Recently, banks have failed, and the Federal Reserve has raised interest rates another 25 basis points, or 0.25%. Some analysts say banks are safe while others cry that the sky is falling. Who is right? Christians need to discern the financial signs of the times.
Jesus warned his disciples to get out of Jerusalem when they saw a sign: “When you see Jerusalem being surrounded by armies, you will know that its desolation is near. Then let those who are in Judea flee to the mountains, let those in the city get out, and let those in the country not enter the city,” (Luke 21:20,21). The early church followed Jesus’ advice and fled to Pella in modern Jordan, thus saving the small group from a similar fate.
Solomon wrote, “A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences,” (Proverbs 27:12).
The recent round of bank failures in the U.S. are a sign for Christians to prepare for the next recession. Where can Christians flee to with their savings? In a recession, the prices of most assets fall, so cash is usually the best option. But due to the Fed’s policies, this recession will probably be like those of the 1970s that we labeled as “stagflation,” or a recession with high inflation. Someone created a misery index that added the unemployment rate to the inflation rate. High inflation eats away at the value of cash.
The reported inflation rate is around 6%, but the real inflation rate is probably higher because in the 1970s and 1980s politicians didn’t know how to tame inflation. They tried regulations, intimidation, and price controls and only made life worse. The poor economic situation threatened Nixon’s re-election before he resigned over “Watergate,” so he was the first President to force statisticians to monkey with the statistics to make inflation and unemployment look better than they were.
The economy cost Gerald Ford and Jimmy Carter their second terms in office. So, statisticians continued to change the way they calculated inflation. Shadow Government Statistics continues to use the original model so we can compare today’s adjusted rate of inflation with the original method.
One of money’s purposes is to be a measuring tool that allows us to compare the values of different things from donkeys to donuts. It is like a yardstick or a measuring cup. For most of history, money was a weight in silver, then gold. The Biblical Shekel, for example, weighed about 0.39 ounces of silver.
When the Fed creates new money out of thin air, it changes that measure because a dollar buys less in the market. It’s not different from creating false weights and measures, which the Bible warns about: “You shall do no wrong in judgment, in measures of length or weight or quantity” (Leviticus 19:35). “A false balance is an abomination to the Lord, but a just weight is his delight” (Proverbs 11:1). “You shall not have in your bag two kinds of weights, a large and a small. You shall not have in your house two kinds of measures, a large and a small” (Deuteronomy 25:13-16). The Fed commits the evil of unjust measures when it debases our money.
Isaiah condemned the debasing of money in 1:22: “Your silver has become dross, your wine mixed with water.” In the same way that merchants added water to the wine and sold it as pure wine, they added so much base metal to silver coins that they became worthless as dross, the scum on the surface of molten metal.
Amos joined Isaiah with the same indictment: “Hear this, you who swallow up the needy, and make the poor of the land fail... Making the ephah small and the shekel large, falsifying the balances by deceit, that we may buy the poor for silver, and the needy for a pair of sandals" (Amos 8:4-6). Making the ephah, the measure of grain, small, merchants defrauded the poor with false measures. By enlarging the shekel, they debased the money so more of it was needed to buy a given product which caused higher prices. The increased poverty made it easier to enslave the poor.
The Fed creates a false measure when it counterfeits new money into existence through its policies. That new money creates an artificial economic boom and inflation that robs people of their savings. The boom always ends in a bust, or recession, in which people lose their jobs. Many economists warn of a looming recession. Christians need to prepare for it. We can start by paying down debt and increasing savings as much as possible.
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