Say?

Remembering Milton Friedman’s School Choice Legacy

Milton Friedman: Regulation In A Free Society

Milton Friedman Shows Us How Regulations Have Grown

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USDA Predicts Surging Food Prices In Coming Year

Christopher Santarelli warns at The Blaze:

The USDA has released their projections for food price inflation in 2011/2012, showing troubling forecasts that may send you to the grocery store today, before paying higher prices tomorrow. The report shows that the Consumer Price Index (CPI) for all food increased 0.8 percent between 2009 and 2010, and is forecasted to increase 3.5 to 4.5 percent in 2011.

Bruce Krasting notes that the USDA’s projections are especially troubling considering Federal Reserve Chairman Ben Bernanke has said he wants to contain inflation (although excluding food and energy) at less than 2%. Food inflation is running at double his target. Writing in Business Insider, Krasting says the problem is even more serious than the USDA indicates and that global demand is set to push prices even higher as time goes on:

“It’s not surprising that the US pays less for food as a percentage of income than any other country. But the comparisons are still interesting. The US spends 6.5% of disposable income for food. Poorer countries like Nigeria, Kenya and Cameroon are forced to pay ~45% of incomes to put food on the table. The high population countries are as follows
Vietnam = 38%

Indonesia = 32%

India = 28%

China = 22%

I find these numbers troubling. There is only one direction for them to go. The developing countries with big populations will see greater gains in income, with that will lead to increased food consumption. Approximately 30% of income goes to food in these areas.  It’s hard not to see that this is going to push up the prices the globe pays for everything we eat.

For example, the USDA put the per person food cost in China at $129 in 2000. Today that number is $360 (280% increase). Over the same period the USA consumption increased only 42%.”

Items that are expected to inflate the most include  beef, cooking oils, and seafood. Processed vegetables and beverages were projected to to see smaller changes in the CPI. TheWall Street Journal notes that “the midpoint of the new USDA outlook signals the sharpest acceleration in the food inflation rate from one year to the next since 1978, and makes the increase itself the biggest since 2008, when prices rose 5.5%.” While things may seem bleak for the rest of the year, the USDA projects that prices will rise only 2.5 percent next year.

The report also found that food-at-home prices increased 0.3 percent, the lowest annual increase since 1967, while food-away-from-home prices rose 1.3 percent in 2010. Total food expendituresfor all food consumed in the U.S. were $1,240.4 billion in 2010, a 3.4-percent increase from $1,199.8 billion in 2009. Spending on food away from home accounted for 47.9 percent of total food expenditures in 2010; spending for food at home accounted for 52.1 percent.

Bloomberg Business Week notes that the Bureau of Labor Statistics earlier this month said consumer food costs rose 0.4 percent in September, capping a 12- month gain of 4.7 percent.

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Get ready for higher food prices

Global Org. Warns of Possible ‘Social Instability’ as Food Prices Rise

Time to stock up: Building and stocking your pantry

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God our Provider vs. The State

The headlines are ominous.  Our nation’s financial situation is precarious.  Unsustainable deficits, moutains of debt, looming inflation, the possible collapse of our currency.   As one after another of our trusted financial institutions shows its weakeness, the façade of security is being stripped away.

What is going on here?

Could it be that God is tearing down one of the principle idols of our modern society?

“The LORD disciplines those he loves, and he punishes each one he accepts as his child.” ~ Hebrews 12:6

Prosperity is the allure for many forms of idolatry.  The golden calf of the Egyptians that the Israelites made in the desert was a god of fertility and harvest.  Rather than trust that God would not allow His people to starve in the desert, Israel quickly turned to a false god that promised provision.

After correcting His people, God miraculously demonstrated His provision by providing manna from heaven for forty years. (Exodus 16:35)

Throughout Israel’s history, the people were repeatedly seduced by Ba’al, the Canaanite cult of fertility and harvest.  The Canaanite tribes believed he was the god who controlled rain and fertility, and engaged in horrific human sacrifices in attempts to appease Ba’al and conjure up rain.  Without irrigation technology, the entire Mesopotamian region was completely dependent on the seasonal rains.  One year could bring plenty, and the next could bring famine.  It was absolutely essential  that the rains come on time, that the crops flourish, and that many children be born to keep their numbers strong in the face of so much uncertainty.  We can see why the idea of a fertility/rain god one could manipulate was so tempting.

In the reign of Ahab, Israel that had been largely seduced by this dangerous cult (1 Kings 18).  God withheld the rains to help Israel understand that Ba’al was powerless and the cruel worship of this false god was useless.  After 3 years, God knew He had to send the rain soon, or the whole nation would die of famine.  He also knew that the people would have given Ba’al credit for the rain and become even more entrenched in the cult, so He arranged the show-down on Mt. Carmel between Elijah and the 450 prophets of Ba’al.  After the people repented of their idolatry, God mercifully sent the rain.

Today, we worship another Ba’al called the State.  We grant it power over our lives that belongs only to God, enslaving ourselves in exchange for the promise of guaranteed security and having all our needs provided for.  We try to regulate, tax, inflate, and redistribute our way to prosperity through the Ba’al of a command economy, instead of following Biblical principles.

Our founding fathers recognized the Lord as Creator and commonly referred to Him as ”Providence” – the source of all provision.  They founded this nation on the principle that God, not the state, was our provider.   They knew from the tragic history of the Roman Empire what would inevitably happen if our country’s citizens began to look to the state for provision.  They specifically limited the powers of the federal government in our Constitution in order to prevent the state from going outside its scriptural boundaries.

But things have changed.  An ever-growing number of Americans no longer value personal responsibility and trust in God as our provider.  We demand that the state provide food stamps, HUD housing, Medicare, Social Security, disability benefits.  We like the security of “guaranteed” unemployment benefits and welfare checks.  We have invited the state to take over the role of Providence in our lives.

The truth is, there is no such thing as a “guarantee” from this idol called the State.  It’s an illusion.  Our nation is on the verge of bankruptcy.  Sooner or later, the creditors will come to call.   History teaches us that governments are easily overthrown, conquered, or collapsed.

“For because you have trusted in your works and your treasures, you also shall be taken.” ~ Jeremiah 48:7

Our security is supposed to be in God, not the State.  He is our strong tower, our refuge. (Psalm 59:9)

“Anyone who trusts in him will never be put to shame.” ~ Romans 10:11

Milton Friedman once observed that “underlying most arguments against the free market is a lack of belief in freedom itself.”  In order to control an economy, one must first control the individual actions of people whom God has granted free will.

