From the Easy Chair

Money and Debt

Professor: Dr. R.J. Rushdoony

Subject: Conversations, Panels and Sermons

Lesson: 213-214

Genre: Speech

Track:

Dictation Name: RR161Z47

Year: 1980s and 1990s

Dr. R. J. Rushdoony, RR161Z47, Money and Debt, from the Easy Chair, excellent colloquies on various subjects.

[ Rushdoony ] This is R. J. Rushdoony, Easy Chair number 149, July the 9th, 1987.

Tonight Otto Scott and I are going to discuss a subject very important to all of us, money and debt. This is a subject we must be interested in because we are in a monetary crisis. A crisis has been created most of all by debt. It is going to come home to us in the next few years in the form of an international monetary crisis and collapse. As a result, for anyone to be heedless about the question of money and debt is to be suicidal.

Otto, would you like to comment on that aspect of money and debt?

[ Scott ] Well, I think we are in an unprecedented situation. Almost every country at one time or another in modern times has gone through a commercial, financial crisis. Many have gone through collapse. But this is the first time, so far as I know, that money doesn’t exist anywhere in the world that we know. All the money of Europe is paper with nothing behind it. It is convertible to nothing. The money of the Soviet Union and the Soviet block is paper with nothing behind it. The same thing is true of China, the orient, all those areas. So we have a world wide situation where in reality the is no money.

[ Rushdoony ] And even more, behind the money there is less than nothing. There is debt. What we do is to monetize our debt. We borrow the savings of people, put bonds in the hands of the bank instead. And then, against that borrowing, we issue paper money. And the net result is that the our money represents debt, not wealth. This is an unusual and unprecedented fact in all of history.

[ Scott ] Well, the bonds, the bond market, to which you refer, has gone through one of the greatest collapses of modern times. The newspapers don’t even seem to have realized it. There is more money in the bond market in the United States than there is in the stock exchanges by far. But in the Depression of the 30s most of the municipal bonds were rejected. They collapsed. The various cities and municipalities and what not that had issued construction bonds of one sort or another had to forget about them, because they lost their tax revenues. They couldn’t complete the projects or the projects where there unused and the bonds were worthless like trolley park stock. And people were wiped out.

Now most of the pension funds are in bonds. If we have the sort of commercial debacle that has been predicted every economist who hasn’t sold out to the establishment, all these people who are living so well on pensions are going not find that they will be without an income. Can you imagine what this is going to do?

[ Rushdoony ] Yes. And there is more, too. About, oh, 20 years ago, the committee for godly and profitable living in Lubbock, Texas put out a leaflet entitled, “What about the 30 year Mortgage?” We reprinted it in the 1984 Journal of Christian Reconstruction a symposium on Christianity and business. The chairman, I believe, of the committee that put this pamphlet out was an officer in a Lubbock bank. He ran into trouble for having done this, because what he did in this pamphlet was to call attention to the fact that in the Bible debts were limited to six years, according to Deuteronomy 15, for example. And the seventh year was to be a sabbatical from all debt. And he pointed out how if you bought a house, most of your payment went to pay interest. And the 30 year mortgage, in particular, you would in, I believe it was on a 24,000 dollar loan at nine percent interest and 30 years you would have paid 45,000 dollars, 500... 45,519 dollars.

Now that tells you what the problem is. He has the figures in his pamphlet for 10, 20, 30 years as well as for seven years. And he also calls attention to the statement in Proverbs 37:21, “The wicked borroweth and payeth not again.” And he made the statement in the writing of this pamphlet that you can be sure there will be massive non payment in the years ahead. I think we are very close to that.

[ Scott ] Well, I was recently at a mining town in Wyoming named Hannah, after Mark Hannah, by the way. It was erected on or next to the shell of a previous mining town that had turned into a ghost town. And the new Hannah, which had a sort of spurt in coal mining in the early part of this century and then declined slowly through the 20s and, of course, precipitously in the 30s, was revived by the renewal of the coal industry in the late 60s, early 70s attendant upon OPEC and the oil situation, the energy situation. So developers... the mines opened up. Several new companies moved in. Hundreds of people were hired. They arrived, some of them, with trailers and they lived in tents and then developers appeared and the put up nice home. They put up a very big nice school. One of the companies put up a recreation center at a cost of about nine or 10 million dollars with an Olympic size swimming pool and all the amenities. So here you had modern life, television and so on, satellite dishes.

