Archive for the ‘Banking and Monetary Policy’ Category
Facts and Truth About U.S. Inflation, Debt, and Political Crisis
Friday, August 19th, 2011The U.S. Bureau of Labor Statistics (BLS) yesterday released their consumer price index (CPI) data for the month of July. The BLS reported an increase in year-over-year CPI growth to 3.63%, the highest rate of U.S. price inflation since October of 2008. July’s official government reported year-over-year U.S. price inflation rate of 3.63% was up from 3.56% in June, 3.57% in May, 3.16% in April, 2.68% in March, 2.11% in February, 1.63% in January, 1.5% in December, and 1.1% in November.
The official rate of U.S. price inflation has increased by 230% over the last eight months. NIA conservatively projects the official rate of U.S. price inflation to surpass 4% by year-end and 5% in early 2012. NIA estimates the real rate of U.S. price inflation, without geometric weighting and hedonics, to currently be approaching 8%. NIA projects the real rate of U.S. price inflation to reach double-digit territory by mid-2012, if not much sooner.
Gold prices today reached a new all time high of $1,877 per ounce. Gold is the best gauge of inflation, not the CPI. On June 15th when the BLS reported May CPI data, gold was trading for only $1,520 per ounce. Even though the BLS reported a year-over-year CPI increase for the month of May of 3.16%, the mainstream media reported that inflation was slowing down and not a problem because gas prices were declining. Although seasonal adjusted gas prices in the month of May were down 2%, NIA reported to you that non-adjusted gas prices actually rose 3.6%. NIA then warned you that the BLS’s seasonal adjustments will reverse beginning in the month of July and start boosting reported gas prices.
NIA was right, seasonal adjusted gas prices in the month of July increased 4.7%. The mainstream media intentionally misled Americans about price inflation during the month of June, but the world is now recognizing the truth about how U.S. price inflation is spiraling out of control with the price of gold having risen 23% since mid-June. The investment community is also finally realizing what NIA has been saying for years, inflation does not create real economic growth.
The Dow Jones declined today by 172.93 points to 10,817.65 and the Dow Jones/Gold ratio fell to 5.84. The Dow Jones/Gold ratio is declining at a faster rate than even we expected. NIA was one of the only organizations in the world to accurately predict that the Dow Jones/Gold ratio would decline to 6.5 in 2011. NIA continues to believe that the Dow Jones/Gold ratio will decline to 1 this decade, which will mean another 83% loss for Dow Jones stocks in terms of real money.
The lower the stock market declines in the near-term, the greater the chances are that the Federal Reserve will soon unleash QE3 in disguise under a new name. Despite gold reaching a new all time high, the core-CPI, which the Federal Reserve likes to use to gauge inflation because it excludes food and energy prices, is currently up 1.77% on a year-over-year basis, compared to an annual gain of 0.61% in October of last year. Even though core-CPI growth appears to still be low, year-over-year core-CPI growth has increased by 290% since October of last year, a larger gain on a percentage basis than the official CPI. Ever since the Federal Reserve announced QE2 in November of last year, core-CPI has increased for nine straight months.
By the time the 2012 Presidential election comes around, inflation will be the top concern on the minds of all Americans. Inflation will be an even bigger concern than unemployment, because nobody will want to have a job that pays them a salary in U.S. dollars. The only Presidential candidate who has the knowledge and courage necessary to preserve what little purchasing power the U.S. dollar still has left is Ron Paul. NIA supports Ron Paul to become the Republican nominee in the 2012 U.S. Presidential election. To become the Republican nominee, Ron Paul will need to win the Republican presidential primaries. Unlike the general election to be held on November 6th, 2012, the Republican primaries are a series of primary elections and caucuses that are spread out over five months beginning in February.
Iowa is always the first state to vote and will have their caucuses on February 6th, followed by New Hampshire on February 14th, Nevada on February 18th, and South Carolina on February 28th. The results of the first few primaries/caucuses usually influence how people will vote in the following primaries/caucuses. It is important for a candidate to build momentum early on. If a candidate doesn’t have a strong showing in early primary states, they frequently drop out of the race before all of the primaries/caucuses are completed.
The way the primaries are structured gives voters in early primary states, especially voters in Iowa, a lot of power compared to voters in states like New York who very often don’t vote until the nominee has already been determined. About six months before every Iowa Republican primary is the Ames Straw Poll, an unofficial Presidential straw poll that takes place in Ames, Iowa, of who Iowa voters are planning to support in their caucuses. The 2011 Ames Straw Poll just took place on August 13th with Michele Bachmann finishing first place with 4,823 votes and Ron Paul coming in second with 4,671 votes, only 152 votes behind Bachmann.