God has made man in His image (Genesis 1:27).  He has instilled in us both a free will, and the capacity to create through our labors.  Each of us is designed to use our giftings and hone our skills to the glory of God.  As we learn to create goods and services of value, we enter into voluntary exchanges with others around us, to the benefit of all.  These voluntary exchanges develop into markets and larger economies.

At the root of all our attempts to control and manipulate the economy through central planning is the desire to control that which only God can control.  Our misplaced reliance on man’s wisdom and government intervention is a manifestation of our lack of trust in God as our provider, the One who is truly in control.

Again and again in scripture, God uses miracles to demostrate where our provision truly comes from:

Jesus turned water into wine (John 2:1-11), and fed the 5000 with the small offering of bread and fish from young boy. (John 16:10)

During a long famine, God rewarded a poor widow for sharing what little she had with the prophet Elisha by miraculously multiplying her store of flour and oil so that they never ran out.  (1 Kings 17:7-15)

For 40 years, the Lord provided “bread from heaven,” called manna, for the Israelites in the desert. (John 6:31)

In the Lord’s prayer, Jesus reminded us to turn to God for our provision: “Give us each day our daily bread.” ~ Luke 11:3

In truth, our prosperity is in God’s hands, not the state.  It cannot be forced or manufactured.  It requires complete trust in Jehovah Jirah, our provider, and respect for the free will and creative capacity He has given each individual.

“Command those who are rich in this present age not to be haughty, nor to trust in uncertain riches but in the living God, who gives us richly all things to enjoy.” ~ 1 Timothy 6:17

“But blessed is the man who trusts in the Lord, whose confidence is in him. He will be like a tree planted by the water that sends out its roots by the stream. It does not fear when heat comes; its leaves are always green. It has no worries in a year of drought and never fails to bear fruit.” ~ Jeremiah 17:7-8

Why is the Church Silent on Economics and Government?

Biblical Economics: A Commonsense Guide to Our Daily Bread

Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem

Prosperity and Poverty: The Compassionate Use of Resources in a World of Scarcity

The Moral Issues of Money

Stewardship, Compassion, Justice and the U.S. Budget Crisis

Christians Seduced By Socialism?

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The Seven Deadly Fallacies of Bad Economics

John K. Williams wrote this at The Freeman in 1986, but it’s just as true today as it was then, and the “occupiers” could learn a lot from it:

In the sixth century of the Christian era Pope Gregory I, remembered by history as Gregory the Great, listed what became known as the “Seven Deadly Sins.” Gregory’s listing soon became as popular as the vices listed, and by the Middle Ages any preacher worth his salt had in his traveling bag a sermon, or a series of sermons, expounding the nature and detailing the perils of those Seven Deadly Sins.

It may seem somewhat extravagant to liken bad economic thinking to attitudes and actions which allegedly condemned the soul to hell. Yet economic errors are not to be taken lightly• The errors I call the “seven deadly fallacies of bad economics” can lead and have led to unspeakably destructive consequences. Their seriousness cannot be overstated.

The Fallacy of Forgotten Costs

The first fallacy to be considered might be called “the fallacy of forgotten costs.” This fallacy is admirably discussed by Frederic Bastiat in a pamphlet he penned in 1850 entitled, “What Is Seen and What Is Not Seen.” Writes Bastiat: “Nothing is more natural than that a nation, after making sure that a great enterprise will profit the community, should have such an enterprise carried out with funds collected from the citizenry. But I lose patience completely . . . when I hear alleged in support of such a resolution this economic fallacy: ‘Besides, it is a way of creating jobs for the workers.’”

Continues Bastiat: “The state opens a road, builds a palace, repairs a street, digs a canal: with these projects it gives jobs to certain workers. That is what is seen. But it deprives other workers of employment. That is what is not seen . . . In noting what the state is going to do with the millions of francs voted, do not neglect to note also what the taxpayers would have done—and can no longer do—with these same millions.”

These words, written over a century ago, could have been penned yesterday! Today’s politicians are still prone to justify their high taxing, high spending policies by pointing to the employment opportunities they thereby create—indeed, Lord Keynes provided such politicians with an entire volume of incantations they can mutter when perpetrating what Bastiat called this “ruinous hoax.” Strip away the new terminology, and the old fallacy so castigated by Bastiat is revealed—the deadly fallacy of the forgotten cost.

The full import of this fallacy is concealed if we think of “costs” simply in terms of “prices.” A price is merely a cost expressed in monetary terms. It is extremely useful so to express a cost, relative money prices being the key to economic calculation.

In truth, however, the “cost” of a good a person acquires or of a service a person enjoys or of an activity in which a person engages signifies whatever that person has spent, surrendered, or forgone in acquiring the good, in availing himself of the service, or in engaging in the activity. The cost to me of purchasing a book may be not acquiring a theater ticket. The cost to me of spending a day in a park may be my not acquiring the income I could have earned from writing. The cost to me of using some land I own to grow wheat may be not using that land to run cattle or grow vegetables. Simply, in considering the cost of acquiring some good or using some service or engaging in some activity, one must consider every thing, activity, and state of affairs surrendered or for-gone in opting for one of two or more alternatives. Factors such as comfort, time, ease, anticipated future satisfactions, and the approval of other people may well be involved; indeed, any thing, activity, or state of affairs a person values can enter that person’s calculation of costs.

Some extremely significant implications for sound economic thinking follow from this insight. The primary point Bastiat makes, however, should be crystal clear. The good a person chooses is seen and felt and enjoyed; the money surrendered to acquire that good, and alternative uses to which that money could have been put, are by definition not seen and felt and enjoyed, and hence are easily forgotten.

Politicians, to take but one example, can triumphantly point to the jobs they have saved in, say, the textile and clothing industries by the imposition of tariffs. Not so obvious, however, are the costs these tariffs involve. In the absence of the tariffs, men and women may well have preferred to purchase relatively cheap imported clothing for themselves and their children. They would thus have possessed additional cash to spend on goods and services they value, but rank in importance below a certain amount of clothing.

Workers would have been employed to provide these goods and services. Other workers would have been employed to produce whatever goods the overseas suppliers of textiles di-rectly or indirectly accept in exchange for those textiles. Jobs in the textile industry are protected, but at considerable cost: The additional goods and services consumers could have enjoyed had they been able to purchase relatively cheap clothing, and the jobs in the production of these additional goods and services for home-consumption and the goods exchanged, directly or indirectly, for the imported textiles.

