Money Cartel

Gary North explains that central banking is a cartel.

Monetary theory should therefore reflect the presuppositions, logic, and evidence that undergird general economic theory. Any attempt to segregate monetary theory from general economic theory is an admission of the failure of the general economic theory. This general theory is not general, because it does not apply to monetary theory.....

Nowhere in introductory economics textbooks do we find an analysis of central banking that is consistent with the chapter on economic cartels. No textbook in money and banking begins with an analysis of the banking system in terms of the economic analysis that applies to a cartel. Yet modern banking is unquestionably a cartel.

When money is controlled by a cartel that uses political power to keep out entrants into the industry, we can be sure that the members of this cartel are acting in their own economic self-interest. They are not acting on the basis of concern for the general public. They are not public-spirited individuals; they are self-interested individuals, just like everybody else.

Here is an example. When members of the school of economic thought called "public choice theory" analyze any government- protected cartel except central banking, they begin by showing how government protection of the cartel leads to higher prices, reduced productivity, and actions in opposition to the public interest. Yet when public choice economists write a chapter on central banking, they abandon their entire system of economic analysis. They speak of central bankers as public-spirited individuals who must be protected from interference by self- interested politicians, because banking is too important to be left to politicians. What banks need is legal independence, they say. What they need is immunity from democracy.

They seem completely oblivious to the fact that they are totally schizophrenic, analytically speaking. This goes on, decade after decade, yet other economists do not point to this inconsistency, precisely because they hold the same position.

I deal with this topic at Deposits and Loans and Mistrust and Banks.

Schizophrenic Economists

Gary North is currently publishing a series on money in his fortnightly newsletter. His latest article, highlights one of the most serious problems with modern economic theory.

If monetary theory is accurate, it is a subset of general economic theory, which must also be accurate. Monetary theory is not an independent theory of human action that is divorced analytically from a general theory of human action.

Only the Austrian School of economics believes this and adheres to it in practice. All other systems of economic thought segregate monetary theory from general economic theory.

There is a reason for this. Bankers for five centuries have benefited from a grant of privilege from the state: a legal privilege. Banks are allowed to write contracts that are prohibited to all other profit-seeking agencies. They are allowed to promise depositors immediate payment, yet they lend the depositors' money to borrowers.

Non-Austrian School free market economists do not challenge this legal arrangement, either in the name of economics (counterfeiting) or law (special privilege). They accept it. They do more than accept it. The applaud it, but in a value- free, totally neutral academic way. They are apologists for this grant of privilege.

They pay an intellectual price for their cheerleading. They cannot conceptually integrate this grant of privilege into their general theory of economic causation, which rests on a concept of private ownership and enforceable contracts. They make no attempt to square the analytical circle. They remain silent about this anomaly.

They pretend that their various rival theories of economic causation are coherent. They aren't.

This disconnect between monetary theory and general economic theory is the major flaw with modern economics. It is also the main reason that mainstream economisst did not foresee the financial crisis.

Gems from the North (15) - No Christian Ayotollahs Please

Here is a quotation that is never used by those who like to cite Gary North as an example of a Christian Ayatollah.

What it means is that the long-term goal of Christians should be the preaching of the comprehensive gospel of salvation, including the supernatural healing of all institutions. Christians should also pray for and expect a huge revival, so that a vast majority of Americans will convert to saving faith in Jesus Christ. If this future postmillennial revival does not take place, then any attempt to establish a national covenant will fail, long-term. It is not our job as Christians to ram religion down everyone’s throat. We must recognize that if postmillennialism is wrong, then the pursuit of the national covenant really is utopian. Worse; it would require massive coercion or deception. We dare not imitate the deceptive strategy of James Madison and his national covenant-breaking accomplices. We also dare not be premature, as Cromwell was.

The first step is to adopt a slogan. Every revolution needs slogans. Here is mine: politics fourth. First comes personal faith in Jesus Christ as Lord and Savior (not just Savior). Second comes Church renewal. There can be no successful reformation of society without first beginning a reformation of the Church. Third comes family renewal. This involves pulling your children out of the public schools. Fourth comes local politics… From there we go to state and national politics. Before national political renewal can begin, we must first do what we can to make it clear to the politicians and the national government that a major religious transformation has already taken place. Without the widespread movement of the Holy Spirit, this cannot happen (Political Polytheism pp.558,559).