Now the mines have begun to close. The ... in part because the coal is playing out and in part because the coal industry has been in a decline, together with the oil industry. And people who paid down payments for a 60, 70, 80,000 dollar homes which was a price that was running there have walked away. They call them walk always. They leave in the middle of the night, home after home, street after street that I toured was desolate and deserted and tall grass in front of the place.

But here and there there were still people living who were still keeping their gardens up and who were still making payments in 70,000 dollar mortgage. And right next to them might be somebody who had moved in. After the banks foreclosed the banks would turn them over and sell them for what they could get. In some cases, 15,000.

So a fellow would be next to a man who was paying a mortgage on a 70,000 dollar house and the fellow that moved in next door to the same houses, 15,000. Now we have these ghost... new ghost towns. We ... the recreation center is shuttered and boarded up because they can’t afford to pay the maintenance bill, the gas and the light and the air conditioning. And so the eight or nine, you know, what ever it is, center is sitting there abandoned. There are only two functioning restaurants left in the town and my host took me to one of them and we had sandwiches and soup. He said, “There are two restaurants. This is the best.”

And ... and... and I... it was interesting to see a 20th century ghost town in the making next to a 19th century ghost town of the past. And you realize how little the economics of life have altered. Economics don’t change through the years. There is nothing about the modern era which makes it impossible for us to go broke. And yet we run into this insane idea that because it is 1987 or 1988 or whatever year it might happen to be, that suddenly all the rules have changed. The rules have not changed. The Americans have had a love affair with paper money from the time they were colonials. State after state experimented with paper money before we broke with England and went broke. And it was one of the reasons the constitutional fathers actually wrote into the Constitution, only Congress shall coin money.

[ Rushdoony ] And only gold and silver can be legal tender also.

[ Scott ] Yes. And both of those injunctions at absolute clearly written literal law into the Constitution, violated and not only violated, but when Mr. Roosevelt took gold away from the American citizens, we had citizens had all these contracts that required repayment in gold. One of the men took the case to the Supreme Court and the Supreme Court threw the case out, held that his contract was no longer valid.

Now in a well ordered society, that particular court would have been impeached.

[ Rushdoony ] Well, people when they see inflation—and inflation is created by debt, as I pointed out in The Roots of Inflation. And debt and inflation are twins. They are inseparable. Always assume that the values are going not go up and up. Well, we have seen it in California, acreage, farm acreage, choice land that was up in excess of 10,000 dollars is worth less than half of that now. And yet people feel that it is only a temporary dip.

I can recall when with the 29 crash, the 21 and 29 crash, because people forget the 21 crash, which was for the farm sector of the economy, led to properties that had been purchased for over 100,000 dollars go begging at 5000 dollars. And this happened in the cities. One of the choicest bits of property in Beverly Hills was during the Depression, up for sale for 8500 dollars. Today it would take two or three million to come close to buying it. It may be worth 8500 again before too long.

[ Scott ] Well, people don't really understand the real estate market. If, for instance, all Manhattan were to be put on the market, there isn’t enough money in the world, even worthless paper money...

[ Rushdoony ] Yes.

[ Scott ] ... to pay the assessed value of the property in Manhattan.

[ Rushdoony ] Yes.

[ Scott ] Now this is based on the idea... it is a mathematical game that all the property in an area is not on the market at the same time. This is the way bankers argue when they run their reserves down to five percent of their deposits, that all the depositors won’t ask for their money back at the same time. But all... none of those values in Manhattan, that enormous figure, none of those values mean anything unless there is somebody else available to pay the price.

[ Rushdoony ] Yes.

[ Scott ] And one of the few smart things credited to John Kennedy was that a rising tide lifts all boats. Well, yes. Inflation has created an illusion of prosperity for an awful lot of Americans who paid 25,000 for a house that is now worth 200,000.

But this is a temporary thing. My mother left a small amount of money... well, actually she put 80,000 into war bonds in 1942 in my name and my brother’s and being a woman that had a great deal of faith in he country and her government, she left the money there all these years. And when she died in the 1980s that purchasing power of that 80,000 dollars has dwindled to the equivalent of 20,000 or 15,000 at that time.

[ Rushdoony ] Yes.

[ Scott ] She didn't realize that her government was stealing, that its word was no good, that there was no honor in Washington and that the are bonds, three and a half percent, I believe they were, if you remember World War II bonds.

[ Rushdoony ] Yes.

