Prodigal nation

The Constitution gave Congress the power to coin money, not a central bank cartel controlled by banks. In 1914 the Federal Reserve was established to create an elastic currency to promote inflation and provide liquidity. However, inflation is a sin. It is immoral to intentionally dilute the value of money.

Diluting money breaks the eighth commandment by stealing or defrauding others. Leviticus 19:35 states, “You shall do no injustice in judgment, in measurement of length, weight, or volume.” Inflation tends to redistribute wealth in the hands a few rich who own assets on credit and hurt the poor on fixed income and savers. After the U.S. removed the gold backing from money, the dollar became fiat money, or paper declared money by government decree.

Total public and private debt in the U.S. expanded from $1 trillion in 1964 to $67 trillion currently. Public debt is approaching $22 trillion and there is also $46 trillion in unfunded liabilities for Social Security, Medicare and Medicaid.

When the Chicago Board of Trade allowed cash settlement on commodities contracts it opened the door for gambling on such items as currencies, interest rates, and stock market volatility. A decade after the crash of 2008, U.S. banks have a notional exposure of $600 trillion in derivative contracts.

Banks measure their exposure based on net risk if they have a short and long position. However, during financial crisis, if counterparties fail, net risk can become a notional or uncovered risk overnight. Derivatives do not spread risk, they multiply it and concentrate it with a few big banks. The next collapse will not be stopped by government because it will be larger than governments.

By rejecting God revealed in Scripture and by embracing naturalistic materialism, the modern mind has no grounds for holding to any ethical standard or reason for esteeming virtue over vice. Keynesian economics provides intellectual rationale for rejecting the Christian virtue of saving and deferring present consumption. Keynes promoted excessive extravagance. The United States has become a prodigal son.

Steve Johnston

Brookings

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