Add to that the even more intangible factor of forgone competition, and the forgone innovations and technological improvements that may well have characterized a threatened industry’s response to competition. Throw in the reality of the forgone liberty of individuals to exchange goods with whomsoever they please and for-gone bonds of interdependence forged between nations. It may be that what is surrendered and forgone is valued by many individuals less than what is realized by the imposition of tariffs, but that is not at the moment the point. The point simply is that what is forgone and surrendered is less visible than what is realized. Thus the ease with which men and women fall for the fallacy of the forgotten cost.

The truth is simple. It is summarized in the proposition, “There’s no such thing as a free lunch.” Every economic choice we make or politicians make for us has a cost. The cost is not obvious, being the valued opportunities for-gone. The beginning of economic wisdom, however, is to keep an eye open for what is not obvious, and thereby avoid the deadly economic fallacy of forgotten costs.

The Fallacy of Misplaced Value

In Canterbury Tales, Chaucer’s Parson states that the Seven Deadly Sins are “all leashed together.” So, it might be suggested, with the seven deadly fallacies of bad economics. They merge and overlap. It could well be claimed that the second fallacy in my list—“the fallacy of misplaced value”—and the first fallacy-“the fallacy of forgotten costs”—belong together. Yet it is useful, I think, to distinguish them.

Many medieval ethicists concerned themselves with what they called “the just price.” In so speaking, they were suggesting that the money prices of economic goods should reflect the “real” or “objective” value of these goods and services. This “real” value of an economic good was perceived as no less a quality of that good, than, say, the good’s weight.

As economic thought developed, a distinction was drawn between the “use value” of a good—the good’s usefulness to human beings—and the “exchange value” of the good—the alternative goods and services for which the good might be exchanged. Attention focused, however, upon the “exchange value.” What, people asked, determines this value? The most promising answer seemed to be that it derived from the productive resources used in its manufacture, labor being the most significant. Thus Adam Smith in his Wealth of Nations wrote that, “If among a nation of hunters . . . it usually costs twice the labor to kill a beaver which it costs to kill a deer, one beaver should exchange for or be worth two deer.” David Ricardo built on this foundation, and later Karl Marx, greatly indebted to Ricardo, developed his version—some would say versions—of the labor theory of value. The value of an economic good derived, insisted Marx, from only one of the productive resources embodied in that good: the “socially necessary labor time” its production involved.

In 1871, however, a radical challenge to this way of thinking appeared in the form of Carl Menger’sPrinciples of Economics. Menger insisted that the idea of “value” was crucial in economics, but he went on to argue that the value of an economic good was not a mysterious quality inhering in the good. Rather, when speaking of economic value one is referring to the relationship between an appraising mind and an object appraised. Value is invariably “value to someone.” Value, in other words, is subjective, varying from person to person, from time to time, and from situation to situation. Locating that value in a good rather than in the mind appraising that good is what I signify by “the fallacy of misplaced value.”

One distinction must be noted. In determining the value to me of, say, a book, I am ranking the book in relation to other goods on my own value scale. I rank it, let us say, above a theater ticket, and thus acquire the book at the cost of a forgone opportunity to acquire a theater ticket. I might also, however, appraise the purchasing power of a good—that is, estimate how much that good could be sold for. On this matter I can be correct or incorrect. Something “objective” is involved. Yet appraised purchasing power itself rests upon the countless subjective evaluations of my fellow market participants. It is from these hundreds of thousands of subjective evaluations that changing relative money prices in the market are born.

Elaborating how market prices—including the prices of the factors of production—derive from the subjective evaluations of market participants is a fascinating exercise. Linking the subjectivity of value to an understanding of costs in terms of forgone opportunities leads to some extraordinarily significant conclusions.

We are forced, for example, to assert that the cost of an economic choice—be it that of purchasing a book at the cost of the forgone opportunity to procure a theater ticket, or of producing jump ropes at the cost of the forgone opportunity of using the same productive resources in producing clotheslines—is known only to the person or group of people making the choice. We are further forced to insist that an objective measure of cost is simply not available, the individual’s evaluation of a forgone opportunity being by its very nature subjective. If this be granted, talk of “social costs” becomes suspect, to put it gently.

No less fascinating is the study of the attempts of many economists to avoid these conclusions, perhaps the most significant of these being Alfred Marshall’s tortuous synthesis, which featured a productive resource theory of cost on the supply side and a subjectivist analysis of cost on the demand side.

Suffice, however, that we be aware of the fallacy of misplaced value. When we hear Marxists darkly muttering of the “surplus value” expropriated by capitalists, or other economists speaking as though they could objectively compare the “value” of one distribution of economic goods to that of an alternative distribution, we should become suspicious.

The realization that all economic choices involve costs can lead, by a faulty leap of logic, to two further deadly economic fallacies that typically come together: “the fallacy of static wealth” and “the fallacy of the zero-sum game.”

The Fallacy of Static Wealth and the Fallacy of the Zero-Sum Game

These twin fallacies take the form of a sort of picture dominating the thinking of many people. Economic activity is depicted in terms of a poker game. One player’s chips are observed to have increased. Immediately one concludes that some other player has lost chips. Poker is, as they say, a zero-sum game: Gains enjoyed by one party must be balanced by losses suffered by another. So it is, people embracing the fallacies of “static wealth” and “the zero-sum game” insist, with economic exchanges. “Winners” must be balanced by corresponding “losers.”

Such was the “picture” held by advocates of the socioeconomic system known as mercantilism, the system Adam Smith so vigorously attacked. Perhaps the word “system” is somewhat misleading, for, as Thomas Sowell has noted, “[mercantilism] is a sweeping label coveting a wide range of writings, laws, and policies beginning in various European nation-states in the seventeenth century, still pervasive in the eighteenth century, and never completely extinguished till the present day.” (“Adam Smith in Theory and Practice,” in Adam Smith and Modern Political Economy, edited by Gerald P. O’Driscoll [Ames, Iowa: The Iowa State University Press, 1979] pp. 3-18) Yet crucial to the thinking of “the motley collection of businessmen, pamphleteers, and politicians” described as “mercantilists” was the perception of wealth as something static and of economies as gem-sum games.

According to the mercantilists, wealth was a constant, a given—like the chips in a poker game. If one community—and typically the mercantilists thought in terms of communities—improved its overall economic situation, another community must have lost out. That losing community, so it was claimed, must have bought more goods from the winning community than it had sold to that community, the difference having been made up in gold. As the seventeenth-century writer Thomas Mun expressed it, only “the treasure which is brought to the realm by the ballance [sic] of our foreign trade . . . [constitutes the amount] by which we are enriched” (England’s Treasure by Forraign Trade [1664; New York: Kelley, 1965] p. 21). To achieve an export surplus, mercantilist nations were characterized by governmental controls of a magnitude and scope which, as Sowell puts is, “probably exceeded anything seen in the twentieth century, either in capitalist economies or in most socialist economies” (ibid., p. 4).

