On Faith and Finance

During the past few weeks, the roller-coaster ride being taken by the stock markets around the world is being interpreted as fundamentally a matter of confidence. In other words, is a question of whether or not people have faith (fides in Latin) in the worth of the dollar (or the Euro, or whatever other currency) or even more, faith in the free enterprise economic system and the government that stands behind it. As well they might!

“Faith” is indeed an apt term — at least if it is taken in the gospel sense of the word, which is not a list of beliefs (which at best only a recount the reasons we think that we can have faith) but instead a matter of fundamental trust in the Almighty. Thus, when we say we have lost confidence in some day or some one, we are saying that we no longer trust that person or institution.

Certainly, this seems to be the case today. For a long time U.S. treasury notes (paper money) were backed by gold bars held in reserve by many banks, while gold coins continued to circulate. Theoretically, one (the notes) could be exchanged for the other (real gold). But beginning in 1932, in the depths of the great depression, President Franklin D. Roosevelt recalled all the gold that was owned in the U.S.A. (paying citizens $20.64 an ounce) — except for personal jewelry — and making the possession of U.S. gold coinage illegal. This eventually resulted in the storing (by 1948) of some 650 metric tons of gold bullion, most of it, but not all, at Fort Knox and the Federal Reserve Bank in Manhattan. However, because of dwindling gold reserves, in 1971 President Nixon cut the tie between the U.S. dollar and the gold standard altogether. Since then, the U.S. treasury’s gold reserve has dwindled to about one-fourth of what it once was and what is left at Fort Knox is presently worth (despite its present price of around $750 per ounce) only about $134 billion. How then can the U.S. Treasury bail out Wall Street and the banking system by a loan of $700 billion?

The obvious answer to that question—other than just printing more notes—is that the value of the dollar has been reduced to being only worth what people think it is in terms of faith or trust in the growth of the American economy and the soundness of our institutions. Lose that faith or trust and our paper money becomes practically worthless — even more than our coinage where our newer pennies are made of zinc that is only copper plated, our nickels are only 25% real nickel, and (since 1965) our dimes, quarters, and half-dollars are mostly copper with either nickel or silver plating. Or for that matter, what would real gold really be worth in terms of practical use, other than for filling teeth, as electrical contacts, or making an impression on the impressionable? So why not just use, as did the natives on one Pacific island, very large stone disks to symbolize wealth? — a policy that would make bank robberies, money laundering, and other financial high-jinks just about impossible.

So, in the end who or what are we really expected to trust? Beginning in 1864, the motto “In God We Trust” began to appear first on our penny and then gradually on most other U.S. coins. No doubt, this was partly motivated by the trauma of our bloody civil war, with its counterfeit as well as Confederate currency, and it began to look as if only God could save our nation. By 1908, the motto also began to appear on our paper money. But not without protest. Theodore Roosevelt thought that invoking God’s name on something as grubby as our money was a sacrilege. Maybe he was right in a way, for when one looks at the placement of those words on our larger denomination bills it seems rather odd to find them inscribed over a picture of the U.S. Treasury building in Washington—although I suppose that means more than what is left in the vaults at Fort Knox. But either way, it should remind us that it is not in the U.S. Treasury but ultimately only in God that we should trust. Anything else is really idolatry.

However, this also raises a disturbing question. Can people who do not believe in God (or maybe claim that they do but act otherwise) be trusted? Reason tells us that even an atheist, if he wants to be trusted and respected, will keep his word and deliver on what he has promised. Nevertheless, especially after the revelations of all the financial conniving that has been going on in recent years on Wall St. and other financial centers, one can only wonder. More and more it’s beginning to look like those who have enough power and money to think they can get away with it have lost all fear of the possibility of any divine retribution. The result has been that the rest of us have all become the losers.

R. W. Kropf 10/21/08 Faith&Finance.doc 08-10-21.htm