To attend the Ames Straw Poll and have the opportunity to vote in the poll, attendees were required to purchase a ticket priced at $30. Bachmann gave her supporters 6,000 free tickets at a cost to her campaign of $180,000. Only 80% of the people she gave free tickets to actually voted for her and that’s assuming none of the people who bought tickets voted for her. Bachmann didn’t just pay for the entrance of 6,000 people who she thought supported her, but she paid a small fortune to have Grammy Award winning country singer Randy Travis perform in a special air-conditioned tent. Bachmann even paid to transport forty bus loads of Randy Travis fans to the event, who were required to register at the Bachmann table and vote before seeing the entertainment.
With Bachmann spending a total of nearly $1 million on this event, she should have won the straw poll in a blow out. Click on the link below to see a shocking video we just posted to the NIA blog of the never ending line of Bachmann “supporters” registering at her table so that they could vote without paying the $30 fee. NIA believes that many of these people pretended to support her in order to get free tickets, but actually voted for Ron Paul: http://inflation.us/blog/2011/08/crazy-video-of-bachmann-ames-straw-poll-line/
The morning after Bachmann’s phony victory, she appeared on five different nationwide talk shows. Ron Paul wasn’t allowed to appear on any, with both ‘Meet the Press’ and ‘Fox News Sunday’ canceling interviews they had scheduled with him. Meet the Press spent the morning talking about Bachmann’s win and Tim Pawlenty dropping out of the race after finishing third with less than half of the votes of Bachmann and Ron Paul. They barely mentioned Ron Paul even when he finished in a statistical dead heat with Bachmann.
Even more frustrating and disturbing, the Wall Street Journal published a long article Sunday morning about the race and it focused almost entirely on Bachmann’s straw poll win and Rick Perry’s entry into the race. The article only had one sentence about Ron Paul that read, “Libertarian Ron Paul, who has no chance to win the nomination, finished a close second.” On Monday morning, Ron Paul was scheduled to appear on NBC’s ‘Today’ show, but that interview was canceled as well with an NBC official saying it was due to “logistics and timing reasons with the news in Indiana and Somalia.”
The mainstream media believes that if they repeat “Ron Paul has no chance of winning” enough times, it will be a self-fulfilling prophecy. The same applies to the media constantly referring to Mitt Romney as the front-runner. The media supports Romney because they like how he is a part of the Republican establishment and if elected would stick with the status quo in Washington.
Four years ago when Ron Paul was relatively unknown, Romney was the winner of the 2007 Ames Straw Poll. Rudy Giuliani and John McCain, who were both also seeking the 2008 Republican presidential nomination, chose not to participate in the 2007 Ames Straw Poll. Romney at the time in his own words called Giuliani and McCain cowards. Romney said, “I think if they thought they could have won, they would have been here,” and “If you can’t compete in the heartland, if you can’t compete in Iowa in August, how are you going to compete in January when the caucuses are held, and how are you going to compete in November of ’08?”
NIA believes that if Romney thought that he could have won the 2011 Ames Straw Poll, he would have been there. Romney knows that he lost all of his grassroots supporters when he spoke out in favor of the Federal Reserve’s destructive monetary policies and said Fed Chairman Ben Bernanke was doing a good job. Romney showed his true colors when he said that the Federal Reserve is a non-issue and that he won’t be discussing it during his campaign. He has now proven himself to be a hypocrite who was scared of looking bad by losing to Ron Paul in the straw poll and losing his “front-runner” status that was handed to him by the mainstream media. If Romney was afraid to compete in Iowa this month, NIA sees no chance of him winning in Iowa this February and no chance of him winning the Republican nomination.
With Iowa voters having a lot of power being in the first primary state, Iowa residents have spent more time researching the candidates than residents of most other states. Because Iowa voters are educated on the issues, especially issues affecting the economy, the media knew Ron Paul would have a strong showing in the Ames Straw Poll and for weeks leading up to it ran countless stories designed to downplay the poll and make it seem irrelevant. One Fox News reporter even went as far as saying that winning the straw poll is a negative and makes it nearly impossible to win the nomination. None of these things were said before the poll in 2007 because the media knew their darling Romney would win.
