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Copyright 2012 P. Anthony. Reproduction prohibited without authorization.
Last revised: 12/27/12
Introduction
As the financial crisis in Western societies continues to worsen and the steps taken to alleviate the situation have done little to reverse negative trends, it would be instructive to look again at one of Father Denis Fahey's important works on the subject, Money Manipulation and Social Order (MMSO). Originally published in 1944, and later included in his magnificent The Mystical Body of Christ and the Reorganization of Society, (MMSO) investigates and discusses many of the same problems that currently plague financial life.
Unlike most economists and social theorists at the time and now, Fr. Fahey presents a unique perspective on the matter which goes beyond why the modern financial order has failed so miserably. His analysis shows how the monetary system has been manipulated for the massive redistribution of wealth to the politically well-connected who, to make matters worse, have used their financial clout to breakdown even further what is left of Christian morality. Money and banking are no longer simply means to facilitate exchange, but are now controlled by an anti-Christian power elite long hostile to the Faith.
Unfortunately, authentic reform that will re-establish an honest monetary order will not take place as long as the current ethnic-political-financial bloc which has been running (or more accurately, "ruining") Western monetary policy for the past several centuries remains in power. Financial elites have no intention of relinquishing their power or will they hear of any authentic reform that would endanger their privileged status.
Moreover, the liberal democratic social order which has ruthlessly replaced Christian governance after the so called "Reformation," the French Revolution, and the other anti-Catholic social upheavals which came in their wakes, derives immense power from central banking. The kingpins of social democracy will do whatever it takes be it tighter regulations, greater nationalization or even political repression to protect their privilege.
Sound money and an honest banking system are only possible when the Social Reign of Christ the King, as Fr. Fahey so tirelessly fought for, is re-established in the minds and hearts of men. Until then, any hope of reforming the current system is futile.
Money
Fr. Fahey held a number of misconceptions about the theory of money. His view on it stemmed, in large part, from High Scholastic thought especially that of the Angelic Doctor, St. Thomas Aquinas, whom he readily quotes. It does not appear that the priest read, or if he did, chose not to incorporate into his own work the more sophisticated and accurate monetary writings of the later Spanish theorists. A number of these Churchmen diverged in certain aspects from their Scholastic forefathers on economics where their analysis has proven to be sounder.
Fr. Fahey begins by speaking on the "role of money" and relies heavily on St. Thomas: "According to right order, then, money or exchange-medium is for the production of material goods, . . . . Money, . . . was invented by the art of man for the convenience of exchange by serving as a common measure of things saleable." [MMSO, p. 9.]
He quotes from the Summa, St. Thomas's distinction between "natural wealth" and "artificial wealth:" "Natural wealth is that by which natural wants are supplied, for example, food, drink, clothing, vehicles, dwellings. . . . Artificial wealth is that which is not a direct help to nature, as for instance, money. This was invented by the art of man, for the convenience of exchange by serving as a common measure of things saleable." [MMSO, pp. 9-10]
A couple of fallacies are present here. These errors are by no means unique to Fr. Fahey, but have been held by numerous thinkers of the past and those of the present. Nor should the cleric be entirely dismissed as a number of commentators have done because he held such views.
First, the idea of money as a "measurement" or an instrument to gauge "value" is false. Money does not measure anything; there are no means in the realm of economic science or, for that matter, any other discipline that can quantify the actions of individuals in their preference for goods. "Measurement" of human endeavors by the methods of the physical sciences or mathematics for predictive purposes is improper and meaningless. The use of statistics to record man's past actions is the only appropriate discipline to quantify human behavior.
The value and, ultimately, the "price" of an economic good is determined by the subjective demonstrated preferences of individuals in accordance with the vagaries of supply and demand. Prices are exchange ratios of goods which are reflective of the aggregate valuation of individuals in their purchasing and selling activities. Money is the means by which individual preferences for goods and services can be made a reality.
On firmer ground, Fr. Fahey believes that money is an "exchange medium" which allows goods to be more readily traded. This aspect of his analysis could have been developed to a fuller extent, however, his explanation is accurate: "Money is, therefore, essentially an exchange - medium. . . . Money is meant to facilitate families in procuring by exchange the sufficiency of material goods required for the virtuous life of the human personalities composing them." [MMSO, p. 10]
Fr. Fahey is correct: money is a medium of exchange that facilitates trade and makes possible specialization and the division of labor - cornerstones of sophisticated civilizations. Without money, mankind would be reduced to barbaric, primitive conditions unable to sustain any significant population. Moneyless societies (barter) which did exist were severely impoverished.
In his discussion of money as an "exchange medium," Fr. Fahey misconstrues the idea of "stability" and money as he again falls prey to the notion of money as some sort of measurement or gauge. The priest writes: "As a common measure it ought to be stable. . . . Stability in value is a property or necessary attribute of an exchange-medium." [MMSO, p. 10] He quotes St. Thomas: "As a measure used for estimating the value of things money must keep the same value, since the value of all things must be expressed in terms of money." [Ibid.]
The idea that money remains stable is an impossibility. Money is a commodity; the most marketable (exchangeable) good which is primarily sought after not for its "direct consumption," but to exchange for other goods or services. Before a good becomes a "money," it is a commodity that is used to satisfy a human need. Over time, a good, because of its inherent qualities (divisible, durable, portable, high unit of value, per unit of weight), is sought after not for direct use (consumption), but for exchange. Once a good is predominantly demanded for its "exchange use," it becomes a "money" or general medium of exchange. Because of their qualities, the precious metals, in particular gold, have always proven to be superior monies.