[ Scott ] ... three and a half percent and inflation was running at the rate of what? Fourteen percent when she died. It was like the Irish idea of fairy gold that melts in your hand.

[ Rushdoony ] Well, about 18 years ago Howard Kushner wrote a paper on the fallacy of compound interest and he said at five percent compounded annually money doubles in a little les than 15 years or about seen times a century. So, he concluded, and I quote him in the second volume of Institutes of Biblical Law, “Obviously, long continued compound interest is a fallacy. Any government dedicated to maintaining it will bankrupt itself.” He also pointed out that at that time, 18 years ago, the people of the United States were paying out one sixth or more of their income for interest on various kinds of debt. Since then, the percentage, of course, has risen.

Well, in those years also we have encouraged people to go more and more into debt. We have created a situation where everyone knows who has any knowledge of money and of interest that compound interest creates an impossible situation, an impossible expansion of money and sooner or later there will be a collapse. This has happened before. It will happen again, but they go ahead because each person is bent on getting what he can out of it.

In the 30s a man who saw the election of Roosevelt as the beginning of the end of the United States, as the beginning of inflation, as the beginning of all kinds of problems, said that inflation succeeded because people had larceny in their hearts and that wherever people have larceny in their hearts they are going to be ready to go along with inflation, because they can pay off good debts with bad money.

[ Scott ] Well, that is the idea that some sharp observers latched on to. But, of course, that is a very limited kind of intelligence. It is almost criminal intelligence which is willing to sacrifice principle for short term gain irrespective of the outcome at the end. There are several ways to look at it, but the... the point that really keeps coming back to me is on the question of liberty. A people that have no money have no liberty. You realize that the world has rolled back about 4000 years, back beyond the Greeks and the Romans.

[ Rushdoony ] Yes.

[ Scott ] Because the Greeks and the Romans, at least had gold and silver. We have paper. Now when I was a boy in the fourth grace I recall very distinctly in the fourth grade—and I was 10 years old—that they taught us about coin clipping. They taught us the essence. They taught us about Gresham’s law. They taught us the essence of inflation in those days. Now this was in the 20s in an American elementary school. I don’t believe that they teach it in the university today.

[ Rushdoony ] No.

[ Scott ] I don't think the average university graduate ever heard of Gresham’s law unless he has an MBA and even then I question, because most of the MBAs that I run into seem to have mastered a vocabulary more than anything else.

[ Rushdoony ] Well, what they teach nowadays is that coinage was first developed by the Greeks, I believe, in Lydia. And they cite that as a major advance in civilization when the state began to coin money. Actually it was the beginning of the debauchery of money, because prior to that time gold was by weight and silver was by weight and you dealt with various pieces of gold and silver which had a weight. The shekel of gold and shekel of silver in the Bible was not a coin. It was a weight of gold and a weight of silver. So the state entered into a monopoly situation saying, “We will create the only acceptable gold and silver by coining money.”

[ Scott ] Up until fairly recently everything being relative, say the later part of the 19th century, the early part of the 20th, you could take raw gold to the mint and they would stamp our coins and there would be your gold. And you could do the same thing with the British treasury. So you could do that. And since there was no income tax, you didn’t have to explain where you got it. You didn’t explain ... you didn’t have to give them any part of it. It wasn’t theirs. It was yours. If you found a gold mine in those days it was like finding your own treasury, your own... you really had your wealth.

But when you took this away from people, when the money is no longer convertible into gold and you have paper instead, you have no money.

[ Rushdoony ] That is right.

[ Scott ] Now if you have no money there is no way that you can escape the controls of the modern world.

[ Rushdoony ] Yes. Well, in California the private coinage of money existed longer than anywhere else in the United States. I believe it was, perhaps, 1878 when the ... an act of Congress outlawed it, but Californians were minting their own money. You could get gold pieces of 25, 50 cents on up. And in the early days of California they would not accept paper money. If you came from back East and tried to buy something with paper money, you would pay for it once. When you came back into the store the second time they were out of everything as far as you were concerned unless you could show them the color of your money, gold or silver.

That attitude continued in California and in other western areas as in Nevada through the 30s and 40s to the beginning of the 50s among farmers and rancher and, as I have told you before, Otto, I can remember the deep coin purses that cattlemen and farmers would carry full of silver dollars. In those days the dollar went a long way. And they rejected paper.

[ Scott ] Well...

[ Rushdoony ] They don’t regard it as money.

[ Scott ] Well, you... as you know, there are parts of the Middle East where Bedouins, for instance, put gold coins on their women. The women are walking family treasures.

