As we noted within the Preface to Organic Economics™, the word wealth is NOT a bad word. Nor is it wrong for Christians to obtain “wealth.” In economic usage, it simply means “the goods and assets owned” regardless of quantity. If it is biblical to own food, clothing, shelter, transportation, and other beneficial goods, then it logically follows that wealth (and its attainment) is permissible in God’s eyes for His people. Since the bulk of Scripture talks about these material things as “blessings,” then this line of logic is fully confirmed by many biblical precepts as well.
Within this chapter, we will first take a few moments to lay down some theological foundations about whether it is “right or wrong” to obtain wealth. We will then quickly move into discovering through the Scriptures that all wealth has labor (i.e. work) integral within its formation. This will form a firm foundation upon which the subsequent chapters will build.
However, let me first note that there are many people who are not presently working today due to no fault of their own. Such people are unemployed or under-employed because of the ongoing economic meltdown and the resulting effect this has upon the labor markets. So let me begin here by encouraging anyone reading this who is in such a dilemma to not consider this chapter as any sort of “reproof” against you or your circumstances—as that is not the intent at all. Rather, this chapter will disclose both theologically and economically a few of the Organic Economic™ elements that are necessary for both individuals and societies to build wealth. Thus, I hope that the Lord uses this chapter as an educational framework through which to illuminate key concepts to your understanding. I pray that this information will also prove to be helpful to you regarding your own particular circumstances.
I also hope this chapter reveals to my wider audience some of the key reasons that the current crisis is unfolding in the first place. As an added ingredient towards accomplishing this goal, I will conclude this chapter with a brief application of these principles by applying them to the current economic crisis. We will therein examine how the government of the United States destroyed its own productive capacity—and thus, destroyed its jobs. For those outside of the USA, I trust that the illustration will help you to understand your own country’s problems as well.
Special Acknowledgments: I would like to sincerely thank (alphabetically) Dennis Collins and Pastor Steve Lumbley for the insightful feedback that they gave me regarding this chapter in particular. Both of these fine Christian men provoked me with their sincere comments/questions—Steve regarding some theological points, and Dennis on some important economic and personal aspects—which challenged me to pray for further wisdom, and subsequently, to enhance this chapter significantly. Many thanks to you both.
An Extant Error
Though it has become more scarcely heard within recent decades, the Dark Ages legacy of “poverty is holy” doctrine still circulates within some branches of Christendom. This is particularly true within some sects of the more traditional branches of the Church, such as within the Roman Catholic, Eastern Orthodox, Russian Orthodox, and other such branches. (Though the Sixteenth Century Roman Catholic Scholastics of the School of Salamanca provides us a quick example to prove that such doctrine never entirely permeated through these groups.) Such concepts also seem to be more prevalent within countries outside of the United States of America.
However, there are an estimated 2.26 billion professing Christians worldwide (i.e. not everyone who professes to be a Christian is actually a Christian—see Matthew 7:21-23; and note also Matthew chapter 13). Of that larger population, only about 10% of that number reside within the United States. And the majority of professing Christians outside the USA are non-Protestants (though Evangelicals and Pentecostals are the fastest growing groups). Thus, since this website is geared toward a global audience, I need to address this topic briefly.
The Bible does not support such theological concepts as “poverty is holy” (and we hope that this Organic Economics™ study makes quite clear). Nevertheless, it is a fact that this sincere-but-ignorant concept has prevailed within some circles. For example, consider this quote from an e-zine contributor, who cites an unnamed source to substantiate their point:
When we finally emerge into contemporary times we must hold our noses and brace our stomachs at the new incense of the pious: money. When Wren put forth his plan for London after the great fire, he placed the Bank of England, not St. Paul’s, at its center. Here we find cities emphasizing speculation, not security; profit-making innovations, not value-conserving traditions and continuities: in short, capitalism. “Capitalism, denying the holiness of poverty or the imaginative sustenance of art, sought solely to increase the amount of consumable goods and measurable gain….Many of the practices introduced by capitalism were in fact salutary…but the immediate effect…was to transform the complex social order of the city into the over-simplified routines of the market. Its ultimate result was a money-making economy that had no definite ends or purposes other than its own further expansion.”