Goods which eventually become money do so because their "value" or more accurately their "purchasing power" remains, over time, relatively constant unless, of course, the money supply is "artificially manipulated." Due to its qualities, gold remained a stable medium through the ages except those times when monetary authorities would debase it. Thus, the "price" of money, or what it will buy (purchasing power), will, like any other good, fluctuate over time. If the fluctuation is through "natural causes" (gold discoveries), it is not economically destructive or morally wrong. Granted, in periods of great precious metal discoveries such as that from the New World, the purchasing power of gold would naturally fall and price inflation would ensue. Such situations do not typically last long and are mitigated by the fact that gold, unlike paper currencies of today, has "non money" attributes. Gold can be used as jewelry or for industrial uses when it becomes too plentiful. The non-monetary characteristics of commodity money reduces the inflationary aspect of gold discoveries.
Fr. Fahey's discussion about the stability of money is not well founded. If not debased, there is no need for concern. There is certainly not a necessity for legislative fiat to "stabilize" money just as there is no need for the State to interfere and "set" prices for other goods. If prices are allowed to freely rise or fall, surpluses or shortages will be quickly eliminated.
So it is with money. It is certainly naive to advocate, as St. Thomas and Fr. Fahey do, that the State should be in charge of stabilizing the "value" of money especially with the long and dismal record of governments and their banker cohorts' debasement of money. Maybe in a Christian era when rulers are bound by a higher moral law, could governments be entrusted with such power, but certainly not today, or any time in the near future.
While Fr. Fahey has been dismissed by a number of modern-day theorists for his monetary views, his analysis contained a component which has dropped out of not only economic analysis, but in academics altogether. Beginning with the "Reformation," and certainly by the time when economics began to be considered as a separate and distinct discipline, references to Almighty God and the teachings of His Church had all but vanished. Instead of appendages to philosophy and theology, new "soft sciences" like sociology, psychology and economics sprang up devoid of Christian doctrine. The Scholastic method and approach which had shaped man's greatest epoch, the Middle Ages, had all but died out in academics in an increasingly Protestant, and then, secular world by Fr. Fahey's time.
For economics, its methodology was grounded, for the most part, on the individual and his exchange relationships. The idea of man as a creature whose purpose in life was to save his soul and use the institutions and goods he created to accomplish this task has never been a part of economic thought.
"Economic man" was soulless and studied by the science which created him in the different roles he would perform in the market economy: laborer, consumer, capitalist and entrepreneur. The most esteemed members of the market economy were the capitalist/entrepreneur who seized business opportunities and made vast quantities of products for the masses all the while creating employment opportunities for the public.
The "market," too, became a subject of awe for some students of economics and an entity which required no supernatural assistance for its well being. Terms such as "free trade," "the invisible hand," "equilibrium," "property rights," became "sacred" and were believed by some to create and lead to social harmony and cooperation far superior than the supernatural graces of the Sacraments especially the Holy Sacrifice of the Mass. A veritable "paradise on earth" could be achieved if mankind heeded the sage advice of economists.
Fr. Fahey had termed such an approach, or its polar opposite economic system, socialism, as that of "naturalism" a philosophy which did not incorporate the existence of the supernatural, but instead, sought to create an earthly order not dependent on or made for God's glorification. Following in the footsteps of the Scholastics, Fr. Fahey saw money, or for that matter any other human institution or practice as how it fit into a social system where Christ was King. A general medium of exchange was not to be manipulated to enrich a few or to be "worshipped" for its own inherent qualities in making markets more efficient, but evaluated in how it serves members of the Mystical Body in their daily struggles. "According to right order," the priest wrote, "money or exchange medium is for the production of material goods, and the production of material goods is for the virtuous life of members of Christ of which the foundation is laid in the Christian family." [MMSO, p. 9]
How the study of economics is to fit into the context of a Christian commonwealth is discussed by the priest:
Economics, then, will study: firstly, the constituent relations of the members of Christ, who compose the family; secondly, the science of the production, distribution and exchange of natural wealth, in view of securing that sufficiency of material goods which is normally indispensable for the virtuous life of members of families; thirdly, the auxiliary art of the manipulation of money or artificial wealth, which is meant to facilitate families in procuring by exchange the above-mentioned sufficiency. [MMSO, p. 9]
Fractional-Reserve Banking
Fractional-reserve banking is the practice that allows banks to keep only a portion of their deposits on hand while the rest is surreptitiously lent out for "profit." By any moral code, fractional-reserve banking can only be considered as "fraud," yet, to this day, it is allowed and sanctioned as legitimate banking procedure by Western monetary authorities. Until the immoral and economically destructive practice of fractional- reserve banking and the institution created to protect it, central banking, are eliminated, there is little hope for a return to prosperity.