[ Rushdoony ] Yes.

[ Scott ] And in Asia and in Italy and in Franc the French are famous for burying gold in the back yard. They have been putting gold in the mattresses of Europe for generations.

[ Rushdoony ] Yes.

[ Scott ] For centuries, because they know what happens.

[ Rushdoony ] Yes.

[ Scott ] Now the refugees who managed to get out, most of these Chinese, I believe, ethnic Chinese, get out of North and South Vietnam after the debacle there, had to pay their way out in gold.

[ Rushdoony ] Yes.

[ Scott ] And these were people who had little gold discs that they had accumulated without any stamp on it or anything else, just plain gold. They had to pay their way out with gold. I recently read where there are graveyards being dug up in the Soviet Union and they are looking for gold in the teeth of the skeletons. The underground black market of the Soviet Union is looking for gold.

Eric Danish, an individual who is 80 some years old who remembers very vividly the German inflation of 1920, 22, 21, 22 told me that there was a family friend that had a gold chain on his watch, one of those vest chains. They were very fancy. He survived by breaking them apart by the links and selling the links. But, he said, “Every metal began to disappear.” He said, “Brass doorknobs, bronze fixtures, all kinds of real objects became part of the underground economy as the paper marks got larger and larger and larger and in the end, you know, they were only printed on one side.

[ Rushdoony ] Yes.

[ Scott ] Hitler got that point, by the way. He only printed the German marks in 1945 on one side. The other side was blank.

Now all of these things are part of the, you might say, ancestral memory of the West that the East, of the Orient, of very area except Africa which has its own varieties of coinage, its own forms of money. And yet with all this historical knowledge, with all this in formation, with more schools than any country has ever had in the history of mankind put together, we are embarked upon this course.

[ Rushdoony ] We have switched from a faith in God to a faith in the state. The attitude is: Well, when that problem comes, Washington or London or whoever or whatever will do something about.

My most vivid recollection of the earthquake of 1971, the Los Angeles area, was standing in a line in a supermarket a day or two after and people talking about the damage done to their house. And one person saying, “Why doesn’t Washington do something about earthquakes?”’

Well, that is a religious attitude.

[ Scott ] Well, they passed a law, didn't they, forbidding them? I am sure Congress had something to say.

[ Rushdoony ] But with that mentality they are not going to have a sound view of money. Their solution is that Washington will come up with something to get us out of the problem.

[ Scott ] Well, let’s look ahead. Just imagine the condition we would confront if we had a genuine financial crisis. First of all, it wouldn’t be like the Depression of the 30s, because that was a period when people didn’t expect the government to do anything about it. They were pathetically grateful when the government indulged in direct relief. But in anticipation of such an event, we have today difficult people. We have minorities who have been encouraged to believe that we all owe them a very good living and so on.

But we also have an army of regulations all prepared so that the government can declare an emergency and then take total and complete control...

[ Rushdoony ] Yes.

[ Scott ] They can assign housing units in your home to the teeming masses of the ... of the... of the metropolis. They can establish rationing. They can teach you in reality how you can live without money. All you have to have will be a government certificate and a card.

[ Rushdoony ] Well, to abandon gold and silver as money is to abandon freedom.

[ Scott ] Totally.

[ Rushdoony ] Yes. And paper money has one great utility, to give the state power.

[ Scott ] It put the state in complete control.

[ Rushdoony ] Yes. It means, then, that you have no independent wealth. There are multi millionaires in the Soviet Union today, but there is no independent wealth. They can be wiped out in a matter of seconds by any agency.

[ Scott ] If they lose... if they lose favor with the government.

[ Rushdoony ] Yes. And they have no independent wealth, then, Nothing that can be useful to establish their freedom or fight.

[ Scott ] They can’t pick up and go.

[ Rushdoony ] No.

[ Scott ] And they have no possessions.

[ Rushdoony ] No.

[ Scott ] They can’t buy their way in or out.

[ Rushdoony ] Not even the highest ranking people can own their own homes. They may have three or four places, but they are state property. And with the slightest bit of disfavor they start to lose what they have.

[ Scott ] The comment that you made on the ownership and independence, the fact that the Soviet citizens could not own their own homes applies with... to us. Nobody owns their own home in the United States. Everyone has to pay taxes.

[ Rushdoony ] Yes.

[ Scott ] ... on their home.

[ Rushdoony ] And it is like a rent.

