Listening to the economic establishment, one would think that fixed exchange rates were a vestige of times past, and the gold standard a thoroughly discredited idea. After all, didn’t the Great Depression hit countries on the gold standard harder? Didn’t the collapse of the Bretton Woods system sound the death knell for regulation of the value of a currency? Wasn’t it a pegged currency which led to the Asian Financial Crisis?

It’s easy to look at the character of a currency pegged to a particular value (whether dollars or gold) as regulation, and a floating currency as letting the market have its say about the relative values of currencies. But this abdicates from money its role as the unit of exchange – the anchor by which all prices are reckoned.

One might well ask, why does money need to be an anchor? Have we not done fine since the collapse of the Bretton Woods system of fixed exchange rates? This misses the point: there must always be a price anchor. We function well enough without an anchor because currencies are depreciating slowly enough that we can act as if they were anchored in the short run. Yet in the long run, all currencies must tend towards the value of their base – in the case of a floating currency zero. Indeed, the history of all floating currencies is a tendency, sometimes quick and sometimes slow, towards worthlessness.

If our current system of floating fiat currencies then is insufficient and unstable, then what alternative is there? Has not the failure of fixed currencies been made manifest?

The characteristic feature of pegged currencies is that they impose a limit upon central banks: the monetary base may not inflate unduly, either through cheap credit or printing money. If this happens, the market value of the currency drops – and to prop it up, the central bank must buy the currency with reserves at the fixed price. Eventually the reserves run out, and either the government goes bankrupt (as was the case in Thailand, which had fueled the widening disparity between the Baht and the Dollar to which it was pegged by cheap credit), or it is forced to devalue (as Mexico had to do with the Peso in the early 1990s when investors determined the government’s 3.5 pesos/dollar policy was out of line with its market value).

Every case where a pegged currency collapsed was due to governments failing to heed this constraint. Indeed, one of the causes of the Great Depression was the attempt to return to prewar gold parity after massive inflation to pay for World War I. It is not the case that “economies got too big for gold”; it is the case that a pegged currency made the consequences of fiscal and monetary irresponsibility more immediately manifest. And of course what better justification for irresponsibility than the necessity of paying for a world war?

This is perhaps the most evident form of price distortion caused by inflation and deflation. Right now, central banks manipulate their currencies’ value by buying and selling reserves in order to improve the competitiveness of their exports. China in particular, by pegging their currency to the dollar as it weakens, stands to gain enormously on the world market. This should be the first sign that something isn’t working right: when an industry can become more competitive relative to its foreign competitors simply by adjustments by the central bank. There is no productivity increase – the exporting industries in this inflationary country have done nothing at all to merit their more favorable position.

What then is the buying of foreign reserves with new money, except an indirect and general subsidy on exports? The central bank spends money, in the process giving unmerited help to domestic industries. And since everybody’s doing it, everyone is forced to do the same. Like Mali, ruthlessly impoverished by America’s cotton subsidies which made Mali’s cottons uncompetitive with less productive American cotton, the country which does not send its currency along with everyone else’s down on the spiral towards worthlessness will be plundered by these implicit subsidies.

This is not a merely hypothetical fear: Nobel Laureate Paul Krugman is worried that China is plundering us in exactly this manner. Thailand, South Korea, Russia and the Philippines are scrambling to devalue their currencies relative to the dollar to protect their exports from Chinese competition.

What then is to be done? Perhaps government fiat has permanently spoiled the character of money as an anchor, at least until the slide towards worthlessness begins to accelerate worldwide. I see no impetus for governments to reconsider the wisdom passed down from Keynes until world prices begin to skyrocket uncontrollably. Perhaps a Bretton Woods II would be appropriate: a multilateral agreement to peg currencies to the current market price of gold, and more importantly, not to inflate after that point.

Or, the power of the determination of the unit of account could be removed from governments entirely. As it is now, the effects of inflation on investors are offset so long as governments are willing to pay interest plus expected inflation on government bonds, which they always are, for the lavish and irresponsible spending of Western governments is funded by these bonds (in the absence of the trust required to issue bonds, governments may choose to fund by print-inflation, as Zimbabwe – which compresses the long-term doom of fiat currency into a much shorter time period). Without control of the currency, interest rates can no longer mask the pernicious effects of inflation. No longer will one be guaranteed a return by investing in nonproductive activity.

The benefits of private currencies are numerous. For one, they may not rely on fiat, and so they must necessarily be anchored to a particular base – most likely gold, but other bases may be used too. Without a bond market, this allows the market to equalize relative prices among the various currencies, an incontrovertibly good and natural process of the market which is nevertheless subverted by inflationary distortions made manifest in exchange rate fluctuations. This adjustment in turn prevents both the indirect subsidies of devaluation and the subsequent plunder of one economy by another.

Government control of money is a major conflict of interest. The incentives are to inflate, devalue, and fiddle in order to improve one’s lot relative to other currencies. Central banks, knowing well that rational expectations will thwart the effect of many of their attempted policies, must to some degree or another rely on either the element of surprise (most Western banks), or outright secrecy (the Chinese bank). Private competition without the use of fiat will necessarily increase transparency, for the incentive is stability, thus eliminating the need for secrecy and surprise. Well-managed currencies with strong reserves backing them will prosper, while any damage done by poorly managed currencies will be quickly cauterized, for holders will not allow a currency much leeway before moving to another. In this way, we get a system of well-managed currencies with a stable value, and disconnected from national interests.

“Every time the citizens have voted on marriage, they have always sided with natural marriage,” said Mathew Staver, founder of Liberty Counsel, a Florida-based Christian legal group.
Gay leaders blame TV ads, Obama for loss in Maine

So Christians fight for what’s “natural” to be codified into our legal system?