While Fr. Fahey held some misconceptions in the field of monetary theory, he clearly understood the fractional-reserve process. "The bankers observed," the priest explained, "that about 90% of their total stock of gold remained in their vaults entirely undisturbed, and that only about 10% of the precious metal was required for the normal transaction of business. The Banks then began to circulate far more promises to pay gold than they had gold to meet, and to collect interest on the fictitious money." [MMSO, p. 19]
He then quotes Sir Reginald Rowe from his book, The Root of All Evil, who continues the analysis: "that is to say, that they could issue far more promises to pay in gold than they could meet with all the gold of their coffers. This was because it was found in practice that the promised payments were never simultaneously demanded; in fact, except in crisis, never more than one-tenth of these at any time." [Ibid.]
Banks, therefore, can make “additional income,” by not only charging customers for safekeeping of their deposits, but they can lend out for interest the deposited funds which are supposed to remain in the banks. This, of course, is illegitimate and if any other firm or organization did such a thing it would be considered fraud punishable with stiff fines and or significant jail time. As Fr. Fahey has incisively pointed out, over time bankers realized that not all depositors demand their money at once. If depositors all at once or if a significant amount demanded their funds simultaneously, the fraud would be exposed. If such a thing happened today, the entire monetary system would collapse overnight!
One reason that banks can perform such a procedure is that money is a "fungible good." Which means that each gold coin or bill looks the same. Depositors who give banks their money do not care if they receive the same coins or bills in return as long as the ones they receive have "equal value" to those deposited. Warehouses which safeguard non-fungible or heterogeneous goods cannot engage so readily in such a practice.
While the fungible quality of money creates an opportunity for mischief to occur, it is not the most important reason as to why bankers can do such a thing. The most significant reason is that governments have weakened the statutes which prohibited and criminalized such practices and eventually through their alliance with banking and the financial sector have created a monetary order which has institutionalized such behavior. In return for this privilege, bankers and financial elites have "cut" States in on their "take."
Not only have States failed to enforce contract law, but governments have actively pushed policies and propaganda campaigns to persuade the public to "trust" banks. Gimmicks like "insured" deposits "guaranteed" by institutions in American such as the FDIC (Federal Deposit Insurance Corporation) have been created to get people to keep their money in the banks and, most importantly, to dissuade and or prohibit mass withdrawals or "bank runs" by depositors.
Under a gold standard where gold coins and bullion circulated, such chicanery was difficult to do, however, when paper notes (money substitutes) became the dominant circulating medium, fractional-reserve banking could, unfortunately, be more readily accomplished as banks could simply print pseudo warehouse receipts (counterfeiting). In fact, had it not been for state intervention, paper notes would have never flourished to their present extent.
One reason why paper notes would not circulate is that they have a "time" component involved with them. Originally, those who held warehouse receipts and later bank notes had to pay the warehouse/bank for safekeeping of their gold. In return for their deposited money, customers would receive a receipt. However, the receipt was not money in the sense of a gold coin which can be instantaneously exchanged for any good or service. The owner of the receipt when he retrieved his gold had to pay a fee to the warehouse/banker for safekeeping of the gold. If he exchanged the receipt for another good, the amount the owner owed the warehouse for the safekeeping of the gold, would have to be deducted. This, of course, would make exchange with receipts terribly cumbersome and if such transactions did occur, they would be extremely limited. Warehouse receipts and later bank notes only would circulate when they were granted legal tender status and when gold redemption for notes was eventually done away with.
To his credit, Fr. Fahey recognized that fractional-reserve banking was condoned by governments and accurately predicted that an unaccountable plutocracy would arise beyond popular, or legislative control. "The toleration by the State of this practice," he wrote, "of lending promises to pay to ten times the amount of money which the bankers had in their possession was the second and more important step in the bankers' advance to control in modern States. From the point of view of the ordinary man, and especially of the poor, it was the second and more fatal error." [MMSO, p. 20]
Central Banking
The ultimate source of the present financial mess and the genesis for most of the boom-bust cycles, inflations, and monetary devaluations of the past few centuries has been central banking. Central banking, such as the United States' Federal Reserve System or its predecessor, the Bank of England, is now a permanent feature of every nation-state's financial order. Central banking did not come about by happenstance, but was deliberately conceived by bankers, politicians, and "intellectuals" to allow banks to engage in fractional- reserve banking.
Both bankers and States derive immense financial power from this "cozy alliance" and governments will go to any extreme to protect their arrangement as witnessed by the recent massive bailout of banks and financial institutions. In a demonstration by which the power elite will do just about anything to defend its privilege, it was reported that if the United States House of Representatives did not pass the massive 2008 financial bailout package, marshal law was to be imposed!
While it has been hailed by the Establishment as the insurer of "monetary stability" and an "inflation fighter," a central bank is a "banker's bank" designed to bailout bankers when they "overextend" themselves primarily through fractional-reserve practices. Central bank notes are granted monopoly status and made legal tender (no other notes are allowed to circulate except central bank notes) which must be accepted when presented for debts and other obligations. As long as there was a gold standard with notes redeemable in gold, central banks could not inflate too wildly, however, as the gold standard was done away with (to the delight of bankers and inflationists!) little check was left on central bank monetary expansion.
