3. Maintaining Honest Money

CHAPTER THREE

MAINTAINING HONEST MONEY

You shall do no injustice in judgment, in measurement of length, weight, or volume. You shall have just balances, just weights, a just ephah, and a just hin: I am the Lord your God, who brought you out of the land of Egypt. (Leviticus 19:35–36)

It’s not necessary to get into a debate over just exactly what unit of measurement an “ephah” and a “hin” were. The point is clear enough: once defined, they could not be changed by individuals in the marketplace.

Who defined them? That isn’t said. Not the Hebrew civil government, in all likelihood, because it was being set up at the time the law was announced. Like the widespread use of gold and silver, certain weights and measures had also come into widespread use on a voluntary basis. The important thing was not that the civil government made its definitions “scientific”; the important thing was for the civil government to enforce a consistent standard.

It should be noted that God immediately provides the reason for this commandment: He is the One who brought them out of Egyptian bondage. He is the Lord, the sovereign master of the universe. He is the deliverer of Israel. To avoid being placed in bondage once again, they had to discipline themselves. First, they had to discipline themselves by means of honest weights and measures. Second, they had to discipline themselves by means of God’s comprehensive moral law.

We cannot do without discipline. It is never a question of “discipline or no discipline.” It is always a question of whose discipline. Will we be disciplined by ourselves, as individuals under God’s law? Will we be disciplined by God directly (for example, when He sends a plague on us, as He did several times in the Old Testament)? Or will we be disciplined by the State? In our day, State tyranny is the most common alternative to self-discipline.

Without self-discipline under God’s revealed laws, there can be no freedom. False weights and measures lead to unrighteousness. People who sell items to the public must be sure that they avoid giving less than what is expected—revealed on the scales—through tampering with the physical standards. In short, tampering with society’s physical standards is a sign that men have already tampered with the society’s moral standards.

Market Scales

When a person in Old Testament times (indeed, up until relatively modern times) went to market in order to buy something, he brought with him something valuable to exchange. In barter societies, he would bring some homegrown or homemade item for sale. He would try to exchange it for someone else’s homegrown item, or manufactured item.

If a man brought something that would require weighing (for example, a sheep) and wanted to trade it for some other item that required weighing (for example, a sack of wheat), the question of accurate scales was less important. If something was underweighed for the “seller,” it was equally underweighed for the “buyer.” (Remember, both parties are buyers and sellers simultaneously: one buys wheat and sells a sheep, while the other buys a sheep and sells wheat.) Dishonest weights would be those in which the professional seller—the man who could afford the scales—tampered with the weights in one half of the transaction. Tampering in half the transaction probably isn’t easy.

When people started bringing metals to market in order to buy consumer goods, it became easier for sellers to use dishonest scales. The metal bar or item would normally be measured in small units of weight (“ounces”), or even less (“grams”), in the case of gold. But the item being sold for money would, if sold by weight, probably require much heavier units (“pounds”). The man with the scales could cheat the buyer by lightening up the money metal scale, while making heavier the product scale.

Thus, once money metals came into widespread use, as they would in an advancing, high division of labor economy, the opportunities to commit fraud increased drastically.

The Seller’s Advantage

The seller in the marketplace normally has an advantage over the buyers. He understands his trade, especially scales. It is easier for the professional seller to tamper with the scales than it is for the buyer to tamper with the coins. This is not a universal rule, however. Coin clipping is an ancient practice. People would shave a bit of the gold off the rim. This is why coins have those little ridges around them: to reduce theft (a forgotten legacy of the days when coins were made of valuable metals).

There is an odd example from United States history. In the late 1800s, during the “wild west” era, a famous crooked cattleman named Dan Grew herded his cattle for days without allowing them access to water. Then, just before he sold them, he would let them drink their fill. He would then take them to the stockyards and sell them. This became known as “watering the stock.” The same term was later applied a similar immoral practice by corporations. Corporate officers would print up huge quantities of ownership certificates (stock) and sell them whenever some outside group would try to take over the company by buying up 51 percent of the outstanding shares. The buyers wound up with shares of depreciated value—“watered down stock.”

