Posted on 04/29/2002 5:14:43 PM PDT by shrinkermd
1. I suggested we restrict ourselves to financial disasters rather than all economic disasters because the former are more easily attributable to the nature of the currency.
2. You claim on the one hand that all the economic disasters (unnamed) happened while on the gold standard and on the other hand allege that we have never been on a gold standard. I agree with the latter of these two self-contradictory positions of yours. Which one do you really agree with?
3. I believe all the bailouts I mentioned were fiat currency related, you believe my position is “completely false”. I will BEGIN a discussion of this issue below.
4. You claim the US currency has been the strongest fiat currency for 7 decades. Even with the “exorbitant privilege” of being a reserve currency, we have DECLINED versus every other major currency except the pound during this period. This is objective and verifiable.
5. I believe there was MORE scarcity integrity when paper money was recognized as a claim to money rather than money itself. You presumably do not. I believe there was more stability in the system when we went through “cold turkey” withdrawals every 20 years or so, you favor the system where we pretend everything is fine by “sticking another needle in the arm.” I believe there was more stability during the period where a dollar was more or less a dollar with some ups and downs (from 1800-1940) rather than delining to about seven cents (since 1940).
6. You appear to believe that money is issued by government. I believe it is issued by the banking system (about 5% by the unaccountable, secretive Fed and 95% by the rest of the money monopoly cartel).
7. You describe a process under a bona fide gold standard that you conclude “is precisely the same as printing more or less fiat currency, inflating or restricting the money supply, and the currency manipulation has the exact same effect in both cases. Do you get it now” My simple answer, for now, is “you don’t seem to get it.”
8. You claim that since no anti-manipulation system can be fool-proof we shoudn’t try. That’s akin to saying, since men are going to murder anyway, why impose harsh criminal penalties on those who do.
9. You ask “are you in favor of the idea that FDR should have let the currency collapse occur, with the resulting devastation, just as a matter of principle.” This is a loaded phraseology, but my answer is that I would have favored staying on the gold standard and going to “100% money” as Irving Fischer of Yale argued at the time in a book by the same name.
10. You allege that my “whole argument is based on the totally false conception of us having a non-fiat currency before 1932.” My position is based on no such conception (false or otherwise). You also continue to repeat that you equate issuance of notes in excess of gold available for redemption with fiat currency. But you have also said FRNs are not fraudulent but over-issuance is. Are they the same or are they different? I agree only with your last statement and think they differ in many other regards too.
The S&L fiasco was not due to currency problems.
You blame the S&L fiasco on "deregulation" and Democrats in the 1980s. Let’s back up to the 1970s. Until the 1970s, the S&L marched happily along paying 3% for short term deposits and investing the money in 7% mortgages. They could have done that forever. In the 1970s, we had double digit inflation of our fiat currency (Unlike any we had ever before experienced except to finance wars, which were subsequently reversed after the war). All of a sudden, banks had to pay 14% to raise money that was already committed for 30 yrs to earn 7%. One does not need to be a rocket scientist to realize the S&Ls were up that proverbial body of water with no visible means of locomotion as of the late 1970s. It’s true that the sh*t didn’t hit the fan for 10 years while BOTH DEMOCRAT AND REPUBLICAN politicians bestowed “gift legislation” on a bevy of campaign contributors wanting to enrich themselves in the process while pretending to be rescuing the situation (that you lay the blame only on the Democrats is telling).
The same double-digit fiat inflation of the 70s required money center banks to find borrowers who were willing to pay 20% interest so they could pay 14% and still make money. Other than the consumer, no other domestic borrowers were willing for a variety of reasons. They began throwing money at any foreign borrower they could find. Since, then, the Ponzi scheme has been to pretend nothing is wrong and rescue the banks with bailouts when necessary. Again, the UNPRECEDENTED fiat explosion in the 1970s was the proximate cause.
I’ll stop for now and look for the link to my prior discussion of a fiat based system with scarcity integrity.
I disagree, but you are, of course, free to make whatever arguments you wish.