All educated Americans who understand the facts and truth about the U.S. economy and inflation are in strong support of Ron Paul because of his 24 year record in Congress of voting against increases in government spending and taxes, and voting for measures to strengthen our currency and reduce monetary inflation. Ron Paul stands for everything that NIA believes in such as liberty, freedom, and sound money. He has done more to protect the U.S. Constitution than any other person in Washington. Our founding fathers had the foresight 224 years ago to see the economic problems we have today. Even back then, rulers of nations had a history of coin clipping, replacing the silver in coins with base metals, and implementing other measures that stole from the purchasing power of ordinary citizens. Our founding fathers never would have imagined just how easy it has become to create inflation, where now the Federal Reserve with the click of a mouse can credit trillions of dollars to any banking institution worldwide.
For years, the media has dismissed Ron Paul’s fight against the Federal Reserve and its destruction of the U.S. dollar. The media calls Ron Paul’s ideas radical, but NIA believes Ron Paul is the most sane person in Washington. NIA believes balancing the budget, auditing the Federal Reserve, returning to a gold standard, and bringing our troops home from the Middle East, are all sane ideas that must be implemented if we want to have any hope of avoiding hyperinflation.
Rick Perry, the governor of Texas who just entered the race for the Republican presidential nomination, was recently asked about the Federal Reserve and in response he called Bernanke’s acts of printing money “treasonous”. NIA was the first to call Bernanke’s actions treasonous. Back on December 9th of last year, NIA released an article entitled “WikiLeaks, Bernanke, and Hyperinflation” in which NIA said that it was “deeply disturbed by how U.S. politicians and the mainstream media have been calling for WikiLeaks founder Julian Assange to be charged with treason.” Although in no way does NIA support Assange or his actions, we expressed in our article how we don’t believe it is a treasonous act to help spread the truth about our country’s foreign policy and other sensitive topics when the information he posted was given to him and in no way did he hack any government systems to obtain it.
NIA went on to state in its December 9th article, “If there is one American who deserves to be charged with treason, it is Federal Reserve Chairman Ben Bernanke.” It is not humanly possible to betray ones country in a way that is more egregious than Bernanke’s despicable acts. NIA is currently in the process of producing a sequel to its critically acclaimed documentary ‘Meltup’, which has received over 1.1 million views with 96% of its viewers “liking” the movie and only 4% “disliking” it, a record for YouTube documentaries at least 50 minutes in length with over 1 million views. NIA’s sequel to ‘Meltup’ will expose the latest updated facts and truth about the U.S. economy, Federal Reserve, and inflation. It will set a whole new standard as the most in-depth, informative, educational, and entertaining economic documentary ever produced. Most importantly, it will expose why Bernanke’s actions are indeed treasonous.
As far as Rick Perry is concerned, he is really no different than Romney. Perry like Romney is a governor who was elected to office due to his strong ties to the Republican establishment. Both Perry and Romney according to many media pundits look very Presidential. You will never hear Perry or Romney speak a word about bringing our troops home, repealing legislation that invades Americans’ privacy rights without making us any safer here at home, and eliminating entire departments of government including the Department of Education, Department of Energy, Department of Commerce, Department of Health and Human Services, and Department of Homeland Security. These unnecessary bureaucracies have done nothing but add to our budget deficits, without a single success story to justify their existence.
Perry is not a true fiscal conservative. He and his wife complained that the Texas governor’s mansion was too small and is now spending $11 million of President Obama’s stimulus money to renovate and expand its size. With the construction now taking place at the governor’s mansion and Perry unable to live there, Texas taxpayers have so far spent $700,000 to rent him an even bigger Texas mansion and to cover expenses at the mansion including Neiman Marcus window coverings and a subscription to Food & Wine Magazine.
What is unbelievable to us is that Perry for the most part has been a career politician, yet he has somehow managed to become a multi-millionaire while spending nearly all of his time in public office earning a relatively modest salary. Of course, if Perry was elected President, nothing much will change from the Obama administration and within a few years, he might become a multi-billionaire because a billionaire will be the new millionaire. Make no mistake about it, Perry may be trying to differentiate himself from Romney by speaking out against the Fed, but as President of the United States of America, NIA guarantees that Perry wouldn’t do a damn thing to limit the Fed’s powers and stop it from wiping out both the savings of senior citizens and the purchasing power of their Social Security checks. Perry is already in the pocket of the big banks and we just posted an 11 second video on the NIA blog that proves it: http://inflation.us/blog/2011/08/shocking-video-bank-of-america-executive-offers-to-help-out-rick-perry/
Tomorrow, Saturday, August 20th, is Ron Paul’s birthday. To celebrate his birthday and help build momentum for his Presidential campaign, Ron Paul supporters have organized a huge “moneybomb” that starts at midnight tonight. If you would like to give Ron Paul the best possible birthday President and help increase the chances of our nation’s survival, please make a donation beginning at midnight tonight by going to: http://www.ronpaul2012.com/
It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us
Related Posts:
World Domination By ‘The Money Changers’
Wednesday, August 10th, 2011The Secret of Oz
It is commonly known in economics academia that The Wonderful Wizard of Oz written by L. Frank Baum in 1900 is loaded with powerful symbols of monetary reform which were the core of the Populist movement and the 1896 and 1900 presidental bids of Populist Democrat William Jennings Bryan. Oz is a virtual forest of monetary reform symbolism, done by someone extremely well versed in the Populist monetary reform goals of the period (Baum was a newspaperman and author) – goals which have never changed - they are still valid today, they are needed now more than then.