Let us for the sake of argument grant that homosexuality is unnatural in some meaningful way. Guess what else is unnatural? Monogamy. Certainly the proportion of animals in the animal kingdom practicing monogamy is lower than that which practices homosexuality: Neither is unheard of, but both are comparatively rare. And if one can make an appeal to naturalness without reference to animals, then what constitutes naturality? Humanity stripped of its culture? No doubt homosexuality would be uncommon, but monogamy would no doubt be as well: the scenario changes nothing.

Arguments from naturalness must necessarily take homosexuality and monogamy as a package deal. Yet who among the social conservatives would advocate a repeal on polygamy bans on the basis of naturalness? Indeed, polygamy is usually further down the slippery slope than homosexuality in their conception, right before toaster marriage.

The error in reasoning that leads Christians to advocate a position which necessitates polygamy is readily apparent to anyone even marginally familiar with Christian doctrine, which apparently does not include the Liberty Counsel quoted above. Quite simply, “Natural” does not equal “Good”. “Natural” is almost always used negatively in the Bible. Throughout Romans 8, the natural man is contrasted with the spiritual man, and the natural man isn’t the good one. Indeed, sanctification at all – the necessary fruit of salvation – is completely unnatural, that is, against our nature. It is the result of an outside force, God, acting upon us, overcoming our natural tendencies – tendencies which would be to our ultimate destruction.

The Natural Marriage argument is nothing but a red herring, and coming from a legal group which calls itself Christian is at the same time a bastardization of Christian doctrine and a mockery of the American political process. It presumes a gospel which saves us to naturalness rather than godliness, and subverts the separation of church and state which exists for exactly this reason: that moral legislation (as distinct from just laws) is ineffective at best and counterproductive at worst.

We must distinguish two things which might both possibly be called “nearness to God.” One is likeness to God. … But, secondly, there is what we may call nearness of approach. If this is what we mean, the states in which a man is “nearest” to God are those in which he is most surely and swiftly approaching his final union with God, vision of God and enjoyment of God. And as soon as we distinguish nearness-by-likeness and nearness-of-approach, we see that they do not necessarily coincide. They may or may not.
C.S. Lewis, The Four Loves

C.S. Lewis in the above passage from The Four Loves draws a contrast between proximity to God and likeness to God. And when we say that nearness to God is the Good for all men, it is important to keep in mind in which sense we mean that.

The way of the LORD is a stronghold to the upright, but ruin to the workers of iniquity.
Proverbs 10:29

Is the spirit of the LORD impatient? Are these his doings? Do not my words do good to the one walking uprightly?
Micah 2:7

The way of the Lord is ruin to some? The words of God only do good to those walking uprightly?

The Way of the Lord in Proverbs can be understood as encompassing all of life, for the worker of iniquity is as surely on his way to the Lord in judgement as the upright (Hebrews 9:27); as can the Words of the Lord in Micah, for the prophecy (which up to that point had been of woe) spoke of events which would affect the lives of everyone. This is where the distinction between proximity and likeness to God become clear: both these verses describe a proximity to God; not a likeness. As the worker of iniquity draws proximately near to God, his woe is made manifest.

At this point it will be good to define the difference between the upright and the workers of iniquity – or more generally, between good and evil. As Augustine argued in Confessions, evil does not have a substance of its own, as if it were the substantial opposite of good. Lewis expounded on this point several millennia later in works such as The Great Divorce, arguing that evil is not the lack of good, but a malformed good – a good whose aim has been twisted from its proper ends. How many evils have been spawned in the name of love – love of self, overprotective jealousy, idolatry – just to name a few malformations of one good. Thus, the upright man is the man whose ends are oriented correctly towards God. He is the sanctified man whose selfish ends have been aligned towards God by the revelation of the supreme worth of God. The worker of iniquity, by contrast, is not any more or less human than the upright man; his ends are merely misaligned.

Yet this is not a “mere” misalignment: this is the very definition and full extent of culpable evil. Proximity to God is good in an absolute sense, in that all ends orient towards God as they approach him in proximity. Yet we know that the flesh can be incorrigibly rigid in its ends (Romans 8:7). Thus as this rigid evil approaches God, it faces a choice: bend – align yourself towards God as the supreme desire and ends of your heart – or be destroyed. Final judgement is thus the threat of utter destruction of the rigid fleshliness at the presence of God. They are cast away for their existence cannot bear the near presence of God (Matthew 7:23). Proximity to God, though good in an absolute sense, is destruction to that which is not like God in perfection.

For what the Law could not do, weak as it was through the flesh, God did, sending his own son in the likeness of sinful flesh and as an offering for sin: He condemned sin in the flesh.
Romans 8:3

He who began a good work in you will perfect it until the day of Christ Jesus.
Philippians 1:6

These verses, however, speak of likeness to God. Though we are of ourselves incorrigibly rigid, and though the law was powerless to overcome that rigidity, sanctification by the work of the Holy Spirit has been given to overcome just this problem. Rather than face obliteration at the day of judgement because our ends cannot orient themselves towards the Good, sanctification is the progressive reorientation of one’s desires and values to align with the Good.

In this way, our perfection by the work of the Holy Spirit, though not completed until the day of Christ Jesus, allows us to approach God in proximity because we have approached Jesus Christ in likeness. It makes us good by making our identity malleable, and so saves us from destruction when all things are made good. Thus though we are never fit to behold the glory of God firsthand in this life (even Moses could not behold God’s face without the threat of destruction; Exodus 33:20), sanctification is the down payment which assures us the ability to be joined to God in nearness – to our good, and not to our destruction (Jude 24). Election is the assurance that the final and absolute good coincides with our personal good, the gracious gift of God in overcoming our own rigidity for His own glory.