US Constitution 28th Amendment (Jubilee) – Text

This is a draft. I am open to suggestions for changes or improvements. Some parts are more necessary than others, but it’s the best I can do without further input. In any case, here goes, the text of the proposed 28th amendment:

1. Except for demand deposits as determined under section 3 of this amendment and Federal Reserve Notes outstanding as of the date of the ratification of this amendment all debts incurred or alleged to have been incurred by any person or legal entity anywhere in the world up to the date this amendment has been ratified are hereby and forever canceled, void, and unenforceable in any action or proceeding in law or equity in any court of any state, territory or possession of the United States or of the United States itself.

2. The Federal Reserve Act of 1913 is hereby repealed, effective immediately upon ratification of this amendment. All Federal Reserve Notes then outstanding shall hereafter be redeemable upon demand by the Secretary of the Treasury in accordance with sections 3 and 7 of this amendment.

3. Except for an amount required to satisfy the provisions of section 2 with respect to the redemption of Federal Reserve Notes by the Department of the Treasury, eight-tenths of all remaining gold in the possession of the United States, including gold in the possession of the Federal Reserve System, as of the date of the ratification of this amendment shall be physically distributed so as to satisfy all claims against banks and lending institutions based upon demand deposits existing on that date, as determined under section 4. One-tenth of said gold shall be distributed to the governors of the several states in proportion to their respective populations, as determined by the Secretary of the Treasury under section 4 of this amendment.

4. The Secretary of the Treasury shall have the power to carry out the provisions of this amendment and shall report and account to a joint session of Congress, which session must be held within thirty (30) days of the ratification of this amendment. The sole power of Congress with respect to this report and account is defined in section 10 of this amendment.

5. The United States is hereafter prohibited from establishing, chartering, regulating, or operating directly or indirectly, any bank, depositary institution or lending institution other than the Treasury itself.

6. The United States shall not make any thing but gold and silver coin a tender in payment of debts.

7. The monetary unit of the United States shall be the dollar. The Secretary of the Treasury shall define the dollar as a specific quantity of gold, measured in troy ounces, at the time of the report to a joint session of Congress specified in section 4. Unless the provisions of section 10 are applied, the quantity so specified shall become final and thereafter may be changed only by amending this constitution. The quantity so specified shall have as its sole purpose the fulfillment of the requirements of section 3 of this amendment.

8. Article I, Section 8 is hereby amended in that Congress shall not have the power to regulate the value of money.

9. Section 4 of Amendment 14 is hereby repealed.

10. a) Bad faith by the Secretary of the Treasury, or his successor under section 11, in carrying out the provisions of this amendment shall constitute treason against the United States and shall be punishable by death. Congress shall determine the presence of such bad faith, which shall require the agreement of three-fourths of both houses at the joint session prescribed by section 4.
b) In the event Congress makes a finding of bad faith under subparagraph (a), and notwithstanding any other provision of this constitution, the President shall execute and put to death the Secretary of the Treasury at dawn on the day following such Congressional finding, in whatever manner the President deems advisable.
c) In the event the President or any successor fails or refuses to carry out the provisions of this section, the United States shall be promptly dissolved in accordance with section 12.

11. Should the provisions of section 10 be applied, the President shall thereafter be substituted for the Secretary of the Treasury to carry out the provisions of this amendment, and shall report and account to a joint session of Congress within thirty days and be subject to the provisions of section 10; and in the event the provisions of section 10 are again applied, the president shall be succeeded in accordance with amendment 20, 25, and the laws enacted pursuant thereto, and each successor shall report and account in accordance with section 4 and be subject to the provisions of section 10, and this section.

12. Notwithstanding any other provision of this amendment or this constitution, in the event the provisions of section 10 are applied to all successors under section 11, then upon the execution and death of the last successor so named the United States is to be promptly dissolved and its assets distributed, pro rata, to the several states by delivery of such assets to each governor thereof. The Chief Justice of the United States Supreme Court shall conduct such proceedings to carry out the provisions of this section as he shall deem advisable, but such proceedings must conclude within one (1) calendar year of the death of the last successor under this section.

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57 responses to “US Constitution 28th Amendment (Jubilee) – Text

  1. Zarepheth

    Interesting – especially the part about bad faith in the performance of official duties being punishable by death and making the president and all successors in line responsible for fulfilling those duties.

    However, I dislike the idea of limiting currency to gold and silver. I think it would be rather inconvenient to perform daily transactions in grains of gold or silver so small it takes a magnifying glass and tweezers to work with them.

    • I actually don’t care for the death penalty, but the overlords should not get the idea that they can fool around with this, and I’m not sure anything else would assure that.

      And the amendment would not limit currency to gold and silver. It says nothing about silver at all. Paper money would still be fine, but it wouldn’t be legal tender. Nothing at all would be legal tender under the amendment, but Congress could make gold and silver coin legal tender by law if they wanted to.

  2. Calgacus

    Legal tender is an essentially meaningless concept, especially in modern economies. As I said elsewhere, the gold standard is a failed and recent experiment, an attempt to make money something it never was. Why it is so important to enrich gold mine owners is obscure. Our current monetary system, run by banksters, criminals and their puppets in government is still superior to this, which arbitrarily ties the fates of economies to mining a relatively useless metal.

    Section 9 repeals one of the wisest provisions in the constitution. Government debts are easily payable – nothing easier. They have nothing to do with the economic problems the world is facing, which is that national debts and budget deficits are too small, and private debts are too large. The problem right now is that there is just too little government debt out there, as the fortunate few who hold it well know.

    • I’m not super knowledgeable about monetary history, but I understand that the Byzantine Empire had a functioning gold standard for a thousand years. The “fate of the economy” is a function of a lot more than what is used for money, although using the wrong thing for money can doom an economy. The point of the gold standard is to bind the government to the same natural law that applies to everyone else. Governments that do not recognize any authority higher than themselves invariably become tyrannical.

      The point is not to “enrich gold miners”, although that may result at the beginning. But many people have been enriched for various political reasons the other way.

      There is nothing obscure about the gold standard. And I submit that your characterization of it as a “..failed and recent experiment” is factually inaccurate.

      • Calgacus

        Gold coinage is different from a gold standard, which is a recent development based on misguided ideas, which to be sure were hazily expressed earlier. Money is many thousands of years old, and predates coinage (ca 600 BC) by millennia.

        Precious metals were originally used as an anti-counterfeiting measure for coins, which for millennia were a minor part even of the base/government “money supply”, let alone the supply of bank credit money.

        The point of the gold standard is to bind the government to the same natural law that applies to everyone else.

        What natural law is this? That one’s actions should be constrained by the availability of gold? That finance should be highly unstable with frequent booms and busts, as in the 19th century, quite unlike the 20th? Governments are constrained by their laws (ideally), physical laws, politics and their real wealth, not mystical ideas about how big the supply of (base) money should be. The money supply has always been essentially endogenously driven by the needs of the economy.

        You seem to want to outlaw both government and private banking, or credit. This won’t destroy such a fundamental human idea, it would just put it in the hand of organized crime. The Mafia and their loan sharks would then be the saviors of the people, and probably lead a successful revolution against ultrahard money madness.

        Only one thing can be “used as money” – money itself, which is credit, a social relationship, like a duty, or a favor, between two entities. Gold standards set a government price for gold, and fully employ gold. Why would one want to do this?