Over time, central banking went beyond merely the protection of the bankers' fraudulent practices. Central banks and their directors became, in essence, the ruler of nations. Fr. Fahey comments on a passage from an English Chancellor of the Exchequer who admitted that most people did not comprehend the power that central banks had amassed. The priest states: "In his 1927 speech, the same distinguished banker said that the total of available bank cash on which the quantity of loans or deposits of private banks depended was determined by the Bank of England. Thus we can conclude that . . . the Governor of the Bank of England directs the policy of the English Government and practically holds in his hands the destiny of the English people." [MMSO, p. 12]
Woodrow Wilson, who was president when the Federal Reserve was established, surprisingly conceded that the American economy, despite its enormity, was subject to the financiers. Wilson's frankness did not escape Fr. Fahey's alert eyes as he quotes the revealing admission: "A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. . . We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world - no longer, a Government by conviction and the free vote of the majority, but a Government by the opinion and duress of small groups of dominant men." [MMSO, p. 13]
In this section of MMSO, the priest only hints at a subject he had previously researched and written about at length: the Judeo-Masonic control of Western monetary institutions: "Let us now take the testimonies of the Rulers of States. When the Federal Reserve Bank of the United States, created in 1913 by Mr. Paul Warburg, a German Jew belonging to the Banking Firm of Kuhn, Loeb and Company, . . . ." [Ibid.] This control would only become firmer and expand into all sectors of Western life as the 20th century wore on.
Unlike most opponents of central banking who base their criticism on the economic ruin that it causes and the loss of liberty which ensues from it, Fr. Fahey saw a more fundamental problem with its existence. Central banking was part of the program of those aligned against the Kingship of Christ which provided a ready source of income for these forces as they gradually transformed the former lands of Christendom into secular welfare/warfare states.
The Gold Standard
Unfortunately, while Fr. Fahey had a firm grasp on the evils of fractional- reserve and central banking, his negative view of the gold standard would plague his monetary analysis throughout his career. The priest was not alone in his hostility to gold as most of the economics profession had turned against "hard money" by his time. One reason for this is that the then burgeoning class of professional economists could find positions, jobs, and, above all else, power in the new state and quasi-state apparatuses designed to "manage" nation-states' money supplies.
The gold standard was constantly blamed by the proponents of paper money for economic fluctuations and panics that would occasionally occur. Yet, it was not the gold standard that was responsible for the business cycle, but bankers and governments themselves who constantly engaged in fractional-reserve practices igniting a boom which invariable led to a panic and bust.
It is not from a "lack of liquidity," so often asserted by bankers and financiers that caused panics, but too much "liquidity" in the form of fraudulent bank notes (counterfeiting) issued with no gold backing. A gold standard, where notes can be redeemed in gold is the antithesis of fractional-reserve monetary systems. Gold redemption is a mighty check on the amount of paper notes that banks can print which curtails their counterfeiting.
From the start of his analysis and in his policy recommendations, Fr. Fahey advocated doing away with the gold standard. The hostility to gold rested, in part, in his confusion over certain aspects of monetary theory and that of banking although he correctly understood that central banks and their aligned financial elites sought to manipulate the gold standard for their own aggrandizement. Nevertheless, he remained a lifelong foe of metallic money, writing: “From what we have seen of the functioning of the Domestic Gold Standard, it will be evident that it is opposed to the Common Good. . . . “ [MMSO, p. 61]
Several themes, sometimes overlapping, can be seen in Fr. Fahey's opposition to the gold standard. One centered on the notion that gold was "insufficient" to sustain a nation's "productive capacity:"
But the principle governing the injection of money into the country’s industrial system must be the determination to actualize the country’s potential resources in view of the Common Good. The endeavor must be to reach the point in which all the available labour and resources are being utilized in a manner respectful of the Catholic Church’s programme of the widest possible diffusion of property. There has to be a planned gradual development, but the increasing capacity of a nation to make and supply goods ought never to be hampered by the lack of the means to carry on the indispensable exchanges. As money is, broadly speaking, a claim on the goods capable of being produced by the persons owning property in a community, its rate of issue must be regulated by the rate of actualization of these goods. The regulation of the issue of money on other principles will lead inevitably to a defective and lopsided development of a country’s resources. [MMSO, p.15]
There are a couple of problems with this position. First, in a 100% gold reserve system, a bank note is only issued when gold has been deposited for safe keeping. Any time a bank or financial house issues notes beyond the amount of gold on hand, it has necessarily engaged in fraud. Had it not been for legal tender laws and state sanction of such practices, it is doubtful, as some have argued, that bank notes would have ever become the significant component of the money supply that they eventually became.
Money's purpose, as discussed earlier, is as a medium of exchange. Money, in short, facilitates exchange without which no advanced, sophisticated society could exist. Artificially increasing the money supply only dilutes the purchasing power ("value") of each individual monetary unit. For money, unlike all other goods, is not "consumed" in an exchange, but remains in "circulation." Arbitrary additions to the money supply will not “stimulate” production or bring more resources or "idle labor" into use. Only savings and capital formation can provide the means (actually, “the time,”) for greater “productive capacity,” and, hence, economic growth.
There is a significant difference conceptually and, in reality, between money and savings which to this day is still misunderstood by theorists. Savings can be considered “frozen time” while money’s primary purpose is as a medium of exchange. Savings provide the crucial means for the factors of production (land, labor, capital) to be put into use during the production process.
In a hard-money system, the supply of money is determined by "market conditions." When shortages or surpluses do occur, the natural workings of supply and demand will rectify abnormalities. Prolonged and habitual shortages and/or surpluses are the result of state intervention that prevents market adjustments. If a shortage of money does occur, money's "price" would rise which would, in turn, send a signal to producers to mine more gold. Conversely, if there is an "overabundance" of money, gold production would slow. Moreover, since gold has non-money qualities, in times of its plentitude, the metal could be used in other endeavors such as jewelry or industrial production. This would tend to reduce the monetary usage of gold and, hence, raise its purchasing power.
