I thought you might enjoy this dialog between law philosophers John Wolfgram and Jon Roland on the subject of money.
Debt-based currency
Thread started: Monday, April 18, 2011 3:51 PM
Anything, including debt certificates, may be used as currency if it is accepted as such by most players in the market. The key to that acceptance is that the supply of it track the growth in economic production. Not the GDP, which calls it growth if two people who produced for themselves start trading the same products with one another without increasing the net amount produced. Arguably, it should also not include services, such as entertainment, that do not contribute to production. In other words, production of capital rather than consumption.
The problem with debt certificates is that there is no natural mechanism to hold down their supply, other than periodic market collapses. On the contrary, there are strong incentives on the part of both the public and private sector to magnify the supply of debt certificates. See what happened with securitization, which is still going on.
Note that congress has no constitutional authority to make anything legal tender on state territory. Only the states have that authority, and only to make gold or silver coin legal tender there. Congress may make federal reserve notes legal tender on federal territory, like the District of Columbia or various military bases and port facilities, under Art. I Sec. 8 Cl. 17, but nowhere else. It can also accept FRNs for payment of debt to the federal government. What it may not do, contrary to the Legal Tender Cases, is compel anyone outside exclusive federal enclaves to accept FRNs or anything else in payment for debts. Every state that accepts FRNs as legal tender is violating the Constitution.
When the Federal Reserve creates "money" out of thin air and uses it to buy Treasury bonds to finance government expenditures, as it did in QE1 and QE2, it is doing several things. One is to use focused inflation to prop up prices of various investment vehicles, such as housing, bonds, stock, and securitized debt, which would otherwise fall. Contrary to popular belief, rising prices of oil and food are not the result of it, not yet. That will come, but those price rises are due to reduction in supply of oil and food, not an increase in the supply of currency.
There is a close relation between this kind of government financing with debt certificates and unemployment. Opponents of deficit reduction by reduced government spending fear the unemployment of government workers, and that would indeed happen. However, a debt-finance deficit also involves the creation of the money that goes to foreign governments ("sovereign wealth funds") that loan the money back to us, but also accumulate FRNs that drives currency exchange rates that favor the sale of their products to us, and the offshoring of U.S. jobs to them. For every government job maintained by continuing the deficit, there is a destruction or non-creation of at least five jobs in the private sector, about two off-shored and the rest layoffs or never created.
The entire federal deficit comes from only a few key programs: Social Security, Medicare, Medicaid, unfunded government pensions, farm subsidies, and military spending. In trying to sustain the elderly, the ill, farmers, and our policing of the world, we are now at the brink of bringing down Western Civilization. This is not just a U.S. problem. The entire world has been following our lead and will fall with us. Within a year of the collapse, we may see unemployment of 90% everywhere, riots, looting, destruction of productive facilities, and hundreds of wars everywhere, some of them nuclear.
That outcome is not worth sustaining the elderly or the ill. If we have to choose, it is better to let them all die. Better them than most of the rest of the people on Earth. Those are our choices. Too many people are in denial that those are our choices. We will soon see, because at this point it is probably too late to prevent it.
-- Jon What do you mean, Jon: "Note that congress has no constitutional authority to make anything legal tender on state territory."? It certainly does have that authority. It is the states that are limited in that respect, to making naught but gold or silver legal tender. Art. I, Sec. 8, Congress shall have the power to coin money and regulate the value thereof. And also Congress had the power to punish counterfieting the securities and current coin of the US. There is nothing in Sec. 8 that would limit Congress powers to federal enclaves. On the contraty, the Section 8 powers individually and collectively could not be exercise except as a federal government superimposed on the states ... each and all of them.
Wolf
The powers to coin money and punish counterfeiting are not the power to make anything legal tender. The only way they get that power is in Art. I Sec. 8 Cl. 17, for federal enclaves:
To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings
And perhaps in Art. IV Sec 3 Cl. 2, for other non-state territories:
The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State.
