Posted on 02/06/2002 4:39:25 PM PST by agitator
This week on The Agitator Hour, heard Wednesdays at 9pm Eastern/6pm Pacific the guest is Mr. Bernard von NotHaus Chief Economist of the National Organization for the Repeal of the FEDeral Reserve Act and the Internal Revenue Code.
NORFED, the National Organization for the Repeal of the FEDeral Reserve Act and the Internal Revenue Code, is a supporter-based nonprofit organization dedicated to using all its revenue to restore a honest monetary system for all Americans, as required by our Constitution. It is governed by a Board of Directors and a Supporters Advisory Council. NORFED solicits your support to effect a change to our nation's monetary standards.
| Guest: | Mr. Mr. Bernard von NotHaus |
| Date: | Feb. 6, 2002 |
| Showtime: | 9pm EST / 6pm PST |
| Where: | The Agitator Hour - Click here to Listen Live at 9pm |
The toll-free call-in line is 1-800-478-7780
This was written into the Constitution as a result of the experience with Continental Dollars issued by the Continental Congress to finance the War of Independence. "Not worth a Continental" is the phrase coined as a result of that unhappy currency. Continentals had depreciated to something like 10 cents on the dollar when the Philadelphia Convention gathered to reform the Articles of Confederation, and the hazard of non-convertable currency was fresh on everyones' mind.
Alexander Hamilton, who certainly was a genius, gave the United States sound finances. The new Constitution gave the national government taxing power, and Hamilton agreed to accept either Continentals or specie as payment for taxes (tariffs, actually). As a result Continentals were quickly bid up to the value of $1. Hamilton also promised to pay interest on the debt of the United States only in specie, which made U.S. Treasuries highly sought after.
Remind me again which Amendment abolished that.
No Amendment needed. The Supreme Court had outlawed such currency issues in the past (Lincoln's Greenbacks), and certainly would have done so once again when FDR abrogated gold convertability- but Congress removed the issue from the Court's jurisdiction. This ability is provided for in some section of the Constitution, perhaps someone else can give you the Article and Section.
You pay your debts (for whatever you buy) with paper that the States aren't supposed to allow to be used to pay debts.
But then the Constitution is a living document that can only be interpreted by what's happening today, not strictly as written. (At least that's what they tell me.)
And you conservatives have come a long way, baby, from what you used to stand for. Now you'll stand for anything.
The one's who are managing this magnificent fiat money we have are doing a great job. It only took about three years for the citizens of France in the early 1790s to figure the scam out and rise up. Actually, it only took a few months for them to figure it out. The rest of that time, they were trying to work around the problem without rising up directly against the government.
Of course, in that case, gold and silver were used on the black market to insure value for value, but the government forbid this, so the people just did it all the more.
Historically, fiat money has never suceeded for long. Our situation today is unique in this regard. It's lasted longer than any other, I think.
(Yes, I know I am ending the sentence with a preposition.-g-) The problem is that it doesn't explain the beginning of the Great Depression, it only explains the middle.
I don't know if you read the post in which I linked a recent paper by Eichengreen and Temin that I find very exciting.
http://elsa.berkeley.edu/users/eichengr/counter_histories.pdf
The paper assumes that the reader is familiar with the prior research, so I would suggest that if you are interested in understanding their argument you start, as DallasMike suggested, with Eichengreen's Golden Fetters. I can't remember if Friedman & Schwartz discuss this, but it's well known that none of the central banks followed the "rules of the game" vis-a-vis the gold standard in the 1920's, and it would be fun to speculate what would have happened if they had. I think Mundell has developed this theme, but I haven't read very much by him yet.
A lot of people write, and think, silly things because they don't really understand what they are talking about. Article One, Section 10, of the Constitution prohibits the States from making anything but gold and silver acceptable for payment for debts. Well and good. However, it is the federal government which declares our money to be legal tender for all debts.
Take a dollar bill out of your wallet. Turn it so Washington is face up. Look at the upper left hand corner. In fine print, it says, "This note is legal tender for all debts, public and private." 'Nuff said.
Of course I've read Friedman & Schwartz, and lots of other very intelligent writers, but that's not enough. I am a graduate student in history at George Mason, so I need to find original topics to research, not just parrot what others have done. I can't do math so I can't be an economist, and economic historians appear to all be economists first and historians second. However, for the most part they don't do their own archival research, as far as I can see, while historians do (and must).
Or maybe I should take time off and learn math well enough to do calculus. Not sure whether that is possible - my guess is not.
And Legal Tender was passed as a law, right? Man, it's been so long since I studied this stuff. A law trumping the Constitution. Who'da thunk?
So the federal government declares that the States don't have to be restrained by the Constitution? How clever. They didn't have to even bother with the cumbersome amendment process. Sheesh.
I understand where you're coming from, though. You're trying to position yourself for a career in this field after you finish your graduate work. Mustn't rock the boat. Better take the party line. Double sheesh.
It's not easy to summarize, so I will leave it there.
Vieira is currently writing a 1500 page treatise on this and related subjects which should particularly appeal to you, Pelham.
So under this, what did you call it, f-f-f-federalism, the gold and silver coin clause doesn't really apply to the States?
If only I'd known that, I'd have never brought up anything about that old, outdated Constitution.
And here I thought maybe the 10th Amendment would apply. Silly me.
LOL.
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. Since the clause of the Constitution we are discussing specifically prohibits the states from making anything but gold and silver acceptable payment for debts, then the 10th Amendment can't apply - when the Constitution forbids it, then the 10th Amendment can't change that.
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
Since the clause of the Constitution we are discussing specifically prohibits the states from making anything but gold and silver acceptable payment for debts, then the 10th Amendment can't apply - when the Constitution forbids it, then the 10th Amendment can't change that.
Federalist 44 explains that the purpose behind these money clauses is to prop up the confidence in the country's money, by avoiding any possibility of the use of worthless paper.
The history of legal tender is fascinating. Someday you may want to read up on the legal tender cases, challenging the constitutionality of the Legal Tender Act of 1862, Hepburn v. Griswold (1870), Knox v. Lee (1871), Parker v. Davis (1871), and Julliard v. Greenman (1884). The power of Congress to issue paper money has been resolved for over 100 years.
It may well be that you have a good idea, but if so, don't waste your time re-fighting old battles.
You've studied this matter enough to know that fiat money systems always collapse. Why are you supporting this one so staunchly?
No, dollars don't have value simply because people "agree to agree they have value". They have value for the same reason Hamilton was able to give value to the Continentals- the government has the power to impose taxes, and accepts FRNs as payment for those taxes.
the value of the U. S. government's ability to print enough of them to pay for whatever needs to be paid.
I don't know what you mean by this, but it sounds like a recipe for pure inflation. A government that simply prints money to pay for what it wants generates pure inflation. This is one main reason the Fed is independent of direct government control, because the experience of nations with central banks controlled by politicians was one of rampant inflation.
Robert Mundell, like Alan Reynolds, was a favorite of National Review during the Reagan Administration.
Schumpeter, the greatest of economic historians, didn't "do math". His writing is therefore a joy to read. Oddly enough, he thought Econometrics would be the future of economics even though he didn't use it.
Friedman and Schwartz do describe the timing of the collapse of credit, "bank money". Take another look at the chapters on the great contraction.
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