As the Christian humanist pendulum is swinging back to the left, I see Christians becoming more and more enthusiastic about using the power of the state to sort out the problems of the world. This is very dangerous. Without a mighty outpouring of the Holy Spirit, social transformation cannot come. We must not make the same mistake as Cromwell and rush ahead of the Holy Spirit. He does not want us shoving our religion down the throat of an unwilling world.

Gems from the North (14) - Political Polytheism

I will end this series with a couple of quotes from another book, Political Polytheism. At 660 pages long, this is not for those with weak arms, but it provides information about the origins of the American political system that you would not have got in your high school civics class. Everyone who is serious about understanding the American system should read it. Here is the warning at the beginning of the book.

Without biblical guidance from God’s covenant people, the whole world is now adrift in the rapids with a shattered rudder and a conked-out engine. That growing roar we now hear is ominous. Thus, a handful of Calvinist scholars and activists are today trying to make up for lost time and to recover lost intellectual territory before the turn of the millennium. We perceive that the whole world is in the throes of a massive religious, social, and philosophical upheaval, and the dominant ideologies of the last two or three centuries are no longer able to hold together the fragmenting center. What will be the new center? We know what it had better be: Jesus Christ. It does no permanent good to swing back from left-wing Enlightenment thought (socialism and social revolution) to right wing Enlightenment thought (capitalism and social evolution). (It will, however, increase per capita economic productivity and therefore per capita income.) We do not need a perpetual humanistic pendulum; we need a progressive manifestation of the kingdom of God in history.

In the midst of social and intellectual revolutions come major paradigm shifts. Entire worldviews change, and they can do so within a single generation. Judging from the extent of the visible turmoil today, as well as the intellectual turmoil, the next paradigm shift ought to be a whopper. We know that whatever philosophies today undergird world civilization are slipping rapidly. In fact, we are seeing serious attempts by scientists and social theorists to make slipping the basis of the next dominant worldview. The question is: What will be next? When the shift begins in earnest, Christians had better be in the paradigm marketplace with a table full of books and strategies containing principles for solutions to every major problem. A few manuals on direct action wouldn’t hurt, either.

Before this task can be accomplished, however, Christians must jettison the last three centuries of philosophical compromise. Baptized humanism has produced muddled thinking and worn-out, discarded humanist solutions to major social problems. It is time for a change. Let us pray that this change will be in time (Political Polytheism (1989 pp.6,7).

This was written in 1989, when the political pendulum was swinging to the right. That swing has now completed and the Christian humanist pendulum is swing back to the left. We are still seeing the worn out discarded humanist solutions to major social problems. I do not see much sign of the Christian books of strategies and solutions that we really need.

Gems from the North (13) - Comprehensive Gospel

The Great Commission is comprehensive – as comprehensive as all the sins that engulf the world. Redemption is comprehensive – also as comprehensive as all the sins that engulf the world. Therefore, biblical theology is equally comprehensive. It must include the principles – laws – by which society can and must be reconstructed. Any theological system that abandons the very idea of such principles of social restoration has understood neither the comprehensive rebellion of modern autonomous man nor the comprehensive redemption offered to him (Millenialism and Social Theory p.259).

When Brian McLaren says that we need a more comprehensive gospel, Christians get stirred up. I find it hard to get excited, because I have heard it all before. Gary North said something similar in the quote above way back in 1990, but was largely ignored.

Gems from the North (12) - Holy Spirit and Victory

The premillennialist expects the good times to come to earth when Christ returns bodily to overcome the weakness of the Church in history. What premillennialism ignores is the doctrine of the Holy Spirit. It also denies the doctrine of God’s irresistible grace. What the premillennialist ignores is the question of the two angels to the witnesses of Christ’s ascension: “Ye men of Galilee, why stand ye gazing up into heaven...?“ (Acts 1:11). Then the witnesses returned to Jerusalem to await the coming of the Holy Spirit. But premillennialist are still standing around culturally, gazing in hope at heaven. In the meantime, their pockets are being picked by the humanists. ‘Just keep on looking up,” the humanists tell them. “Let us know if you see something.”

Jesus said it was better that he went away, because then the Holy Spirit could come. He sent the Holy Spirit to establish his Kingdom of God on earth. The Holy Spirit can do more than Jesus could, either in his earthly ministry, or on his return, because the Holy Spirit has all the power of God, but is not limited to being in one place like Jesus.