THE MONEY MASTERS is a 3 1/2 hour non-fiction, historical documentary that traces the origins of the political power structure. The modern political power structure has its roots in the hidden manipulation and accumulation of gold and other forms of money. The development of fractional reserve banking practices in the 17th century brought to a cunning sophistication the secret techniques initially used by goldsmiths fraudulently to accumulate wealth. With the formation of the privately-owned Bank of England in 1694, the yoke of economic slavery to a privately-owned “central” bank was first forced upon the backs of an entire nation, not removed but only made heavier with the passing of the three centuries to our day. Nation after nation has fallen prey to this cabal of international central bankers.
Related Posts:
Important Debt Ceiling Update
Monday, August 1st, 2011President Obama just announced late this evening that a deal has been reached to cut government spending and raise the debt ceiling in order to avoid a debt default. If the deal is approved on Monday, it will raise the debt ceiling by between $2.1 and $2.4 trillion in three installments: $400 billion immediately, $500 billion this fall subject to a disapproval vote by Congress, and $1.2 to $1.5 trillion more after a special committee agrees on a matching amount of spending cuts that will be in addition to $900 billion in spending cuts proposed in the bill. With no tax increases included in this plan, all of this additional debt will eventually be monetized and paid for through monetary inflation.
Although the deal is supposed to cut as much as $2.4 trillion in spending over the next decade, Obama said that none of the spending cuts will occur anytime soon so that not to derail the phony economic recovery. That’s right, none of the cuts will come until early 2013 and by then we will need to once again raise the debt ceiling to north of $20 trillion. If our elected representatives were serious about cutting spending, they would have the bulk of the spending cuts now and not in the future when many of them will be out of office.
This deal is a complete and total sham, and will do nothing to prevent hyperinflation. In no way will these spending cuts be mandated and nothing will force future Congresses to abide by them. Even with these cuts, government spending is going to increase every single year for the next decade. As price inflation spirals out of control in the years ahead causing the purchasing power of the dollar to plummet, all government employees will demand higher salaries and it will cost more to run all parts of the government. Future Congresses will raise spending and make the spending cuts proposed in this deal meaningless.
NIA believes that all of the events that took place in Washington this weekend were scripted in advance. It is likely that both parties knew from the beginning what deal they would ultimately agree to, but came out with these other proposed bills in order to satisfy tea party supporters and make them think that their efforts are making a difference. The reality is, although the tea party movement helped Republicans take over the House of Representatives so that Democrats didn’t have free rein in Washington, most of the new Republicans elected to Congress haven’t followed through with their promises and have failed to make any kind of a positive difference.
Everybody in Washington assumes that interest rates will remain at artificially low levels for the rest of this decade. The interest rate that the U.S. paid on its total marketable debt in the month of June was only 2.38%. Exactly one decade earlier, in June of 2001, we paid 6.162% interest on our total marketable debt or 159% higher than current average interest rates. On August 15th we owe our next interest payment of approximately $30 billion. Imagine if that payment rises 159% higher to $77.7 billion or $932.4 billion annualized. Later this decade, interest rates will not only rise back to normal levels like we had in 2001, but will likely rise to artificially high levels to balance out the damage being created today from artificially low interest rates.
If this bill is approved by Congress and the President on Monday, it will avoid a short-term honest debt default but just about guarantee a default by inflation later this decade. There is about a 1 in 1,000 chance that future Congresses will stick with the spending cuts in this bill, but even if they do, rising interest payments will not only wipe out the $2.4 trillion in spending cuts, but they will add trillions more to future deficits and the national debt. A new Gallup Poll shows that 53% of Americans oppose raising the debt ceiling compared to only 37% who favor an increase. We pray that millions of Americans march to Washington tomorrow in protest of this bill and that millions more call, email, and fax their elected representatives in the morning demanding that they vote no.