(Emphasis added; Click here for the full article.)
Now the objective of the writer above can be appreciated when one considers the fact that they are grieved by the wholesale abandonment of morality and religious traditions within many communities for the mere sake of financial gain. He wants to turn people back towards religious tradition.
However, this author’s foundational belief system is quite flawed. The Bible says we are to turn people towards the Savior. It never says we are to turn people towards “church traditions” (many of which are not biblical anyway, though some do have scriptural merit). And “capitalism” is not the problem, but a lack of biblical counsel within capitalism is the problem. Thus, his conclusions are quite errant, though his intent may be commendable on some levels.
In contrast, I would briefly argue here that if the Church had not been so overly myopic regarding its many traditions—and had instead taken the time to develop a fuller Economic Theology™ and convey those principles to their congregants—then perhaps the nature of “capitalism” so evident within the marketplaces historically and even today, would not be quite so devoid of spiritual insight and focus (as that author lamented). In short, many within the Church “abandoned” the markets and discussions of commerce (except perhaps either to condemn them outright, or to otherwise demonstrate their ignorance of such things). Thus, they left the door wide open for immorality to spread therein due to the vacuum left by a lack of true biblical discourse on such subjects.
Even today, many people within financial and government institutions are crying out about “moral hazards” regarding the fiscal policies being followed by the U.S. and many other countries around the world. However, these same people often cannot clearly name and quantify those hazards, much less point to a moral foundation upon which to truly substantiate the immorality of such policies.
So where is the Church to address these “moral hazards”? Until TheWisdomOfGold.com was launched, there remained an eerie silence on such financial subjects of financial morality—because, again, the Body of Christ was just too ignorant of such matters.
Thus, one of our objectives is to speak godly wisdom about “moral hazards” to those within the financial and governmental communities, and to point them toward sound policies that will help the people of those countries instead of enslaving them. Another objective demonstrated throughout this website—and the ongoing Economic Theology™ project as a whole—is to equip Christians of all ages and denominations (both clergy and non-clergy alike) to be able to clearly identify, quantify, and communicate, what “moral hazards” certain policies have, and to speak up for righteousness regarding the markets and financial systems of the world.
The “moral law” found within Scripture is the ONLY true foundation upon which morality can be contrasted with immorality. Thus, it is up to the Body of Christ to understand and then communicate these truths—in conjunction with a clear focus on the Gospel of Jesus Christ, which alone is able to change men’s hearts. (See also Godly Wisdom About Gold and The Supreme Value of Righteousness for more teaching along these lines.)
Returning now to our discussion more particularly…
Work is Godly
So where did the crazy “poverty is good” concept come from within Christianity anyway? Actually, any student of theological history will tell you it came from non-Christian Eastern religions whose influence entered into the Church through affected monasteries, during the first few hundred years of the Church. The Bible itself does not support such concepts in either the New Testament (as an honest examination will prove) or within the Old (as any Jewish person will be happy to explain to you Christians, should you be unable to figure that out through your own study).
So why do such errant concepts still exist today in Christendom? Such “poverty is good” mentalities continue within certain circles because few people understand the fact that wealth is actually created by labor— and labor is certainly considered “permissible” throughout Scripture. Even the wealth created through inventions, businesses, or investment vehicles, is “made up” or “composed” of labor—either our own, or the labors of others.
Whenever we ministers bring up the topics of “work,” “labor,” or “effort,” however, some people seem to cringe with anxiety at the mere mention of such terms. It would appear that some people prefer “get rich quick schemes” or waiting for a miraculous “harvest” on the money they “sowed” to minister so-and-so rather than to work honestly—even though such methods typically impoverish people rather than profit them.