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d:
"2. You claim on the one hand that all the economic disasters (unnamed) happened while on the gold standard and on the other hand allege that we have never been on a gold standard. I agree with the latter of these two self-contradictory positions of yours. Which one do you really agree with?"
These positions are not self-contradictory. When I use the term 'gold standard' and 'gold-backed currency' in a post, it's almost always in quotes to denote that it is a false term. While the currency notes were supposedly backed by gold, there was never really nearly enough to cover them. The real problem with the pre-1932 currency was that its value was tied to gold, making it extremely vunerable to deflation. But then, we've been over that.
As for the economic disasters in American history being 'unnamed'.... ask and ye shall receive.
- Postwar Decline of 1784 (severe, lasted two years)
- The Decline of 1809 (moderate, due to British embargo)
- The Depression of 1819 (severe, lasted until 1822)
- The Recession of 1833 (moderate, lasted two years)
- The Depression of 1837 (severe, lasted until 1842)
- The Panic of 1857 (severe, lasted two years)
- The Post-Civil-War Recession of 1866 (moderate, lasted two years)
- The Panic of 1873 (severe, lasted until 1878)
- The Panic of 1893, aka The Silver Panic (severe, lasted two years)
- The Panic of 1907 (severe, lasted two years)
- The Recession of 1910 (moderate and short)
- The Recession of 1913 (moderate and short)
- The Panic of 1914 (moderate, lasted one year)
- The Postwar Recession of 1920 (Severe, lasted two years)
- The Great Depression of 1929 (Extremely severe, lasted until WWII)
The recessions were much like the early '80s one, with high inflation, unemployment and some bankruptcies. The panics and depressions were marked by major corporate loan defaults, runs on banks, bank closings, very high unemployment, lots of major bankruptcies, speculators being wiped out, investment capital drying up completely, forclosures, very low levels of economic activity, etc.. Since we dumped the phony gold standard, we've had four recessions in the post-WWII era; a moderate one in 1957, a severe one in 1981, a moderate one in 1991, and a minor one now (thus far). No depressions or panics at all. We're too spoiled to realize how good we've had it compared to the pre-1932 period.
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d:
"3. I believe all the bailouts I mentioned were fiat currency related, you believe my position is “completely false”. I will BEGIN a discussion of this issue below."
Okay.
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d:
"4. You claim the US currency has been the strongest fiat currency for 7 decades. Even with the “exorbitant privilege” of being a reserve currency, we have DECLINED versus every other major currency except the pound during this period. This is objective and verifiable."
There has been a low, but steady rate of inflation in US currency, with the exception of a few periods like the early '80s. What does that have to do with it's strength? The strength of a currency is measured by the confidence people have in it, and the US dollar has been and remains the most desired currency on the planet because people have more confidence in it than any other currency.
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d:
"5. I believe there was MORE scarcity integrity when paper money was recognized as a claim to money rather than money itself. You presumably do not."
This is a false assumption. I simply don't put the importance on scarcity integrity that you do. A dollar is worth only what someone is willing to trade you for it, and scarcity integrity is pretty much irrelevant to that. If the people believe in the currency, it will remain strong. If people don't believe in the currency, it will collapse regardless of scarcity integrity. If scarcity integrity was such a vital factor, our currency couldn't have possibly survived without it this long. That puts the lie to your claim.
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d:
"I believe there was more stability in the system when we went through “cold turkey” withdrawals every 20 years or so, you favor the system where we pretend everything is fine by “sticking another needle in the arm.” I believe there was more stability during the period where a dollar was more or less a dollar with some ups and downs (from 1800-1940) rather than delining to about seven cents (since 1940)."
Too bad your beliefs don't coincide with the historical record. The whole goal of a realistic person is a stable economy that prevents economic disaster and keeps people from suffering. You seem to prefer that people suffer regularly just so your ideal can be achieved.
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d:
"6. You appear to believe that money is issued by government. I believe it is issued by the banking system (about 5% by the unaccountable, secretive Fed and 95% by the rest of the money monopoly cartel)."