It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us
Related Posts:
BTL Update 2011 July 30
Saturday, July 30th, 2011Two States Defy DC on No Child Left Behind
The Unintended Constitutional Mistakes of “Cut, Cap, and Balance”
Green agenda has parallels with excesses of communism
Busting Posse Comitatus: Military Cops Arrest Civilians in Florida City
New NASA Data Blows Gaping Hole In Global Warming Alarmism
NIA Exposes Debt Ceiling Truth
Related Posts:
BTL News Update
Monday, July 25th, 2011Competing Currencies – a Defense Against Profligate Government Spending
Sunday, July 17th, 20112011 July 11
Ron Paul
The end of June marked what is hopefully the end of the Federal Reserve’s policy of quantitative easing. For months the Fed has purchased hundreds of billions of dollars of Treasury debt, enabling the government to fund its profligate deficit spending, push the national debt to its limit, and further devalue the dollar. Confidence in the dollar is plummeting, confidence in the euro has been shattered by the European bond crisis, and beleaguered consumers and investors are slowly but surely awakening to the fact that government-issued currencies do not hold their value.
Currency is sound only when it is recognized and accepted as such by individuals, through the actions of the market, without coercion. Throughout history, gold and silver have been the two commodities that have most fully satisfied the requirements of sound money. This is why people around the world are flocking once again to gold and silver as a store of value to replace their rapidly depreciating paper currencies. Even central banks have come to their senses and have begun to stock up on gold once again.
But in our country today, attempting to use gold and silver as money is severely punished, regardless of the fact that it is the only constitutionally-allowed legal tender! In one recent instance, entrepreneurs who attempted to create their own gold and silver currency were convicted by the federal government of “counterfeiting”. Also, consider another case of an individual who was convicted of tax evasion for paying his employees with silver and gold coins rather than fiat paper dollars. The federal government acknowledges that such coins are legal tender at their face value, as they were issued by the U.S. government. But when it comes to income taxes owed by the employees who received them, the IRS suddenly deems the coins to be worth their full market value as precious metals.
These cases highlight the fact that a government monopoly on the issuance of money is purely a method of central control over the economy. If you can be forced to accept the government’s increasingly devalued dollar, there is no limit to how far the government will go to debauch the currency. Anyone who attempts to create a market based currency– meaning a currency with real value as determined by markets– threatens to embarrass the federal government and expose the folly of our fiat monetary system. So the government destroys competition through its usual tools of arrest, confiscation, and incarceration.
This is why I have taken steps to restore the constitutional monetary system envisioned and practiced by our Founding Fathers. I recently introduced HR 1098, the Free Competition in Currency Act. This bill eliminates three of the major obstacles to the circulation of sound money: federal legal tender laws that force acceptance of Federal Reserve Notes; “counterfeiting” laws that serve no purpose other than to ban the creation of private commodity currencies; and tax laws that penalize the use of gold and silver coins as money. During this Congress I hope to hold hearings on this bill in order to highlight the importance of returning to a sound monetary system.
Allowing market participants to choose a sound currency will ensure that individuals’ needs are met, rather than the needs of the government. Restoring sound money will restrict the ability of the government to reduce the citizenry’s purchasing power and burden future generations with debt. Unlike the current system which benefits the Fed and its banking cartel, all Americans are better off with a sound currency.
Related Posts:
Glenn Beck meets The Creature from Jekyll Island
Wednesday, March 30th, 2011Related Posts:
The Floating Dollar as a Threat to Property Rights
Friday, March 11th, 2011Seth Lipsky is the founding editor of the New York Sun. A graduate of Harvard College, he served in the U.S. Army in Vietnam as a combat correspondent for Pacific Stars and Stripes. A former senior editor and member of the editorial board of The Wall Street Journal, he has also served as editorial page editor of The Wall Street Journal/Europe, managing editor of The Asian Wall Street Journal, and assistant editor of Far Eastern Economic Review. In 2009, he published The Citizen’s Constitution: An Annotated Guide.
The following is adapted from a speech delivered on February 16, 2011, at a Hillsdale College National Leadership Seminar in Phoenix, Arizona.
TO BEGIN, consider one of the most important measures of property, the kilogram. It’s a measure of mass or, for non-scientific purposes, weight. According to the papers last week, a global scramble is under way to define this most basic unit after it was discovered that the standard kilogram—a cylinder of platinum and iridium that is maintained by the International Bureau of Weights and Measures—has been losing mass.