What Adam Smith perceived, essentially, was first that “wealth” was not something static and given like gold, or, indeed, poker chips, but rather consisted of goods and services that could be created, and second that both parties to an economic exchange could improve their respective situations. This second perception is sharpened if we take seriously the truth ignored by those committing the fallacy of misplaced cost, namely, that the value of an economic good is not a mysterious quality somehow residing in the good but a relationship between an appraising mind and some object appraised.

If, in the absence of coercion, two individuals exchange goods or services, it can be only because each party to the exchange values, at least at the time of the exchange, what is obtained more than what is surrendered. Each anticipates enjoying a more valued situation by making the exchange than obtained before making the ex change. There are two winners, not one. This is a positive-sum, rather than a gem-sum game.

Given that Adam Smith in 1776 exposed the twin fallacies—the fallacy of static wealth and the fallacy of the zero-sum game—and given the clinching of this exposure by the insistence of economists following the lead of Carl Menger that the “value” of a good or service signifies the value of that good or service to someone, one might have thought that the two fallacies could be exorcised from people’s thinking. But not so.

Consider the following statement, taken from the published sermons of a cleric with whom I am fighting a somewhat protracted baffle:

“Think of an economic system in terms of some castaways on a desert island. The castaways have brought with them some fresh water, and they find a supply of bananas and coconuts on the island. Some of the castaways have greedily claimed that they own the water and the supply of food. They feast, but their fellow castaways starve. Some suffer, simply because others are selfish.”

The key phrase in this: “Think of an economic system as . . .” The speaker is describing a static situation: an island with a given supply of food and water. And that is precisely how not to think of an economic system!

If an economic system is to be compared to an island, let it be a large island inhabited by active people. Some people have devised a way of distilling fresh water from sea water. Some have established banana and coconut plantations. Some have become skilled at fishing. Some have bred wild goats. Some have learned to extract iron. Even the simplest are contributing to the process of wealth creation, say by tending a fire used for the distilling of water. The moment one starts thinking not in terms of goods simply provided like manna in the wilderness, but of men and women using the skills and imagination they possess and the raw materials at their disposal to create the goods and services they want, one is beginning to approach the reality of an economic system. And one has escaped from the deadly economic fallacy of finite wealth.

Consider another quotation from the same source:

“One does not have to be a genius to realize that, if some citizens in western nations are getting richer, then other citizens of these nations—or perhaps men, women and children of the Third World—are getting poorer. One does not have to enjoy a university education to realize that, behind newspaper headlines reporting company profits, are the many helpless little people who have been forced to endure losses. If Peter prospers, somewhere there’s a Paul Peter has robbed.”

Frankly, one does not have to be the possessor of a university education to realize that the author of these passages is peddling the discredited economic nostrums of yesteryear. He has embraced, and is luring his listeners and readers to embrace, the twin fallacies under consideration: the fallacy of static wealth and the fallacy of the zero-sum game.

In all fairness, I should add one qualifier. The fallacy of the zero-sum game is only a fallacy if the exchanges made by people are not coerced. The moment coercion enters the picture—be that coercion exercised by individuals who have discovered that improving their well-being by plunder is more congenial than doing so by production and voluntary exchange, or by governments using their coercive power for purposes other than the protection of citizens from such individually initiated coercion—then zero- and indeed negative-sum games abound. Sadly, however, few of those depicting economic activity in terms of zero-sum games are advocating the only economic system which avoids such “games”—the free market.

The Fallacy of False Collectives

The fifth deadly economic fallacy I would bring to your attention is the fallacy of false collectives. All of us are familiar with collective nouns: “the community,” “the state,” “a society,” “the working class,” “aggregate demand,” and even “the market.” These terms can be extremely useful, functioning as a sort of shorthand whereby we refer to numerous individual human beings and particular relationships between them. Problems are created, however, when we start speaking and thinking as though these terms signify “thing-like,” existing entities distinct from these individuals and relationships.

There may be some value, for example, in occasionally using such terms as “aggregate demand” and “aggregate supply.” Mischief is afoot, however, when the real world that economics seeks to understand—the world of people seeking to improve their situations by using what they have to acquire what they want—is Supplanted by a purely imaginary world, a sort of ballet called “the economy” starring the two dancers “aggregate demand” and “aggregate supply.” Lost in that imaginary world one is tempted to get into the act, so to speak.

Why not play choreographer? Why not improve the performance by stimulating “aggregate demand”? There is nothing wrong with this fantasy if fantasy it remains, but when the real world of economic activity is subjected to governmental activities described as “stimulating aggregate demand,” disaster can result.

Indeed, there are dangers inherent in aggregates even if one avoids the fallacy of treating these aggregates as concrete “things.” As Madsen Pirie observes in The Logic of Economics (London: The Adam Smith Institute, 1982), “When we use numbers we lose information.” A study of “apples” dictates indifference to information about the particular weight, shape, taste, and so on of each component apple; a study of “fruit” dictates indifference to further detailed information. Yet in economics, as is the case elsewhere, truth often lies in the details.

Suppose we are thinking of the phenomenon of involuntary unemployment. We are wondering if the phenomenon is related to wage rates. We do our homework. We reach a fairly general conclusion: If men and women are to use what they have to acquire what they want, they must direct their productive efforts in a way that takes account of the changing tastes and preferences of their fellows, the changing skills and technologies available to a community, the changing relative scarcities of raw materials distributed globally, and so on. We further conclude that information about such realities is available only when it is encoded in changing relative money prices in a free market.

We note, for example, that a rise in the price of one product relative to others tells both consumers and producers what they must do to improve their situations, and constitutes an incentive for these people to act. We finally conclude that changes in the prices for various forms of labor in various activities encode the best information available in a large and complex society for what we might call the “distribution” of labor.

A downward move in the wage level available for people of certain skills in a particular industry, and an upward move in the wage level available for people of different skills in another industry, “informs” people as to what skills it is desirable to acquire and in what industry it is desirable to seek employment. We thus conclude, perhaps, that politically determined or sanctioned measures preventing wage rates from moving downward in certain industries or arbitrarily forcing them upward in other industries deprive people of the information they need if some sort of correspondence is to obtain between the distribution of various forms and quantities of labor and the distribution of demand for these forms and quantities of labor.