Technically, you are correct. However, although the Federal Reserve Bank is supposed to be a private corporation, anyone who seriously believes that it is independant of the government is quite naive. You might look at how Federal Reserve Board members are appointed, and how involved the government is in the process of minting, regulating and guaranteeing the integrity of US currency, as well as regulating the banks.
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d:
"7. You describe a process under a bona fide gold standard that you conclude “is precisely the same as printing more or less fiat currency, inflating or restricting the money supply, and the currency manipulation has the exact same effect in both cases. Do you get it now” My simple answer, for now, is “you don’t seem to get it.”"
I have heard estimates that historically, the government bullions reserves have been adequate to redeem as little as 10% of issued currency. Thus, 90% of the notes are backed by nothing. They kept printing more of them at will without increasing bullion reserves. Are you still trying to tell me that this 'gold-backed' currency is not a fiat currency, when most of it is backed by virtually nothing, and they printed as much money as they wanted ??? If you believe that, you are lying to yourself.
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d:
"8. You claim that since no anti-manipulation system can be fool-proof we shoudn’t try. That's akin to saying, since men are going to murder anyway, why impose harsh criminal penalties on those who do."
False. I made no such claim; you wrongly inferred it. I merely put the lie to the standard claim that a 'gold-backed' currency couldn't be manipulated.
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d:
"9. You ask “are you in favor of the idea that FDR should have let the currency collapse occur, with the resulting devastation, just as a matter of principle.” This is a loaded phraseology, but my answer is that I would have favored staying on the gold standard and going to “100% money” as Irving Fischer of Yale argued at the time in a book by the same name."
As I said, you seem to favor sacrificing the savings, possessions and dreams of Americans on the altar of your 'hard currency' ideology. You would have Americans suffer terrible cyclical depressions, as we did in the past, in the name of scarcity integrity. Out of courtesy to the forum rules, I won't plainly express my opinion of your views. I will just say that I'm glad you don't have the power to make economic human scarifies of us all to your demigod of scarcity integrity.
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d:
"10. You allege that my “whole argument is based on the totally false conception of us having a non-fiat currency before 1932.” My position is based on no such conception (false or otherwise)."
You could have fooled me. Almost all of your examples defending you position involve references to pre-1932 America.
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d:
"You also continue to repeat that you equate issuance of notes in excess of gold available for redemption with fiat currency. But you have also said FRNs are not fraudulent but over-issuance is. Are they the same or are they different? I agree only with your last statement and think they differ in many other regards too."
Please cut & paste from any of my posts where I said that "FRNs are not fraudulent". I don't believe I've ever said any such thing. I'm not sure what you mean by "fraudulent". Do you mean "fiat" ??? FRNs are a fiat currency, obviously. I've said that repeatedly. Please clarify what you're trying to say here.
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V1:
"The S&L fiasco was not due to currency problems."
d:
"You blame the S&L fiasco on "deregulation" and Democrats in the 1980s. Let’s back up to the 1970s. Until the 1970s, the S&L marched happily along paying 3% for short term deposits and investing the money in 7% mortgages. They could have done that forever. In the 1970s, we had double digit inflation of our fiat currency (Unlike any we had ever before experienced except to finance wars, which were subsequently reversed after the war). All of a sudden, banks had to pay 14% to raise money that was already committed for 30 yrs to earn 7%. One does not need to be a rocket scientist to realize the S&Ls were up that proverbial body of water with no visible means of locomotion as of the late 1970s. It’s true that the sh*t didn’t hit the fan for 10 years while BOTH DEMOCRAT AND REPUBLICAN politicians bestowed “gift legislation” on a bevy of campaign contributors wanting to enrich themselves in the process while pretending to be rescuing the situation (that you lay the blame only on the Democrats is telling)."
As I said, the S&Ls were considered a pillar of strength in the banking sector right up until deregulation. I recall no stories of imminent S&L failures previous to deregulation, and the financial press makes its living on ferreting out and reporting such bad news. You will have to provide evidence of your claim if you expect me to accept it.