Time to unlearn more of what you were mis-taught in law school.
Jon
Gees Jon: Just because the Constitution also gives federal power to micro manage non state territories that have no other sovereign does not deny, and is not a basis to deny that Article I, section 8 grants certain federal powers over the states. I forgot to mention that in addition to giving congress the power to coin money and punish counterfeiting, it also gives congress the power "to regulate the Value" of money. That is the same section that also grants powers to regulate the value of foreign coin and fix the standards of weights and measures and over bankruptcies, to define and punish piracies, and declare war.
Do you think that when the US declares war it does so only for Washington D.C. and Puerto Rico, and as to whether the states join in, it's all voluntary?
I think that you are putting me on, Jon: Just trying to see if I'm senile yet, right?
Wolf
Of course not. There are several powers, most in Art. I Sec. 8, delegated to Congress to apply to individuals within the states. It is just that the power to make anything legal tender is not one of them. That is a distinct power that requires a distinct delegation.
Jon
I don't know what is debatable about this Jon. Congress "shall have the power ... to coin money, regulate the value thereof, and of foreign Coin, ...
Are we talking about only "coin", as in "small change" or is "Coin" another name for the manufacture of money? If congress can regulate the value of money, both foreign and domestic, how could doing that not be the creation legal tender. Within the meaning of "Coin" could Congress have coined a brass slug and fixed the value as one dollar? It really doesn't matter. There has been no ambiguity about this clause for 220 years and I rather doubt that you are going to create any now. Nor is there any debate about the Constitution super imposing a federal government over the state government so that it could fix the standard of measures among them.
But to spread such rumors, to create constitutional debate where there is none is either designed to get people to research and think for themselves, or it defeats your educational goals for Constitution.org.
Wolf
On 04/18/2011 07:29 PM,
I don't know what is debatable about this Jon. Congress "shall have the power ... to coin money, regulate the value thereof, and of foreign Coin, ...
And that does not include the power to make anything legal tender. Coin may or may not be legal tender. Apples and oranges.
Wolf
Are we talking about only "coin", as in "small change" or is "Coin" another name for the manufacture of money?
It literally only means pieces of metal. The Founders were very literal about powers. Rights may be interpreted broadly, but not powers.
1. Potestas stricte interpretatur. A power is strictly interpreted.
2. In dubiis, non præsumitur pro potentia. In cases of doubt, the presumption is not in favor of a power.
If congress can regulate the value of money, both foreign and domestic, how could doing that not be the creation legal tender.
They are two entirely different kinds of things. That power to regulate foreign currency doesn't make foreign currency legal tender. That power to regulate is only the power to restrict how much gold or silver (or other metal) is in a coin, and the purity of it.
Delegations of power are definitely territorially confined. Legislative, like judicial and executive, jurisdiction is territorially confined. Except for "piracy and felonies on the high seas and offenses against the law of nations". That and jurisdiction over military and diplomatic personnel abroad are the only powers not confined territorially.
All the material in support of this is on our site. I have even sent you links on those very materials in years past. Did you read any of it?
Within the meaning of "Coin" could Congress have coined a brass slug and fixed the value as one dollar?
Not after the Seventh Amendment fixed the meaning of "dollar" to the coin known by that name at that time. Congress could call it something else, but not a "dollar".
It really doesn't matter. There has been no ambiguity about this clause for 220 years and I rather doubt that you are going to create any now.
Of course there has been. Paper as legal tender did not exist before the Union government after the War of Secession tried to force people to accept it for payment of the government's debts, then force people to accept the paper from the people paid by the government for those people's debts. That is what the Legal Tender Cases were all about, and that was a thoroughly corrupt and unconstitutional decision. Have you ever actually read them?
Nor is there any debate about the Constitution super imposing a federal government over the state government so that it could fix the standard of measures among them.