You may think that this is impossible. Of all the elements, iridium is the most resistant to corrosion, and the cylinder is kept in a facility at Sevres, France, where it is under three glass domes accessible by three separate keys. The cylinder itself is more than 130 years old and is what the New York Times calls the “only remaining international standard in the metric system that is still a man-made object.” The new urgency to redefine the kilogram comes from the fact that its changing mass “defeats,” as the Times put it, “its only purpose: constancy.”
The question I invite you to consider for a moment is what would happen if we just let the kilogram float? This is a question that was posed in an editorial last week in the New York Sun. After all, the editorial said, we let the dollar float. The creation of dollars, and the status of the dollar as legal tender, is a matter of fiat. Its value is adjusted by the mandarins at the Federal Reserve, depending on variables they only sometimes share with the rest of the world. This would have floored the Framers of our Constitution, who granted Congress the power to coin money and regulate its value in the same sentence in which they gave it the power to fix the standard of weights and measures—like, say, the aforementioned kilogram.
Now, the record is clear in respect of how America’s founders viewed money. Many of them went into the Second United States Congress, where they established the value of the dollar at 371 ¼ grains of pure silver. The law through which they did that, the Coinage Act of 1792, noted that the amount of silver they were regulating for the dollar was the same as in a coin then in widespread use, known as the Spanish milled dollar. The law said a dollar could also be the free-market equivalent in gold. The Founders did not expect the value of the dollar to be changed any more than the persons who locked away that kilogram of platinum and iridium expected the cylinder to start losing mass. In fact, in this same 1792 law, they established the death penalty for debasing the dollar.
Today, members of the Federal Reserve Board don’t worry about how many grains of silver or gold are behind the dollar. They couldn’t care less. And this is what I believe is the most worrisome threat to property rights today. When the value of a dollar plunges at a dizzying rate—at one point in recent months it collapsed to less than 1/1,400 of an ounce of gold—Fed Chairman Ben Bernanke goes up to Capitol Hill and declares merely that he is “puzzled.” No “new urgency” to redefine the dollar for him. The fact is that we’ve long since ceased to define the dollar, and it can float not only against other currencies but even against 371 ¼ grains of pure silver.
So, the New York Sun asked, why not float the kilogram? After all, when you go into the grocery to buy a pound of hamburger, why should you worry about how much hamburger you get—so long as it’s a pound’s worth? A pound is supposed to be .45359237 of a kilogram. But if Congress can permit Mr. Bernanke to use his judgment in deciding what a dollar is worth, why shouldn’t he—or some other Ph.D. from M.I.T.—be able to decide from day to day what a kilogram is worth?
No doubt some will cavil that the fact that the dollar floats makes it all the more reason for the kilogram to be constant. But what’s so special about the kilogram? If the fiat dollar floats, one has no idea what it will be worth when it comes time to spend it. If the kilogram also floats, it will simply be twice as hard to figure out what something we’re buying will be worth. So what if, when we unwrap our hamburger, the missus has to throw a little more sawdust in the meatloaf?
Or let us consider a compromise. Let’s go to a fiat kilogram—that is, permit the kilogram to float—but apply the new urgency to fixing the dollar at a specified number of grains of gold. To those who say it would be ridiculous to fix the dollar but let the butcher hand you whatever amount of hamburger he wants when you ask for a kilogram, I say, what’s the difference as to whether it’s the measure of money or of weight that floats?
For that matter, one could go all the way and fix the value of both the kilogram and the dollar but float the value of time. You say you want to be paid $100 an hour. That’s fine by your boss. But he—or Chairman Bernanke—gets to decide how many minutes in the hour. Or how long the minute is. You know you’ll get a kilogram of meat for the price a kilogram of meat costs. But you won’t know how long you have to work to earn the money.
There was obviously a satirical element to that Sun editorial. But it’s not satirical to say that we are in a dangerous situation in our country in respect of the dollar, and that property rights are very much bound up in the question of money. After all, consider that kilogram. It is a cylinder. And it’s a cylinder the size of, say, a golf ball. The amount of mass that it is believed to have lost is measured in a few atoms, and yet the institution where they maintain standards is in a complete tizzy about it. The implications are said to be enormous.
The dollar, by contrast, has collapsed from 1/35 of an ounce of gold to less than 1/1,300 of an ounce of gold. If the kilogram had collapsed on that order of magnitude, there would be left only a small shard of that handsome grayish cylinder under the three glass domes at Sevres, France.
I understand that this is not where the property rights discussion is usually focused. It usually centers around the takings clause of the Constitution—the clause at the center of the landmark case that erupted when condemnation proceedings were launched against the homes in New London, Connecticut, of a woman named Susette Kelo and her neighbors. Under the Fifth Amendment, the government is prohibited from taking private property for public use without just compensation. That is a bedrock principle of American constitutionalism. What was special about Susette Kelo is that her property was taken for private use. It was coveted by a private, non-profit development corporation for private, for-profit use near a big pharmaceutical development that the town reckoned would benefit the public.