The fear by writers, such as Fr. Fahey, about a shortage of money under a gold standard is misplaced. In actuality, when gold was money its supply remained relatively "constant." A gold-based monetary order is typified by falling prices and costs where the supply of goods increase (fueled by genuine savings and capital formation) with a constant supply of money.
Another significant problem with a money supply based on, as Fr. Fahey calls for, the "actualization of [a] country's potential productivity" is that it would necessitate a considerable amount of economic planning. Not only would statistics have to be kept on national production, but eventually, an arbitrary figure would have to be derived by authorities to supply an economy with a certain amount of money. The enormous power which would be placed in such an institution even under "popular control" would be frightening and would result in the concentration of power similar to that of central banks.
In his discussion of the gold standard, Fr. Fahey speaks of the money supply controlled by "private individuals" and "private hands." This refers to central banking, however, such terminology is inaccurate and discredits the gold standard.
Central banks are not "private," but creatures of governments. They are highly privileged cartels which are granted monopolistic control of a nation's money supply and are allowed to engage in fractional-reserve practices because governments have given them a "right" to do so. And, it was through central banking that the gold standard was gradually eradicated.
The most economically sound and morally honest monetary order is a 100% gold reserve system devoid of central banking where fractional reserve banking is treated as fraud and severely punished. Because of original sin, however, there is, ultimately, no guarantee that any social system or institution will remain uncorrupted. The best hope is that the foundations of a society are grounded on the principles laid out by Christ and that of His Holy Catholic Church.
While Fr. Fahey misunderstood the superiority both economically and morally of the gold standard, he correctly saw that those who sought to destroy it did so not only for their own aggrandizement, but as a means to further destabilize and undermine what was left of Christian morality. Control and manipulation of money through central banking was a means to propel anti-Christian forces into other arenas of human endeavors most notably the print and electronic media which were then used to shape and mold public opinion. Unlike most theorists, however, Fr. Fahey was not afraid to name names and point to the individuals, groups and organizations directly responsible for the West's cultural transformation.
Monetary Reform
Fr. Fahey did more than just identify the factors which had corrupted the monetary order and explain the historic trends which led to the present-day crisis. He offered a program to rectify the situation. While his plan contained good and bad features, it is unique in the sense that unlike the policy recommendations of contemporary libertarians and conservatives, Fr. Fahey's position is that money and banking, like all aspects of life, should conform to Gospel principles:
Fallen man cannot maintain the rule of reason over the senses and observe order in social life, unless he subjects his reason to God and acknowledges Our Lord Jesus Christ and His Divine Plan for world-order. According to the hierarchical order of the practical sciences, the art of manipulating money is subordinate to Economics, the science which, according to St. Thomas, studies families in the constituent relations of their members and in their conditions of existence, and to Politics, the science which has for object the organization of the State in view of the complete Common Good of the families and persons composing it. Decisions as to what is for the Common Good of the State and family life must be made, not by those skilled in the manipulation of money but by those in charge of the Common Good and of the maintenance of sound family life. Those skilled in the manipulation of money are masters of an auxiliary art furnishing to Politics and Economics the instrument they need. [MMSO, pp. 80-81]
Libertarians want to see an unfettered monetary system which will lead to the creation of abundant wealth while conservatives seek a system which will enrich the nation state. Neither are a "Catholic" position but by-products of Protestantism and latter Enlightenment ideals. The creation of wealth is all well and good and the establishment of gold money is certainly preferable to the present fiat arrangement, however, without a monetary order, or for that matter, any other aspect of life guided by the Church, social disintegration and immorality will prevail. If anyone thinks that the establishment of free markets and a gold standard will turn around the rampant degeneracy witnessed in the world today - broken, dysfunctional families, rampant divorce (for Novus Ordo Catholics, "annulments"), the legitimization of "gay" lifestyles, vulgar music, debased literature and art, they do not understand that the fundamental crisis in Western life is not economic or political, but spiritual.
As he repeatedly urged, Fr. Fahey believed that the elimination of the gold standard needed to be part of monetary reform. He mistakenly thought that the gold standard led to an unfavorable balance of trade: "It [the gold standard] inevitably leads to a state of affairs where every country wants to export goods in order to have a favourable balance of trade and where no country wishes to import."[MMSO, p. 32]
This view is nonsense and has been repudiated countless times. Countries do not trade with one another only individuals, organizations, and corporations of one locale exchange goods and services with groups and individuals from other areas be it within or across political boundaries. There is no difference economically speaking if an exchange takes place across borders or within neighborhoods. There is no "imbalance" or "deficit" in an exchange, instead individuals seek through trade the advantages of specialization and the division of labor.
On sounder ground, although still mistaken about the gold standard, Fr. Fahey saw that the monetary system was being "manipulated" by "private individuals" and organizations for their own aggrandizement. "Great evils have resulted," the priest argued, "from the functioning of the Gold Standard and the control of the exchange-medium of countries by private individuals. . . . The first point of reform is that the creation or issuing exchange-medium must be taken out of private hands."[MMSO, p. 62]
Of course, by "private hands," Fr. Fahey means central banks most of which are not technically part of governments, but are highly privileged cartels granted monopolistic control of national money supplies. The use of the term “private” in description of central banks is unfortunate and leads to confusion.