Gems from the North (11) - Tremendous Opportunity

We have a tremendous opportunity today. We are seeing the death of a major faith, salvation through politics. While the rhetoric of the imminent, transnational New World Order is escalating, the economic vulnerability of all government welfare programs becomes more and more visible. The reality of modern political life does not match the reality, any more than the reality of Roman political life in the third century AD matched the messianic announcements on the coinage. Reality will soon triumph. Humanism as a rival religion is breaking down even as it asserts the apotheosis of the New Humanity.

Something must be put in its place. There is no neutrality. There can be no covenantal vacuums. The gangs of Los Angeles testify loudly to this. The Church, however, is not equally confident about this. Christians look at the religion of humanism as if it were unbeatable. They have forgotten what God does each time in history when covenant-breaking men begin building the latest Tower of Babel. They no longer believe in God’s negative corporate sanctions in history.

Churches today are not prepared for the coming of mass revival: theologically, institutionally, financially, educationally, or morally. If we get a mass revival, new converts will inevitably ask: “How Should We Then Live?” If this new life in Christ is defined as “meet, eat, retreat, and hand out a gospel tract,” the revival will leave one more egg on the face of God’s Church (Millenialism and Social Theory pp.326,327).

When this revival comes, I want to be able to answer the question: What will the economy look like in a society where most of the people are Christians?

Gems from the North (10) - Standards

Social theory requires a unified, authoritative concept of good and bad, right and wrong, efficient and inefficient. To be consistent, it must affirm the existence of known or at least knowable standards, and it must also affirm that there is a sanctioning process that rewards the good (or the efficient) and penalizes the bad (or the inefficient ). If the standards are affirmed without also affirming appropriate sanctions, then there is no way for society to insure justice. There is also no way for it to insure progress. Modern Christian theology has denied both biblical law (the standards) and God’s historical sanctions. It has therefore sought the standards of society elsewhere.

Dispensationalists have generally avoided even discussing social theory. They recognize their theological dilemma and have prudently remained silent. Neo-evangelical social scientists have spoken out in the name of Jesus, and have sounded very much like a cassette tape of some abandoned political program of a decade earlier. Amillennialists have generally done what the neo-evangelical premillennialists have: baptized secular humanism, meaning politically liberal humanism. They have generally adopted the worldview of the professors who certified them at humanist universities. There has to be a better way. Christians will never beat something with nothing (Premillenialism and Social Theory p.208,209).

Gems from the North (9) - Continuity of Evil

The kingdom of God grows little by little. Meanwhile, God’s sanctions against evil societies break the continuity of corporate evil.

God’s kingdom and Satan’s are locked in mortal combat. Both kingdoms seek continuity. Both seek victory. Neither is ready to surrender to the other. But the terms of battle, like the terms of surrender, are covenantal. This is not a battle that will be decided in terms of political power or any other kind of power. It is not a power play. It is an ethical battle in history based on rival covenantal commitments. If it were a power play, the conflict would have ended in Eden. There are, however, negative corporate sanctions that are applied by God in history to His covenantal enemies. These sanctions are applied because of corporate covenant-breaking by people in history. He breaks the continuity of corporate evil. He may replace one society’s corporate evil with another society’s corporate evil, but He does not allow the compound growth of the same social evil.

Meanwhile, He shows kindness unto thousands of generations of those who love Him and keep His commandments. This is God’s compound growth process for covenant-keeping in history. Little by little (with occasional discontinuities), God’s kingdom expands over time (Millenialism and Social Theory p. 284).

Gems from the North (8) - Sanctions in History

What I argue in this book is that law, historical sanctions, and eschatology are uniquely linked together in ways denied by virtually the whole of the modern Church. God’s stipulations (laws), God’s historical sanctions, and God’s kingdom triumph in history are a unit. This is not to deny that God’s absolute predestinating sovereignty is what guarantees His kingdom’s historical triumph, or that Christians, as members of God’s Church, are not God’s kingdom representatives in history. But the great debate has come over the inextricable relationship between biblical law, God’s historical sanctions, and cultural progress over time. Yet most modern covenant theologians expressly deny this connection (Millenialism and Social Theory pp.39-40).