[ Scott ] After they pay....

[ Rushdoony ] It is a {?} rent.

[ Scott ] After they pay for the place, after they buy the land they have to pay the government in order to keep it.

[ Rushdoony ] Yes.

[ Scott ] It can be taken away from them for non payment of one dollar.

[ Rushdoony ] That is why in biblical law there is no such thing as a property tax.

There is an interesting aspect to all this that has increasingly attracted my attention and I would like to comment on it now, Otto. I will be dealing with this in my Leviticus series a little later, but not too long ago a Russian economist, Nicolai Condratiav...

[ Scott ] Oh, yes, very famous.

[ Rushdoony ] Yes.

[ Scott ] Stalin had him shot.

[ Rushdoony ] Yes. Yes. ... studied all the cycles that he could find, economic cycles, boom and bust, cycles in the weather and so on. And he found that there were a great many cycles of boom and bust and they all seemed to run roughly around 50 years. He found that wheat prices ran a 54 year cycle studying them from 1545 to the present. The same was true of coal consumption, coal production, leads production, pig iron production, rainfall, the thickness and thinness of Arizona tree rings from the year 1000, coal production, cotton acreage, oat acreage. One thing after another seemed to run in a cycle of about 50 to 54 years. He found this in the affairs of men and in the affairs of the natural world.

Well, what he came to realize, then, was that there was something here that man could not control. Moreover, Kirkland, in writing about this—William and Douglas Kirkland in Power Cycles published just within the past year—made this comment. They are not Christian. “One of the best,” And I am quoting, “documented attempts to recognize and control the destructive nature of the Depression phase of the 50 year cycle was implemented by Jewish tribal leaders in the pre Christian era. In the Old Testament the important festival of the jubilee was celebrated every 50 years to absolve debtors of their financial obligations by a reinstating the rights of all possessions and land holdings to their original owners. The tribal leaders learned from experience the threshold level of accumulate debt that a society can tolerate before significant civil disruptions begin to occur,” unquote.

Well, of course, that is a completely naturalistic interpretation. But God says that we have to have a sabbath every seventh year and a cancellation of debts, no long term debt, no debt more than six years. And then a jubilee at the end of seven... 50 years, seven sevens of years, even more drastic in its cancellation.

What this did was to prevent man from inflating his economy. If you could not go into debt for more than six years and you were confined to gold and silver money as the Bible requires, you could not inflate an economy. And it meant that there was a stability. There was a necessity of thrift, because every seventh year you had to live on what you had saved.

Now some people say, “How could people in the modern world manage to save enough to stop working every seventh year and have a sabbath?”

Well, they could do more than that with the interest they are paying.

[ Scott ] Oh, yes. Well look at...

[ Rushdoony ] Because the interest amounts to more than 100 percent of their income in five years.

[ Scott ] Well, yes. Installment purchases, 30 year mortgage. My grandfather bought a home, a very modest place along the Hudson in the early years of this century and paid cash. The price was about what he would earn in a year and a half. So if you saved the equivalent of a year and a half salary... now let’s say that the average salary today is about 25,000, 20,000, somewhere around there. That would mean that a home should cost about... a modest home should cost about 30,000 dollars. But, as you know, homes in California begin at 100,000 and most of the rest of the country around 60, 70,000. Now they used to put the mafia in prison for charging an interest which meant that you had to pay the interest and you never paid off the principle. They actually put them in prison for this.

[ Rushdoony ] Yes.

[ Scott ] And there were men murdered over these sort of things. Well, now, of course, they have lifted the limits of the usury laws in every state in the United States. Usury is no longer a crime in this country. And in fact usury is a profession.

[ Rushdoony ] We had the highest rate of home ownership and farm ownership in the world prior to Roosevelt. And we had it because we had a stable money and people were able in five years to buy a home and pay of it, or a farm and pay for it.

[ Scott ] Well, the average mortgage was only five years.

[ Rushdoony ] Yes. It was only after World War II that the bars were let down and the 10 year, then the 15, the 20 and finally the 30 year mortgage began.

[ Scott ] Well, now they are talking about selling automobiles on a five year loan, 60 month payments.

[ Rushdoony ] Yes.

[ Scott ] Five years to pay off a car. Be better off with a horse and buggy.

[ Rushdoony ] Then you are paying not the ... for the car, but you are paying interest primarily.

[ Scott ] Oh, yes. You pay interest all the way.

