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The Federal Reserve System is the United States of America’s (U.S.A.) central banking structure. It was developed on December 23, 1913, after the Federal Reserve Act’s enactment, following a sequence of fiscal panics that triggered the demand for the monetary system’s central control to attenuate financial crises (Schoen, 2016). Through the years, events including the 2000s Great Recession and the Great Depression during the 1930s expanded the responsibilities and roles of the Federal Reserve System (Schoen, 2016).
The U.S Congress developed three primary monetary policy objectives within the Federal Reserve Act: moderating interest rates in the long-term, stabilizing prices, and maximizing employment. Far from being the remedy to the U.S economic meltdown, Schoen (2016) argues that the Federal Reserve is the fundamental cause of the underlying economic issues. According to Schoen (2016), the country is where it is financially due to the organization’s contravention of sound ethical and economic precepts. This paper aims to address how the government has overstepped the basic biblical principles through the Federal Reserve.
Pecuniary inflation is unjustifiable for both ethical and economic reasons. According to Schoen (2016), increasing financial supply cannot benefit the entire society. Inflation typically leads to elevated prices; it does not result in a spontaneous increase in capital goods, labor, and land stock. Furthermore, as Schoen (2016) indicated, it does not promote the generation or manufacturing of more consumer products to satisfy their underlying needs. Instead, it increases the number of funds spent on the same quantity of commodities. Since more finances are expended, the demand for customer and producer goods rises, causing an increase in overall prices and a decrease in the dollar’s purchasing power. There is, therefore, no general social benefit generated from inflation.
Inflation typically benefits some individuals at others’ expense by redistributing wealth. According to Schoen (2016), not all balances increase upon the increment of pecuniary supply by the Federal Reserve. Specific individuals usually gain access to the new money first from commercial banks, and according to Schoen (2016), these recipients reap the benefits of inflation. They can spend the new cash on products prior to their price increase.
A comprehensive analysis of the Federal Reserve procedure from a Christian viewpoint integrates two primary concepts: ethics and economics. The inflationary and Federal Reserve policies trigger government inflation, the money production procedure’s monopolization by the state, and significant economic impacts. It also infringes the Christian private property morality. It also infracts the voluntary exchange precept, and it is intrinsically fraudulent (“What does the Bible Say about inflation,” 2020). The Federal Reserve’s actions are both ethically unjust and economically dangerous.
The ethics ground on inflation starts with the interconnection between property entitlements and monetary inflation. Whenever the state assumes a monopoly over the money production procedure and participates in pecuniary inflation, it breaches the biblical private property morality and, therefore, inflation cannot be recognized as an ethical, economic policy (“What does the Bible Say about inflation,” 2020). Metallic currency debasement can be used to advance further the comprehension of the moral issues related to inflation.
Historically, the devaluation of metallic money by ancient rulers by either coin dilution or clipping with base metals was done by representing the degraded coin as a pure metallic coin of substandard weight. The metallic currency was developed through the discretionary exchange, and the various fiscal units were characterized by the differing amounts of precious metals. For instance, the money cited in the Holy Book – the talent and shekel – were different weight units. Debasement is an attempt to utilize unfair or biased scales by issuing money claimed to contain a specific weight of silver or gold when, in actuality, its content is less than cited quantity (“What does the Bible Say about inflation,” 2020).
The Bible identifies the use of false measures and weights as a fraudulent act akin to stealing (Proverbs 11:1; Leviticus 19:3 –36) (“What does the Bible Say about inflation,” 2020). Fractional reserve banking, a procedure adopted by the Federal Reserve acts, represents a similar example of swindling or defrauding, whereby the money produced by commercial banks with the central bank’s full endorsement is marketed as payable of demand. Nonetheless, since banks only control a section of the financial reserves essential to cater to all of their pending monetary warehouse receipts, it is impossible for them to promote morality with regard to their promises.
Moreover, as elucidated earlier, inflation often leads to wealth redistribution. It typically increases the wealth of prompt new money recipients and exploits those who receive this cash later. The aforementioned wealth reallocation process does not occur as a result of voluntary private property exchange but rather as a consequence of the coercive monopolization of the money production procedure by the state.
According to Schoen (2016), the state usually monopolizes this process to increase the monetary supply. Inflation initiated by the Federal Reserve, a money monopolist created by the government, ends up taking specific individuals’ wealth forcibly and transferring it to others. This is synonymous too government-sponsored theft, and it clearly breaches the fundamental biblical precept, “Thou shalt not steal” Exodus 20:15) (“What does the Bible Say about inflation,” 2020). It is, therefore, evident that the strategies by the Federal Reserve violate biblical principles.
In summation, the Federal Reserve System is the U.S.A central banking structure. Far from being the remedy to the U.S economic meltdown, it is the fundamental cause of the underlying economic issues. The Federal Reserve and its inflationary procedures infringe the absolute private property entitlement on several levels; therefore, it cannot be considered a moral monetary policy. The government’s exploitation of the money supply through the Federal Reserve proves to be both ethically and economically disastrous. It continually violates the moral and pecuniary laws established by God.
References
Schoen, E. J. (2016). The 2007–2009 financial crisis: An erosion of ethics: A case study. Journal of Business Ethics, 146, 805–830. Web.
What does the Bible Say about inflation? (2020). Intrepid Eagle Finance. Web.
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