Enough Bonus: Full Text and Setting of Chris Garmon Essay - On Money and Faith
From: Chris Garmon [mailto:cjrhgarmon@yahoo.com]
Sent: Wednesday, October 12, 2011 10:28 PM
To: Ginger
Subject: message
Ginger,
Tonight, you mentioned that the lectionary for this week was Matthew 22:21 (“Give to Caesar what is Caesar’s, give to God what is God’s”) and that you were having trouble composing your message. (At least, that’s what I heard. I apologize if I was mistaken.) Whenever I hear that passage, I’m reminded that money is just a piece of paper (actually much less, in most cases). It has value because of a government decree and, ultimately, because we simply believe it has value. What is most important is God. Whenever I worry about money, I remind myself of that fact and am reassured. I think I shared the attached draft with you a few months ago. Feel free to use it or parts of it if you feel so inclined.
Also, when I turned on the radio in my car after tonight’s meeting, Once in a Lifetime by the Talking Heads was playing:
“Letting the days go by
Water flowing underground
into the blue again
after the money’s gone
once in a lifetime
water flowing underground”
I read once that we are each like a glass of water and God is like the ocean. One can never be sure what a Talking Heads’ song is about, but I think they were trying to say that, when it’s all over and we return to God, all of the money and earthly worries are ultimately trivial.
Thanks.
Chris
On Money and Faith
Draft: Chris Garmon 5/28/11
Then Jesus said to them, “Give to Caeser what is Caeser’s and to God what is God’s” Mark 12:17
I am an economist by training and vocation. Whenever someone says “economics” or “economist,” usually the first thing that comes to mind (for a non-economist, at least) is “money.” In many newspapers and magazines, articles about economics are often accompanied by pictures of money or dollar signs. The same is often true of web sites discussing economics. To the economist, this is somewhat misleading, because economics is not the study of money. There are many definitions of economics (e.g., the study of scarce resource allocation; the study of consumers, firms, and markets), but none of them focus on money. Most economic models do not use or reference money (except as a unit of measurement) and focus instead on “real” prices. In fact, there are some economists (e.g., real business cycle macroeconomists) who believe that money is largely irrelevant. As I often tell my students, economists are to money as mechanics are to oil and grease. While mechanics must deal with oil and grease on a regular basis and most non-mechanics associate the profession with those substances (“grease-monkey”), it is engines and transmissions that are the focus of their work. Likewise, economists focus on the drivers of the economy: production and consumption. Money simply works like oil and grease in the economy’s engine by helping markets work more efficiently, even though it is not what powers the engine.
Still, economists study money more than other social scientists. The more I’ve studied money, the more fascinating and puzzling it has become to me. What exactly is “money?” Why do people value it as much as they do?
Go into your purse or wallet and take out a dollar bill (or a five, ten, or twenty dollar bill). Take a good look at it. Imagine you are a scientist from another planet who has just encountered a dollar bill like this. How would you describe it? First and foremost, it is a piece of paper. From the feel of it, it seems to be a high quality piece of paper. It’s sturdier and slightly softer than an average piece of paper. This is due to its high cotton content, not unlike high quality resume paper. Anyone who has ever left a dollar bill in their jeans in the laundry knows that these pieces of paper don’t break down like other types of paper. It also has an excess of pictures, symbols, and elaborate artistic trim. The front is mostly grey with a picture of a dead president (or, in the case of the ten dollar bill, Alexander Hamilton) and many official-looking symbols and signatures. At the top of each bill, it says “FEDERAL RESERVE NOTE” and “THE UNITED STATES OF AMERICA.” Flip it over and you will find more artwork. On some bills (like the one dollar bill), the back contains even more elaborate trim, a picture of the seal of the United States and a bizarre picture of a pyramid with an eye on top. On other bills, the back contains the picture of an important building (like the Treasury building on the ten dollar bill). The back of every U.S. bill is colored with a bland green ink (although some newer bills have some other brighter colors on the back). Again, at the top, in big bold letters, you’ll see “THE UNITED STATES OF AMERICA” and just below it “IN GOD WE TRUST” (which, as discussed below, is an ironic context for this statement, to say the least).
So, these bills seem to be no more than high quality pieces of paper with interesting artwork in bland colors. They fold just like other pieces of paper. They rip just like other pieces of paper. You can write on them just like other pieces of paper. However, as a scientist from another planet, you notice that people don’t treat these notes like other pieces of paper. They are careful to put them away in their pockets, wallets, and purses. If they come across one on the ground, they pick it up and inquire if others nearby have lost the bill (or they simply keep it). Other pieces of paper are simply thrown away or recycled (or worse, just left on the ground).
Most amazing of all is how these pieces of paper are used. Someone with a piece of this paper can go into a store and exchange it for something of value. A person with a twenty dollar piece of paper can go into most restaurants and exchange it for a nutritious meal. The same piece of paper can be exchanged for a classic of literature or a CD of music at the book store. Clearly these pieces of paper have more value in this society than the value of the paper and ink that is used to make them. Why are they so valuable? Where does this value come from?