[ Rushdoony ] Well, the sad fact is we have a nation of people in slavery because the Bible tells us the borrower is the slave to the lender.

[ Scott ] Well, we know that is true. We know that is true. And it has become a way of life for corporations as well as for individuals.

[ Rushdoony ] Yes.

[ Scott ] A corporation has to go to the well time and time again and sell stock on the exchange. And in order to sell the stock... I have seen corporations that actually had a loss year and they... at the share holders meeting the share holders went up and wanted to know if the dividend was going to be increased when the company was losing money. They are that far divorced from reality.

[ Rushdoony ] Yes.

[ Scott ] Well, of course, you know what happens to an individual who loses sight of reality. He falls onto the rocks. Now there isn’t anything we have, now, of course, the legal right to own gold again. And the United States government is putting out a gold coin and I think it is very interesting. The official price of gold is what is it 445 dollars an ounce?

[ Rushdoony ] Yes.

[ Scott ] And... and the... the government of the United States is putting out a gold coin that it is selling at market price.

[ Rushdoony ] Yes.

[ Scott ] And nobody has pointed out the weirdness of this situation.

[ Rushdoony ] Yes.

[ Scott ] The official price of gold is being violated by the government itself.’

[ Rushdoony ] Yes.

Well, I read an item recently that the various states the world over, Japan and European countries, the U S, when they buy gold now buy outside of the regular markets.

[ Scott ] Oh, yes.

[ Rushdoony ] So it will not be reflected in the market prices and to keep the price of gold from going up more.

[ Scott ] Yes. I was told that by a man from Citibank quite recently who was in charge of the gold sale to the Japanese government which they were using to create a commemorative coin for Hirohito and also, I believe, to increase their gold reserves. And he said it was purchased from central banks in order not to allow the price of gold to go up in the ordinary market place, because this reflects upon the governments.

[ Rushdoony ] Yes.

[ Scott ] This makes the political situation that much shakier. When Gold got up to 800 dollars an ounce it had to be brought down, because if it goes too high the stability of the financial system becomes perilous.

[ Rushdoony ] Yes. When it went up that high what people were doing was to recognize how worthless their paper money was becoming and their investments, so that...

[ Scott ] Well, gold... gold wasn’t increasing in value. It was the dollar that was dropping.

[ Rushdoony ] That is right. As a matter of fact, I have often pointed out that there is a closer correlation between the price of gold and the price of goods over the years than anything else. In the early 30s you could buy a new car, a Ford, a Plymouth of Chevy for a six... for under 600 dollars in gold. And today you can still buy a new car with 30 double eagles. You will do better than Ford, Chevy or a Plymouth or get one of their best models. But what it means is that gold is more closely related to the reality of the economic scene even though we are not on the gold standard.

[ Scott ] The value of... the... the... the... yes. The purchasing value of gold is constant. You can compare it to wool. You can compare it to almost any commodity. Somebody did do that, you know. Bill Drake, I believe it was, who pointed out that in 1620 one ounce of gold would buy a good man’s suit. And it still will, selling now at 445 an ounce. So you can buy a decent suit for that.

[ Rushdoony ] Or a very good suit.

[ Scott ] Yes, a good suit, yes.

[ Rushdoony ] Yes, well, the problem we now face is that most Americans are mortgaged to the hilt. And some economists say the end is in sight. 1991 is the date used by a number. I have no idea whether it is a year away or six years away...

[ Scott ] Well...

[ Rushdoony ] But it is close.

[ Scott ] The... the old word was panic. It was never depression. There was no such thing. There was a panic. I remember my father coming home and saying, “Catherine, the panic is on,” in the Depression. And this is fear. Everyone gets excited and starts to cash in. Everyone wanted to sell all their stock and in October 29 at the same time. That is why the market collapsed because there was nobody to buy. Everyone got scared at the same time and wanted to pull out. So, of course, their fright destroyed the value of their holdings.

Now when the Iran gate began, you know. This began as great shock over the fact that the president had sold some arms to the... to Iran, to the Khomeini. And now that shock has vanished in indignation over the fact that arms were shipped to the Contras in Nicaragua. So it turns out that they are shocked at several different things at once and several different direction. But the minute Congress began to hammer at the president, the dollar began to drop. Up until then the dollar had risen under the Regan administrations because of the sort of Eisenhower era of good will that he had crated temporarily. The minute Reagan’s position became unstable, the dollar began to drop. It will continue to drop as long as we have this political crisis. And, in fact, if this political crisis continues and deepens the dollar may drop completely out of sight. The panic will occur, because around the world we are now witnessing a betrayal of our allies in Central America, a betrayal of our allies in South Korea, a betrayal of our president while he is still in office and this adds up to bad news. Bad news costs you money.