But to spread such rumors, to create constitutional debate where there is none is either designed to get people to research and think for themselves, or it defeats your educational goals for Constitution.org.
No, it fulfills them. Federal legal tender statutes (not laws) are unconstitutional, if applied to state territory, and always have been, like most other federal statutes. It doesn't matter how many people think otherwise. Truth and logic is not about popularity. As it happens, there are many scholars who agree with me, even it they don't have the courage to come out and say so. I certainly get plenty of support from them in private communications.
-- JonYup, you are right Jon. And since states are prohibited from making anything but gold and silver legal tender, we can't have any funny money, except private and foreign, and federal coin. I guess that is the way it is. There used to be federal money, backed by all the gold in fort knox. But now there are just Frns ... federal ious ... securities, such as they are, but they are not money...but securities for the money borrowed by Congress on the credit of the United States, another section 8 power.
I never thought of it that way Jon, but ol FDR must have known what he was doing, getting rid of the unlawful money of the United States backed by Gold and putting us on the proper standard of Frns ... or WRS as they are otherwise known ..."Well Regulated Securities" for the US debt. Funny why the states never picked up on making gold and silver legal tender like the fed made frns, one of its secuities, legal tender. The states must have been happy wth the feds regulating the value of money, even if it was a usurpation.
Yup, ol FDR finally put us on the right track getting rid of all of that unconstitutional federal money backed by gold and issuing instead, securities on our debt. :-)
I guess the problem will go away as money goes digital. All money will be private money then and the fed will simply act as an insurer ... which it is doing now, more or less.
Glad that you set me straight on that Jon.
Wolf
On 04/18/2011 09:31 PM,
Funny why the states never picked up on making gold and silver legal tender like the fed made frns, one of its secuities, legal tender. The states must have been happy wth the feds regulating the value of money, even if it was a usurpation.
Wolf
Not funny at all. Politics, with a strong blend of bribery and intimidation, and an ignorant and passive public, which is likely to soon yield the most tragic period of history, far worse than the falls of the previous 20 civilizations.
-- Jon I don't know Jon: A conservative such as your self coming to a conclusion that FDR took us off the gold standard to preserve the Constitution because the federalies did not have Constitutional authority to print gold backed notes is at least as funny as liberals mandating more federal give away programs in obedience to Christ's command to "love one another".
But then, when you think about it for awhile, it all seems logical. Your idea that the feds have no constitutional authority to print money, only coins, would include gold backed notes, with or without a federal reserve bank, wouldn't it? And Christ's command to love your neighbor as yourself would include sharing the wealth, wouldn't it? You just have to think about it a little longer, Jon. It will all appear natural in awhile.
Humph: And I thought that Karl Marx originated communism and now I find out that he was just following Christ's teaching. And China teaches us that communism, capitalism and free enterprise work better together than capitalism, libertarian freedom and democracy.
And traditional conservatism is as anti Christianity as modern communism is contrary to the teachings of Mao... and Lenen.
Jon, is this just rewriting history, or do we really have something here. Could modern communism really embody workable economic and political principles, or is what we see in China just a transitional stage from communism through free enterprise and capitalism to democracy ... and what is the "democracy" that emerges from that order. The ancients say that democracy is intrinsically unstable, yet today, we bet the future of the world on its stability. ... or do we? Democracy requires government accountability to the people under the law, doesn't it? Is government unaccountability the leg of stability that the ancients didn't consider ... or are we in a passing phase into a real order of democracy with accountability ... and what about China, could it be on the way to a new kind of communism that has a single communist party with accountability to the people ... or does accountability lead to democracy ... as a sham, or with accountability?
Is this kind of political re-orientation what Obama means by "change"? Is this new order merely propaganda, or is it a new truth facing off with and over coming the established propaganda?
Or maybe, the mere consideration of these questions is a sign of senility creeping in.