Go back and take another look at the bill you took out of your wallet or purse. If you are looking at a dollar bill, look in the top left corner, just under “THE UNITED” in “THE UNITED STATES OF AMERICA.” Here you will find the following simple statement in relatively fine print: “This note is legal tender for all debts, public and private.” (On other bills, this statement can be found in the bottom left corner.) These pieces of paper are what economists call “fiat money.” These pieces of paper are valuable by fiat, by decree. They are valuable because the federal government says they are valuable. A long time ago, back in the 19th century, most money was backed by something else of value. It was tied to a certain amount of gold or silver (or some other tangible thing that most people valued, like a government bond). If you held a $100 gold certificate, you could go to the bank that issued it and exchange it for the equivalent amount of gold. Of course, you can still buy $100 of gold with a $100 bill, but there is no longer the direct link between the value of the money and the amount of gold “backing” it. Today, the pieces of paper we call “money” have value because the government says they have value.
Of course, it’s not as simple as that. The government decrees that everyone must drive no faster than 65 miles per hour on highway 50. The government decrees that no one can park on Marne Lane during the week. Thirty years ago, the government told everyone to switch to the metric system of measurement. Every so often, the government comes up with a new dollar coin and does everything to get people to use it and no one ever does. A simple government decree that these grayish-green pieces of paper have value cannot automatically make it so. Even a government law, backed with active enforcement, would not be sufficient. Suppose you go into a restaurant, order a burger, fries, and a drink, and−when attempting to pay for it with some of these pieces of paper−the cashier gives you a puzzled look and says “Do you honestly expect me to give you a burger, fries, and a drink in exchange for a few ugly pieces of paper?” You respond: “Look, it says here ‘This note is legal tender for all debts, public and private” and she responds “that’s fascinating….next customer!” Incensed, you go straight to the police and tell them of your experience. Even if the police believe you, what could they do? Suppose the police return with you to the restaurant and tell the cashier that she must accept these pieces of paper in exchange for the meal. One possible response of the stubborn cashier could be: “Ok, fine, I’ll give you the burger, fries, and the drink if you give me one million of those ugly grayish-green pieces of paper.” At that point, there is nothing the police or any law enforcement agency could do short of setting the prices for this meal and all other products. When the government sets the price for products like restaurant meals, you no longer have a market-based economy.
Consider the experience of the artist J.S.G. Boggs. He is most famous for drawings that look almost identical to money. His artwork has the same size, feel, and look as the pieces of paper we call money. In some cases, he will make slight changes (e.g., putting “FUN” on a dollar bill instead of “ONE”), but often the “art” will look exactly like the pieces of paper we call currency. Your first reaction might be: “Artist? He sounds more like a counterfeiter to me.” Certainly, history is full of criminals who have tried to recreate currency to get rich. What distinguishes Boggs from the typical counterfeiter is what he does with these pieces of “money art.” He will bring his “art” to a store and ask to exchange it for something in the store. Unlike the typical counterfeiter, he will make it clear to the store owner that the piece of paper is not money. He very clearly states that the paper is his artwork and he is proposing to barter his artwork for the product he wishes to “purchase.” Furthermore, he asks that the store owner give him change, in (non-art) money, so that the posted price of the item plus the change equals the denominated amount on his piece of artwork. In essence, he is asking the store owner to purchase his piece of art in a transaction that looks like he is purchasing something from the store as if the art is actually money. If the owner agrees, he makes out a receipt with his signature authenticating his work of art for its new owner.
Some store owners simply decline Boggs offer. Most don’t know how to react.1 With any other piece of art work (say, a portrait of the owner), the store owner could decline by saying that she doesn’t like the drawing. But, when the drawing looks exactly like a piece of paper that you do value, how can you say you don’t like it? As a store owner, you accept pieces of paper that look identical to this “art” without hesitation for the products you sell. But this artist/customer makes it clear that this is not like the other pieces of paper, it is his art, but he is asking you to treat it like the other pieces of paper you value that look identical. The art/money becomes something simultaneously difficult to accept or refuse. Ironically, those who have accepted Boggs offer have been handsomely rewarded as these pieces of art now sell for many multiples of their “face value.”
What makes the Boggs offer so uncomfortable to the recipient is how it starkly illustrates what money really is. Money is just a piece of paper. Not unlike a work of art, it has value because we give it value. We project onto it a value that is much more than the value of the paper and ink used to make it. The government cannot effectively declare a piece of paper to be valuable, anymore than the government can declare something a work of art. These pieces of paper that we call money have value because we believe they have value. Simply put, we all have faith that the pieces of paper we call currency have value and, therefore, they have value.
This faith doesn’t end with the pieces of paper we carry in our wallets and purses. Most money, as economists define it, is not held in paper currency or coin. Most money comes in the form of bank deposits in checking and savings accounts. These deposits can be used like currency and coin at most stores to buy the things we need and desire. A customer can write a check or use a debit or credit card to transfer some of the balance in her bank account to the store’s bank account in exchange for the products purchased. In fact, you no longer need a check or credit/debit card to make this transfer. Just recently, a smart phone “app” was developed that lets the user purchase something by using nothing other than her smart phone.