Now most of... most people in the West are living in the illusion of prosperity. They are living under the illusion that they are still free like their grandparents, that they have money, when they don’t have money. All they have is company scrip. They are just as... as locked in as the employees of an old fashioned coal company in Kentucky and in 1888.

[ Rushdoony ] You used the word panic. You will find it is still in the history books to describe, say, the Panic of 1819.

[ Scott ] Yeah.

[ Rushdoony ] The interesting thing is about those old panics, they often lasted only a few months. And the economy quickly righted itself because it was a free economy. And it is interesting, also to see why those panics came about. It was not because the legal tender was gold and silver, but because there is a serious loophole in the Constitution as it was written whereby it was the federal government that was prevented from issuing paper money, but not the banks.

[ Scott ] And not the states.

[ Rushdoony ] No. And the banks were being set up all over the territories and the states issuing worthless paper and creating a temporary boom and then a collapse. And instead of recognizing that this is the danger, our tendency as a country has been to say we want more of that disaster.

[ Scott ] Oh, yes. Well, look at Congress. Congress votes appropriations bills like people who are under the influence of... of real drink. I mean to say that they behave like drunken sailors is to insult the sailors. No amount of money is excessive no matter how large the national debt is. Well, of course, this inevitably creates a corner from which the government cannot extricate itself with any honor. Every revolution in the 20th century and including the French Revolution was triggered by a financial catastrophe or crisis on the part of the government, not the people.

When France went bankrupt in 1789 the French people were still very wealthy. Wealth was in the private sector. It was the government that went bankrupt.

[ Rushdoony ] An interesting aspect of all this is that in a sense Congress today is an illegal body, because when you go back to the original intent as it was manifest in the various states and in the federal government, the conception of congress and of the state bodies, the House of Burgesses, the House of Deputies, the General Court of Massachusetts and all, was not that they were creating law making bodies. They had a governor or a president and then they had a representative body, representatives of the people and representatives of the states. And their purpose there was to be a watch dog for the people, not to make laws. They were to pass whatever was needed to expedite the operation of the fundamental law, but basically they operated in terms of a biblical structure.

[ Scott ] Yes.

[ Rushdoony ] ... of justice as it was conceived of by a Christian people. And this is why the total acts of Congress that are law making for the era prior to the Civil War is minimal...

[ Scott ] Compared to what? To compare it to one session today.

[ Rushdoony ] Yes.

[ Scott ] Because now we not only have Congress grinding out laws like a little salt mill at the bottom of the ocean, but we have regulatory agencies and we have the executive department issuing executive orders and now we have the judiciary who is operating in Massachusetts, the school district in and Alabama the penitentiary and prison district system that we... across the country the... the educational system. There isn’t anything that the courts don’t feel capable of issuing decrees about. And what is a decree but a law?

[ Rushdoony ] Yes. Well, it used to be that these be that these bodies met for a couple of weeks every other year.

[ Scott ] Sure.

[ Rushdoony ] In fact, up until a few years ago there were still some states where there was no session, except for about two weeks every other year. And in some states, I believe, Indian is one, the state capital had the living quarters of the governor and lieutenant governor right in the capital building as well as the court room.

[ Scott ] Because it was a temporary habitation.

[ Rushdoony ] It was a temporary place. For years and years in this history of this country the chief justices and the members of the Supreme Court, the members of Congress would go to Washington for a couple of weeks a year and stay at boarding houses.

[ Scott ] Yes. And as that... it was good for them, too. They had a chance to talk and to think.

Well, the treasury just a few weeks ago issued a statement regarding a treaty that it had with a Caribbean Island saying that they were going to change the terms. They weren’t going not renew that treaty on the same basis. And the people in the treasury were astonished to discover that the international markets were suddenly in a turmoil, because by changing the terms of the treaty they had disrupted all kinds of businesses that had gone there, located and had based their profit and loss...

[ Rushdoony ] Yes.

[ Scott ] ... and operations upon the terms of that treaty. Now the fact that the treasury was surprised at the impact of what it considered a minor change gives you some little insight into what is going on inside the American government.

You remember some time ago I talked about the fact that we discarded, as a nation, the sanctity of treaties on an international level which was one of the two pillars of the British Empire. We allowed the Arabs to change the terms of the oil treaties, unilaterally.