Nevertheless, the program of the Church is peaceful positive displacement, soul by soul. God wins, Satan loses: soul by soul. Who brings the necessary negative corporate sanctions? God does, not through the Church but through such means as pestilence, plague, and war. The Church is supposed to pray for God’s negative discontinuities in history against entrenched corporate evil. This is why God gave us His imprecatory psalms to sing and pray publicly in the Church (e.g., Psalm 83). Here is the biblical program for cultural transformation. First, the Church is to bring continuous positive sanctions into a covenant-breaking culture: preaching, the sacraments, charity, and the disciplining of its members (a negative sanction by the Church, but positive for society: it keeps other Christians more honest). Second, the Holy Spirit must also bring positive discontinuities into individual lives: conversion. This is at His discretion, not ours. Third, a sovereign God in heaven must bring His discontinuous, corporate, negative sanctions against covenant-breakers in history. Notice, above all, that it is God who brings negative corporate sanctions in society, not the Church. The Church is an exclusively positive agent in society. I stress this because of the continuing misrepresentation of our position on social change by critics, both Christian and pagan (Millenialism and Social Theory pp.134-135).

God advances his kingdom in three ways. The Church disciples christians. The Holy Spirits brings unbelievers to salvation. God brings negative sanctions against societies that reject him. The sanctions ensure that evil does not get out of hand.

To complement the praying of imprecatory Psalms, we need a prophetic voice to warn of God's judgement (sanctions) against societies that choose evil.

Gems from the North (7) - God's Sanctions in History

Gary North is one of the few theologians who deals seriously with the working of God's sanctions in history.

Without visible sanctions in history, there can be no public testimony to the truth or falsity of any assertion regarding the effectiveness of any proposed system of social organization. The theorist must be able to offer evidence from history that the application of his logic in history will have the positive results that he promises This is not philosophical pragmatism; this is biblical covenantalism: the nations can see the benefits that come from obeying God’s law. They can also see the righteousness of this law-order (Deut 4:4-8). The work of the law is written in their hearts (Rom 2:14-15). Righteousness does not produce bad fruit: “For a good tree bringeth not forth corrupt fruit; neither doth a corrupt tree bring forth good fruit” (Luke 6:43).

In any free society, visible sanctions must be imposed in terms of a publicly announced system of law (Deut 31:10-13). These public sanctions must be predictable. This is what law enforcement is all about: the imposition of negative sanctions against publicly proscribed behavior. Try to run a family or a business without law and sanctions. It cannot be done. But if you accept (“sanction”) the idea that a legal order’s sanctions can Iegitimately be random in terms of fundamental law, you have accepted the legitimacy of tyranny and arbitrary rule.

Nevertheless, Christian theologians insist that there is neither a required system of biblical civil law nor corporate sanctions imposed by God in terms of this binding legal orders The rejection of the idea of the reality of God’s corporate covenantal sanctions in history parallels the rejection of the idea that biblical covenant law is supposed to govern society formally. Those who deny that biblical law is God’s required corporate standard also hasten to assure us that God does not bring negative sanctions against societies that ignore this standard (Millenialism and Social Theory pp.197-188).

Gems from the North (6) - Decentralization or Terror

God, being omnipotent, omniscient, and omnipresent, can afford to allow self-government to men and angels. God is not dependent on His subordinates, so He has the ability to delegate responsibility. Because He is absolutely sovereign, He can safely delegate partial sovereignty to His representatives. This is the great mystery of God’s sovereignty: God is totally sovereign, yet He delegates authority. Those under His authority are responsible
to Him.

Satan, in contrast, imposes only one covenant. He imitates God’s sovereignty, but he cannot imitate it to the extent that he can afford to decentralize. He imitates it as a creature must, centralizing power rather than delegating it. Satan’s system of control is a top-down bureaucracy. It has to be. He is not omnipotent, omniscient, or omnipresent. He has to rely on his subordinates to provide him with information and to execute his commands. Yet they are all liars and rebels, just as he himself is a liar and a rebel. He has to manage incompetents. So he must use terror and coercion to achieve his goals. This is why Satan’s model is always the State, which has the power of the sword, of life and death.

Satan’s attempt at God’s cosmic personalism results in the personalism of the tyrant who seeks to substitute his will for the will of his subordinates. Satan is a rebel against lawful authority. So are his followers. He therefore dares not allow his subordinates freedom. He must control them from the top down, which means that Satan’s system of rule is power-oriented, not ethics-orientated. He exercises power in history through terror; God exercises power through service. Jesus Christ is the archetype servant in history; Satan is the archetype tyrant and terrorist. Thus, Satan has to centralize power. He could govern his hierarchy in no other way.