        Rational economists realize that the sensible thing to set the price of is human labor. This creates a zero unemployment economy, creates real wealth and speeds economic growth. This was essentially worldwide policy from 1945 to 1980, and led to the most prosperous period in the history.

        Limiting money and credit – nailing humanity to a cross of gold – for arbitrary, mystical reasons constrains economic growth, scientific and technological progress, employment, human happiness and life expectancy and real wealth.

        • There is too much misinformation in your comment to reply fully, but briefly: booms and busts have occurred under a gold standard and under no gold standard. Saying that the 20th century was an improvement over the 19th century in this regard is simply false and even fatuous. The boom-bust cycle has more to do with lending practices than whether there is a gold standard.

          I don’t know how you can conclude that I want to “outlaw government”, private banking or credit. None of that is in the amendment.

          There is nothing “mystical” about a gold standard; on the contrary, a belief that economics professors from Princeton can run the economy for 300 million other people strikes me as mystical in the extreme.

          Governments cannot “set a price” for human labor, but even if they could this has never created a “zero unemployment economy”, it could never “create real wealth” and most emphatically was NOT worldwide policy from 1945 to 1980.

          • Andrew MacDonald

            Gold standards make booms and busts much more likely. Every time a major new gold deposit is found, inflation goes zooming up. If gold traders hoard gold on the open market, you get crashing deflation. You can easily imagine such a situation – someone cornering the gold market and then making downside bets on the US economy – free profit on the backs of US suffering!

            The ability of speculators to mess with US money supply would multiply greatly. Right now if someone starts hoarding dollars, simple solution – print more dollars. Likewise, if there are too many dollars out in the system, causing inflation, just remove them from circulation. What would the US do if it were on the gold standard and speculators in Europe started hoarding gold? Invade Zurich?

            The simple analog to this situation is to imagine oil as the medium of exchange, rather than gold. Would you really want the value of your currency tied to the (from your home country’s perspective) arbitrary world price for oil? If not, why would you want gold instead?

            Cross of gold indeed. I think what most gold-bugs are looking for is a way to constrain governments from creating arbitrary and high levels of inflation. But the solution to that is to simply take away the Fed’s dual mandate of low inflation and full employment and simply make their mandate low inflation (something along the lines of the old Bundesbank). Perhaps a dumb idea but much less dumb than a gold standard. .

            • You can easily imagine such a situation – someone cornering the gold market and then making downside bets on the US economy – free profit on the backs of US suffering!

              Unfortunately I don’t find any of this “easy”. Let me try here. I’m not sure what you are suggesting. Under a gold standard you have the monetary unit of account defined as a specific amount of gold, so if you have more gold you have more dollars by definition. Cornering the gold market would be cornering the dollar market. A person who did that would indeed be economically very powerful, but it’s not like in the current system no one is economically very powerful, it’s just that in the current system it is central banks and not somebody hoarding gold.

              I think what most gold-bugs are looking for is a way to constrain governments from creating arbitrary and high levels of inflation.

              To the extent I am a “gold bug” I am looking to constrain governments by subordinating them to natural law; every other potential benefit or drawback of the proposal is incidental to that, really.

              Thank you for the thoughtful comment and welcome to you and maybe your friends from across the pond.

              • Andrew MacDonald

                [quote]
                Cornering the gold market would be cornering the dollar market. A person who did that would indeed be economically very powerful, but it’s not like in the current system no one is economically very powerful, it’s just that in the current system it is central banks and not somebody hoarding gold.
                [/quote]

                Well, the Federal Reserve chair is appointed on a mandate to ensure (basically) the steady expansion of the US economy. Speculative bankers, not so much. I know people don’t have a lot of faith in the Fed, but surely you must have more faith that Ben Bernanke has the interests of the US more in mind than speculators like George Soros (who got rich implementing exactly this kind of speculative attack against Great Britain in 1992).

                [quote]
                To the extent I am a “gold bug” I am looking to constrain governments by subordinating them to natural law; every other potential benefit or drawback of the proposal is incidental to that, really.
                [/quote]

                What does gold have to do with natural law? If you’re looking to constrain the supply of money, why not just fix the M2 according to law (I think it’s somewhere around $10 trillion right now) and say that M2 can only be increased each year by 3%?

                I guess what I’m curious about is that the main problem that most people fascinated with gold have is that the Fed right now can expand the money supply without end, and they (seem) to want some hard limits on how much the money supply can be expanded. But given all the downsides of pegging to a commodity, why go that route?

              • Well, the Federal Reserve chair is appointed on a mandate to ensure (basically) the steady expansion of the US economy. Speculative bankers, not so much. I know people don’t have a lot of faith in the Fed, but surely you must have more faith that Ben Bernanke has the interests of the US more in mind than speculators like George Soros (who got rich implementing exactly this kind of speculative attack against Great Britain in 1992).

                But is that the dichotomy? Ben v. George? Of course I think that Ben is a very smart guy and has US interests at heart and I’ve really gotten to the point where I don’t like all this “central banks are evil” stuff. But that’s not the point. The money supply itself should not vary depending on anyone’s conception of US interests. In other words, a “dollar” can’t just be anything some people, even very smart and well meaning people, decide it should be. It has to have a fixed meaning or we begin to talk gibberish.

                That’s what I mean by natural law, or natural reason.

                And I still don’t understand how what George Soros did in 1992 to the UK would be any more or less likely to happen if we had a gold standard. My gut tells me it would be less likely or even impossible because currency exchanges wouldn’t exist the way they do now, but you seem very convinced otherwise and that interests me, or at least I feel like I’m missing something.

              • Andrew MacDonald

                The issue is that the money supply, instead of varying based on someone’s interests, would vary based on natural production rates and general scarcity of some specific commodity (i.e. gold).

                If you, by fiat, said that 0.01 oz gold = 1 dollar from now until eternity, then you’ve made the money supply fixed. Great. Let’s now say you want to trade with another nation. The main way that they can get your currency to trade is to give you gold in exchange for dollars (again at the 0.01 oz gold = 1 dollar rate). To do that, they have to buy gold on the open market in their own currency (say, Euros). Fine.

                But what if someone starts hoarding gold on the open market? The price of gold skyrockets. Now it becomes very expensive to trade with you, because it becomes very expensive to buy that gold to get your dollars. So no one will buy your exports (because they can’t afford the gold) and you will have very little gold coming in. On the flip side, US citizens notice that they can go to the US treasury and redeem their dollars for gold, go to Europe, and live like kings for the price the gold will fetch. So a lot of gold starts to be withdrawn. Lots of gold going out with little gold going in means that your currency base shrinks and deflation starts in. Which is bad, real bad.

                In general the speculative attacks don’t really work until you get close to the margins of sustainability. What will happen is that if gold production decreases, the open market price of gold will slowly increase. Gold will slowly start to drain out of the treasury until you get close to an unsustainable tipping point and then the speculators will come in and you’re done.

              • If you, by fiat, said that 0.01 oz gold = 1 dollar from now until eternity, then you’ve made the money supply fixed.

                I don’t see that. The money supply would increase along with the quantity of gold to back the dollars, wouldn’t it?

                But what if someone starts hoarding gold on the open market? The price of gold skyrockets. Now it becomes very expensive to trade with you, because it becomes very expensive to buy that gold to get your dollars.

                How does anyone “hoard” gold any more than they can hoard anything else, including a currency, which is what Soros supposedly did with the pound, isn’t it? How can the price of gold skyrocket when it is fixed by law?