Wolf
On 04/19/2011 08:27 AM, John Wolfgram wrote:
Your idea that the feds have no constitutional authority to print money, only coins, would include gold backed notes, with or without a federal reserve bank, wouldn't it?
The federal government can print gold or silver backed notes. Those are called "securities" in the Constitution. They just don't have the authority to make them legal tender. For that matter, they don't have the authority to make the gold or silver coins legal tender, either, on state territory. Only on territory under their exclusive legislative control, which excludes the states.
You seem not to be getting the concept of "legal tender". It means what someone with a judgment may be forced to accept in payment of that judgment. If A sues B for an injury or a debt, and gets a money judgment against B, that money judgment has to be denominated in legal tender, and A has to accept legal tender to pay the judgment. If silver coins called "dollars" have been made legal tender by the government with authority to declare legal tender, that would mean the judgment would have to be denominated in "dollars" and a would have to accept those silver coins from B.
Just because the federal government may mint coins or print notes backed by those coins doesn't automatically make them legal tender, and the power to mint is not the power to declare what is or is not legal tender. Nor is a state, which may not mint coins, obliged to make federally minted coins legal tender. It could make foreign or private minted coins, but not federal, legal tender, and some states did just that. Congress, on the other hand, exercised the powers of a state government on non-state territories, and once even declared Indian wampum to be legal tender in one of the territories for a while. But that was not in a state.
Most state constitutions originally had specific provisions delegating to their legislatures the power to declare legal tender. Some don't. The Texas Constitution does not, and at present Texas law vaguely refers to legal tender without declaring what it is, so technically there is no legal tender in the State of Texas. Judges just define it from one case to the next, on their own alleged authority, which, constitutionally, they don't have. (Indeed, The Texas Constitution does not enumerate legislative powers, which is a cogent reason to replace it.)
And Christ's command to love your neighbor as yourself would include sharing the wealth, wouldn't it?
Love doesn't mean charity without limits, especially public charity, which involves forcefully taking from some to give to others.
You just have to think about it a little longer, Jon. It will all appear natural in awhile.
I have thought about it long enough. Don't be patronizing.
Could modern communism really embody workable economic and political principles, or is what we see in China just a transitional stage from communism through free enterprise and capitalism to democracy ...
Most Chinese themselves consider it transitional, and tolerate it only as long as the leaders are not too abusive of their power. Power eventually corrupts, and when it does, people rise up against it, as we see happening in several Middle Eastern and North African countries.
and what is the "democracy" that emerges from that order. The ancients say that democracy is intrinsically unstable, yet today, we bet the future of the world on its stability. ... or do we?
We bet on its righteousness. We only hope for its stability.
Democracy requires government accountability to the people under the law, doesn't it?
It does, although that does not necessarily mean majoritarian voting. It could also mean supermajority voting, or decision by representative assemblies charged with specific issues, such as legislatures and juries.
Is government unaccountability the leg of stability that the ancients didn't consider ...
No. They did consider it. Things haven't changed that much since then.
or are we in a passing phase into a real order of democracy with accountability ...
Only if the people rise up and demand it with sufficient force that they prevail.
and what about China, could it be on the way to a new kind of communism that has a single communist party with accountability to the people ... or does accountability lead to democracy ... as a sham, or with accountability?
Accountability comes from demands for it, not by a political system running on autopilot.
Is this kind of political re-orientation what Obama means by "change"?
You'd have to ask him. At the moment it seems more plausible he is trying to destroy Western Civilization, whether he is aware of it or not.
Is this new order merely propaganda, or is it a new truth facing off with and over coming the established propaganda?
Mostly propaganda.
Or maybe, the mere consideration of these questions is a sign of senility creeping in.
You should have a physician check you.
-- JonWhat you claim as "legal tender" as required to pay a damage judgment is indeed a change from old law. In the old days a judgment for damages followed rule of an "eye for an eye, a tooth for a tooth". If there were not such thing as legal tender, could a damaged person demand application of Hammurabi's law?