The individuals and groups which control the money supplies are the real masters of the world, who, to say the least, have no interest in fostering supernatural ends:
The revolt against the Supernatural Life and the Divine Plan for order and the withdrawal of Politics and Economics from subjection to the Mystical Body of Christ have gradually led to the overthrow of the natural hierarchical order of the practical sciences. Money now rules. Those skilled in manipulating it dictate policy to Statesmen and Economists. [MMSO, p.81]
To replace central banking and the gold standard, Fr. Fahey advocated that money creation rest with the legislative branch where he believed there would be greater accountability. While such a policy sounds plausible, it is loaded with difficulties and would undoubtedly lead to as much inflation and monetary chaos as the present system.
What will limit the legislative branch from being just as profligate in the issuance of money as a central bank especially with no gold standard, as Fr. Fahey recommended, and the myriad of constituent groups clamoring for money creation? Look how the number and percentage of taxes have escalated since the era of democratic government has reigned! Would it be any different with popular legislative control of money and banking?
The priest accurately predicted that if reform of money and banking on Christian principles did not come about, the world would experience one financial calamity after another:
The proper functioning of money is not a panacea for all disorders, as is clear from all I have written here and elsewhere, but its improper functioning is even more disastrous nowadays than it was in the days of the Roman Empire. The pace of life (and of destruction) has been accelerated by modern inventions. [MMSO, p. 81]
For Fr. Fahey, monetary reform and, eventually, social order must have, at its core, fidelity to the papal office:
It was the conviction of their membership of Christ that nerved the early Christians for the long struggle for order under the Roman Empire. That same conviction, shared in and acted upon by all Catholics the world over, will be necessary to undo the present reversal of order in economic organization. The first fruit of that conviction ought to be the demand by Catholics of all nations that the political, economic and financial arrangement between States at the end of the present conflict shall be submitted as to their morality to the judgment of the Sovereign Pontiff, the Vicar of Christ [MMSO, pp. 84-85.]
History and Social Order
While Fr. Fahey may have misunderstood some of the nuances of monetary theory, his analysis of how central banking and fiat money were used by the forces long hostile to Christ and His Church has proven to be quite perspicacious. Not only did he name names of those hell bent on the destruction of Christianity, but he provided a valuable methodology by which Catholics can evaluate the past and size up their own social condition.
Although developed more fully in the Mystical Body of Christ in the Modern World and the Mystical Body of Christ and the Reorganization of Society, the priest saw history from the principles of the Social Reign of Christ the King. Mankind and the societies in which he creates are gauged not upon worldly accomplishments ("naturalistic ends") - affluence, military prowess, egalitarianism, individual freedom - but how they conform to Christian doctrine ("supernatural ends"). A society whose ethos is based on supernatural ends is one filled with churches great and small, seminaries and religious houses bursting with candidates, a moral code that insures public decency, and where the Holy Sacrifice of the Mass, feast days, public processions, and the liturgical seasons are the predominant activities of community life. In short, a Catholic world!
Historically, Fr. Fahey believed that the Social Reign of Christ the King had its fullest fruition during the High Middle Ages where man created a culture which was unabashedly Christocentric: " . . . Western Europe in the thirteenth century had come to acknowledge God's Rights in the way He Himself had laid down and had organized society on the basis that man's supreme dignity was his supernatural and supernational life as a member of Christ. The truth was recognized that all men were members of Christ, actual or potential, and that society as such was bound to favour membership of Christ." [MMSO, p. 77.]
The idea of the Church and the Holy See having little or no role in the politics or the financial affairs of its members was not a part of Christian social development, but a consequence of Protestantism. “Social life, in which Politics and Economics would be put into watertight compartments and sectioned off from the life of members of Christ,” the priest explained, “was completely alien to the minds of that day. Western Europe as a whole then recognized the authority of the Vicar of Christ the King, and his right to say what was moral or immoral in Politics and Economics.” [MMSO, p. 77]
The Protestant revolt went beyond ecclesiastical differences and, over time, drastically altered the nature of society. Before the break became permanent, Western man understood that life's primary purpose was for the salvation of souls and, thus, the societies which he constructed reflected that belief. The "Reformed" world's focus shifted to all sorts of earthly goals (naturalistic ends) as each aspect of society became less and less influenced by Christian principles. Eventually Christ's teachings and especially those of His Church were relegated to only certain sectors of life as Fr. Fahey describes:
The revolt of the sixteenth century sectioned off the Christian life from the life of the Citizen, so political and economic organization left membership of Christ out of account. According to the Catholic ideal, the one divinely-instituted ideal, the whole life of a member of Christ is meant to be subject to Christ and animated with the meritorious Supernatural Life of Grace, just as all the movements of the hand or of any other member are subject to the head in the physical body. In addition, there is solidarity between the members of the Mystical Body as there is between the members of the physical body. According to the Lutheran ideal all the activity of a Christian in the world is withdrawn from the rule of Christ and given over to Naturalism. [MMSO, pp. 77-8]
Thus began the process that eventually became the system of beliefs known as Liberalism which, by the late 19th century, became the basis for the body of thought that would eventually engulf the Church - Modernism. Fr. Fahey articulates the development of Protestantism to Liberalism:
Lutheranism, then, initiated that dualism, which separates life into two halves so independent that they have only accidental relations with each other and thus prepared the way for Liberalism. Liberalism is simply the application of Naturalism to morality, politics, economics, and finance. Perhaps we may best describe it by saying that it consists in erecting particular sections of human activity, economic or political, into separate domains, each with its own autonomous end completely independent of the final end of man as a member of Christ. [MMSO, p. 78]
One of the first areas of social life that became "independent" of Christian oversight was finance. "Thus when Politics and Economics were withdrawn from subjection to the moral law binding on members of Christ," the priest described, "the manipulation of money or exchange-medium was in due course withdrawn from subjection to Politics and Economics and erected into an autonomous department of life subject only to its own laws." [MMSO, p. 78]
Not only did money and banking become immune from the influence of the Church, but their control became increasingly dominated by an unaccountable plutocracy. Fr. Fahey saw this as a more pernicious stage in the rise of naturalism:
But the subjection of human personality to the production of material goods is not the end of the perversion of order. There is a further stage of decay, which is realized by the subordination of the production of real wealth to the manipulation of exchange-medium or token wealth. [MMSO, p. 79]
A key factor which sustained the Protestant revolt especially in England was central banking. Along with the confiscation of the monasteries and the pillaging of Churches initiated by Henry VIII, the Bank of England played a significant part in seeing that the Anglican Schism remained permanent. Some theorists and historians point to the establishment of central banking as an important step in the rise of modern statism. While this is certainly true, it must not be forgotten that originally the Bank of England was used to bolster the newly formed English Protestant state and finance its conflicts with the Catholic powers.
By the 20th century, central banking had become a permanent feature of the modern state unquestioned in its supposed necessity for economic well being. The small contingent of theorists which attacked central banking over the years did so on both economic grounds - central banking created monetary chaos - and from a political standpoint - it led to an immense concentration of power. While their analysis is largely accurate and one which Fr. Fahey concurred, it fails to take into account a larger perspective of central banking's role in the breakdown of Christianity. Fr. Fahey describes how in Great Britain the Bank of England sustained the newly created Protestant financial class:
When Henry VIII attacked the Divine Plan for order, he prepared the downfall of the English popular Monarchy. The families that rose to wealth and power by the confiscation of the property of the Church and Abbey lands, which were used for the maintenance of the poor and the education of the people, gradually hemmed in the Monarchy. . . . When James II, the creator of the English fleet, who was a convinced Catholic and a man not given to compromise like Charles II, came to the throne, the wealthy nobles had a twofold reason for plotting to get rid of him. They knew that he would not be a pliable servant and they feared a Catholic reaction which might reopen the question of the old Church lands. With the advent of William of Orange, the triumph of the Aristocracy over the Monarchy was complete. The foundation of the Bank of England, however, with its privilege of creating money, meant that wealth and power gradually passed into the hands of the financiers and the speculators with disastrous results for the landowners and the countryside. The rule of the financiers and the speculators is called Democracy. [MMSO, pp. 100-102]
Instead of mankind bonded together as collective members of the Mystical Body of Christ, Protestantism eventually led to a social environment where man became a "soulless" autonomous cog of industrial life and later as an individual actor of the market process whose decision making in economic affairs derived solely from his reason with little influence from the Church or its Divine Founder. While the Industrial Revolution produced rising standards of living for nearly every social distinction, it flourished within a largely Protestant environment and thus lacked the necessary restraints that Catholicism requires which reduces man's natural inclination for excess and sin. The marketplace largely triumphed, but it was achieved at a heavy cost - the loss of the true Faith:
The rendering of the Mystical Body by the so-called Reformation movement and the uprise of private judgment or individualism on the supernatural level, led inevitably to the breaking up of the Guild organization and to the uprise of individualism, that is, of unbridled self-seeking, on the natural level of production, distribution and exchange of material goods. . . . The self- centered economic theories of Calvinism replaced the self-sacrificing asceticism of members of Christ. The aim of society became, not to supply a sufficiency of goods to families, so that the human personality of their members might be cultivated to the utmost, but to produce as much as possible, irrespective of the deleterious effects on the personality of the workers engaged in production. [MMSO, pp. 78-9]
As more and more of Europe fell from the Faith, a vacuum was created where the functions and services which had been supplied by the Church were seized by Her enemies. Education, health care, charities, and money and banking eventually came to be run or heavily regulated by secular governments. The rise of the total State is not entirely, as some theorists argue, because nation states do not live within the limitations of their constitutions, but it has been the elimination of the role that the Catholic Church played in providing many of the functions which the modern State now does that has led to increase in state power. A return to "limited government" will not come about by "strict construction" of constitutions, but the revival of the Catholic Church and its auxiliaries as the center of Western social life.
Gradually, each of the former lands which comprised Christendom repudiated the Faith with the last and greatest apostasy emanating from Rome itself and the vast changes which took place during and in the aftermath of the Second Vatican Council. Within a decade of the close of Vatican II, the Conciliar religion had displaced the ancient Faith while Protestantism had long since lost its original vigor leaving the world ripe for the onslaught of cultural Marxism.