                What will happen is that if gold production decreases, the open market price of gold will slowly increase.

                But there won’t be any “open market price of gold” in any currency which defines itself as a quantity of gold. Am I missing something here?

              • Andrew MacDonald

                I think what you’re missing here is that if the US were to adopt a gold standard, other countries in the world would continue to have an open market for gold – gold, after all, does have some uses outside of being pegged to a currency (some industrial uses, jewlery, etc., and if gold is pegged to the US dollar, then it will also have value as a means to trade with US businesses).

                Take the example of a German grocery store that wants to stock American wines. The first problem is that they have to get dollars to pay the American wineries. To get these dollars from the US treasury, you have to give the US treasury gold (let’s ignore for a moment that there would be a secondary market for dollars in Europe – it merely complicates the example, doesn’t change it) and in exchange you get the dollars that you need to give to the American winery for the wine.

                So the German firm now needs some gold. Where can the German firm get gold? In this simplified example, let’s say you can only buy gold from gold producing firms (again, there would be a secondary market for gold in Europe and elsewhere, but this also doesn’t substantively change the example). The gold producing firm would set the price of gold in Euros to be roughly their marginal cost of production. So great, the German firm buys some gold, uses that to get the dollars, and then uses the dollars to get the wine for their store. So far so good.

                Now what happens if a speculator comes in and buys up all of the gold mines? He can set the price of gold to be whatever he wants, because he is the only supplier. Let’s say he raises the price of gold that he’s willing to sell to Europeans dramatically. Now the German store has to pay a lot of Euros for a small amount of gold, and this means that they can no longer make a profit on the trade because they have to pay a lot of Euros for the gold (which will eventually get them the wine), but can only sell the wine that they get for a relatively fixed price in Euros. Now imagine that this same speculator took short positions on the US stock market in companies that depend on exports. Voila – US exporters take it in the shorts since they are no longer competitive, while said speculator gets rich.

                Extend this a bit further and now notice that there would in fact be an open market for gold in Europe and elsewhere even after a US dollar peg. In reality, for most commodities, not many people actually buy directly from the producer; there is almost always an intermediate market. So in this case European importers need gold to buy US products, and gold producers will meet this need by selling to them. Since its not really that efficient if you’re a small grocery store to have to contract directly with a gold mine for your gold that you would need (and gold producers wouldn’t want the overhead of finding clients individually), a worldwide gold market comes into existence. Great, German grocery stores can buy gold from a centralized marketplace, where the price on the market is determined by supply and demand (in the long run, the price should stabilize around the marginal cost of production for gold, but that’s neither here nor there). As in any marketplace, a speculator could come in and try to buy up all of the gold available for sale in the open marketplace, driving up the price (i.e. cornering the market – this happened in the silver markets in the late 1970s – see the wikipedia entry on Silver Thursday). In addition to the German company that now can no longer afford US exports, holders of US dollars (which would be mostly US invididuals and companies) would now notice that it would be very profitable to go to the US treasury and redeem their dollars for the stated amount of gold (in my example 0.01 ounce per dollar) that was backing the dollar, then go to Europe and sell the gold for Euros. That is, their 1 US dollar’s worth of gold, which, before the speculator, may have only bought 1 Euro on the gold market in Europe, now, thanks to the scarcity of gold in Europe due to the speculator, might fetch 2 or 3 Euros.

                For an individual, that might mean that they could redeem their dollars for gold, then sell that gold in Europe and have a great vacation. For a US-based company, they could afford to go on a huge acquisition streak in Europe, as now their dollar savings (redeemed for gold) would now be worth 2 or 3 times as much in Euros than previously. The end result of this is that the incoming amount of gold would shrink dramatically as European importers and tourists could no longer afford gold on the open European market to do business with the US, while there would be a steady outward stream of gold to Europe, where it would be more valuable there than in the US. In this way, the US gold stocks (and hence, monetary base) would start to shrink dramatically and you’d get ruinous deflation.

                This effect also works over slower time periods. If the marginal cost (the long run driver of gold prices on an open market) of gold mining starts to increase, then gold will become more expensive in Europe and the same shrinking inflows coupled with rising outflows of gold to the US treasury would occur, and deflation sets in. In fact any shock to European gold supply or demand would affect the US monetary base – if a new industrial use is found for gold, then gold (and, in effect, US dollars) would migrate away from the US and into Europe. Likewise, if a new vein of gold is found, then the gold price in Europe would fall and gold traders there would move their money into the US economy, where they could get more goods for the same amount of gold. Or if consumer preferences in Europe changed and instead of gold jewelry, consumers demanded silver jewelry. This would drive down the price of gold and cause inflation in the US.

                So in a simple two-market trading system, the commodity-pegged currency base of the US would thus depend, somewhat counter-intuitively, on the commodity price of that good in the second market (in my example, Europe).

                Historically, cornering the market has rarely happened, but the slower-scale changes like some of the imagined did happen all the time. In the beginning of the 19th century, many European nations were faced with big fiscal crises because their currency was silver based, yet much of the silver was being taken and given to the Chinese in exchange for tea and other goods. This caused major inflation in China and major deflation in Europe until the English hit upon the idea of trading tea for opium.

                So gold provides a kind of false stability of the money supply. In reality, the US currency base (if we were to return to the gold standard) would largely be a function of ex-US supply and demand for gold.

              • Andrew, thank you for putting the time in for that explanation. I see the problem you are identifying. One preliminary point is that deflation, as opposed to “ruinous” deflation, may not be such a bad thing as it seems to central bankers. At least there are those who argue that, like Austrian economics guys.

                But here is the main point, and I don’t want to be flippant about it either. I think if the US were to adopt a gold standard everyone else would be more or less forced to follow suit, if only because of the very problem you cite. And that would eliminate that particular problem. Not that it might not generate others. But it is worth recalling that basically the entire world went on a “floating currency” regime because the US did. And before that there was Bretton Woods, which is in New Hampshire and for some reason everyone met there and agreed on this and that in 1944 before we had even buried Hitler. Or Stalin.

                Now I don’t see this as being some kind of honor due the US because of pre-eminence and hegemonic noblesse oblige. It’s more like we screwed it up so we’re the only ones who can fix it.

                There was quite a bit of discussion about the gold standard in other posts on the blog, if you’re interested:

                http://strikelawyer.wordpress.com/2011/01/23/the-gold-standard/

                http://strikelawyer.wordpress.com/2011/01/24/gold-standard-ii/

                You might particularly like this one:

                http://strikelawyer.wordpress.com/2011/02/13/freegold-fail/

                Of course the gold standard is only half of the proposed 28th amendment. The other half, and the part that really gets me labeled as some kind of kook, is the jubilee part. I put quite a bit of thought into that, perhaps to no avail, but part of it that is all my own thinking without anyone else weighing in is the idea of canceling all the debt except for demand deposits and currency. No one has offered any feedback on that aspect of it, which is unfortunate because for me that aspect, and the problem it is is designed to address, is the most difficult part of the jubilee idea and the one I am most unsure of, from the standpoint of whether that is the right thing to do or how it would work.

                So any thoughts you might have about that would be appreciated.

              • Zarepheth

                Andrew – that’s a good write up concerning the problems of a commodity pegged money supply.