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d:
"The same double-digit fiat inflation of the 70s required money center banks to find borrowers who were willing to pay 20% interest so they could pay 14% and still make money. Other than the consumer, no other domestic borrowers were willing for a variety of reasons. They began throwing money at any foreign borrower they could find. Since, then, the Ponzi scheme has been to pretend nothing is wrong and rescue the banks with bailouts when necessary. Again, the UNPRECEDENTED fiat explosion in the 1970s was the proximate cause."
You seem to believe that only increasing the money supply can cause inflation, which is false. Increasing wages, caused by a tight labor market, will cause increased prices, and thus inflation. Price increases caused by a restriction of supply of commodities are also inflationary, and usually lead to wage hikes. In either case, the dollar, although it may still be fixed to the price of gold, will still buy less, and will some like to engage in semantic hairsplitting, as far as I am concerned, when your dollar buys you less, that's inflation. Likewise, huge deflation can and has occured with no significant change in the currency supply. To address your specific example, the inflation of the late '70s was in large part caused by the oil embargo, and the resulting huge energy price increases. To lay that all at the foot of monetary policy is wrong.
And you still have not been able to dispute the fact that economic hardships were much greater with the 'gold standard' currency than with the fiat currency.
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d:
"I’ll stop for now and look for the link to my prior discussion of a fiat based system with scarcity integrity."
I'll keep an eye out for the link.
I said just that in my post. I was showing that your claim that the fedgov solved all their financial crisises by merely printing more money was wrong.
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i:
"My question to you was how the fiat system itself has contributed to smoothing out the panic cycles; which you have yet to answer."
You didn't read my response, then. From my response to i's earlier post:
V1:
"As for the 'gold standard', when you have tied the value of the currency to the value of gold, that creates a big problem in a depression. As all us capitalists know, government price fixing schemes never overcome real-world market forces in the end. So regardless of the fact that the government had fixed the price of gold by edict, when there was a depression there was the typical massive price deflation that characterizes such an event. The value of gold and the currency that was tied to it deflated, plummeting rapidly, as did the confidence of the people in that currency. When people knew even their gold wouldn't buy them nearly as much in real market, it's pretty obvious how their attitude toward the supposedly gold-backed currency changed."
I thought I was quite clear in making the point that tying the value of the dollar to the value of gold make the currency extremely vunerable to massive deflation. Since massive deflation occured cyclically while we were on the 'gold standard', and hasn't occured at all since we got off it, I'd say history's lesson is undeniable.
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i:
"You also made a rather artful sleight-of-hand when you likened the gold standard to a "price-fixing" scheme. In your response to Deuce, you said, "Since the price of gold was fixed by government edict...," in reference to the Coinage Act of 1792. That is totally bass-ackwards. The purpose of that act was to define the value of the dollar, not "fix" the price of anything. By way of analogy in physics, the speed of light is defined as 299,792,458 meters per second, exactly. No, that doesn't mean their "fixing" the speed of light at any value, heedless of what reality tells them; they're just defining the meter as the distance light travels in 1/299,792,458 of a second."
This is mere semnatics. Whether you call it valuation of the dollar or price fixing of gold, either way the price of a commodity, namely gold, is fixed by government edict in relaton to the dollar. Your 'speed of light' analogy in inapplicable, as the speed of light is a constant, and gold is a commodity who's value fluctuates with supply and demand.
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V1:
"The amount of physical US currency in circulation, FRNs and coins, circa 2000, as per the Federal Reserve website is $600 billion$. The US trade deficit, circa 2000, as per the Department of Commerce, Bureau of Economic Analysis website was about $370 billion$. And yet, the GDP for America in 2000 (again from the DoC, BoEA website) was $10.2 trillion$. So how is that possible?"
i:
"How is it possible? Because it's the same money sloshing around and around. Nobody cares if the same dollar gets counted several times if it's used in several transactions. How has McDonald's served over 35 billion when there's only 6 billion people in existence?"