Suppose, however, that we attempted to tackle the problem, thinking only of some abstraction called the “unemployment rate” and the “average wage level.” There is no way that, so thinking, we would find ourselves looking askance at measures interfering with changes in relative wage rates. Inevitably, economic theorists and politicians embracing the fallacy of false collectives are destined to lead men and women to economic disaster.

The Fallacy of Centralized Planning

The sixth deadly economic fallacy I have called “the fallacy of centralized planning.”

The defining economic question can, perhaps, be expressed thus: “How are men and women to use what they have—skills, raw materials, information, and time—peacefully to acquire what they want?”

Some components of an answer are reasonably apparent. For example, the adverb “peacefully,” which precludes an answer to the question in terms of the oldest labor-saving device known to humanity—the use of violence to expropriate desired goods from men and women creating these goods—demands, I suggest, some adopted practices or accepted institutions protecting people from coercive violence. Any response to the question which goes beyond the most primitive will involve, I submit, at least a rudimentary division of labor. But the activity I particularly wish to focus upon is that of coordination.

Historically, human beings have discovered but three ways to coordinate their productive efforts so that they more or less successfully use what they have to acquire what they want: coordination by tradition, coordination by political edict, and coordination by “the market”—and I am aware, incidentally, that this term “the market” is itself an abstraction or collective of sorts, pointing to individual men and women enjoying private property rights and voluntarily engaging in transactions chosen and negotiated by themselves.

Tradition is a satisfactory means of economic coordination—“planning” if you like—only for the most primitive and static of societies. The two options today deemed viable for large and complex societies are those of coordination by political edict and coordination by the market—the “command economy” and the “market economy.”

The fallacy of centralized planning has it that while in simpler times it may have been possible to coordinate the economic activities of men and women by the market, the complexity and rapid technological changes of today’s world make such a means of coordination impossible. It is claimed that we thus require expert planners working in conjunction with politicians.

I submit that this claim is a fallacy reversing the reality. Only the market can coordinate the economic activities of hundreds of millions of men and women in a rapidly changing world.

Consider, for a moment, a simple tribal society. Assume that the wants of its members are limited, the skills possessed by the “tribe-as-a-whole” are relatively few, and the raw materials available to the tribe remain more or less the same from year to year. In such a situation we can imagine tribal elders, or even the tribe as a whole, meeting and planning the tribe’s economic activities by reference to this readily available information about what the tribe “has” and what tribe members want.

Now consider, in contrast, a large and complex society. A vast menu of possible wants is available, individuals opting for widely different “lists” of wants and diverse rank orderings of these wants. Skills are highly specialized and are diffused through millions of people, and constantly change as new technologies become available. Resources are distributed globally, and are marked by constantly changing relative scarcities. It is literally impossible for political planners, however good and wise, to collate, synthesize, and make economic decisions by reference to this totality of information.

Yet as already noted, this information is available, in an appropriately distilled form, in a market economy. Changing relative money prices, which are determined by the interactions of millions of individuals seeking to improve their situations through what they produce and the voluntary exchanges they make, “encode” this data. There is planning and coordination, but it is the planning of countless individuals doing what they can to acquire what they want, and the coordination of these plans by what Carl Menger called the “organic phenomenon” of the market or what Friedrich Hayek called the “spontaneous order” of the market. The very complexity of modern societies, and the diffused, changing, and essentially private nature of much of the information which coordinated economic activity must utilize, combine to make central planning impossible.

It is tempting to suggest that this sixth deadly fallacy of bad economics is rooted in the first of the old Seven Deadly Sins: the sin of pride. It is humbling to acknowledge that the peaceful activities of the many can coordinate an economy with a subtlety and flexibility the deliberative planning of a super intelligent few could never realize. Perhaps it is this very pride that makes the deadly fallacy of centralized planning so attractive.

The Fallacy of Market Mastery

The seventh and final deadly economic fallacy to which I would draw your attention I have called “the fallacy of market mastery.” This is the fallacy of those who claim that the market is a means whereby some people exercise power over others.

Consider, for example, this frequently heard statement about labor unions: “Were it not for unions, employers could set whatever wages they wished. Their economic power would be absolute!”

The model is clear. Capitalists allegedly enjoy power over those with only their labor to sell. The whim of employers would determine wages were it not for the bargaining power of unions—a power dependent upon the capacity of unions to prevent workers from accepting a wage lower than the “union wage.”

This claim could well lead us into an examination of a range of theories explaining how wages are determined: the subsistence theory of Malthus and Ricardo, the wage-fund theory of John Stuart Mill, and so on. Let us content ourselves, however, with briefly returning for a moment to the days of mercantilism—in particular, mercantilist France.

Unions as such did not exist. The government actually imposed maximum wage laws. Any employer who paid wages above a legally defined ceiling was charged with an economic crime, tried, and if found guilty, may well have been sent off to be chained to an oar in one of France’s sea-going galleys. The shocker is that numerous employers defied these maximum wage laws!

Why? The selfishness of employers, and the forces of even a grotesquely fettered market, led them to engage in their law-defying activities.

Suppose, for example, I am a factory owner in mercantilist France. By taking on an additional worker I can increase the hourly output of my factory by goods I can sell for $40. The money costs of the raw materials involved in producing these additional goods, and the money costs of the additional wear and tear on my machinery, come, let us say, to $20. The maximum wage rate the government allows me to pay each worker is $1. Each additional worker I can put on thus yields me an additional $19 an hour!

Now for the purposes of our discussion, let us assume the same figures apply in all industries. Each additional worker an employer takes on represents an additional $19 in the employer’s pocket. But to acquire my additional worker, I have to attract him from his present employment. To do that, I must content myself with, say, an extra $18.50 an houri can pocket, offering him not $1 an hour but $1.50 an hour.

Simply stated, employers must bid for a worker’s services. In this hypothetical situation, the critical figure is $20 an hour. At any wage rate below that figure, employers benefit by adding employees. At any wage rate above that figure, it doesn’t pay to add an additional employee—hence the damage caused by minimum wage laws. Wage rates tend toward the money value of the productive output of labor, and that is increased as the capital invested per worker increases.