              • Z.:

                So good to see you back over here. I feel like I have held your interest, at least a little. That gives me a sense of satisfaction, not to mention less of a feeling that I might be some kind of raving lunatic. I mean, I never really feel that way until some people say it. Then I begin to wonder. Is that good or bad? I don’t even know.

              • Andrew MacDonald

                In terms of ruinous deflation, very moderate deflation may not be a big problem, but empirically big deflation shocks are generally associated with large economic output declines. Whether it has anything to do with deflation itself or merely the rapid changes in prices (same negative effect inflation has), the result is the same – ruinous changes to GDP.

                As far as the world going on the gold standard, that raises a set of issues that have bedeviled countries worldwide during the 19th century and was the main reason for the collapse of the Bretton Woods system.

                Let’s say that you set up a system in which 0.01 oz = 1 dollar = 1 euro (let’s keep ourselves limited to two countries to keep the example simple – the principle is the same when more generalized). Let’s also say the population and supply of gold remain fixed, to keep things simple (again, you can think about what happens if they aren’t, but they wouldn’t change the core dillema).

                At first, this is great. The money supply for the world is fixed and trade can occur reliably. Let’s say that the main US export is wine, and the main US import is automobiles. Conversely, the main German export is automobiles and the main German import is wines. Let’s also say 100 cases of wine sell for the price of 1 car. Each year 100 cars are sold to the Americans and 100,000 cases of wine are sold to the Americans. Fine, trade balances out.

                Now let’s say that there is a productivity shock in Germany – a new factory system is invented in which German cars can be made twice as quickly. So for the same amount of effort, Germany can now produce cars for half the price. So, since the price of German cars is now halved, American demand skyrockets (in reality, the amount of demand increase and the price decline would be determined by the supply and demand curves, but suffice to say it would be a dramatic change if the marginal cost of production was halved). Americans are eager to buy more of the cheaper German cars, and so redeem their dollars for gold, send the gold to Germany, and use that to buy euros to buy this cheaper version of the car. Gold starts draining out of the US Treasury to be sent to Germany, while at the same time, US wine still attracts the same amount of gold for its wine sales, since the productivity of wine production has remained unchanged. In the end, you get a shrinking supply of US money (since the demand for the now cheap German cars increased, that increased the flow of gold (and, in turn, dollars)) and an expansion in the supply of German money. Inflation in Germany and deflation in the US as the terms of trade have now gotten out of whack.

                What has happened here is that because both countries are on the gold standard, they’ve effectively fixed their exchange rate (since 1 dollar = 0.01 oz gold = 1 euro, 1 dollar = 1 euro). Fixed exchange rates have never worked in the face of differing rates of productivity growth – this is what sunk the Bretton Woods agreement, that European and Asian countries caught back up to the US in productivity and so the fixed rates based on the gold-backed US currency resulted in large negative balances of trade for the US with these newly-productive coutnries. You can also see how shocks to supply and demand for countries on the same commodity standard can lead to the draining of one currency and inflation in the other by examining the case of the UK and China in the 18th and 19th century; a shock to British consumer preferences (i.e. demand for tea) lead to a large increase in outflows of silver to China to pay for the tea trade. You can read about this in the background to the Opium Wars: http://en.wikipedia.org/wiki/Opium_Wars

                I think I addressed your criticism of the Fed in the other post, but let me expand briefly:

                The Fed has two main roles, one is to manage the money supply and the other is to manage the liquidity of the money system in the face of bank crises. These are inter-related powers, of course, but most of the criticism you have of the Fed seems to come from how they’ve used their latter power, not their former. I’d say that, given the frequency of banking panics before the formation of the Federal Reserve in 1913, that on the whole it’s done a decent job preventing banking panics. The Fed only inhereted managing the money supply after the collapse of the Bretton Woods system, and it seems to have done a pretty good job there too of keeping inflation in check after a bit of a rough start in the mid 1970s.

                As for the proposal to hang the Secretary of the Treasury, certainly would make partisan politics a real blood sport! I’d imagine that one’s opinion of whether the Secretary of the Treasury faithfully upheld his duties would depend quite a lot on which party you were a member of.

              • Americans are eager to buy more of the cheaper German cars, and so redeem their dollars for gold, send the gold to Germany, and use that to buy euros to buy this cheaper version of the car. Gold starts draining out of the US Treasury to be sent to Germany, while at the same time, US wine still attracts the same amount of gold for its wine sales, since the productivity of wine production has remained unchanged. In the end, you get a shrinking supply of US money (since the demand for the now cheap German cars increased, that increased the flow of gold (and, in turn, dollars)) and an expansion in the supply of German money.

                But Andrew, in the example you’re using this is not a distortion of the economies of Germany and the US; this is the proper functioning of them. And when you conclude: “Inflation in Germany and deflation in the US as the terms of trade have now gotten out of whack.”, you’re suggesting that any increase in money supply = inflation and any decrease = deflation. But the situation you described is one in which money supplies are simply changing to reflect that one country has become better at producing than the other. Their balance of trade should reflect that, not mask it.

                As for the proposal to hang the Secretary of the Treasury, certainly would make partisan politics a real blood sport! I’d imagine that one’s opinion of whether the Secretary of the Treasury faithfully upheld his duties would depend quite a lot on which party you were a member of.

                The execution proposal is half serious, intended partly to amuse and prompt interest in the rest of the idea. But to the extent it could be seen as a serious proposal, I did provide that executing the Secretary of the Treasury would require a 3/4 vote, and that the only question on the table would be whether he had acted in good faith, not whether anyone disagreed with anything he did. I have some limited faith that even morally challenged Congresspersons would not vote to kill someone they probably know pretty well unless they really believed it was necessary, but I must concede that it is possible that even this minimal decency is just beyond them.

              • Andrew MacDonald

                Well, in modern times, we have floating exchange rates that allow international trade to continue on with productivity changes /without/ causing inflation and deflation in the countries between which trade occurs. A pair of gold-backed currencies could survive one-off shocks above with some economic disruptions. But it can’t handle situations like the below.

                Say that German productivity improves at a continual rate of 3% a year forever. Say also that the US productivity improves at a continual rate of 2% a year forever. Eventually, if both operate with a gold-pegged currency, the US will run out of gold in this situation as the terms of trade will continually (and at a continually increasing rate) favor Germany. Then what? A barter economy for the US?

                This is more or less what happened to the Bretton Woods system. The European and Asian countries productivites improved faster than the US for 20 continuous years until the US was basically in danger of running out of gold.

              • Say that German productivity improves at a continual rate of 3% a year forever. Say also that the US productivity improves at a continual rate of 2% a year forever. Eventually, if both operate with a gold-pegged currency, the US will run out of gold in this situation as the terms of trade will continually (and at a continually increasing rate) favor Germany. Then what? A barter economy for the US?

                This is more or less what happened to the Bretton Woods system. The European and Asian countries productivity improved faster than the US for 20 continuous years until the US was basically in danger of running out of gold.

                Isn’t there a problem with your hypothetical in predicating productivity differentials that go on “forever”? If the productivity differentials are allowed to appear and visit the consequences upon the players the productivity differentials are likely to adjust. And that’s what we should want, isn’t it? What you’re proposing is that the productivity differentials should be overcome or masked through adjustments in monetary policy. But that just distorts things, right?

                And indeed it was true that the Bretton Woods system collapsed when the US was in danger of running out of gold. Or put another way, the US was running out of gold because it was losing in the production and trade contest, if you will. But why should the US get an exemption from the production and trade contest? Maybe it should have to some extent, because it was protecting the free world from the commies, for example. But what’s the rationale for the exemption after that? It seems that in the 21st century the old rationale is wearing thin in other parts of the world. Perhaps this is understandable.