On the whole, though, a professional produce-seller with the scales is more likely to cheat than the seller of goods. It is he who is normally the focus of attention by the civil government. On the other hand, it is easiest to check him, for he operates in a public place.

Perhaps even more important, the seller of produce has competitors. Buyers catch on when they are being cheated, if they have access to a rival. The competitors have an economic incentive to warn the buyers, or warn the civil government, about the fraud at any particular shop. Thus, market competition tends to pressure produce sellers to stay honest, at least within the generally accepted “permissible range” of the free market.

Scales of Justice

God links the ownership of scales with His own sovereignty. The man who owns the scales is a judge. God judges men in terms of moral standards. He is a Judge with the scales of justice.

When the evil Babylonian king Belshazzar was having his great feast, in the midst of a military siege by the Medo-Persians, the hand of God wrote the famous words on the wall: “MENE, MENE, TEKEL, UPHARSIN.” The king called Daniel to translate, and Daniel did so: “MENE: God has numbered your kingdom, and finished it; TEKEL: You have been weighed in the balances, and found wanting” (Daniel 5:25–27).

Weighed in the balance: this is symbolic of God’s final judgment. Therefore, the man who controls the “scales” of civil justice is a judge. So is the man who controls the actual weights and measures in the marketplace.

If a man misuses his position and cheats people, he is thereby testifying falsely to the character of God. He is saying, in effect, that God cares nothing for justice, that He tips the balance. He cheats mankind for His own ends. This is precisely what Satan implies about God’s role as Judge. It is false witness against God. Thus, God warns men that they must use honest weights and measures, for He is the sovereign God who delivered them out of bondage. He implies that He has the power to deliver them back into bondage if they cheat in this very special area of economics.

Honest Metal Money

What was money in ancient Israel in the days before the Babylonian captivity? It would have been any item that people voluntarily accepted in exchange for goods and services. The only monetary units identified in the Bible relating to money were the shekel and the talent. These were units of weight. In principle, though the Bible doesn’t specify this, they were also units of fineness. (“Fineness” refers to the percentage of pure gold or silver in the total weight of the coin.) We conclude this because of the fact that base (cheaper) metals can be melted in when the smelter is pouring the metal into the molds. Weight was not enough; there had to be a particular fineness.

An ingot or coin of a specific size, assuming it’s well known, is known by sellers to weigh a certain amount. By measuring the ingot or coin, and then by weighing it, the expert can determine whether it’s of the standard fineness (the proper mixture of a base metal for hardness and a precious metal for value). I own a simple, inexpensive set of weights and measures that measure the more common gold coins.

The weights and measures for the ingot of gold or silver is the professional seller’s defense against fraud. The scales for produce are the buyer’s protection against fraud.

The Bible lays down the rule of honest weights and measures. To tamper with the scales is a moral evil. It is theft through fraud. Someone trusts the seller, and the seller misuses this trust. It is easier to cheat a trusting person because the latter isn’t watching every move of the seller. Thus, tampering with the scales is a major sin. When sellers get away with it because the authorities look the other way, honest, trusting people lose, while crooked dealers win. This reverses God’s standards for dominion, namely, dominion by ethical behavior. Furthermore, it reduces the efficiency of the market, for buyers have to devote extra time and trouble in testing sellers. God will not tolerate such behavior indefinitely.

One reason why gold and silver came into widespread use in the ancient world was that they could be tested by sellers of goods and services. Today, a seller of goods (buyer of money) can use simple tools, if necessary, to determine the reliability of a particular ingot or coin. He could test the ingots in the ancient world, too, using similar simple tools. Because gold and silver were recognized, and because standards of shape and weight made it possible for people to test the full weight (precious metal content) of the ingots, these two metals could more easily function as the most marketable commodities in society.