An important trend of the post-"Reformation" world has been revolution. While revolutionaries would speak of lofty goals such as liberty, freedom, self determination and the alleviation of social inequalities, the historical record has shown that once power had been seized, few if any of the lofty pre-revolutionary principles would ever materialize. What did happen, more often than not, was the confiscation of the Catholic Church's money, property, and the creation of post-revolutionary social orders where the Church became subservient to the doctrines, dictates and whims of whatever revolutionary trend was then fashionable. Fr. Fahey explains:
We need to bear in mind that revolutions against the Catholic Church and the Mass are not spontaneous uprisings of the people. They are movements prepared a long time in advance by the forces organized against our Divine Lord and the Supernatural Life of Grace. The art of revolution is that by which a small but well - organized minority compels an unwilling but unorganized majority to submit to the overthrow of the State. The method is the same to-day as it was in 1789-1793, namely, the creation of a revolutionary atmosphere by the exploitation of existing grievances. There is a grievance ready to hand in our country in the failure of our successive native governments to deal with unemployment and emigration. Every effort will be made to canalize the discontent of the poor with this failure into revolt against religion and private property. [MMSO, p. 60]
After control of the police and military had been secured, revolutionaries would quickly turn to money with their first order of business being the enrichment of the revolutionary vanguard while the financing of the pre-revolutionary rhetoric of a better world fell by the wayside. Fr. Fahey understood this and argued that only when money and banking were returned to serve the interests of Christ the King will the world be in conformity with the Divine Will:
We in Ireland must bear in mind that the world-wide struggle to bring those skilled in the manipulation of exchange- medium into the place in States to which the hierarchical position of their art entitles them is part of the wider struggle for the integral return to the Divine Plan for order in the world. [MMSO, p. 60]
MMSO was released in the midst of mankind's second act of sheer insanity of the 20th century as the world plunged itself into the most devastating conflict of human history, World War II. Fr. Fahey does not mention the conflagration, but he does speak at some length about its horrific predecessor in regards to the Bank of England's post-war monetary policies.
His reticence on the Second World War is not surprising. The priest understood that the contest was between nations which had long ago rejected, as their true sovereign, Christ the King. The incredible killing, bloodshed and destruction which took place was a consequence of this rejection. While the war produced military and political victors, the world itself became decidedly less Christian and more secular - an outcome which the priest had long anticipated.
As an aside, some of Fr. Fahey's opponents have accused him of holding "idiosyncratic" ideas about religion, politics, economics and especially history which, they claim, are the product of his own peculiar or “conspiratorial” mindset and not that of the Church. Their objective, of course, is to portray him as some sort of kook; nothing, however, could be further from the truth.
The priest’s works are filled with passages from writings of the popes, saints and fathers as can be seen in earlier parts of this essay. It is difficult to determine at times when reading Fr. Fahey’s books who is speaking - the popes or him - the language, content, and meaning are so similar. Take, for instance, his analysis of how modern economies have become devoid of Christian moral precepts as he supports his contention with a direct quote from Pius XI’s Encyclical Letter, Quadragesimo Anno: "At the time the new social order was beginning, the doctrines of Rationalism had already taken firm hold of large numbers, and an economic science alien to the true moral law had soon arisen, whence it followed that free rein was given to human avarice.“ [MMSO, p. 78]
One reason that modern critics of Fr. Fahey attempt to paint him in this light is that they can implicitly attack pre-Vatican II teachings and doctrines most of which they surreptitiously reject. They know if they criticize saintly popes such as Pius V or Pius X or disagree with the doctors of the Church like Saints Augustine or Aquinas, they would open themselves to rebuke. Instead, they attack Fr. Fahey, although he held similar positions as the popes and saints, which allows them, in a roundabout way, to denigrate the traditional Faith. This is just another manifestation of how the neo-Modernist mindset works which, because of the lack of true Catholic opposition in the 20th century, has largely triumphed.
Conclusion
Fr. Fahey "lovingly and humbly" dedicated Money Manipulation and Social Order to the Blessed Virgin, Her Spouse, St. Joseph, the Angelic Doctor, St. Thomas, and Ireland's St. Brigid in the hope that through their intercession the world would return "to the full acceptance of the rule of Christ the King, so that [the] social environment may once more sustain men in their efforts to live as members of His Mystical Body." Such was the mindset of one who sought a return of Christ as the center of human existence.
While the priest held a certain number of erroneous economic opinions in regard to money, most regrettably that of the gold standard, he did understand that money and banking were in the hands of those who despised the notion of Christ the King. His aim was to expose these forces and their methods. In this regard, Money Manipulation and Social Order more than succeeds.
For the theorists who contend that the monetary order leads to economic chaos and a vast accumulation of power, Fr. Fahey would concur. While a market-based monetary system would certainly be preferable to the present one, without the guidance of Christ and His Church an economy and society will eventually collapse.
The root cause of the West's financial downturn is not one of misguided policies or the application of incorrect theories, but instead, is spiritual. Taken from a wider perspective, the financial debacle is part of a world in decline which is the consequence of its rejection of Almighty God. Mankind has mistakenly believed that a social and economic order can be created without the assistance (sanctifying grace) of its Creator. The predictable result of such madness is all too apparent in the pervasive cultural depravity and now economic turmoil both of which are sure to worsen.
The solution to the financial mess and moral rot cannot be found by reason alone, but for Western man to become once again, as Fr Fahey so tirelessly fought for, a member of the Mystical Body where Christ the King reigns in the social and economic orders and, more importantly, in the hearts and souls of His wayward creatures.