            • Andrew MacDonald

              That is to say, the gold standard is like any other type of peg that you might use. Instead of gold, you could peg your currency to silver, oil, the British Pound, U-235, Venezuelan Peso, whatever. The main goal of such pegs is to remove the power of the central bank to inflate the currency, since the supply of money is governed by the thing to which it is pegged. However, the main downside is that the thing to which you’ve pegged your currency now governs your inflation/deflation rate. So if the amount/number of pounds/pesos/U-235/gold increases, you’ve increased your effective inflation rate until things come back to equilibrium. With commodities, these kind of shocks can be quite large and damaging to overall economic performance. On the flip side of the coin, if the supply of whichever thing you’ve chosen to peg your currency experiences a negative shock, the amount of money chasing the same amounts of goods will result in potentially ruinous deflation. And there would be nothing you could do about it.

              • Forgive me if this sounds obtuse, but isn’t one reason gold has historically been chosen as a money measure the fact that its supply is relatively stable? I won’t dispute that there can be supply spikes one way or the other, but the question isn’t whether there is some conceivable problem with a gold standard, but rather how those conceivable problems compare to problems you encounter when you don’t have a gold standard.

                The problems we are having now that all look so insoluble, both in the Eurozone and the Americas and indeed the world, appear to me to be the result of not having a gold standard, and I think a gold standard is better in the sense that it generates fewer and better manageable problems than the ones we have now.

                And as for “ruinous deflation”, isn’t that regarded as a difficult and maybe unsolvable problem problem no matter whether you are on a gold standard or money-managed by a central bank?

              • Andrew MacDonald

                In fact, worldwide gold production has been declining. So over time you are going to have less gold per person (i.e. less dollars per person) or effective deflation. If you read the wikipedia entry on gold standard, I think it does a reasonable job explaining all of the various exchange rate issues that gold has engendered over the years, including supply and demand shocks.

                Indeed, ruinous inflation/deflation has been a recurrent problem in human history. I’d rather it be possible through a force that I in theory have some control over (politicians) than ones I don’t (foreign supply of commodities, speculators, etc.)

              • Indeed, ruinous inflation/deflation has been a recurrent problem in human history. I’d rather it be possible through a force that I in theory have some control over (politicians) than ones I don’t (foreign supply of commodities, speculators, etc.)

                Well, without getting into psycho-analyzing the situation, you must be more politically connected or powerful than me or most so-called gold bugs. I don’t feel like I have any control over politicians at all, theory notwithstanding.

                In fact I would say that you’ve hit the nail right on the head here. Gold bugs are people who would rather entrust these problems to nature and its laws; central bank proponents believe that political will is a better method. Not surprisingly, then, gold bugs tend to be politically weak and outside the “mainstream” by comparison. Which in turn makes it unlikely that their ideas will ever prevail unless there is some catastrophe and they are the only ones left standing, politically speaking.

              • Andrew MacDonald

                Well, without getting into psycho-analyzing the situation, you must be more politically connected or powerful than me or most so-called gold bugs. I don’t feel like I have any control over politicians at all, theory notwithstanding.
                —-
                That’s a fair statement. I’m not powerful in the least, and I don’t believe I have any individual power over politicians. And if Congress were to reclaim direct control over the money supply, I’d probably be slightly nostalgic for the gold standard too. But so far central banking has worked out reasonably well in the advanced economies of the world. Inflation in the US, after the period of the late 70s, has been quite moderate, as has been the case in Europe in the advanced democracies there up until the ECB (and the ECB retains the Bundesbank’s hawkish inflation policy). It seems to be a relatively good compromise – influenced by politics to some degree but remains generally independent to follow a mandate of moderate inflation/growth. I’d say growth and inflation have maintained a level of smoothness in the US that, as you can see from a graph of world gold prices, we would not have had with a peg to the gold in the last 30-40 years.

              • But so far central banking has worked out reasonably well in the advanced economies of the world.

                Well, this is the claim. My own impression, for what it is worth, is that a central bank monetary system slows down and obscures cause and effect in economic matters so that they become very hard to discern, not just for average people but for everyone. That would be the natural consequence of handing the power to redefine money at will to anyone. Particularly smart and conscientious people, who will be cautious in using what they know is really at bottom an awesome social power that probably no one should have. Their own intelligence and conscientiousness winds up undermining them, though.

                The negative results of this are hard to describe in a blog. It would take a major work in macro economics, probably more than I would be capable of even if I had the time and resources, which I don’t. If I had to sum it up in a sentence or so, I would say that the obscuring of cause and effect, while not the main intention, is a function of the desire on the part of central planners to collect information and analyze it before they wield the frightening power they have been given, and no matter how independent or aloof they try to be, the information flow, the analysis of it, and the actions in response to it, are more and more corrupted by political considerations as time goes on. And this corruption process itself is largely invisible to the players who are busy with the game, even when it reaches extreme levels like it has now.

                So now the world’s central banks, having unselfconsciously succumbed completely to political temptation despite their best intentions, bail out major banks with trillions of dollars even as they insist that homeowners, for example – many of them jobless as a result of the very processes the central bankers are engaged in – suffer draconian penalties for their piddling economic miscalculations.

                And this is all happening even though none of the players are bad people and only have the best of intentions.

                I sometimes think that we should look at all this in theological terms, not economic ones. But I am already so far off anyone’s reservation that I hesitate to even bring that up. But you’re far away in the UK. Don’t tell any of my friends, okay?

              • Andrew MacDonald

                I guess I don’t really see what is so complicated about the Federal Reserve. The US has a fixed supply of money, say x. The Federal Reserve can either increase that supply or decrease that supply, creating a new value for x. That’s all it can do. If it increases x, that increases inflation. If it decreases x, then that induces deflation. It’s a pretty simple cause and effect system.

                The way it does these various things is, admittedly, a bit convoluted. But the cause->effect relationship between the Fed action and the resulting inflation (or deflation) is much more straightforward than you’d get in the case of a gold-backed currency. Instead of, “The Fed increased the money supply, therefore inflation is at 5%, hence why we raised our prices 5%”, you would have statements like: “well, a new gold mine opened in Siberia, plus consumers in Japan have shifted their desire from gold jewelry to silver jewelry, plus increases in the price of steel has made gold refining equipment more expensive (which raises the marginal price of production of gold), so gold prices are up worldwide, which means gold stocks are down in the US, meaning our prices are down %5 due to the resulting deflation”. I don’t know about you, but the second seems much more hand-wavy to me than the first.

                It is true that gold-backed currency is less subject to domestic political manipulation (although foreign powers could of course mess with the gold supply). But I think most of your complaints about the Fed action above are about it’s non-money supply powers.

