A young man stepped from behind the curtains of his private quarters onto a platform erected for this historic occasion. The murmuring of the crowd became a roar. Rehoboam was a sight to behold. His royal robes flashed in the morning light with diamonds and gold and gorgeous colors. Nobles and princes in similar array flanked him. Hundreds of soldiers in their best uniforms surrounded the platform. Spears glittered. Tassels flew. The platform itself stood next to a giant monolithic stone pillar erected centuries before by one of the founders of their beloved nation, Joshua. It seemed to be part of Mount Ephraim itself, at whose base it stood. It was etched with their original constitution and stood impassively overlooking the pomp and splendor of the proceedings.
Rehoboam was heir by birthright to the most powerful kingdom on earth. His grandfather David was a legendary warrior who had finally conquered the coveted territory framed by the Mediterranean to the west, the Jordan River to the east, and Dan and Beersheba to the north and south. His father, Solomon, had extended that rule as far north and east as the Euphrates River, and south deep into the deserts, pushing the boundary of Egypt beyond the Sinai Peninsula. He also established the nation as the center of global commerce. Solomon’s reign made the nation of Israel the superpower of the world, and in the process, made it the richest nation on earth by orders of magnitude.
Trumpets gave musical announcement that the most important person of the most important nation had arrived for this most important event. Today was coronation day.
Yet something was not quite right. Instead of coronation happening immediately after his Father’s death and in the grand halls of the palaces he had grown up in, Rehoboam had been forced to delay the event and to come to Shechem, 70 miles to the north of the Capital. Furthermore, the roar of the crowd was not entirely friendly. The contrast between the richly dressed urbanite crowd from Jerusalem and the rough-hewn men of the small villages was suddenly acute. It did not take Rehoboam and his attendants long to realize that the carefully choreographed events of the day would not work out as planned. The people were restless. Some were angry. The situation seemed out of hand.
The leader of the insurrection was Jeroboam. He stepped forward for a word with the presumptive king. Rehoboam knew him well; he had once been a high-ranking dissident in Solomon’s court. After a prophet predicted that Jeroboam would eventually become king over most of the kingdom, Solomon had tried to kill him, and he had fled to Egypt. Now he was back, and Rehoboam would be forced to decide how to deal with him. Jeroboam’s demands were simple. Reduce the crushing burdens imposed by Solomon. Make them bearable, and the people would be glad to serve Rehoboam. The “or else” would not be pretty. Three days later, after deliberating with his advisors, Rehoboam decided a firm hand was needed, and attempted to bring Jeroboam and his cohorts to heel.
The results were stunning. The men of Israel flatly refused his kingship and made Jeroboam king instead. Before the day was over, one of Rehoboam’s top officials was dead, and Rehoboam was in his chariot galloping south toward Jerusalem. He escaped with his life, but the great empire of Solomon was fragmented forever. Israel would never be a united kingdom again.
The events leading up to Rehoboam’s fall from power contain some striking parallels to today in America. Our focus is on the economic parallels, but we will touch on others as well.
Perhaps the most significant parallel is monetary inflation. 1st Kings 10 describes the vast accumulation and subsequent devaluation of gold and silver. “And all king Solomon’s drinking vessels were of gold, and all the vessels of the house of the forest of Lebanon were of pure gold; none were of silver: it was nothing accounted of in the days of Solomon.” And later in the same chapter: “And the king made silver to be in Jerusalem as stones, and cedars made he to be as the sycamore trees that are in the vale, for abundance.”
This rapid expansion of commodity and money supply has an indirect, yet significant parallel to the fiat monetary expansion of today. It is indirect in the sense that Solomon’s accumulation of physical assets retained some value even in an inflationary environment as opposed to today’s expansion of paper or digital commodities. Gold, silver, and lumber are still useful, even if they have become so abundant that they have less value. The parallel is in the sense that Solomon’s expansion was also artificially rapid. Solomon used his genius to leverage the conquests of his father into a coercive and lucrative relationship with his neighbors. Basically, he agreed to be nice and stop expanding his territory as long as they would do business with him and pay him taxes on the revenue. Solomon reaped both profits and taxes from the rest of the world. The inflows were beyond imagination. The results were a great accumulation of wealth in Jerusalem and the inevitable currency debasement for the entire country, putting a strain on the budgets of those not close to the source of the inflows.
Modern economic engineers have taken a different tack, but with the same outcome. Instead of accumulating hard currency, today’s economists have decided they can create wealth out of thin air by simply using the power of government to print currency that has value because they say so. We all know the utilitarian value of a dollar bill is exactly the same as that of a 100-dollar bill. They are literally printed on the same paper of identical size. The difference in their nominal value is simply what is printed on them at the direction of the Federal Reserve. When those same economists decide that there needs to be more currency available to stimulate the economy, they make the choice to, in essence, create more $100 bills and fewer $1’s. The results become obvious in due time. The quarters and pennies that your grandfather carefully saved in his day are now the equivalent of the silver in Solomon’s time becoming as common as gravel. Your grandfather wonders why you would walk past a dime on the sidewalk. But you know it is not worth straining your back for.