The economic system in mercantilist France was anything but a free market. Yet such rudimentary and lettered aspects of the market as did exist were sufficient to generate what we might call “the mystery of the inexplicably generous employers.” Simply put, the market itself—the self-directed productive and exchange activities of individual market participants—determines wage rates, just as it determines all prices. Indeed, in an unfettered market economy, the profits of the entrepreneur, the interest accruing to the owners of capital and land, and the wages of workers, are all determined in this sort of way. They reflect the relative contributions of the entrepreneur, of the owners of capital and land, and of those selling their labor, to the productive process. That is the genius and, indeed, the beauty of the market.

For our purposes, however, it is sufficient to stress that given a market economy—and that entails the rule of general principles of conduct equally applicable to all proscribing the use of violence or threatened violence by any—the price for which individuals can sell their labor is set by the same process all prices are set, a process of competitive bidding for scarce resources and goods. No person or group of people exercises mastery over the market or is in a position arbitrarily to control the price of anything. All that anyone can do is to offer to exchange goods and services with his or her fellows.

Conclusion

Men and women once took the Seven Deadly Sins with desperate seriousness. Pride, envy, anger, sloth, covetousness, gluttony, lust: the list was familiar. Preachers, and writers such as Chaucer and Dante, depicted in considerable detail the dire consequences of actions informed by these realities.

I have referred to seven fallacies. The fallacy of the forgotten cost. The fallacy of misplaced value. The fallacy of finite wealth. The fallacy of the zero-sum game. The fallacy of false collectives. The fallacy of centralized planning. The fallacy of market mastery. There is no need for me to depict the dire consequences of actions informed by these fallacies. They are familiar to all who contemplate human history, both ancient and contemporary. Familiar also, however, are the consequences for a people who seek to use what they have to acquire what they want in ways rooted and grounded not in these fallacies but in economic truth. May the liberty and the plenty that such truth alone makes possible be enjoyed by ourselves, by our children, and by our children’s children!

Politicians Exploit Economic Ignorance

Our Economics Knowledge Deficit

The Economic Delusions of the Political Class

Give Capitalism a Chance

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Why is the Church Silent on Economics and Government?

America is currently in the cross-hairs of a dangerous, subversive, Marxist revolution.  The streets are seething with protesters demanding the demolition of capitalism, the equitable redistribution of wealth and the establishment of a socialist state.

Why is the church silent?

Young people, having spent the past 12 years in a government-controlled education system that left them ignorant of history and economics, indoctrinated with class envy and devoid of a moral compass, are naturally turning their disillusionment with the stagnant economy towards “the rich” they have been taught are to blame for all the world’s injustices.   They don’t know how (or where) to constructively direct their frustrations.

Why is the church silent?

Leftist churches who subscribe to the Liberation Theology heresy teach their followers that the key to bringing God’s kingdom “on earth as it is in heaven” is to establish an earthly socialist utopia.

Why is the church silent?

Many Christians have no idea how to answer the most basic questions about Biblical economics:

  • What does the Bible say about private property?
  • Is redistribution scriptural?
  • Should Christians support the Welfare State?
  • When scripture talks about justice for the poor, is it referring to “economic equality” or “equality before the law”?
  • Is it Biblical for banks to charge interest?
  • How about for governments to devalue currency (create inflation)?
  • What is the Biblical role of government in people’s lives?
  • The Bible tells us to pay taxes, but does that apply only for the legitimate duties of government, or also for all the unscriptural/unconstitutional things it wants to do?
  • Does Romans 13 mean we have to submit to EVERYTHING the government demands, even in areas outside of its scriptural jurisdiction?
  • What is a Biblical response to a government that has gone outside its scriptural boundaries?

Our nation is desperately looking for answers – answers that can be found in God’s Word.   The church must be ready and equipped to provide them, or this generation will have nowhere else but the world – and in this case, Marxist radicals – to turn for answers.

If your church is not prepared to meet this need, these resources are a good place to start:

Biblical Economics: A Commonsense Guide to Our Daily Bread

Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem

Prosperity and Poverty: The Compassionate Use of Resources in a World of Scarcity

The Moral Issues of Money

Stewardship, Compassion, Justice and the U.S. Budget Crisis

Christians Seduced By Socialism?

Worldview Revolution Taking Place in America

The impotent church and Romans 13

Chuck Colson: Time for the Church to Stop Crying and Start Reviving the Culture

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China: Dollar to Be ‘Discarded’ by World

It’s taken less than three years for Obama to take the strongest currency in the world and turn it into a cheap international laughingstock.

CNBC reports:

The man who leads one of China’s top rating agencies says the greenback’s status as the world’s reserve currency is set to wane as the world’s most powerful policy makers convene to examine the implication of S&P’s decision to strip the United States of its triple “A” rating.

In comments emailed to CNBC, Guan Jianzhong, chairman of Dagong Global Credit Rating, said the currency is “gradually discarded by the world,” and the “process will be irreversible.”

Read more at CNBC

China Demands US ‘Live Within Its Means’, Cut Defense Spending to Make Timely Payments

Why the Dollar’s Reign As World’s Main Reserve Currency Is Near an End

Mission Impossible: Rescuing the dollar

The Fed Trashes the Dollar

Chinese President Hu Disses the Dollar; Says U.S. System is a ‘Product of the Past’

Zell: Dollar’s Global Fall Will Be ‘Disastrous’ for US Living Standard

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Grocery Cart Economics: Why the price of Corn Pops keep rising

Anna Rittgers writes at Townhall:

I (like most women) do all the grocery shopping for my family, so I have first-hand knowledge of the rise in food prices. Women be warned, things will probably get worse: Earlier this month, the USDA projected the 2011 corn harvest will be even smaller than previously expected, causing corn futures to soar.

The basic principles of supply and demand are in part to blame: If demand for a good remains the same (or increases), and supply is reduced, prices will rise. In addition to being a staple for humans, corn is a chief component of livestock feed. So we can expect these higher corn prices to push grocery prices higher , and not just for corn-based food like fresh corn and corn meal. Dairy products, meats, and foods containing high fructose corn syrup will be more expensive to produce, and producers will pass along some of these increased costs to consumers via higher prices or smaller product sizes.

What caused the reduction in corn supply? First and foremost, crop prices are affected by the weather. Good weather and bumper crops bring lower prices; droughts and floods bring higher prices. Wet weather and flooding in the Midwest affected this year’s planting season, and thus farmers planted fewer acres of corn.

But the corn supply was tight and prices rising before the bad weather struck, thanks to the federal government’s corn ethanol polices. Around 40 percent of the nation’s corn harvest goes to ethanol production. That means that the supply of corn available for food was already relatively small even before bad weather affected planting.

In essence, Uncle Sam would rather you burn corn than eat it.