Initiative remains at the distant top. How can Christians conduct an organized campaign of cultural conquest without becoming either a scattered occupation force or a top-down bureaucracy? Only by honoring the principle of decentralization, meaning local initiative with a bottom-up appeals court for settling disputes. This means that Christians must also honor the principle of lawful jurisdiction. Each institution, as well as each individual, has an exclusive God-given area of lawful authority. To violate these boundaries is to invite tyranny. (Millenialism and Social Theory pp.324,325)

Gems from the North (4) - Cartoon

The preface of Millenium and Social Theory has a Herman cartoon that sums up the issue.

Gems from the North (3) - Bad Eschatology

The reason why there has been so little serious in social theory is bad eschatology.

Both premillennialism and amillennialism deny that there will ever be a Christian civilization prior to Christ’s Second Coming...

A few premillennialist and amillennialists have offered very cogent criticisms of modern humanist culture, but these critics have never offered a uniquely Christian alternative to the humanism they reject. This exclusive negativism has the effect of discouraging their followers. This lack of a legitimate cultural alternative has persuaded most Christians to shorten their time horizons. They lose hope in the future: present-orientation.

If there is no cultural alternative to humanism available in history, then the only reasonable Christian response is to pray for either the Rapture (dispensationalism) or the end of history (amillennialism). (Historic premillennialists and post-tribulational dispensationalists believe that the millennium will come only after Christians have gone through Armageddon and the Great Tribulation. I have no idea what they pray for.)

Premillennialist and amillennialists share a commitment to a coming cosmic discontinuity as the Church’s great hope in history: deliverance from on high (and in the case of premillennial dispensationalism, deliverance to on high).....
This affirmation of a coming cosmic discontinuity cuts the ground from under the Christian who would seek to discover a uniquely biblical social theory. It also undercuts the incentive for social action. Social action becomes a holding action at best and a kamikaze action at worst.

The Church is believed to be incapable of changing history’s downward move into cultural evil. Social action is therefore adopted on an ad hoc basis: solving this or that immediate local problem. Effective Christian social action supposedly can accomplish little; therefore, it requires neither a long-term strategy nor a systematic concept of ethical cause and effect. Political power, not ethics, is viewed as historically determinative. Power is seen as a necessary evil today. Christians are supposedly never to exercise political power in the “Church Age.” Either they cannot or should not exercise it (possibly both).

The result is predictable: the absence of Christian social theory.(Millenialsm and Social Theory (pp 94-95).

This is an amazing situation. Most Christians are commited to this world going down the gurgler. They have more faith in the power of evil than in the power of the Holy Spirit to change human hearts and through changing human hearts to transform society. It is fairly easy to see who benefits most from pessimistic eschatology. I presume that tells us something about where it came from.

Gems from the North (2) - Social Order

I became a Christian in 1974, just a few months before sitting the final exams for my masters degree in Economics. One of the papers dealt with in Marxist economics. In my exam paper, I wrote that Marxism failed because if failed to create the new man that socialism promised. With all the zeal of a new Chrisitan, I did a little rant declaring that Christianity was the answer to the problems of economics, because the cross and the gospel made “new man” a real possibility. The new birth made by possible by Jesus can accomplish what Marxism has failed to do.

A few months later, one of my lecturers (not a Marxist, but an atheist) challenged me about what I had said. I listened carefully because I presumed that he was the one who had ensured that I was awarded a final grade based on my full years work, rather than one based on my preaching in the final exam.

This non-Christian man said that it is fine to say that the Christianity is the answer, but to be persuasive, I would need to show what society would be different, if everyone did become a Christian. He challenged me to start thinking about that issue.

We did a literature search and found almost nothing. There were a couple of books by Christians offering "warmed-over" socialism, but nothing else (he could see the difference). The best we could find was a couple of books applying Islamic principles to economics. They were at least an example of what could be done. That was a shocking discovery.

I went on to do other things but the question of my lecturer continued to haunt me. What would society look like if every member of society was a Christian?

Gary North was the first writer that I encountered who was actually grappling with this issue. The thing I found refreshing was that he took the Bible seriously and attempted to apply its principles to economic and political issues.

The following quote explains his perspective on why these things are important.

It has been almost two thousand years since the birth of Jesus Christ, Savior of the world....... What is also remarkable – or not so remarkable, as this book will demonstrate — is that two millennia after the Incarnation of God’s Son in history, His followers have no idea what a saved world ought to look like. They have no blueprint for a uniquely biblical social order. There is no comprehensive body of materials that would point to a solution to this question: “How would a Bible-based society differ from previous societies and present ones?” Hardly anyone is even asking the question. Hardly anyone ever has. (Millennialism and Social Theory, p.16).