Consequently, for us to proceed further into some more profound concepts of biblical economics, we need to first explore the “labor” element of all wealth. Once this concept is grasped, then numerous other important and profitable truths, such as labor compounding (which we will discuss within the next chapter), can be easily understood as well.
The Fruits of Labor
As we noted in The Biblical Genesis of Trade, humanity discovered that they could trade the fruit of their labors (i.e. their goods and services) with others, and everybody benefited through such beneficial exchange. With the discovery of a common medium of exchange within the marketplace (money), the efficiency with which people could trade the fruit of their labors with one another increased further, and again, everybody benefited.
Moreover, contained within the very biblical concepts of blessing, trade, and money is the unmistakable presence of the concept of “fruit” or “product” with regard to one’s own labors. Perusing a few passages from the Holy Scriptures will help to bring this thought into further clarity:
Now it shall come to pass, if you diligently obey the voice of the LORD your God, to observe carefully all His commandments which I command you today, that the LORD your God will set you high above all nations of the earth. And all these blessings shall come upon you and overtake you, because you obey the voice of the LORD your God: Blessed shall you be in the city, and blessed shall you be in the country. Blessed shall be the fruit of your body, the produce of your ground and the increase of your herds, the increase of your cattle and the offspring of your flocks. Blessed shall be your basket and your kneading bowl. Blessed shall you be when you come in, and blessed shall you be when you go out. The LORD will command the blessing on you in your storehouses and in all to which you set your hand, and He will bless you in the land which the LORD your God is giving you.
(Excerpts from Deuteronomy 28: 1-14, NKJV)
There is nothing better for a man than that he should eat and drink and make himself enjoy good in his labor. Even this, I have seen, is from the hand of God.
And also that every man should eat and drink and enjoy the good of all his labor—it is the gift of God.
Also, every man to whom God has given riches and possessions, and the power to enjoy them and to accept his appointed lot and to rejoice in his toil—this is the gift of God [to him].
(Ecclesiastes 2:24; 3:13; 5:19, The Amplified Bible)
Blessed are all who fear the LORD, who walk in His ways. You will eat the fruit of your labor; blessings and prosperity will be yours.
(Psalm 128:1-2, NIV)
From the fruit of his lips a man is filled with good things as surely as the work of his hands rewards him.
(Proverbs 12:14, NKJV)
She rises also while it is yet night, and gives meat to her household, and a portion to her maidens. She considers a field, and buys it: with the fruit of her hands [i.e. profits] she plants a vineyard….Give her of the fruit of her hands; and let her own works praise her in the gates.
(Excerpt from Proverbs 31, KJV; edited to modernize some words for translation purposes)
Interestingly, this same concept of “labor” as being the chief component of “wealth” was clearly expressed even within God’s warnings about the curse that is destined to come upon the disobedient:
“But it shall come to pass, if you do not obey the voice of the LORD your God, to observe carefully all His commandments and His statutes which I command you today, that all these curses will come upon you and overtake you:…The LORD will send on you cursing, confusion, and rebuke in all that you set your hand to do, until you are destroyed and until you perish quickly, because of the wickedness of your doings in which you have forsaken Me….A nation whom you have not known shall eat the fruit of your land and the produce of your labor, and you shall be only oppressed and crushed continually.
(Excerpt from Deuteronomy 28:15-68, NKJV)
A man to whom God has given riches, possessions, and honor, so that he lacks nothing for his soul of all that he might desire, yet God does not give him the power or capacity to enjoy them [things which are gifts from God], but a stranger [in whom he has no interest succeeds him and] consumes and enjoys them. This is vanity (emptiness, falsity, and futility); it is a sore affliction!