The oil crisis in the 1970’s sparked Congress’ interest in ethanol as an alternative fuel, but U.S. consumers never found it to be a viable replacement for gasoline. Ethanol is an inferior energy source . From the time it is planted, harvested, distilled, and transported, it takes more energy to make a gallon of ethanol than the gallon of ethanol itself produces. There are also concerns that ethanol brings its own unique environmental problems and, when burned, may produce more pollution than fossil fuels. There are reportsthat ethanol reduces gas mileage in cars. And absent any subsidies, a gallon of ethanol is still more expensive than a gallon of gasoline.

Since ethanol wasn’t going to make it in a free market, Congress decided to interfere and directly encourage domestic ethanol production. Starting in 1978, it instituted a number of measures to encourage farmers to grow corn for ethanol, including tax credits per gallon refined, tariffs on each gallon of imported ethanol (now at 2.5 percent of the value plus 55 cents per gallon), corn crop subsidies, government-guaranteed loans to cover up to 90 percent of plant construction costs for ethanol producers, and tax credits for small-scale ethanol producers (currently 10 cents per gallon). Blenders also get an excise tax credit of 45 cents for every gallon of ethanol they blend with gasoline.

As the supply of corn ethanol increased, Congress stepped in yet again to address the lack of consumer demand. As part of the Energy Policy Act of 2005, the Renewable Fuels Standard (RFS) mandates that refiners blend 7.5 billion gallons of corn ethanol into gasoline by 2012. In 2007, Congress increased it to 15 billion gallons of corn ethanol by 2015. Thanks to Congress, consumers now have no choice but to buy gasoline blended with some percentage of ethanol (up to 10 percent) for their automobiles.

The effects of government intervention ripple through the economy. The artificial increase in demand for ethanol coupled with production and supply incentives persuades farmers (as good businessmen) to devote more of their land to growing corn for ethanol, and in turn growing less corn for food and animal feed. In fact, food prices began increasing after the RFS took effect in 2006.

Add in a severe weather season affecting planting, and you have world food prices skyrocketing. And when people have to spend more on food, they have less to spend on other goods and services, which is bad news for businesses everywhere. The only winners in this scheme are corn growers, agricultural conglomerates like Archer Daniels Midland (ADM), and the politicians perpetuating this scheme. Farmers are guaranteed a premium price for corn. Distillers and blenders get tariffs, tax credits, and mandated usage. The politicians get reelected.

By distorting the free market and favoring one industry (ethanol production) over others (food production), the federal government is actively making it more expensive for us to feed our families. When the economy was strong, average Americans could afford to overlook the interdependence of agribusiness and politicians. That time has passed. We should end ethanol’s dependence on the domestic taxpayer.

The Senate voted last week, in a largely symbolic measure, to allow the ethanol blender credit and import tariff to expire at the end of this year. Congress should take serious action and end ethanol subsidies.

Senate Votes To End Ethanol Subsidies, White House Threatens Veto

Get ready for higher food prices

Global Org. Warns of Possible ‘Social Instability’ as Food Prices Rise

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The Moral Issues of Money

Your silver has become dross, your choice wine is diluted with water.”  ~ Isaiah 1:22

A fantastic overview of the Biblical principles of currency and inflation:

My pastor is an awesome guy. He passionately loves God and people. He preaches from his heart — that is, with conviction — and he continually challenges me both morally and intellectually. I could not ask for a better pastor.

 

But on last Sunday I was asking for a better philosopher.

My problem was this: He was talking about the “ethics” of handling, spending, and earning money, and yet he never even defined what money is. It was like talking about war without mentioning weapons, or like discussing religion without uttering the word “God.”

Something was missing.

His sermon came from the book of James, chapter 5, verses 1 to 6:

Now listen, you rich people, weep and wail because of the misery that is coming on you. Your wealth has rotted, and moths have eaten your clothes. Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. You have condemned and murdered the innocent one, who was not opposing you.

Now, if you’re a “rich person,” this passage seems quite grim. But it’s not that simple of a read. With a little analysis and clear thinking, it is evident — and my pastor pointed this out — that James isn’t speaking to “the rich” per se, but to the capitalists — that is, to business owners, wealthy industrialists, and those who employ the masses. James says to them, Do not exploit.

James warns against four types of exploitation: (1) money debasement, (2) defrauding employees, (3) gluttony, and (4) legal/civil aggression.

Now my pastor did a fine job on addressing points 2, 3, and 4. He instructed us on the ethics of being good employees and workers. He talked about the ethics of running a business in a way that is fair and (economically) gracious to its employees. He even talked about the ethics of spending our money in a prudent and virtuous manner. Simply put, he made the case that money is value neutral — that is, it’s not “bad” to have money — and therefore it is what you do with your money that determines if you are an ethical (business) person.

The question remains, though, what is money?Download PDF And after that — what is ethical money?

Money is the most generally accepted medium of exchange in a society. Simply put, it is that which nearly every person in society will accept in exchange for something else. In the past, commodities like tobacco, shells, cotton, and even whiskey have had their moments as money, but gold and silver have proven — over thousands of years — to be the predominant forms of money. Note, however, that money was neither invented by government nor created by social contract. It resulted from the spontaneous convergence of many individuals voluntarily choosing to peacefully transact with each other. Gold and silver was their common language (Hülsmann, p. 23).

James understood this language as well, and it is evident from his terminology in the passage.

This takes us back to the point my pastor missed — James’s warning against the debasing of money. Verse 3 in the quote above reads, “Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire.”

Read more at the Ludwig Von Mises Institute

The Immorality of Government Inflation

Stewardship, Compassion, Justice and the U.S. Budget Crisis

Christians Seduced By Socialism?

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Inflating Our Way to a Government-Controlled Economy

Lee DeCovnick writes at American Thinker:

Spiraling food prices, record energy costs and federally mandated health insurance reflect this Administration’s slavish ideological devotion to the centralized planning of key sectors of the American economy. So, what are the current results of Obama’s indoctrination of America into progressive collectivism? Global food costs have risen an astonishing 29 % in the past year, and almost 4% a month between October and January of 2011. Retail prices for gasoline have doubled in the 26 months since Obama was inaugurated. And the Democratic majorities in Congress passed a mandated health insurance bill that is not only unconstitutional, but also riddled with exemptions, political payoffs while adding 159 new boards, commissions and programs.