[ Rushdoony ] Yes.

[ Scott ] We put our companies into the position of saying, yes, you can pay for the oil, but they still own it. Now, of course, this makes no sense. In the same token the Congress today is talking about changing the income tax laws. They just got through changing them a year or two ago in which, presumably they have reduced the rates. Congress now wants to change those agreements with the people.

These are contracts between the government and the people. When the government changes the terms of a contract, you have a government that you cannot trust.

[ Rushdoony ] You referred to what you had said a while back. You wrote it up in a superb article which I think people ought to reread. It is in the 1984 number of the journal to which I have referred previously, volume 10 number two, they symposium on Christianity and business. you wrote on the lesson of OPEC and how deadly the contempt for the validity of contracts was in its implications. And we are seeing increasingly that contempt for the validity of contracts manifesting itself in one sphere after another internationally.

[ Scott ] Well, yes. I mean, you can... there was great international indignation when the kaiser ordered his troops to invade Belgium with whom he had a nonaggressive treaty. And he said in response to the criticism it was just a scrap of paper.

Well, we could say this every day in every way.

[ Rushdoony ] That is an interesting point that you brought up, because what people have forgotten is that when the kaiser made that statement he handed a weapon to the propagandists among the allies. They were ready to invent all kinds of stories about German atrocities, mass rape, cutting off the hands of little children, leaving them to die, every kind of atrocity imaginable. And they were false. But the kaiser’s statement made it believable.

[ Scott ] Oh, it did.

[ Rushdoony ] Because if a treaty were a scrap of paper, well, a man was untrustworthy.

[ Scott ] Absolutely.

[ Rushdoony ] And Germany brought it on itself by he kaiser’s statement.

[ Scott ] Absolutely. The kaiser was a disaster in many respects, but I... I just think that at that time there was universal indignation. Now a declaration of war is a forgotten concept.

[ Rushdoony ] And our state department and every state department the world over makes the kaiser look like a piker.

[ Scott ] Oh, absolutely. And when these matters get into the financial stability of a family, now let us go back from, let us say, 1870 after the green backs were recalled, after Lincoln’s experiment with paper money was overcome along about 1870 to about 1910 or 11 money was stable in then United States. If you left your son 1000 dollars that you had worked and saved and set aside, he inherited 1000 dollars that was worth just as much as when you earned it. It wasn’t going to melt.

The prices that you paid in the grocery store were the same prices that your father paid. And this is what real money means.

[ Rushdoony ] Yes.

[ Scott ] Byzantium had for 850 years stable prices and valid money and you could transfer your property down though the family forever.

[ Rushdoony ] And that is why Byzantium lasted longer than any other state in the history of the world. When they abandoned the gold standard, the collapsed.

[ Scott ] Yes. It went down in a generation.

[ Rushdoony ] Yes.

[ Scott ] Now we have had a very long run. We have lasted now, oh, over 60 years violating every rule of the book. But you look at the prices of the 30s. You mentioned that. I remember the first automobile I ever bought cost 700 dollars and it was a good car. It was a new car. It was a very fancy purchase.

[ Rushdoony ] Well...

[ Scott ] But just look at the prices now, 13,000 for the same car.

[ Rushdoony ] Yes. Well, our time is just about up. I do feel that the subject of money and debt is a religious subject. Today our country and every country in the world, being humanistic, feels that it can make its own laws, create its own economic climate, its own economic world and there is no God for them. Therefore, they can do as they please and the result will be a world wide disaster.

[ Scott ] It will be despotism. That is what we are moving into.

[ Rushdoony ] Yes.

[ Scott ] It isn't in the form that people have been told to look out for, but a man who has no money is not free. A nation that has no money is not free. It is very simple syllogism.

[ Rushdoony ] Yes.

[ Scott ] And, of course, it is the consequence of sin in high places and also sin of omission on the part of the people.

[ Rushdoony ] Yes.

[ Scott ] The people have been told. They were told repeatedly that if you don’t protect your own liberties you will not keep them. To allow the government to degrade the money, to elect men who continue the process is to be part of the problem.

[ Rushdoony ] Well, our time is up. Thank you all for listening and do give serious consideration to the problem of debt. We must be, again, a free people. Thank you and good night.

[ Voice ] Authorized by the Chalcedon Foundation. Archived by the Mount Olive Tape Library. Digitized by ChristRules.com.