Honest money is easy to define in the context of a pure precious-metals ingot or coin economy. An ingot or coin contains a specific quantity of gold or silver of a known fineness. In the case of the famous U.S. “double eagle,” the $20 gold piece, the coin weighed 1.075 troy ounces (the standard unit for measuring gold), with .967 ounces of pure gold and the rest copper, for hardness.

For greatest ease of use, an ingot would be stamped with some familiar mark or company, so that the user would know that smelter or firm stands behind the honesty of the weights and measures. The coin or ingot in a literate society would announce its weight and fineness of the metal (such as one ounce, .999 fine). Perhaps the traditional names of national currencies might be retained on the coins—“dollar,” “yen,” “peso,” etc.—but to reduce confusion to a minimum, it would be better to have no name attached. It would simply be a one-ounce gold coin. With or without a familiar name, the coin when originally produced would contain exactly what it says concerning the precious metal.

To tamper with either the weight or the fineness of the coin would be like pouring water into the ground meat at the supermarket. It would be fraudulent: the attempt to get something for nothing.

Honest Paper Money

Coins and ingots are heavy and bulky. It should be obvious why people prefer paper money. It fits into a wallet or purse. It’s flat. It’s easily recognizable. Paper can be printed to represent any number of currency units: 1, 5, 10, 20, 50, 100, and so forth.

The key word is represent. The paper money, to remain honest, must be issued by the money-issuer on a strict one-to-one basis. If it announces that it represents a one-ounce gold coin, .999 pure, then the issuer must have that one-ounce coin in reserve, ready to be redeemed by anyone who walks in and presents the piece of paper.

To issue a piece of paper that serves as an IOU for precious metals without having 100 percent of the promised metal in reserve is fraudulent. It is theft. It is a form of tampering with weights and measures.

How would such a system work? The coin owner might deposit his coins at a warehouse. He wants his coins kept safely. He pays a fee for the safekeeping, the same way we rent safety deposit boxes at our bank. The warehouse issues a receipt. Since the receipt promises to pay the bearer a specific amount of coins, or ingots, on demand, the paper circulates as if it were gold, assuming that everyone knows and trusts the warehouse that issued the receipt.

Warning: whenever someone promises to store your precious metals for free, watch out. You never get something for nothing. Either there is a hidden payment, or else there is fraud. Any system of paper money or credit that doesn’t somewhere involve a fee for storage is unquestionably and inevitably fraudulent. Keep looking until you identify the form of fraud.

The paper certificate is a metal substitute, sometimes called a money substitute. But it isn’t a money substitute; it really is money, if the metal on reserve is regarded as money. Its value in exchange rises or falls according to the exchange value of the money metal in reserve.

The big problem is counterfeiting. It is a lot easier to counterfeit a piece of paper than it is to counterfeit a gold coin. A counterfeit coin is easier to detect. It can be weighed. A piece of paper looks just like other pieces of paper. So, issuers take care to identify pieces of paper by serial numbers, or special water marks, or by using special paper that is easy to identify by the public.

A counterfeiter is clearly a thief when he prints up false warehouse receipts. Some company is required by law to redeem the paper receipts by paying out the specified quantity and fineness of gold or silver. To issue phony receipts places the issuer at risk. Or, if the company should go bankrupt and be unable to redeem the notes, it places at risk the last person who accepted the receipt at face value. He goes to get his gold, and the issuing company has gone bankrupt. He is stuck with a worthless warehouse receipt, whereas the counterfeiter has bought valuable goods and services. The loser (among others) is the last guy to get stuck with the bad receipt when the bad news is made public. Unquestionably, counterfeiting is a form of theft.

One way to protect users from counterfeit bills is for the bank to allow the depositor to write receipts for the deposited coins whenever he makes a transaction. This way, the user has to sign his name at the time of purchase. He writes checks (warehouse receipts) until he runs out of coins in reserve. Then he stops, unless he is a thief, or he makes a mistake (and pays a penalty to the bank), or he has made prior arrangements with the warehouse to “cover” his checks with gold which is held in reserve—gold that has no warehouse receipts issued against it—for this purpose by the warehouse firm.