(Ecclesiastes 6:2, The Amplified Bible)
And of course, this “labor-wealth” nexus is a concept that is also clearly evident within the New Testament writings as well:
In the name of the Lord Jesus Christ, we command you, brothers, to keep away from every brother who is idle and does not live according to the teaching you received from us. For you yourselves know how you ought to follow our example. We were not idle when we were with you, nor did we eat anyone’s food without paying for it. On the contrary, we worked night and day, laboring and toiling so that we would not be a burden to any of you. We did this, not because we do not have the right to such help, but in order to make ourselves a model for you to follow. For even when we were with you, we gave you this rule: “If a man will not work, he shall not eat.”
We hear that some among you are idle. They are not busy; they are busybodies. Such people we command and urge in the Lord Jesus Christ to settle down and earn the bread they eat. And as for you, brothers, never tire of doing what is right.
(2 Thessalonians 3:6-13, NIV)
Biblical Wealth Production
The concept of our wealth being a “fruit” from our labors in unmistakable throughout the Scriptures. Regardless of whether we study the Old or New Testaments, there is absolutely NO biblical grounds for any person to expect “blessings” to come upon them apart from fruitful labors (with the exception of occasional financial miracles obtained through prayer in times of special need, or Sovereign acts of God in accordance with His plan for a person’s life; e.g. Joseph promoted out of prison and into being the acting ruler in Egypt).
Biblically, our own labors (in obedience to God’s revealed will, of course) are to be coupled with the blessing of God (i.e. the empowerment to prosper, which He gives to His obedient people) to consistently produce wealth—which we are to also share with those who are in genuine need.
Notice that the Lord even said within the passage above from Deuteronomy twenty-eight that His “blessing” was going to come upon that to which they set their “hands.” Even the references within that chapter of God’s blessing coming upon their “barns, baskets, kneading bowls, cattle, and lands” all imply labor and work on the part of God’s people.
And again, as I mentioned already within the Introduction to Organic Economics™, the so-called “prosperity preachers” of today often over-emphasize the miraculous occurrences of provision found in Scripture in order to tie such passages to contributions to their so-called “ministries.”
Yet, the Bible emphasizes that we should apply principles such as a good work ethic, wisdom, and honesty within the marketplace if we are to consistently build wealth.
There really is a supernatural element to God’s provision for His people described in the Bible (which I plan to discuss in more detail within a later chapter). But there are also God-ordained natural elements explained within Scripture upon which that supernatural empowerment generally rests. I once heard a preacher say, “God’s ‘super’ comes upon our ‘natural’ to give us supernatural provision.” That expresses it well.
Even the Deuteronomy chapter twenty-eight citation above demonstrates that without the “work of our hands” there is nothing for His “blessing” to empower. So such erroneous teachers are leading people astray with their illusion of “supernatural wealth” because they fail to teach the necessary wealth-building principles emphasized by the Bible itself.
So to formally state the organic economic principle taught already within the text above:
The Labor Component of Wealth: Wealth (i.e. acquired tangible goods and assets) is an outcome (“fruit” or “product”) of somebody’s labor.
This is a major reason why the wise and wealthy King Solomon explained to us through the Spirit of God:
I went past the field of the sluggard, past the vineyard of the man who lacks judgment; thorns had come up everywhere, the ground was covered with weeds [i.e. instead of crops which are useful and can also be sold], and the stone wall was in ruins.
I applied my heart to what I observed and learned a lesson from what I saw:
A little sleep, a little slumber, a little folding of the hands to rest—and poverty will come on you like a bandit and scarcity like an armed man….
The sluggard’s craving will be the death of him, because his hands refuse to work. All day long he craves for more…
(Proverbs 21:25-26a; 24:30-34, NIV; notes in brackets mine)
(And again, those who find themselves unemployed because of poor government economic policies or government oppression DO have circumstances beyond the current context of what I am addressing here. So you also have biblical grounds to seek God’s miraculous provision in prayer. So I encourage you to spend time in Philippians chapter 4 and 3 John 2 to encourage your faith, and seek Him for your needs to be met, even as you continue this study in order to build your financial/economic knowledge.)
