One of the main indications that the American government is seeking to establish itself as an alternative deity is its use of fiat money. Put simply, fiat money is money that is not tied to any fixed commodity like silver or gold. Instead, it derives its value from its relative scarcity and the confidence that members of the society place in it and the institutions issuing it.
Now, in one sense, all forms of money are arbitrary. Gold and silver have no “intrinsic” value; they only have the value that we ascribe to them as representatives of actual goods. The reason that gold and silver have long been used as mediums of exchange is because they are moderately scarce, accessible, durable, divisible, and easily identifiable. What’s more, unless you are King Midas, there is a fixed supply of gold (or silver), making it very difficult to inflate the money supply.
Until the 20th century, most developed societies used either gold and silver as money, or they used the Gold Standard, in which paper money is backed by and can be exchanged for gold. In 1971 President Nixon completely terminated what remained of the U.S. Gold Standard. Now, all of our currency is fiat money. By “fiat,” we mean that the money comes about simply as the result of the arbitrary will of the issuing institution. The money has value only because the government says so. In other words, they simply create the money ex nihilo, out of nothing.
Now, as Christians think about this state of affairs, we must think as Christians. We are not Christians on Sundays, and secular libertarians during the week. Secular libertarians recognize the destructive consequences of fiat money. But, because they look at everything with secular goggles on, they can never penetrate to the ultimate “why?”. In other words, because of their own secular assumptions, they can’t identify the idolatry that is driving the whole risky business.
Here’s my attempt to begin to address fiat money as a biblical Christian: When governments adopt a fiat money system, they are attempting to be God. They want to create something (worth and value) from nothing (paper and ink). Rather than creating real value through the organization and cultivation of the created order established by the living God, they are idolatrously seeking to imitate him in his original fiat lux. Just as “God said, ‘Let there be light,’ and there was light,” so also the government desires to say, “Let there be money,” and there was money.
Idolatrous people are content to live with this situation, partly because of their rejection of the true God, and partly because the State offers to send them some of that newly-created cash, fresh off the printing presses. Everyone goes merrily along, living in their castles in the air, watching the plasma screen TV’s they bought with the last stimulus package, until the newly-minted “god” (pun intended) proves that he is as poor a substitute as Baal, Molech, and Zeus. At that point, all the best laid plans of mice and men come undone, the castles come tumbling down, and our courageous politicians miraculously appear on a beach in Aruba.
Governments make lousy gods. They are as blind, deaf, and dumb as any wooden statue that Isaiah mocked (Isaiah 44:9-20; 46). For all their grand, utopian intentions, they usually only succeed in multiplying disasters; we get five new ones for every one “solution.” But have no fear; they’ll fix all those new problems… with all the new money they just printed.
For a short history of fiat money, see this fine little article at the Daily Reckoning.