This is why checks are money, if the money metal backing them up is money. They are metal substitutes. An honest check is simply another form of warehouse receipt.

A credit card is also money, if the metal backing up the credit card is money. It, too, is a metal substitute. An honest credit card is simply another form of warehouse receipt.

We could add all sorts of examples to this line of reasoning, but by now you have the idea. The key is the honesty of the warehouse firm. If it issues no more receipts than it has gold or silver in reserve to redeem the receipts, then the receipts can legitimately serve as forms of money.

If a warehouse company issues more receipts to valuable money metals than it has metals on reserve, then it has violated the law against false weights and measures. The difference is that it is harder to detect a false (unbacked) warehouse receipt than it is to detect a counterfeit coin not containing the stated amount of gold or silver. The coin can be measured and weighed; the paper bill can’t. But the principle is the same in both cases: counterfeit coins or counterfeit warehouse receipts.

Conclusion

The principle of honest money is quite easy to understand. You deliver what you say you’re delivering. If you promise to give an ounce of gold, .999 fine, to a seller, then that’s what you deliver. He can make an estimation of how much that ounce of gold is worth to him, and if he decides that he wants the gold more than he wants what he has offered for sale, then you get the item, and he gets the gold.

If either of the parties tampers with the scales, or in any way substitutes something less valuable than what he has agreed to deliver, then he has committed a sin. This sin is an attack on God’s principles of justice and man’s social peace. The sinner must make double restitution (Exodus 22:11–12): the return of the value stolen, plus a 100 percent penalty.

The law regarding honest weights and measures is obviously a specific (case-law) application of the eighth commandment: “Thou shalt not steal” (Exodus 20:15). But because God is a Judge, and because the symbolism of His perfect judgment is the scales, honest weights and measures become a theological issue as well as an economic issue. To tamper with the scales is to defy God in a unique way. It is to assert that man, the law breaker, being made in God’s image, reflects a God who is equally a law breaker.

Honest money is an economic application of the law against false weights and measures. Because money in the Bible is metallic, any tampering with the content of the precious metal is the equivalent of tampering with the scales. Counterfeiting coins is illegal. So is the counterfeiting of paper money: creating more warehouse receipts for precious metal than there is precious metal on reserve for future redemption.

Summary

We find the principles of honest money involve the following:

1. The prevailing definitions of measurement must be observed in all our dealings with one another.

2. The civil government need not be the originator of these standards, though it is supposed to certify them.

3. The goal is consistency of use.

4. The God who requires honest measures is the same God who delivered Israel from bondage.

5. Violating these physical standards is the equivalent of violating God’s moral standards.

6. The professional seller in the marketplace has more opportunities to tamper with the scales.

7. Market competitors monitor each other, thereby reducing the extent of tampering.

8. God’s activities as Judge symbolically undergird the law of honest weights and measures.

9. Money in ancient Israel consisted of gold and silver in familiar sizes and shapes.

10. When the civil magistrate refuses to enforce honest weights and measures, evil people temporarily prosper at the expense of honest people. This reverses God’s standards of dominion.

11. Widespread dishonest weights also increase everyone’s transaction costs (costs of exchanging): time involved in checking scales.

12. Paper money represents specific quantities of gold or silver (or whatever money unit which is common).

13. Any issuing of warehouse receipts to money constitutes a violation of the law prohibiting dishonest weights and measures.

14. Issuing more receipts than there is metal to redeem them is a form of counterfeiting.

15. Paper bills, checks, and credit cards are all forms of metal substitutes; they are all true money.

16. Whenever some agency promises to create a paper money system that doesn’t require storage fees for money metals, it’s making a fraudulent offer. You don’t get something for nothing.