                Firstly, I think you’ve got a couple of things wrong about the history of the bailout. What happened was that policymakers (Bernanke, Paulson et al.) decided that the US banks had a liquidity problem, not a solvency problem – due to the fact that the exchange of money had dried up, the banks didn’t have enough money lubrication to keep them moving. The main thing that the Federal Reserve did was to open a short term loan program that allowed banks to get their “lubricant money” from the Fed instead of from each other (since no bank was willing to lend to any other bank). Admittedly, this was a pretty sweet-heart loan deal for the banks but these were loans, not new money. It didn’t really have any impact on the money supply one way or another (in your terms, redefining money). The bailout package (TARP) was also a loan program, in that it gave very cheap loans to the banks to provide extra capital. This extra capital was insurance on attempted runs on the bank – it made sure the banks couldn’t run out of money. In the end, almost all of these loans were repaid to the US government to the extent that the bank part of TARP actually made a small profit for the US taxpayer. Very little in direct free money was ever given to the banks, most of the help was in the form of sweet-heart loans. If you want to read some interesting history, check out the wikipedia entry for the Panic of 1907: http://en.wikipedia.org/wiki/Panic_of_1907
                While the causes were different than from today’s crisis, it unfolded much as events did in 2008. Fortunately, JP Morgan was the right man at the right place to prevent total economic destruction, but all of the actions he and his confederates took to save the banks were basically what TARP and the Fed did that September of 2008. And if he hadn’t been around, you may have had a mini-Great Depression. So rather than hope every time you had a banking crisis like that of 1907, a JP Morgan would show up, Congress created the Fed, which could play the same role.

                Now, you’re quite right that all of this attention lavished on the banks were nowhere near reciprocated to US taxpayers by the government. I think that a large part of the reason we didn’t have more punative actions taken against the banks is because the US government is largely bought and paid for by the banks. It’s a shame, but until we have real political reform, the banks have enormously outsized political influence to bend legislation to their liking. However, the government could (and has) done all of this for banks without the power of the Fed. No part of TARP required a Federal Reserve system, and anything the Fed did could have been done by a treasury department under a gold standard with the appropriate legislated powers.

                I think what appeals to the gold standard for most people is that the world financial system has become incredibly complex and the cause and effect of all of the financial interlinkages are nearly impossible to follow. I study this kind of thing for a living and it’s confusing sometimes even to me (and clearly the banks that were doing it for a living didn’t even understand what they were doing!). The gold standard seems to offer a return to something “real,” rather than all of this seemingly unintelligible fiddling with numbers. But, as history has shown, the gold standard results in a large number of counter-intuitive results, inexplicable changes to the world economy, and other oddities. It produces results as “unreal” as anything that has happened as a result of the US money supply changes by the Fed in the last 3 years. What I think needs to happen is instead of messing with the currency, we need to return to a regulatory regime that makes it possible to really understand what’s going on in the financial system. Banks separated from their investment arm, standardized fiscal products etc. As Paul Volcker has said, the only financial innovation in the last 40 years with any real benefit was the invention of the ATM, which I think has more than a large grain of truth to it. I think the golden age of finance was, rather than the pre-1930s, the 1950s and 1960s. Banks served as a distributor of capital without all of these complex arrangements that produce little value but a lot of downside risk from the fact that no one really understands them.

              • I guess I don’t really see what is so complicated about the Federal Reserve. The US has a fixed supply of money, say x. The Federal Reserve can either increase that supply or decrease that supply, creating a new value for x. That’s all it can do. If it increases x, that increases inflation. If it decreases x, then that induces deflation. It’s a pretty simple cause and effect system.

                Well, two things here. First I submit you’re over-simplifying. To the extent that the Fed can directly increase or decrease the money supply you have to consider how that would pan out from there. The potential for economic distortion is unimaginably large. It’s as if someone had the power to redefine what a “yard” or “foot” or “meter” is at will, in a context where everyone’s day to day living depends upon their production being measured in yards or feet or meters.

                Second, it isn’t quite the case that the Fed can directly increase or decrease the money supply except to a very limited extent. The money supply is increased primarily, and overwhelmingly, by the loan making process of “private” banks. The Fed influences this process, but does not control it directly. And I think this is true of any central bank.

                Don’t you think it’s time to involve lawyers in this discussion? And theologians?

              • Andrew MacDonald

                I agree I’m oversimplyfying somewhat about the Fed – they don’t have quite as precise a control as I mentioned. But they’ve gotten to be pretty good at figuring out how much easing/tightening changes the money supply, and hence the inflation rate. It’s not perfect, but they can get it within +- a percent or two, I’d say that’s pretty good.

                Also, I guess I don’t see how gold changes the fact that the dollar will change in defintion over time? Let’s say that the US produces 100 units of goods each year, and it is a closed economy. There are 100 dollars in circulation (and again, 0.01 oz gold = 1 dollar, so the US has 1lb of gold). Each 1 dollar = 1 unit of goods. Now let’s say we beat a foreign power in war and confiscate 1 lb of their gold for ourselves. We still produce 100 units of goods, but now we have 2lbs of gold, so we have 200 dollars. Each dollar is now going to be effectively worth 1/2 unit of goods. By introducing more gold into the system without a change in productivity we have changed the meaning of a dollar!

                Whether we have a gold standard or a fiat currency, the value (and definition) of a dollar will change over time according to productivity changes in society and the amount of money in circulation. A dollar and a fixed amount of gold are only defined in terms of what you can do with them, not the ratio at which dollars can be exchanged for gold. With a gold-backed currency, nobody cares that 1 dollar = 0.01 oz, they care that 1 dollar = 1 twix bar or whatever. Money is only useful in relation to what you can buy with it, not what it’s underlying exchange rate is linked to.

                I get that you’d prefer the evil of forces outside of the US being allowed to determine the value of the dollar rather than the evil of forces inside the US determining the money supply, but I just don’t see how an independent Fed is more likely to result in wild currency (and, hence, economic) fluctuations more than the gold standard.

                In the end, I’m not really sure how the natural law fits in here at all. Currencies serve as a medium of exchange – instead of I’ll give you two cows for that 1 horse, you can sell the 1 horse for enough money to buy the 2 cows. How the money is denominated (i.e. how big is the money supply) doesn’t really matter; if the money supply is 2x as big as it is now or 1/2 as big, as long as the relationship of 2x as much money for horses as for cows stays true, then that doesn’t affect my economic behavior. It’s when there are sudden changes to the money supply (particularly when future changes are also hard to predict) that it starts to affect economic decision-making. If you’re going to assign a normative good of a stable currency situation (which seems reasonable), I don’t really see why we should privilege gold as a means to do that over the Federal Reserve as a means to do that; there’s nothing in the natural laws about exactly how much gold a dollar should be worth (which is already arbitrary to begin with) nor the future rates of gold production, etc. Gold available to the US for currency backing would likely be more variable than any changes over time by the Fed.

              • I get that you’d prefer the evil of forces outside of the US being allowed to determine the value of the dollar rather than the evil of forces inside the US determining the money supply, but I just don’t see how an independent Fed is more likely to result in wild currency (and, hence, economic) fluctuations more than the gold standard…In the end, I’m not really sure how the natural law fits in here at all.

                Not all the forces outside the US are evil. Some are just naturally occurring economic phenomena that will sometimes favor the US and sometimes not. Not all the forces inside the US – even the political forces that are brought to bear here – are evil either. We could go back to a gold standard and I’m sure that would not perfectly eliminate the influence of politics on money or vice versa. It would not eliminate all manipulation or fluctuations either, even wild ones. It would tend to make fluctuations more the product of economic reality than monetary “policy”, however.

                In a previous comment I referred you to a couple of other posts on here about the gold standard and I would recommend those to you again. I’ve talked quite a bit about the relationship between the gold standard and natural law.