People who are not familiar with banking often think that their checking or savings account balance represents the currency that is held at the bank for them. In other words, they think that a checking account balance of $1,000 means that their bank has that $1,000 sitting in its vault in paper currency or coin. Nothing could be further from the truth. Most of the money we have in our checking and savings accounts is not held as currency. Most of it is simply an entry on a bank ledger. When someone deposits $100 in cash into their checking account, the bank then loans out the majority of this deposit. Those loans are used to buy things and, thus, become deposits in other banks. These other banks then loan out most of these new deposits so people and businesses can buy things and that money becomes a deposit in another bank, and so on. In this way, the deposit of even a small amount of currency can create an amount of “money” that is much larger. However, if even 20 percent of the population decided to simultaneously withdraw their money as cash, it would be impossible to satisfy the requests. That amount of currency simply doesn’t exist in any tangible sense.
Think of the famous “bank run” scene from “It’s a Wonderful Life:” a rumor is started that the Bailey Building and Loan is in trouble and soon everyone converges on George Bailey’s bank to withdraw their money. Jimmy Stewart as George Bailey said it best:2 “The money’s not here. Your money’s in Joe’s house, that’s right next to yours, and in the Kennedy house and Mrs. Maitlin’s house and a hundred others. You’re lending them the money to build and they’re going to pay it back as best they can.” Unlike paper currency and coin, the vast majority of the money that is in checking and savings deposits does not exist at the bank in any tangible sense. You cannot touch it, taste it, smell it, see it or hear it. Unlike planets in far-off solar systems that cause their suns to wobble ever so slightly, you cannot even deduce its existence from its effects on other things around it. It simply does not exist as a physical thing. It is an entry on the bank’s balance sheet, a bunch of binary code in the bank’s computer. The only indication of its existence is the balance printed on your banking statement (which is itself just an electronic document for many people).
The next time you get into a religious discussion with an atheist, and they pepper you with statements like “God does not exist, he’s just a delusion, you can’t point to any tangible evidence that God exists, etc.”, just say “Ok, fine, whatever…let’s change topics. What do you think about money? Does money exist?” Most likely they will pull one of those ugly greenish-grey pieces of paper out of their wallet or purse and shove it in your face, at which point you can ask: “What is so special about that piece of paper?” or “How do you know that is money?” You can then point out everything mentioned above: the piece of paper they are holding is just a piece of paper. It only has value because the government says it has value and, really, it only has value because we agree and believe it has value. Most money does not even come in the form of greenish-grey pieces of paper. Most money comes in the form of bank accounts, the contents of which we cannot see, hear, taste, smell, or touch. For most money, our only indication of its existence is a piece of paper (a bank statement) that says it exists, not unlike the pieces of paper in the Bible that say God exists. If they don’t believe you, just tell them to look at any Economics 101 textbook and thumb to the chapter about money.
Our monetary system requires faith to work. Imagine what would happen if 10% of the population lost all faith in money. In other words, 10% of the population, for whatever reason, refused to accept it in exchange for goods and services of value. Suppose many others started to have doubts about its value. The lack of faith would likely spread as people would question money’s value when so many others are questioning its value. In the extreme, the result would be economic (and social) chaos and our economy would grind to a halt. In order for our economy to work, we all must have faith that these pieces of paper and bank deposits have value.
We don’t have to imagine a world in which people lose faith in money. It has happened many times in history. When people lose faith in money, economists call it “inflation.” Each dollar is worth less over time as people gradually lose faith in its ability to buy the things they want. A little bit of inflation is mostly harmless and happens all the time. As inflation grows, it begins to slow the economy down, as it did in the 1970s in the United States, as people hoard tangible assets that have value (e.g., gold, real estate) instead of money. In the extreme are episodes of “hyperinflation” where money rapidly loses its value as people rapidly lose faith in it. One example of hyperinflation occurred in Germany in the 1920s. By late 1923, you needed a wheelbarrow full of German Marks to buy a loaf of bread. A glass of beer cost 4 billion Marks. People were using Marks as wallpaper as they were essentially worthless as money. As people lost faith in their money, they also lost faith in the government that told them it was valuable. Less than a decade later, Adolf Hitler and the Nazi party gained control of the German government and started their persecution and attempted annihilation of the Jews–who many Germans associated with bankers–as a scapegoat for the problems in Germany in the 1920s, including hyperinflation. In many other cases, hyperinflation has been associated with wars and political instability.3
What happens when people lose faith in God? Imagine if 10% of the population lost all faith in God and others had serious doubts. (In the most recent religious survey I could find, 15% of the sample reported being atheist, agnostic, or having no religion.4) Would God become less omnipotent? Would God’s grace, healing, and peace have less of an impact on those who believe?
Flip that rhetorical question around: What would happen if we believed in God the way we believe in money? When we go into the store, we never have any doubt that these pieces of paper and plastic cards will give us what we want, despite the fact that we cannot see or hear or touch or taste or smell most of what we call money. Imagine if we had faith in God like that: “In God we trust.”