Wrong. I already pointed out that the vast majority of the large transactions were electronic, and didn't involve the $600 billion$ in physical currency in circulation at all. You do read my posts before responding to them, don't you ???
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V1:
"Almost all of the large financial transactions and many small ones (checks, debit card, credit card transactions) don't involve US currency, paper FRNs or coins, they are purely electronic funds transfers."
i:
"I think that statement deserves a little scrutiny. True, electronic transactions don't involve physically handing cash over, but they're still going to be based on money that's located somewhere. The fact that the money doesn't change physical location doesn't mean that it isn't changing hands, and therefore not in circulation. And likewise, it doesn't really matter if a physical dollar flies across the ocean; if it's owned by a foreigner, then it's effectively "out of the country", regardless of its physical location.
You didn't check out the links on electronic currency I posted, did you? If you had, you would know that the statement you made above is false. More than half of the US currency in circulation today is purely electronic, and has no physical existence. This is not electronic credits representing bills in a vault somewhere, it is pure electronic money, issued originally as electronic money (not paper bills) by the Fed.
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i:
"The point I'm making is that we're hemorrhaging money (in whatever form) out of the country at a yearly rate that's at least comparable to the money supply within the country (again, in whatever form). There's no way that could be happening unless there's something here to renew the money that gets lost - otherwise we'd be experiencing massive deflation. And there's going to come a time - I don't know when, but I don't see how it can't happen - when the foreign owners of these overseas dollars are going to want to do something with them. Otherwise, what would they be collecting them for? Hood ornaments?"
Again, this is based on your false idea about the total amount of currency in curculation being paper money. In spite of this, I agree that the trade deficit problem is real. However, we would be hemmoraging money regardless of whether we had a specie-backed or fiat currency. That's what happened during the Revolutionary War, we hemmorraged just about every bit of gold we had out of the country to pay for the war.
Inquest:
The purpose of [The Coinage Act of 1792] was to define the value of the dollar, not "fix" the price of anything.
Vigilant1:
This is mere semnatics. Whether you call it valuation of the dollar or price fixing of gold, either way the price of a commodity, namely gold, is fixed by government edict in relaton to the dollar.
This is central to the differences in our povs. The dollar is a standard of value like feet or hours. Therefore, it must be defined (certainly you will acknowledge that the Founding Fathers felt that way even if you don’t). The Act defined what a dollar is so that it could be used as a unit of measurement. A fiat standard has no unit of measurement. A fiat system with scarcity integrity, however, could still be used and could be consistent with the principles of democracy and free enterprise. This requires either rigidly fixing the number of units or by growing the number of units by a pre-specified percentage in a pre-specified way. The current system has zero scarcity integrity. A handful of un-elected people acting in secret, together with the banking cartel, has been give the very undemocratic un free enterprise special privilege of changing the amount of this precious construct by whim.
On a minor note, in another post to Inquest you state:
you seemed to be proposing that if money leaves the country and is held by foreigners, the money supply in the US shrinks and dollars should change in value. 'Taint so.
Actually, ‘Tis so. If it is not recorded on the books of a domestic commercial bank (even if it is on the books of a foreign subsidiary of a US bank) it IS NOT counted in the money supply. Now if all you meant is that it should be counted, then you are agreeing with what Inquest is saying.
You have said FRNs are not fraudulent but over-issuance is…I agree.
You said:
Please cut & paste from any of my posts where I said that "FRNs are not fraudulent". I don't believe I've ever said any such thing.
In post 152 you state (and I concur):
A suspension of redemption is…a criminal fraud, as the notes claim right on them that they all can be redeemed at any time, which is a lie under such circumstances. At least FRNs make no such fraudulent claim.
Where shall I deliver the crow you ordered for dinner?
But that's not answering my question. I asked you how (i.e. by what mechanism) fiat money has been able to eliminate these deflationary cycles. When you see the answer to that question, you just might see a certain amount of "deniability" in history's lesson after all.