Within the passage above from Proverbs, the lazy and slothful person “craves” but never obtains, because the wealth he or she seeks is produced by labor. Labor produces wealth. This is true not only for individuals and families, but also for entire nations. It is a biblical fact that even within the lush provision of the Garden of Eden man was gainfully employed “to work it and take care of” what God had provided him (Genesis 2:15, NIV).
In contrast, Proverbs noted that the “capital goods” of the sluggard (the stone wall, his field, i.e. the assets he possessed that were capable of producing income) were neglected and deteriorating from a lack of maintenance. This shows us another interesting organic economic truth:
Labor Maintenance of Wealth: Labor not only produces wealth, some effort is generally required to preserve it as well.
The way God’s system is designed to function is this: Labor (i.e. work or “services”) and the “fruits” of labor (i.e. “goods”) are offered to the market by people eager to obtain other goods and services that they want and need. The goods and services they seek are obviously the labors and “fruits of labor” of other people who are trading for the same reasons.
Thus, we can see another organic economic principle at work here (yes, I used a pun):
The Labor Foundation of All Markets: All markets for goods and services are essentially trading the labors of people and the fruits of such labors. This fact includes modern stock markets, bond markets (which buy and sell debt obligations to be repaid through the future labors of others) and futures markets (which buy and sell commitments to provide commodities not yet produced by the labors of others). All markets are trading the past, present, and/or future the labors of people—and/or the fruits of such labor.
After all, what goods and services could possibly be present in a market but that someone’s labor produced them and brought them there? Even in a modern economy, could a car appear in the showroom of a car dealer without immeasurable amounts of labor going into its design and testing, the mining and refining of the minerals needed to make its various parts, the fabrication of these parts, and their assembly in the manufacturing plant?
Every good (and obviously, every service) within the marketplace is a product of labor; and when purchased, you are purchasing the “fruits” of such labors. The “money” you spend in doing so, is itself a fruit of your own labors with which you “trade” for the goods and services that you need or desire.
Nevertheless, there are many sincere Christians who fail to grasp the simple truths we have touched on briefly within this discussion. Further, many have gone to the extreme of promoting completely unbiblical notions of “social justice” as they seek to redistribute wealth from those who produce (i.e. labor) to those who do not. Worse yet, they actually think God approves of such doctrine, though it clearly violates His Eighth Commandment, “You shall not steal.”
However, we will not dive into that topic directly for now. Instead, let us take all that we have just learned above and apply it to contemporary issues. We will take a few moments now to examine how the United States of America destroyed its own production capacity, and thus, castrated its ability to produce wealth. In other words, we will see how the government of the USA has worked against its own population’s best interest, and is depriving them of their fair opportunities to create true lasting wealth.
Therein, we will also see why unemployment is increasing so rapidly as a result.
The World’s Creditor Became the World’s Debtor
Now let us apply all of the above to a contemporary situation, still unfolding with regard to the United States and its employment situation. Please note, however, that this is NOT an exhaustive treatment of this topic. Rather, this is a contextualized account of these issues, that is intended to further illustrate how labor is a key component of all wealth production. Consequently, I have included several links within this study below to provide you other viewpoints and related details for your further study.
By the end of World War One, much of Europe’s production capacity had been demolished. The United States’ mainland, however, had been spared such destruction as the war was fought on the other side of the Atlantic Ocean. This presented a great economic opportunity for America as its production capacity expanded in order to help supply those nations post-war with the products they needed. Thus, this expanded trade caused expanded production, which also expanded America’s wealth in-part through that additional labor—for labor is a component of all wealth creation.
However, because of the outbreak of the war, from about 1914 to 1917 most of the world’s nations also suspended or abandoned their gold-based and silver-based monetary systems. Once hostilities ended, however, only some of these countries returned to any semblance of sound money systems. The resulting “gold standard” in the U.S. and other countries was also not the original true “Classic Gold Standard” system, but rather a somewhat watered down version. (And since we will discuss this later in another chapter, I will not expand the details any further here).
