“Cease and desist” was Sarah Palin’s rebel yell at Federal Reserve Chairman Ben Bernanke last week, in a speech attacking the Fed’s plan to buy up $600 billion in government debt to stimulate the US economy.
While the plan known as “quantitative easing” has been, like all monetary policy, the subject of debate, Palin’s speech wasn’t disagreement so much as it was a rallying cry for Tea Partiers, and a reassertion the Christian Reconstructionist belief that the Fed is unbiblical.
From the safe confines of Facebook, Palin provoked a sparring match with Wall Street Journal reporter Sudeep Reddy, a sign of the disconnect between a Republican Party beholden to Tea Party economic rhetoric and the financial world’s paper of record. Palin’s view, Reddy concluded, “is not supported by the facts.”
For the former Alaska governor’s audience, though, her attack on the Fed is adequate—shall we say—stimulus. In the Tea Party’s short life, the Federal Reserve has been a target of its oppositional rage, spurred by Tea Party godfather Rep. Ron Paul’s persistent calls to eliminate it.
While Paul’s anti-Fed crusade is widely thought of as economic libertarianism, the roots of this combat lie in a theocratic reading of the Bible, arising out of the nexus between Paul (and now his son, Senator-elect Rand Paul), Howard Phillips and his Constitution Party, and Gary North and the Christian Reconstructionists.
For decades, the elder Paul, Phillips, and North have shared the libertarian economic philosophy of the Austrian School, which advocates a strict free market approach to an economy they portray in terms of individual choices and agreements rather than systemic forces. With respect to the Federal Reserve System in particular, they have argued against its fractional reserve banking, and its manipulation of interest rates to control economic ups and downs.
The Austrian School and Christian Reconstructionism
North, the architect of Christian Reconstructionist economic theory, and controversial libertarian economist Lew Rockwell both worked on Ron Paul’s congressional staff in the late 1970s. That collaboration continues today, even after reports during the 2008 presidential campaign that Rockwell had ghostwritten racist and anti-gay statements in Ron Paul’s conspiracy-minded newsletter in the 1980s and ’90s. They continue to collaborate through the Ludwig von Mises Institute, founded by Rockwell and the anti-“statist,” anti-New Deal economist Murray Rothbard, who believed Joseph McCarthy was “the most smeared man in American politics” in the 20th century.
Their work is also found at LewRockwell.com, where North currently writes, often in support of Paul. In promoting their libertarian economic views, Rothbard and Rockwell have, according to the libertarian Reason magazine, “championed an open strategy of exploiting racial and class resentment to build a coalition with populist ‘paleoconservatives.’”
While each of these figures comes to the table from different places, they come together in agreement on Rothbard’s anti-statism, which dovetails with North’s views. For North, the Bible limits the legitimate functions of civil government to punishing “evildoers” and providing for defense. Reconstructionist theocracy, based on the Reconstructionists’ reading of the Bible, gives coercive authority to families and churches to organize other aspects of life. In this view—one that also meshes with Tea Party rhetoric—the Fed’s control of monetary policy is a prime example of federal government “tyranny.”
North argues that the Federal Reserve is unbiblical because it usurps power not legitimately held by civil government (because God didn’t grant it) and it promotes inflation, which he says is nothing more than theft from those who are not in debt in favor of those who are.
Many of North’s works are popularly accessible and have made their way into fundamentalist church Bible studies, as well as homeschool and Christian school curriculum. He lectures on these issues at American Vision’s annual Worldview Super Conferences and he’s written three volumes on economics: Liberating Planet Earth: An Introduction to Biblical Blueprints; Honest Money: Biblical Principles of Money and Banking; and Inherit the Earth: Biblical Principles for Economics. At an April 2009 Rally to End the Federal Reserve hosted by the Minnesota Constitution Party, Rand Paul echoed North’s theories, with an Honest Money sign behind him.
Taking Dominion Through the Free Market
North’s overarching schema is that there is an impending social collapse which will provide the opportunity for biblically-based Christians to exercise dominion by replacing existing humanistic institutions with biblical ones. In Honest Money, he wrote:
First, the bankers and the politicians will continue to try to make the present system work. This will make the present system worse. Second, there will be a collapse in stages: inflation, then mass inflation, then price controls, then tyranny, and finally a worldwide deflationary depression. At that point, there will be new demand from the voters for answers. Third—and this is my hope and my prayer—people will at last decide that they have had enough moral and legal compromise. They will at last decide to adopt a simple system of honest money, along with competitive free market principles throughout the economy.
The current system, North maintains, violates the Ten Commandments, in particular the prohibition against theft. North considers most forms of debt to be unbiblical, with just two exceptions: charitable loans (for which interest may not be charged) and business loans (which effectively form business partnerships between people contributing capital and people contributing ideas and/or labor). The Bible requires a system of “just weights and measures;” for North, manipulation of those weights and measures (such as the Fed does) violates biblical principles.
North argues that the Bible prohibits what he calls “multiple indebtedness,” which makes the Federal Reserve System of fractional reserve banking “legalized counterfeiting.” Again, from Honest Money:
If I loan you $100, I can’t use that $100 while you’re using it… Not so in a fractional reserve banking system. I have the right at any time to spend the money I deposited, even though 90% of it (or more) was loaned out already. Where does the banker get the money to honor my check? From some depositor who deposited his paycheck today… Fractional reserve banking violates the biblical principle against multiple indebtedness. When bankers violate this law (with the consent of the State), it leads to inflation and economic booms, followed by deflation and economic depressions.
In buying and selling bonds and manipulating interest and reserve rates the Federal Reserve, according to North, fraudulently manipulates the value of money (weights and measures), effectively stealing from those who have it and giving it to those who owe it. Both practices, in his view, create inflation, encouraging debt over savings, making the wealth earned and saved worth less. More important, in North’s view, these practices, combined with a paper money system and a government monopoly on money, effectively centralized power in the hands of an unaccountable institution, unrestrained in its power.
The Constitution Party platform asserts that money is both a “medium of exchange” and “a symbol of a nation’s morality.” The Constitution Party promotes the North critique of the Federal Reserve System and calls for its elimination as well as a return to a hard money standard. The platform reads, “It is our intention that no system of ‘debt money’ shall be imposed on the people of these United States. We support a debt-free, interest-free money system.”
Congressional Tea Partiers Vow to Challenge the Fed
Ron Paul’s bill to audit the Fed, which passed the House earlier this year but didn’t become law, is expected to be even more popular in the incoming Congress. There’s even speculation that the House Republicans might mount a challenge to the whole system, and Rand Paul is promising to join the fight in the Senate. (While the Fed audit is popular with Tea Partiers, it’s also been a favorite on the left; Sen. Bernie Sanders (I-Vermont) has championed it in the Senate and Rep. Alan Grayson (D-Florida), defeated last week in his reelection bid, helped Paul push it through the House. But Paul lashed out at Sanders earlier this year, saying he “sold out” for a weaker version of the audit bill, after the version that passed the Senate did not require annual audits.)
The Tea Partiers, who have come to see the Federal Reserve as the source of the nation’s economic problems, are now on board with this decades-old effort to abolish it. Sarah Palin has not gone all wonky with her fears about inflation; she’s just hoping to stay in front of the parade.