The current quagmire of budget deficits coupled with the viral growth of the federal government continues to be carefully planned and executed. We can especially thank the silent and complicit MSM for allowing this radical Administration and Obama’s handpicked shadow government, the thirty-nine unconfirmed czars now running the Federal bureaucracies, to eviscerate trillions of dollars of earned capital. The Marxists’ natural enemy, the professional capitalists (the American “bourgeoisie” in classic Marxist terminology) are rapidly losing significant chunks of disposable income to inflation and energy prices without a formal tax increase. The first and second quartiles (the two lowest socio- economic populations) are more far more dependent on government subsidies then 26 months ago. Plus the federal government last week plummeted an additional $7.7 billion deeper into debt each day.

Using the silent complicity of the MSM, these progressive collectivists want an uncontested control of the six key sectors of the American economy: food, energy, healthcare, auto manufacturing, higher education and non-military government workers. Why this headlong plunge toward the centralization of planning and production? What is the end game?

Read more at American Thinker

Inflation: It’s Getting Crazy

Killer Combo of High Gas, Food Prices at Key Tipping Point

Deliberately Making Americans Poorer

Don’t be Fooled: Inflation is Here

Feed Me, Obama, Feed Me: The Plan for Food Dependency

Year Supply of Basics

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Inflation: It’s Getting Crazy

 

Your silver has become dross, your choice wine is diluted with water.”  ~ Isaiah 1:22

Is this not what we have done with our currency, watering it down until it is mere dross?   And now we must pay the price for ignoring God’s commands regarding debt, honest currency, devaluation, envy, theft and greed.

The Ludwig Von Mises Institute reports:

I’m pleased that we have run Frank Shostak’s piece this morning on inflation data, and it’s pretty alarming but it strikes me that the piece still understates the threat and the reality.

This morning at the store, a fruit drink I usually buy just went from $2.50 to $3.20 in something like two weeks. The apples I bought seem to have jumped 25%. The checkout lady confirmed soaring prices in isle after isle, and I noted that customers in front and behind me were scrambling for coupons and muttering about price hikes. We’ve already known that producers have been repackaging and shrinking their products for 12 months: this is always the first step before price increases. But this only works so long. Finally, the inevitable can’t be put off any longer.

CNBC reported yesterday that at a food industry conference, major suppliers were talking about increases of 4 and 5 percent on top of increases at the same level only last month. Past data already show crazy price increases on things like butter (20% YTD), lamb (18.9% YTD), bacon (11.3% YTD), and even potatoes (6% YTD). The explanation is always the same: weather plus rising demand.

Why is it that by the time price inflation comes around, everyone seems to forget about the money question? It doesn’t matter that the monetarists once seem to dominate the day with the quantity theory or that the Austrians have been talking about this issue for 100 years. When it comes to the reality, casual observers hardly ever mention money and monetary policy. So far, we are being told that it is mother nature at work plus consumer greed. I suppose next we’ll be hearing about producer gouging.

And yet the reality is there for anyone to see. The Fed created an unprecedented amount of reserves out of thin air and with recovery in the air, the banks are using them, causing the money creation. All of this is explained in detail in books such as The Inflation Crisis, And How To Resolve It – which might be the best journalistic reduction of Austrian monetary theory around.

American Thinker: The inflation disaster is near

Get ready for higher food prices

The Immorality of Government Inflation

Politicians steal your money through inflation

Inflation Driving Up Price of Food, Energy

Time to stock up: Building and stocking your pantry

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Federal Reserve is causing turmoil abroad

Inflation is theft. We have allowed our government to deliberately devalue our dollar in order to devalue our own irresponsible debt, and it’s causing painful price increases that hurt the poor worldwide. How is that moral?

In the Wall Street Journal, George Melloan explains why Ben Bernanke and the Federal Reserve are to blame for so much civil unrest:

In accounts of the political unrest sweeping through the Middle East, one factor, inflation, deserves more attention. Nothing can be more demoralizing to people at the low end of the income scale—where great masses in that region reside—than increases in the cost of basic necessities like food and fuel. It brings them out into the streets to protest government policies, especially in places where mass protests are the only means available to shake the existing power structure.

The consumer-price index in Egypt rose to more than 18% annually in 2009 from 5% in 2006, a more normal year. In Iran, the rate went to 25% in 2009 from 13% in 2006. In both cases the rate subsided in 2010 but remained in double digits.

Egyptians were able to overthrow the dictatorial Hosni Mubarak. Their efforts to fashion a more responsive regime may or may not succeed. Iranians are taking far greater risks in tackling the vicious Revolutionary Guards to try to unseat the ruling ayatollahs.

Probably few of the protesters in the streets connect their economic travail to Washington. But central bankers do. They complain, most recently at last week’s G-20 meeting in Paris, that the U.S. is exporting inflation.

China and India blame the U.S. Federal Reserve for their difficulties in maintaining stable prices. The International Monetary Fund and the United Nations, always responsive to the complaints of developing nations, are suggesting alternatives to the dollar as the pre-eminent international currency. The IMF managing director, Dominique Strauss-Kahn, has proposed replacement of the dollar with IMF special drawing rights, or SDRs, a unit of account fashioned from a basket of currencies that is made available to the foreign currency reserves of central banks.

About the only one failing to acknowledge a problem seems to be the man most responsible, Federal Reserve Chairman Ben Bernanke. In a recent question-and-answer session at the National Press Club in Washington, the chairman said it was “unfair” to accuse the Fed of exporting inflation. Other nations, he said, have the same tools the Fed has for controlling inflation.

Well, not quite. Consider, for example, that much of world trade, particularly in basic commodities like food grains and oil, is denominated in U.S. dollars. When the Fed floods the world with dollars, the dollar price of commodities goes up, and this affects market prices generally, particularly in poor countries that are heavily import-dependent. Export-dependent nations like China try to maintain exchange-rate stability by inflating their own currencies to buy up dollars.

Mr. Bernanke has made it clear that his policy is to inflate the money supply. His second round of quantitative easing—the controversial QE2 policy to systematically purchase $600 billion in Treasury securities with newly created money—serves that aim. But even for the U.S. it is uncertain that Mr. Bernanke can hold to his 2% inflation target. Oil is going up. Foodstuffs are going up. And when the Fed sneezes money, the weak economies of the world, and the poor masses who are highly vulnerable to price rises in the necessities of life, catch pneumonia.

Read more at the Wall Street Journal

Fed Policy Burns Down the Middle East, Who’s Next?

Food Riots: Is Bernanke Partially to Blame?

Global Org. Warns of Possible ‘Social Instability’ as Food Prices Rise

The Fed Trashes the Dollar


Click Here For The Wall Street Journal

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