Also, the “winning” nations of that war did not let the “losing” nations off the hook when the hostilities ended. Instead, they imposed punitive trade sanctions and reparations requirements which hampered those countries’ abilities to recover financially from the war. This eventually led to dire economic results within several countries, including the infamous Weimar Germany hyperinflation. Such economic catastrophes also created volatile social climates which led to the rise of Fascists like Adolf Hitler and Benito Mussolini. Thus, these post-war economic policies led to widespread economic suffering, which fed the social fires that eventually started the next World War.
After the end of World War Two, most of the industrialized nations were in ruins. Most of the manufacturing capabilities of Europe, Western Russia, China, Japan, the other Pacific Rim nations, and even much of the Middle East and North Africa, had been damaged or demolished by the war. However, with the exception of the attack on Hawaii in December of 1941, the United States again suffered virtually no domestic war damage. Further, it had built up an industrial capacity during the war that was the envy of the nations.
With much of the other industrialized nations in ruins, the U.S. was now in the desirable position of selling its production to the rest of the world. And roughly 70% of the U.S. Gross Domestic Product (GDP) was production based. This means that the “jobs” within the U.S. were mainly those related to producing actual goods. We could generalize it by saying that about 70% of the jobs produced something (e.g. farming, manufacturing, mining, etc.), while about 30% of the jobs were related to consumption activities (e.g. service jobs, retail jobs, government jobs, etc.).
Of course, everyone laboring earned wages for themselves, because labor is a key component to all wealth—regardless of whether their jobs were production or consumption related. Furthermore, the consumptive labor is necessary to support productive labor (e.g. companies need accountants and machinery repairs, and there are some government services that are actually helpful, though too many government agencies will create a mess and high taxes). NEVERTHELESS, a nation’s wealth generally increases when its aggregate production exceeds that nation’s aggregate consumption—much like a family increases its wealth by earning more income than they spend.
(This is a simplified explanation, of course, and not intended to exclude other ways that nations can build wealth apart from productive capacity—e.g. the Republic of Panama with its Canal, financial services, and tourism. Nevertheless, even all of these sectors within Panama’s economy include significant labor, because that is a major component of all wealth. Moreover, all these Panamanian “services” require somebody somewhere to produce something tangible for Panama to sell its services to them. Companies have to produce tangible goods in order to need the Canal for their shipping containers to pass through, and to earn the money that flows through Panama’s amazing banking sector. Even tourism is either directly or indirectly “fed” by the incomes produced by production-based labor elsewhere; or by the need for business people to travel to Panama for commerce tied in some way—directly or indirectly—to productive industries. As production output slows elsewhere on the planet, it is understandable how Panama’s service-related economy slows somewhat along with it. By the way, Panama does also have a growing production-related economic sector as well.)
Thus, post-World War Two, the United States produced goods with about 2.3 times MORE labor than it expended on consumption-based activities, and it then sold those goods to the rest of the world. So in short, labor was producing massive wealth within the United States.
The U.S. population was also very thrifty, as many of them had recent memory of both the Great Depression and the austerity measures imposed upon them during the war. Their money system was also reasonably stable, though it was not completely a true gold standard system any longer. Thus, productivity was high, and so was aggregate savings. It is not surprising, therefore, that the U.S. was also the world’s largest creditor nation.
Then in the wake of the 1971 abolition of the U.S. quasi gold standard system, price inflation began immediately as the value of the U.S. dollar plummeted. (We will talk about this historical element in detail within another chapter.)
The Middle Eastern nations then decided it was not prudent to sell a diminishing asset (i.e. oil, which is not infinite in availability) for irredeemable U.S. dollars, since they could no longer convert it to gold. And thus, the U.S. “energy crisis” began. Those of you reading this in America who are old enough to remember those days probably remember those long lines at the fueling stations, but were unaware that the “gas shortage” was caused by the U.S. defaulting on its global obligations to pay gold and the subsequent devaluation of the dollar. So in reality, the “energy crisis” was really a “currency crisis” because of the U.S. government’s default.