The most obvious recent example of the expansion of monetary supply was the response of government following the COVID lockdowns. Government officials knew that they would create real hardship and decided to try to offset this by sending people money. This was a relatively novel approach, conceived by the Trump administration, to bypass the need for banks to extend risky credit to stimulate the economy. Back in August of 2021 in an article entitled “Almanzo, Pink Lemonade, and Piglets” I predicted that the downstream effect of that policy would be price inflation. “It’s becoming increasingly obvious what the result of monetary inflation is. Even a very simple person can understand, just as Almanzo could have in 1866, that if there is more and more supply of money, without a corresponding increase in productivity, the prices of goods and services must necessarily go up.”
What we have seen in the intervening six plus quarters was eye watering price inflation as a direct downstream effect of monetary expansion. This has been so dramatic that even people who directly benefitted from that fiscal policy are questioning the advisability of it.
A second parallel between Rehoboam’s dilemma and today is a deterioration of people’s trust toward the institutions that are supposed to serve them. This was made clear in Rehoboam’s day by their insistence that he come to Shechem for his coronation and culminated when he overplayed his hand. Their answer to him- “What portion have we in David? neither have we inheritance in the son of Jesse: to your tents, O Israel: now see to thine own house, David”-marked the dramatic end of the national coalition.
This breakdown is displayed today on the political front with a total loss of respect between parties on the chamber floors, mass migrations from one state to another, and even efforts by portions of some states to become separate states. In media it is reflected as extreme bias in reporting and the birth of a myriad of outlets intentionally independent of legacy broadcast systems. We have yet to see a major economic response, but the recent seismic events in the banking industry will likely result in a rush towards safe havens outside of the banking system such as gold, crypto, or real estate.
The third and perhaps most serious parallel is the collapse of the lower class. Monetary inflation inevitably generates price inflation, which also tends to bloat government. This leads to the toxic combination of high prices and high taxes. This trend was unmistakable in the 40-year span of Solomon’s reign. When the queen of Sheba visited Solomon during the height of his power, her comments paint a vivid picture of peace and prosperity. “Behold, the half was not told me: thy wisdom and prosperity exceedeth the fame which I heard. Happy are thy men, happy are these thy servants, which stand continually before thee, and that hear thy wisdom.” (1 Kings 10:4-9 KJV) In contrast only a few years later, the men at the fateful meeting with Rehoboam paint a much darker picture. “Thy father made our yoke grievous: now therefore make thou the grievous service of thy father, and his heavy yoke which he put upon us, lighter, and we will serve thee.” (1 Kings 12:4 KJV) The combination of heavy taxes and forced labor had become too much to bear. They were begging for change. Ironically, 120 years prior, the prophet Samuel had predicted exactly that outcome. (1 Samuel 8:10-20)
This parallel is most noticeable today in the price of everyday necessities. Food, fuel, and shelter have risen dramatically, and those in the lowest income brackets are feeling the squeeze. If we are not experiencing it directly ourselves, we know someone who can hardly pay their grocery bill and rent. The effect is softened by the abundance of social safety programs. Yet the problem is there; nagging, persistent, and growing even as policy makers insist that the economy is healthy. It is not.
What will be the response? Are there more parallels coming between the upheaval in Rehoboam’s day and today? Are we poised for a broad shift in mentality toward business and economic theory? In government halls this is an active discussion. Is it possible to change policy without creating a worse problem? Is there enough political unity to enact the necessary changes?
We believe the national mood is one of a return to reality. People are sensing that something is profoundly wrong and are ready for something different. They are becoming convinced that many of our wounds are self-inflicted. They are beginning to believe that central planning is becoming more prominent and less effective. The failure of major banks and a historic first indictment of a former president are contributing to a sense of unease that is leading to questions such as: “Is our monetary and political system sound and sustainable?” “Do the “experts” know what they are doing?” “Can the Federal Reserve print our way out of crisis after crisis forever?” “Is it possible for Congress to continue its unrestrained fiscal policy without consequence?”
Historically, if people, in response to these questions, decide that the “system” cannot be depended on for their best interest, they will revolt, either peacefully or violently, seeking to replace or circumnavigate the system. A new mentality begins to emerge. A renewed enthusiasm develops for concepts such as communities of integrity, quality and durability in goods and services, and a focus on the real and tangible. With it comes a deep distrust for the opposite.
What should our response be? Are there opportunities within this outlook? We believe we should, first, be praying for our nation. Pray that any revolution would be a peaceable one. Promote peaceableness. Practice forgiveness. Be unapologetic about objective truth. Be willing to suffer the consequences.
In the world of business, be intentional about building a network of trust. Make quality, fairness, and transparency part of the fabric of your business. Adapt quickly to a higher interest rate environment. Deleverage your balance sheet. Assume inflation will be around for a while and be diligent about keeping your rates current. Know thy numbers! (We’re here to help!) Demonstrate a willingness to “earn” your dollar. We believe now more than ever; these traits will bring compound returns to those who practice them.
When these traits are your strong points, we feel confident you are prepared as well as can be for what comes next. Go out and do what you are already good at!
The Arrow Team
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