Mrs. Kelo and her neighbors went all the way to the Supreme Court to try to keep their homes. She lost the case, Kelo v. New London, albeit by a five to four vote. On the one hand, it was a terrible defeat for the principle of property rights. On the other hand, the decision was so alarming that states have begun changing their own laws to strengthen protections against the kind of raid on private property that Mrs. Kelo suffered. At least 43 states have already passed such laws. Rarely has the loser in a Supreme Court case established so great a legacy as Mrs. Kelo, whose case is one of the most important warnings we have had in my generation of the vigilance that is going to be required in respect of the right to property enshrined in the Fifth Amendment.
Which brings me to the question of how the law can be used to illuminate the problem of the floating dollar. What I consider the most astonishing legal question in the country came into the news in 2008, when Judith Kaye, the chief judge of the highest court in the state of New York, the Court of Appeals, filed a lawsuit in an inferior court, asking it to order the state legislature and the governor to give her a raise.
My first reaction, and that of my colleagues at the Sun, was to consider this something of a joke. Yet the more we began to look at the case, the more it threw into sharp relief the issue of the right to the property that comes to us in the form of a salary or is held by us in the form of savings. The judges on New York’s Court of Appeals, after all, hadn’t had a raise in more than a decade, and they were having an ever harder time making their salaries cover rising costs. In that they are just like the rest of us.
But it turns out that under the Constitution, judges are not quite like the rest of us—and in a way that lies at the heart of the American Revolution. Indeed, in the Declaration of Independence, one of the reasons our Founders listed for breaking with England was that King George III had “made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.” So they wrote into the Constitution not only that judges would have life tenure (with good behavior), but also that the pay of a judge would not be diminished during his term in office. This principle that one can never lower the pay of a judge is also in many state constitutions.
So if in, say, the year 2000 a judge was paid in dollars that were worth 1/265 of an ounce of gold, and if today that same judge is being paid with dollars worth less than 1/1,300 of an ounce of gold, has the judge’s pay been diminished?
The more I’ve thought about it, the more I have been nagged by the thought that judges’ pay could be the device with which to attack the legal tender law I have come to regard as the greatest threat to property in America. This is the law establishing that paper money in America must be accepted in payment of debts, public and private. The Founders themselves hated paper money. Washington, whose picture is on the one dollar bill, warned that paper money would inevitably “ruin commerce, oppress the honest, and open the door to every species of fraud and injustice”; Jefferson, whose picture is on the two dollar bill, called its abuses inevitable; as did Madison, whose picture is on the $5,000 bill. Paper money, he said, was “unconstitutional, for it affects the rights of property as much as taking away equal value in land.”
I’m not so sure that the existence of paper money is the problem. The problem is the requirement that a one dollar paper note be accepted in lieu of 371 ¼ grains of silver. Certainly when the greenback was introduced—as it was by President Lincoln—it was for a cause, the Union, that was worth enormous risks. The Treasury Secretary who helped him put through the greenback as a war measure, Salmon Chase, became, in 1864, the sixth Chief Justice of the United States; and when the concept of legal tender finally came up for consideration, Chase ruled against the greenback. Lincoln, however, eventually got two new justices on the court, and legal tender was established in a series of rulings—one involving the purchase of some sheep, the other of some bales of cotton, and another some land—known as the Legal Tender Cases.
A few months ago, I called Bernard Nussbaum, who was representing Judge Kaye, and asked him why she didn’t challenge legal tender head on. He told me he feared the Legal Tender Cases couldn’t be overturned. It was too heavy a lift. So instead he fought the case on separation of powers grounds. It seems that the New York legislature had said it would not give the judges of New York a raise until the legislators got a raise. The judges sprang on this as a transgression of separation of powers—and, no surprise, when they heard their own case, they ruled against the legislature. A few weeks ago, the legislature decided to delegate to an independent commission the job of deciding judges’ pay.
By my lights, this delegation to an unelected body, even if the legislature could overrule it, was an unsatisfactory outcome. But it turns out that the judges of New York are not the only jurists who are furious about the diminishment of their pay. A group of federal judges is also in court, fighting over their salaries. In the case of the federal judges, Congress had some time ago enacted a law that gave them an automatic pay increase designed to keep up with the Consumer Price Index. But then, as deficits got out of control and Congress’s own salary lagged, Congress suspended the automatic pay increase.