During much of this time, politicians began raising the U.S. “minimum wage” rate, supposedly to “help” people (but really it was to buy votes). This artificial (i.e. as opposed to Organic™) raise in costs of labor had a ripple effect that hurt MANY workers when it increased unemployment. However, it was primarily the labor unions which exacerbated the artificial wage rate hikes. While claiming to help their members, the actions of unions actually helped to destroy the U.S. production capacity and sent those jobs overseas to other countries.
Additional tax burdens and government regulations were also steadily being added to the cost of doing business within the United States. So by the 1980s, businessmen began to realize it was far more profitable to construct their new manufacturing facilities in cheaper labor markets than to refurbish the aging U.S. factories within a hostile business environment. To compete, they simply had to move their factories to the same low-wage business-friendly countries where their competitors had their factories. This trend continues unabated to this day.
In some cases, entire industries, such as textiles and steel, have largely moved outside the United States. For example, during the 1980s, even entire steel mills in Pittsburgh, Pennsylvania were dismantled systematically—with each machine part and brick labeled with great care. This was all subsequently transported by ship to China where the factories were then systematically reassembled and brought quickly into production (and actually at a fraction of the cost necessary to build new factories). Today, China, Latin America, and many other developing countries, produce the goods that are now sold in the U.S.—while U.S. manufacturing capacity is anemic.
Even many of the services industries (e.g. software developers, financial services, customer care centers, etc.) have terminated multiplied thousands of jobs within the U.S. and moved them to their new foreign subsidiaries. Thus, despite how these events are portrayed within U.S. media, many jobs are not really being eliminated—they are being relocated to foreign business-friendly jurisdictions where these companies can hire highly-educated replacements for about one-third to one-half of the salaries formerly paid to the U.S. workers. So while announcements tend to fill today’s U.S. financial media about layoffs and plant closings, the media within many other countries is enthusiastically announcing the arrival of new manufacturing and service companies.
Today, only about 20% of the U.S. economy is based upon production. About another 19% is based upon government jobs and similar non-productive components. The other 71% is founded purely on retail consumption.
The U.S. government then fueled consumption-based GDP growth in the USA through loose central bank credit policies from the 1970s through the 1990s. This also had the effect of turning the U.S. population into credit-based consumers instead of thrifty savers. Today, savings rates are often negative, which means the people consume their savings rather than building them. Understandably, the United States is now the largest debtor nation in the world.
And what caused all of this reversal in America’s fortunes? It was largely caused by terrible economic and fiscal policies by the U.S. government—and to a great extent, by the abandonment of the gold standard in its monetary system. The net effect of these heinous policies was to reduce the economy of the United States of America to a consumption basis, which means that people have to SPEND lots of money to keep the system afloat. Therefore, saving was discouraged through artificially low interest rates and a poor monetary system that used inflation to devour the value of savings. Spending was simultaneously encouraged through cheap loans and easy credit.
However, this economic policy created inflationary “bubbles” in real estate, the financial markets, and other sectors of the economy. When these bubbles began to “pop” almost in unison in October 2007, “spending” slowed dramatically. The ripple effect within the global financial system created similar problems in other nations too, thus, amplifying the problems in the USA. So retail “consumption” jobs (e.g. retail, car, and home sales, restaurants, hotels, etc.) and other service jobs (e.g. accountants, lawyers, dry cleaners, etc.) began to dry up quickly along with the decreased spending. This accelerated the decline in economic activity, which then further accelerated the job losses within the United States and elsewhere. In a word, the party was over.