In any event, even if you were right that Section eight with all of its references to federal control over money was not specific enough to give it the power to declare the measure of value for legal tender, you would still be wrong under the principle that the greater contains the lesser. As your example makes clear, if we are not to revert to Hammurabi's law, there must be a common standard by which to determine and pay debts. So, what we need is a standard measure for such things, which the government has supplied with "legal tender".
Does the government have that authority?
Not only does Article I, Sec 8, Cl. 5 give Congress the power to coin Money, regulate its value and the value of foreign coin, but it also gives Congress the power to "fix the standard of weights and measures" which in this case is the "dollar" as a standard by which to measure value.
I'm not sure that a gold backed note is a "security". In common sense, the gold is the "security" for the note. Not the other way around. The note is the pledge of the gold. Whether gold notes are or are not "securities" within the meaning of the Constitution, it is clear that such is a broad sweeping term that includes many other documents evidencing value.
Wolf
On 04/19/2011 11:31 AM, John Wolfgram wrote:
As your example makes clear, if we are not to revert to Hammurabi's law, there must be a common standard by which to determine and pay debts. So, what we need is a standard measure for such things, which the government has supplied with "legal tender".
The regulatory power of Congress is goes to quantity of precious metal in a coin, or its purity. It can require that that a coin denominated a "dollar" contain at least 371.25 grains of pure silver, or 416 grains of silver of standard (coin grade) purity, as the first Coinage Act of 1792 did. Note that that Act makes no mention of "legal tender" or any term synonymous with it.
Does the government have that authority?
To prescribe the weight and purity, yes. To make legal tender on state territory, no.
Not only does Article I, Sec 8, Cl. 5 give Congress the power to coin Money, regulate its value and the value of foreign coin, but it also gives Congress the power to "fix the standard of weights and measures" which in this case is the "dollar" as a standard by which to measure value.
But that does not make it legal tender.
I'm not sure that a gold backed note is a "security". In common sense, the gold is the "security" for the note. Not the other way around. The note is the pledge of the gold. Whether gold notes are or are not "securities" within the meaning of the Constitution, it is clear that such is a broad sweeping term that includes many other documents evidencing value.
In the context of Art. I Sec. 8 "securities" were something that could be counterfeited. The quantity of gold backing a note can't be counterfeited, although particular coins might be. The notes themselves can be counterfeited, and often were.
-- JonWolf, Jon and Other significant Citizens - My cable is off and as a result I starting using my antenna again and found to my surprise that over-the-air channels are broadcasting multiple digital channels on their assigned frequency. As I have shuffled through them I found an English Language version of CHINA NEWS. What I learned today was startling!!!
Inflation in CHINA is devastating the population. Wages are not rising but food, housing and transportation prices are up 50% and more over the last two months. People are buying less food as a result.
The Government is said to be raising interest rates to combat the inflating money but as they do that it stiffles economic growth, a purely Keynsian Economic Problem with Governments which issue paper money [which is every government now].
If CHINA raises interest rates the building boom will slow and unemployment will ensue. Already Dissidents are critizing government policy and they are being held in jail/prison without hearings or communication.
One such popular artist/dissident is a guy name AY [Pronounced 'I']. When the cameras showed the protestors demanding AY's release, there were many WHITE PEOPLE holding "Release AY" signs. None of them talked on Camera so I couldn't tell whether they were Aussies, Brits, Canadians or USA residents. It is a classic destablization tactic of the CIA to protest and support protestors to topple governments, along with more direct tactics like the recent bombing of Gaddafis living quarters by Patriot missles.
I see the hand of the USA in trying to get the Chinese to revalue the Yuan. The USA has been trying for decades to get the Chinese to revalue the Yuan upward but the Chinese refuse in order to gain their labor advantage, as the japanese did in the 20th century after WWII.
I don't remember the channel but I will note it and send it to you all so you too can share in the REAL NEWS.
- Brad H, JD
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