Your 'speed of light' analogy in inapplicable, as the speed of light is a constant, and gold is a commodity who's value fluctuates with supply and demand.
And the value of the dollar, under the Act, was to fluctuate right along with it. You seemed to be implying that the Act was somehow mandating that this fixed quantity called a "dollar" was to be used to tie down the value of gold regardless of what the market tries to do (which the essential element of a "price-fixing scheme"), and I was simply pointing out that you were putting the cart before the horse. It's no more a price-fixing scheme than saying that a dollar is worth four quarters is a price-fixing scheme.
You didn't check out the links on electronic currency I posted, did you? If you had, you would know that the statement you made above is false. More than half of the US currency in circulation today is purely electronic, and has no physical existence.
I didn't check all the links, no. But that's fine. So what does that raise the total money supply to, 1.3 tril? 370 billion (or more) leaving the country every year is still a lot in comparison. (and that's why I chose my words the way I did: that the money we're sending out is "at least comparable" to the money that's in circulation here, "in whatever form". That statement stil holds true)
However, we would be hemmoraging money regardless of whether we had a specie-backed or fiat currency. That's what happened during the Revolutionary War, we hemmorraged just about every bit of gold we had out of the country to pay for the war.
Umm, yeah, it called an EMERGENCY?! When you need supplies, you need supplies. In today's more normal times, if we had a stable money supply, and we were running the trade deficit we're running now, that would mean that somebody, somewhere, on this side of the ocean is losing money without getting any new cash flow to replace it. How long do you suppose he'd be willing to keep that up, unless his supply was being replenished by a particular source for whom, shall we say, money is no object?
One more point. I gave your response a little more thought, and you seemed to be proposing that if money leaves the country and is held by foreigners, the money supply in the US shrinks and dollars should change in value. 'Taint so. The amount in global circulation determines the money supply. Who holds it at any given moment is largely irrelevant to the value of the dollar (as long as they don't take a very large amount of it out of circulation for an extended period of time).
You'll need to explain yourself a little more clearly here. Whether a dollar is being spent by Chinese among themselves, or whether it's being held in a vault by those same Chinese, it still has zero effect on the U.S. economy, unless it makes its way back into the U.S. economy. If it doesn't, that dollar is completely invisible to the U.S. economy, regardless of what's being done to it. The conclusion I would draw is that your parenthetical "as long as" is in fact, largely the case. Otherwise we would be seeing those dollars coming home. Dollars made from selling us stuff are going to be useless to these people unless they use them to buy something back from us.
IOW, it’s just a crap shoot and that is fine with you.
If people don't believe in the currency, it will collapse regardless of scarcity integrity.
Nonsense, name a single currency in history that even approximated maintaining scarcity integrity and collapsed. Not one, of course.
If scarcity integrity was such a vital factor, our currency couldn't have possibly survived without it this long. That puts the lie to your claim.
Again, nonsense. That’s like trying to evaluate whether something is a Ponzi Scheme merely on the basis of whether its failed yet. You don’t have to be a rocket scientist to figure out the end result of a currency without scarcity integrity. The only issue is when.
Are you not aware that 95% of our money supply is created by banks?
I agree with your concern, however, the money isn't all leaving. Much of it is used to buy U.S. securities, stocks, real estate, etc.
What forum rule would you have to violate to express your opinion of my views?
What proof are you looking for? Everyone knew the S&Ls financed long-term assets (30 yr mortgages at 7%) with short-term liabilities (deposits, that they had to pay 14% for). Where’s the mystery to you? To parody Dylan: You don’t have to be a member of the financial press to figure which way the dollars flow. Your belief, in fact, that the financial press is vigilant could not be further from the truth. For example, in early March, 1932, as state after state declared “Bank Holidays,” the NYTimes reported these events on page six under such innocuous headings as “Banks protected in 6 more states.” More recently, during the ENTIRE campaign of 1988, what news were you seeing about the S&L crisis. Bush Sr. (reminiscent of FDR before him) acted, however, in the first week of his Presidency to begin to stop the carnage.