                My interest in these issues began in 1996. The US was undertaking some changes to the currency and people asked me about them and I realized I didn’t know anything about currency or money. So I got this book from the library – A Monetary History of the United States by Richard Timberlake. One Saturday afternoon I called him. He talked to me for about 3 hours. He was very patient and I was very ignorant.

                So, you know, I’ve had a 15 year long hobby regarding monetary theory, probably the most arcane of the branches of economics, which overall has been termed the “dismal science”. I like to think my perspective is somewhat uniquely informed by having been a practicing attorney, daily observing law and economics in action in what could be called distress situations. In any case, almost no one I know has the level of interest or knowledge to even get into these issues with me, so it’s great to meet someone from across the pond that has a similar interest, even though we might not agree. You are in the UK, right?

    • Zarepheth

      Section 9 is repealing multiple things.
      1) the privilege of the federal government to not have its debts questioned.
      2) the prohibition of the state and federal governments to assume or pay any debts incurred due to insurrections and rebellions against the US.
      3) the prohibition of the state and federal governments to compensate anyone for the loss or emancipation of slaves.

      I can understand the author’s desire to remove anything from the constitution that might allow the federal government to go into debt, but the other provisions of Amendment 14, section 4 need to remain. Rather than output repealing all of section 4 it should replace it to keep the other provisions.

      Amendment 14, Section 4:
      4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

      • Calgacus

        Zarapheth, money is debt. Preventing governments from issuing debt is preventing them from issuing money, and an irrational aim. This is not going to happen. Issuing interest-bearing debt is just a device to play with interest rates, and it is a technical question when and whether to do this.

        2 & 3 are not very meaningful.
        Questioning – not paying – public debt is lunacy, a prescription for economic havoc. Amendment 14, Section 4 is one of the most rational passages in the constitution – courts have held it to be an elucidation of common law and 5th amendment protection of private property against takings without due process.

        • Natural reason tells you that money must ultimately be an asset, not a debt, and certainly not an irredeemable debt. Saying that does not mean that notes – i.e., promises to pay – could not continue to function as an exchange medium. But bank notes and government notes must ultimately be paid like anyone else’s notes, or we have granted banks and governments a power that no one can have: the power to simply decree that value exists where it doesn’t in fact exist.

          As for questioning government debt being “lunacy”, google “sovereign default” sometime. Sovereign governments have repeatedly defaulted and will do so again. ARE doing so.

          Section 4 of the 14th amendment has nothing to do with “common law” or “due process” and there are no court decisions saying so.

      • The rest of section 4 of the 14th amendment is specific to the Civil War and no longer has any meaning. The only part of it with any lasting force is the part about the government debt not being “questioned”. That the United States does not owe anything to those who have unsuccessfully rebelled against them hardly needs to be said now. It is axiomatic. And it is far too late for anyone to make a claim over their lost slaves, so that it completely unnecessary.

        Repealing the part about the debt of the US not being questioned would not mean that the US could not take on debt, only that it could be questioned. There was a Supreme Court case that indicated that this part applied forever, and that’s the reason it needs to be repealed.

        • Zarepheth

          I don’t necessarily agress with repealling the first sentance of Amendment 14, section 4 – I was just pointing out that repealling it is consistent with the desires of the author of this proposed amendment 28.

          Although the rest of amendment 14, section is clearly related to the civil war, it will apply whenever someone or some group attempts another insurrection or rebellion. It also applies if anyone attempts to reinstitute slaverly and our nation intervenes to free those slaves. And yes, chattel slaverly still exists on Earth – fortunately, it is illegal, but that doesn’t stop the practice.

          • Thank you for the comment. It’s good that you can understand what someone else is saying without necessarily agreeing with it. That said, you may want to just take my word for the fact that no ill effects would come from repealing section 4 of the 14th amendment. It’s ridiculous to have a constitutional provision saying that the debt of the United States “shall not be questioned” in the first place. The rest of it is unnecessary: the government would never owe anyone for the debts of its enemies (the only reason this was there was to make clear that the US government would not owe on any debts of the confederacy); and since slavery is illegal under the 13th amendment and has been for a century and a half, there could never be a legal claim to compensation for lost slaves.

            You are right to be careful in dealing with these matters, though. Legislation often winds up working unintended consequences.

            • John David Galt

              No, the rest was put there so that southern state governments (some of which stayed in rebel-sympathizer hands) could not pay off Confederate war bonds, even if that state had issued them.

              And speaking of unintended consequences: Section 1 of your proposal appears to nullify not just the federal government’s debt; nor even just federal and state governments’ debts, but ALL debt anyone owes anyone. Did you really mean that? Because it will ruin everybody.

              • Yeah I really meant it. What did you think? That only government gets the privilege of canceling its debts?

                It won’t “ruin everyone”. At least not any more than any of the alternatives would.

  3. Pingback: Tweets that mention US Constitution 28th Amendment (Jubilee) – Text « Lawyers on Strike -- Topsy.com

  4. liberal sodomy

    Simple. Issue one dollar for each unit of output.

    • Zarepheth

      I like the idea, but there are some practical problems:

      1) How is the output measured? There are lots of different kinds of output whose values relative to each other constantly shift as their popularity and availability go up and down.

      2) What about outputs that are consumed and no longer exist? All services are of this type, and many commodities are also of this type.

      3) What about outputs that last a long time, but eventually wear out, get lost, or are destroyed? Now the wealth that is supposed to counter balance the issued dollars no longer exists.

  5. Jerimiah

    There’s an elegant solution for this already. The ‘value’ of jobs can be determined by a labor ‘market’, similar to a dutch auction. That is, all jobs get put on the ‘market’ and are bid on by workers (rather than bosses). So a popular (AKA easy) job would have a higher ‘supply’, thus lowering its value, requiring the worker to do it for more hours in a week to get the same amount of money as someone who took a very unpopular job (garbageman). After a few years, jobs would find a balance based on supply and demand. (Popularity and availability)

    By the way, I realize this is a gross oversimplification of the process, but hopefully it gets the idea across.

    • Jeremiah, thanks for playing but your comment is not addressing the subject very well. It’s going to require a lot more disciplined study before you will have a handle on what this amendment means and the problems it tries to address. I don’t mean to be harsh or patronizing but that’s just the way it is.

    • Zarepheth

      Click the “Reply” link under the message to which you are replying. It will help keep your comments with the posts you’re commenting on.

      Anyway, a dutch auction for determining the value of labor sounds like a good way to go.

      My biggest concern with it, is that an economy with 10% (probably higher) unemployment is likely to force wages way down as more people compete for jobs than there are positions for them to work. And worst of it is, that when looking around me, I see lots of work that needs to be done, lots of people who’d be willing to work, but no employers hiring them. Since the only thing keeping the workers from working is a lack of money, this tells me our economy needs more money to reach full productivity.

      • Jerimiah

        Yes, unemployment is a problem in the current monetary paradigm.

        Back to the OP, I have got to say that there is no way, in the current state of reality, that this amendment will ever pass. A Jubilee is simply incompatible with the contract law that is the basis for both our constitution, and our economic and legal systems. It is not only unpalatable for creditors such as banks, but also to the American everyman who has a strong moral problem with anyone, including themselves, not paying their debts.

        Now the more interesting topic IMHO, is what exactly this amendment is trying to accomplish. And I don’t mean the mechanics of each clause and the simple math of revaluing the currency. I mean, what is the ROOT of the problem that it is trying to solve? Is it a fancy way to declare bankruptcy for everyone, including the State? Is it meant to level the playing field in regards to the wealth gap? Is it a naive way to return to ‘sound money’, whatever mythical creature that is? Is it meant to destroy the banking system? This needs to be clearly identified to avoid conflicts of interest, and to focus the solution.

