Neither sound money nor the free market comes from printing money into existence. Arguably the only thing worse than the Fed printing money out of thin air is Congress printing money out of thin air for the purpose of full employment and/or any other absurd ideas Congress has.Bill Is Unconstitutional
The last thing we need, the very last thing we need is Congress lending money into existence to pay the bills or to do anything it wants for any reason.
Several readers, James Turk among them pointed out Kucinich's bill is unconstitutional because the proposal amounts to issuing "bills of credit", an act is forbidden by the constitution.
Inquiring minds may wish to consider the following articles regarding constitutional money and bills of credit.
- Test Your Knowledge About Money by Douglas Gnazzo
- Gold and Silver Coin or Paper Money? by Robert Brown
- Dennis Kucinich gains support of Tea Party activist by Arkady Kamenetsky
Those wishing to read the definitive comprehensive guide on American monetary law and history should consider “Pieces of Eight”, and James Turk's effort to reprint that guide.
Kucinich's bill is "To create a full employment economy as a matter of national economic defense; to provide for public investment in capital infrastructure; to provide for reducing the cost of public investment; to retire public debt; to stabilize the Social Security retirement system; to restore the authority of Congress to create and regulate money, modernize and provide stability for the monetary system of the United States, retire public debt and reduce the cost of public investment, and for other public purposes."
You cannot "restore" what was never there in the first place.
Gnazzo, Brown, and Kamenetsky point out these constitutional facts.
Article I, Section 8, Clause 5 of the Constitution states that Congress shall have the power "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."
Article I, Section 10, Clause 1 says "No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."
Reader Emails
Eugene Holloway writes ...
What could pose more potential financial calamity than putting a cartel of banks in charge of your country's currency, giving the fox the keys to the henhouse?Hugo Salinas-Price writes ...
Answer: Putting the U.S. Congress in charge, locking a hungry fox in the henhouse with the chickens. There is no precedent in our country for giving the Congress the unfettered power to dictate how much money can be printed. None. None. It has never been done. Never.
If anyone -- libertarian, conservative, Republican or Tea Party person -- tries to tell you that this is a good concept, please help him understand the certain consequences that will follow such folly.
Hi Mish!Click on the preceding link, added by me, for a synopsis of the book.
Having Congress create money - because "money is scarce" - was the idea picked up by firebrand revolutionaries in France in 1790.
Voices of reason tried to stop the idiots, but they would not listen.
The French economy was totally destroyed in the following inflation. The madness finally ended when the paper currency went to zero value against gold. Not one of the revolutionaries ever admitted that the cause of the whole catastrophe was caused by fiat money!
Good luck stopping the idiots this time. You have, of course, read "Fiat Money Inflation in France" (1896) by Andrew Dickson White.
It's deja vu all over again.
Best regards
Hugo
My friend "HB" writes ...
Fractional reserve banking must end as it violates property rights and is the driver for the boom-bust cycle. However, abolishing fractional reserve banking should be done in concert with establishing a free banking system without a central bank and with a complete denationalization of money.No one in their right mind should support Kucinich's mad proposal, unless their intent is to purposely make matters far worse. Fortunately, that bill is going nowhere with Ron Paul as Chairman of the Monetary Policy Subcommittee. I fully expect Ron Paul to enter a valid proposal sometime in 2011.
It is not possible to rectify the situation by transforming Congress into the new 'money printing from thin air' authority.
Kucinich's proposal is hair-raising nonsense for numerous reasons.
As much as I oppose the Fed and the fractional reserves system, it is actually better than what Kucinich proposes. Direct political control over the printing press would be an unmitigated disaster.
From the standpoint of constitutional law, the constitution does not confer the right to 'create' money from thin air on Congress. Rather, the clear intent of the constitution is for Congress to regulate the weights and measures of gold and silver coins. Those coins the only lawful money mentioned in the constitution. Thus, the current fiat money system is unconstitutional, even if the Supreme Court has said otherwise.
His assertions regarding the health care system and 'solar panels' and other alternative energy schemes are the usual socialistic clap-trap and easily refuted because such projects cannot exist without government subsidies, which ipso facto proves that they are uneconomic and will make the energy related situation worse instead of better.
The alleged 'aversion to borrowing' clashes with the reality that the US government deficit is now one of the highest in history. An aversion to borrowing would be good, not bad.
There is also no 'aversion to hiring people', but rather an economic situation brought on by the government interventions of the past, which have been instrumental in creating a credit-financed boom that has turned to bust. The more additional interventions are undertaken, the worse the employment situation will become.
Finally, it is NOT the 'job of Congress' to get everyone a job or to invest in this or that. Government-directed investment schemes and 'make work' programs will only consume more scarce capital and further lower the standard of living for everyone except perhaps for the few recipients of make-shift work projects at the expense of everyone else.
Addendum:
Further clarification Email from Eugene Holloway:
Paper money is unconstitutional. Legal tender is unconstitutional. You and I know that as a historical fact. But the U.S. Supreme Court, exposing its nature as a political body, has ruled otherwise. All of this is explained in my essays at http://www.gold-eagle.com/research/hollowayndx.html.Mike "Mish" Shedlock
In case someone disagrees with the assertion, the reason I insisted that giving the Congress the unfettered power to print money is unprecedented is that, when the Treasury (approved by Congress) was in charge of the currency, the currency was convertible to gold or competed with it -- the Congress was thus limited. Today there is neither a Constitutional (according to the high court) nor a golden limitation. So the comments of Justice Field apply more than ever. And even more so the comments of the dissenters in the 1935 case in which the Court upheld the law invalidating gold clauses in private contracts: "Loss of reputation for honorable dealing will bring us unending humiliation; the impending legal and moral chaos is appalling."
I am a lawyer. When people consult me about probable consequences of proposed actions, I advise based upon the prevailing precedents and opinions of judges, which are indicative of likely results.
So when I wrote those articles, I painstakingly walked the reader through the documents and history of how the Constitution has been turned on it's head -- because simply saying that paper money, etc., is unconstitutional is not especially credible when the common assumption is that the Supreme Court is a bulwark that protects us against the Constitutional excesses of the other two branches.
The point of my essays is to demonstrate how, slowly, over decades and centuries, the Supreme Court can establish that anything is Constitutional, even if the clear intent and words of the founders are otherwise.
Eugene C. Holloway
http://globaleconomicanalysis.blogspot.com
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