What did you think the (silly) pre-text for “deregulation” was, anyway, if not to “rescue” the industry. Deregulation was a boon to those who feasted on the dying carcass (shady S&L operators, real estate developers, lawyers, accountants, but most of all Wall Street). Unfortunately, it did nothing for the industry: it had long since been declared DOA by anyone who gave it serious thought.
Webster and I disagree with you
My point of view is that the Constituition and Bill of Rights were both full of compromises to get the states to sign on to giving up a fair amount of their freedom and independence (compared to the loose confederation they were under previously). I think that the fact that the founders declared that only silver and gold should be used by the states shows their bias that all currency should be based on these precious metals. Maybe they assumed that everyone knew that all money should be gold and silver (similar to the misinterpretation of the 2nd Ammendment, that the right to bear arms wasn't an individual right but a collective right). Here's what Hamilton said in the Federalist Papers #44 & 12 to explain Article I Section 10:
The right of coining money, which is here taken from the States, was left in their hands by the Confederation, as a concurrent right with that of Congress, under an exception in favor of the exclusive right of Congress to regulate the alloy and value. In this instance, also, the new provision is an improvement on the old. Whilst the alloy and value depended on the general authority, a right of coinage in the particular States could have no other effect than to multiply expensive mints and diversify the forms and weights of the circulating pieces. The latter inconvenience defeats one purpose for which the power was originally submitted to the federal head; and as far as the former might prevent an inconvenient remittance of gold and silver to the central mint for recoinage, the end can be as well attained by local mints established under the general authority...
The extension of the prohibition to bills of credit must give pleasure to every citizen, in proportion to his love of justice and his knowledge of the true springs of public prosperity. The loss which America has sustained since the peace, from the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people, and on the character of republican government, constitutes an enormous debt against the States chargeable with this unadvised measure, which must long remain unsatisfied; or rather an accumulation of guilt, which can be expiated no otherwise than by a voluntary sacrifice on the altar of justice, of the power which has been the instrument of it. In addition to these persuasive considerations, it may be observed, that the same reasons which show the necessity of denying to the States the power of regulating coin, prove with equal force that they ought not to be at liberty to substitute a paper medium in the place of coin...
No one of these mischiefs is less incident to a power in the States to emit paper money, than to coin gold or silver. The power to make any thing but gold and silver a tender in payment of debts, is withdrawn from the States, on the same principle with that of issuing a paper currency.
The prosperity of commerce is now perceived and acknowledged by all enlightened statesmen to be the most useful as well as the most productive source of national wealth, and has accordingly become a primary object of their political cares. By multipying the means of gratification, by promoting the introduction and circulation of the precious metals, those darling objects of human avarice and enterprise, it serves to vivify and invigorate the channels of industry, and to make them flow with greater activity and copiousness.
Notice that every mention of money refers to alloy, while this is a subtle point, I interpret it to mean that money should always be metal. My theory is that they didn't want the Federal money to be limited to only silver and gold (to account for changes in the markets of copper, platinum, nickel etc) but that their intention was to have money consist of metals however various they may be.
The Congress addressed the Federal question of money with the Coinage Act of 1792 which fixed the value of a dollar at the same silver content (.7982 oz.) as that of the Spanish 8 reales (known as the Spanish Milled dollar or ‘Pillar’ dollar).
Untrue.
While I have already pointed out to you that the very definition of inflation IS an increase in the money supply, you prefer to use the certain effect of inflation and call it a cause. Very well. I have taken the liberty to compile some statistics for you. The 1960s and the 1990s had very similar statistics: real growth= 28%, monetary growth = 44%, and the cpi up 30% during the two decades. The 1970s and 1980s had far worse stats: lower real growth (24%), much higher monetary growth (96%), and the cpi up 86%. That is stark realism. Source of figures for both cpi and real (i.e. constant dollar) growth was statistical Abstracts of the U.S. (available online) and the Fed was the source of M1 growth (also available online)
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