Now, at the time of this writing, REAL unemployment within the USA is about 22%. The U.S. government would like people to believe their ridiculous figure of just under 10%, but that does not include many categories of unemployed and under-employed people. Those of you who live within the USA, do you know only 1 out of 10 people who are unemployed? I am sure most of you know quite a few more. So please do not believe the key “official” data of the U.S. government (or any other government) such as unemployment rates and inflation, because much of that is intentionally skewed to look much better than it really is. I suggest Shadowstats.com for more accurate figures for U.S. statistics.
And what is the moral to this story? Labor is a key component of all wealth, but production-based labor (i.e. work that produces new goods or products) is far superior to consumption-based labor with regard to building national wealth. The latter supports the former, and is truly necessary. However, productive labor produces new goods and assets—which of course, are the very things by which wealth is defined.
Of course, the United States economy is not only consumption-based, but also debt-fueled. So when such an economy experiences a significant change within “consumer spending,” this starts a chain reaction that wipes out much of the economic activity, which in turn results in the elimination of many consumption-based jobs. This then also has a “ripple effect” that hurts even some of the productive sectors of the economy, resulting in further unemployment. That is why governments lie about the true economic data, and go to so much trouble to try to encourage MORE spending through credit expansion (i.e. new loans, credit lines, etc.) which they hope will then be spent by people and businesses on more consumption—as the government tries to re-inflate the deflating consumption-based economy. Obviously, such behavior cannot continue indefinitely. Eventually, the entire system collapses in on itself under enormous debt and currency destruction.
In closing, let me summarize the current economic policies of most Western governments. Regardless of where you live in the world, the following fact likely applies to you—especially if you live within Europe or the USA:
- Your government wants YOU to spend THEM out of the mess that THEY put the entire country in.
- If you will not do this willingly, then your government will try to TAX you more heavily so that they can spend your hard earned paper currency for you.
- And in truth, most countries do not spend your tax dollars directly. They just use your tax dollars to pay the interest on the government’s massive and quickly growing debt. Meanwhile, they run up even more debt in an effort to “spend the country into prosperity.” This increases their interest payments, however, so then they try to tax you more so that they can pay that bill to the bankers and bond creditors.
- When government tax revenues are insufficient for all of the above, their central banks “print” more currency to provide them with desperately needed funds. This devalues every unit of their currency and creates “price inflation” as more and more units are needed to buy goods and services. This quickly destroys the wealth of the poor and Middle Class. It also discourages investments into productive activities by the wealthy, thereby preventing new jobs from being created. So eventually, if not corrected, this all results in hyperinflation, destruction of the currency, destruction of the markets, and major social disruption.
So you need to become quickly educated about these things, and regarding how to preserve your family’s wealth, and protect yourselves from the coming hyperinflationary collapse of the world’s financial systems. That is a major reason why I created this website, so please keep on reading Organic Economics™, our Op-Ed posts, and Resources, and the many third-party links we provide for you within these chapters.
(Note: And see my Op-Ed post Gold, Jobs, and the U.S. Economy—in a Nutshell here on TheWisdomOfGold.com for more information on the U.S. unemployment topic.)
- Wealth is not a bad thing at all, but is merely a word that refers to tangible goods and assets.
- God promises His people that He will bless the “work of your hands.”
- Labor is a key component of all wealth development. Why? Because somebody has to labor in order for new goods and assets to be discovered, produced, manufactured, harvested, and/or mined from the ground.
- Labor is also required to maintain most wealth, in order to combat the post-curse condition of decay.
- Labor is the foundation of all markets, as no good or service could be traded that was not first created by labor.
- The modern unemployment situation is a result of bad fiscal and economic policies by governments, and you need to learn how to protect your wealth in order to preserve it.
Now, let us continue our study of Organic Economics™. In the next chapter, we will build upon the points that we just covered herein by learning how Compounding Labor Compounds Wealth. This next teaching will again bring quite a few more truths about modern economies to light.
For more information about Rev. Rich Vermillion, please view the brief bio at the bottom of TheWisdomOfGold.com’s Website Introduction page, or visit his public LinkedIn profile page at: http://www.linkedin.com/in/richvermillion
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