At that point, a coalition of federal judges went into court. Their aim is limited: to force Congress to reinstate the automatic pay adjustment. To understand the scale of what one is talking about, consider the pay of but one of the plaintiffs, Judge Silberman. I don’t know his exact salary. But at the time he was assigned to the District of Columbia Circuit of the United States Court of Appeals, the salary of a federal appeals judge—$83,200—was worth 258 ounces of gold. Since then, the value of the pay of a judge of one of the Appeals circuits—$184,500—has been diminished to 139 ounces of gold.
At this very hour, the judges’ petition in their pay case is before the United States Supreme Court. And while I believe the justices have been wronged by Congress, I hope they lose on the question of whether a suspension in the automatic pay adjustment is unconstitutional. That should get them angry enough to come back and look legal tender in the face. They could force Congress to pay them in the gold or silver equivalent of a federal judge’s salary at the time they were appointed to the bench. It would move judges closer to the kinds of salaries the lawyers before them are receiving.
And people would start to ask: If judges deserve honest money, why shouldn’t the rest of us?
To those who suggest that such a scenario is far-fetched, one can say, no more far-fetched than the notion that the post-Civil War monetary system could be erected on Supreme Court decisions in a pair of disputes over payment for a flock of sheep and some bales of cotton. Or that centuries of law on abortion could be overturned in a fell swoop by a Supreme Court ruling in the case of a woman who later changed her mind. Could the court cast aside precedent to decide such a sweeping issue as legal tender? It certainly didn’t hesitate—nor should it have—in demolishing the notion that racially separate schools could be equal. With everyone from the United Nations to Communist China today calling for the abandonment of the dollar as a reserve currency, is it so hard to imagine that the Supreme Court might revisit the Legal Tender Cases?
It may be that the judges will lose their pay case, just as Susette Kelo lost her house, or that they will win a partial victory and the Supreme Court will shy away from confronting legal tender. But we know from Mrs. Kelo’s case that this needn’t be the end of things. People began to see the logic and think about property rights, and now at least 43 states have passed laws to make it harder for state and local jurisdictions to use the power of eminent domain to seize private land for someone else’s private use.
Could such a thing happen with money? Well, there is a part of the Constitution called Article I, Section 10. It is the section that lists the things that states can never do. And one of these prohibited activities is making legal tender out of something other than gold or silver coin. So what is happening now is that a growing number of states, watching the sickening plunge in the value of federal money, are starting to explore how they can set up monetary systems based on gold or silver coins. The most recent effort was launched in Virginia, where there is a bill before the General Assembly to set up a joint committee to study the question. There have been early stirrings—just stirrings—in the legislatures of several other states.
Could the entry of the states into the monetary role be a reaction to a failure at the federal level, the way the states reacted to the failure of the Supreme Court to enforce Susette Kelo’s Fifth Amendment rights? It would be inaccurate to make too much of these efforts. But it would be shortsighted to make too little of them. Strange things can happen. It is even possible that one can take a cylinder of platinum and iridium, lock it away in a room under three glass domes, secure it with three separate keys, and come back in a few years to discover that part of it has disappeared. And the New York Times will write an editorial about the value of constancy.
“Reprinted by permission from Imprimis, a publication of Hillsdale College.” SUBSCRIPTION FREE UPON REQUEST. ISSN 0277-8432. Imprimis trademark registered in U.S. Patent and Trade Office #1563325.
Related Posts:
Free Market Gold Standard vs Government-Guaranteed Gold Standard
Monday, January 3rd, 2011How to Defend the Free Market Gold Coin Standard: Stop Defending the Government Counterfeits
Characteristic features of a free market gold standard:
- Private property
- The right of contract
- The enforcement of contracts by the government
- No government licensing of banks
- Open entry in coin production
- No government mint
- No government currency or coins
- Therefore, no legal tender laws
When anti-gold economists attack the gold standard, they are attacking the phony gold standard — the imitation standard — created by major European governments in the 19th century. Those governments did the following:
- Limited private property
- Did not allow the right of contract
- Did not enforce all voluntary contracts
- Licensed banks
- Forbade entry in coin production
- Ran government mints
- Established government currency and coins
- Passed legal tender laws
GaryNorth.com 2010 December 27
Two Kinds of Gold Standards
This is why the free market is the only reliable source for the re-establishment of a gold standard. Honest money begins with these steps: (1) the revocation of legal tender laws that require people to accept the State’s money; (2) the enforcement of contracts; (3) laws against fraud, which fractional reserve banking is. The free market can do the rest.
LewRockwell.com 2003 August 26