        In my first comment, I responded to a question regarding the value of labor. This leads to a question of unemployment. The further down the rabbit hole we go, the more questions are raised about how to define money.

        Money has a basic function:
        - Coupons for goods and services, earned by labor

        But of course that is the pedestrian use of money. When money itself is treated as a commodity, then the uses are:
        - Lending at interest
        - Investing with preferred stock
        - Gambling with common stock
        - Gambling on international currency exchanges
        - And many other financial devices that ultimately are just a relative measure of confidence used for wealth extraction.

        In real terms, any use of money as a commodity is actually a machine to make more money. Of course, the horrific side effect of using money as the ultimate commodity is that it is now the greatest expression of power.

        I think that this amendment is an attempt to control the power that money now represents –mainly as an oppressing force that corporatocracies like the USA use against both its own people, and other countries. Unfortunately, it cannot be controlled this way, because the root of the problem is that we use the same damn piece of paper for wholly different functions. In order for a currency to be immune to abuse, manipulation, and devaluation, it cannot be used to represent the exchange of real labor for goods and services while at the same time being a commodity that can represent political power. It’s that simple.

        In conclusion, I think that if we really want a return to ‘sound money’, and to interrupt the vast flow of corporate and political power that money has become, we need to redefine it. How we redefine it is for another post, but this amendment doesn’t do that. it puts lipstick on the pig that is our current monetary system, and is therefore flawed from its premise.

        • Jeremiah, thank you for the thoughtful comment. Briefly, the two things the amendment is designed to do are independent and distinct from one another. The first is a jubilee. The second is a restoration of the gold standard for the dollar. You could do either one without doing the other, but of the two the jubilee is the more immediately critical, would have to be done by a constitutional amendment, and since you’re doing that anyway you should take the opportunity to fix what broke and got you to the point where you had to do that. That’s the idea, anyway.

          I agree that the chances this will happen approach zero. The misplaced moral imperative about paying debts is only part of the reason (and it is misplaced; the people at Goldman Sachs and JP Morgan have already had their debts forgiven. The overlords have no such moral inhibitions. Furthermore, while people should pay their just debts, this is not an absolute. There are reasons that justify not paying them. Lastly, a great deal of debt is not going to be paid no matter what anybody does and just canceling them is more honest than the alternatives.) The more important problem is that people are angry, ignorant and confused. And they have lost faith. They hate lawyers, but the law, not economics, is the key to freedom. That’s what this amendment is really about: freedom.

          Freedom itself is a paradox. You can’t have it without a few rules – the law – but if you overdo the rules you lose it. More rules is not better. Before you ever get to the laws of economics you need basic ground rules and the first among these is defining money. This is a function of law, because the primary requirement is that money be economically neutral, as in neutered, economically meaningless in application. This is why the whole central bank idea is wrong. It turns money itself into an instrument of political policy, giving money a power of its own that is not derivative of underlying economic reality. It can’t help but f*ck things up.

          But the law – through the government – can only define money and step back. It can build the stadium but the players have to play the game. It can referee but can’t do that at all if it takes sides. The teams must score the points, not the referee. What kind of game is it when the referee becomes a partisan? A rigged one.

          That’s as good a description as I can come up with this morning. It’s like overtime in a football game. You’ve already played and a lot of damage and scoring has been done, and what’s done is done but you start over with a clean slate and real referees who aren’t taking sides.

          • Great info here. Identifying the root problem is important because it lets you think outside the box of your assumed context. An example of this is trying to build a better and better car, because you think the car is your problem and not the fact that you are trying to move something from point A to B. If you think of it in terms of A to B, then you can think about airplanes, skateboards, railroads and bicycles, in addition to cars.

            With that in mind, there’s a lot of ideas out there that would accomplish the tasks of eliminating debt, eliminating the central bank and controlling the power of money by corporations and politicians. The basic idea is to eliminate incentives for exorbitant profit at any level, and to eliminate the use of money as a measure of ‘wealth’.

            Examples of (relatively) small reforms:
            - Eliminating, through legislation, the existence of businesses that use money as a commodity, at least as a for-profit corporation. That is to say, the business has to have a tangible good or service, not including physical money, that is part of their business.
            - Putting a salary limit on the highest earners. When you cross a certain threshold, say $500,000, everything after that is 100% taxable and goes to projects for the common good This removes the incentive to make ridiculous amounts of money
            - Taking away some corporate rights, such as the liability shield they provide for their shareholders, the right to donate any money for any political purpose whatsoever, and the right to hold exclusive patents for more than 2 years (mandatory licensing after that, similar to the drug industry)
            - Peg government salaries at the average american salary. The only way to raise their salary is to raise the national average. Any money made beyond that (speeches, appearances, books, stocks, real estate) is taxed 100%. In effect, this is sort of a ‘vow of poverty’ for politicians.

            Larger examples:
            - Eliminate money and move to an energy-based economy of credits, inputs, and outputs such as Technocracy. Earned credits are non-transferable, and they expire if not used in a reasonable time. This prevents stealing and hoarding.
            - Eliminate money and move to a resource based economy such as The Venus Project. There is no unit of exchange in this system. Everything is provided for free. There is no incentive to do anything for money, because there is no money. All work is voluntary. Automation does most work. Interesting side effect that unemployment is a plus in this system, rather than a problem.

            These larger examples are no doubt very radical, just like your proposed 28th amendment. They also work best when applied globally. I know this is a sticking point for many people who are polarized by NWO/globalism fears. But if you dig a little deeper, these systems, especially the Venus Project, are heavily based on personal freedom, little to no police or armies, and the core ideals of liberty (freedom of thought and of body, no taxes, no coercion) as opposed to the fake ideals of liberty (the right to unlimited profit, the right to plunder, the right to cause others to suffer, the right to hoard resources, etc.)

            This is all big stuff we’re talking about here. I for one am glad that having a conversation like this is even possible. Thanks.

            • Zarepheth

              That Venus project looks interesting. I especially like their belief that all natural resources should be held collectively for the benefit of all.

  6. Jerimiah

    No problem, Atticus. I’m sorry if it wasn’t clear that I was responding only to Zarepheth’s comment about measuring labor output.

  7. Jeremiah:

    I’m all for thinking it through, and outside the box, but you can’t do away with money. Money is what liberates us from a barter system. It expands the ability to confer value beyond things like you give me a mule and I’ll give you a bushel of wheat. A world without money would be very primitive. Works of art and literature would probably not exist.

    Beyond that, things that are not durable and cannot be measured cannot be money.

    There are no identifiable units of labor, inputs or outputs, and they do not endure either, so such things meet neither requirement.

    There are identifiable units of “energy”, like calories and watts, but they are spent and vanish as soon as they are created.

    The reason durability and measure-ability are important is that people have to know what they are exchanging – receiving or giving – in a transaction. If money didn’t have those qualities it could not function as a medium of exchange because no one would know what they were doing. If it wasn’t durable it would lose value from when it was received; if it couldn’t be measured you wouldn’t know what you were giving or receiving in the exchange.

    Zarapeth:

    Holding natural resources “collectively for the benefit of all” is a nice thought. Heaven will be like that, if religion is to be believed. But even religion does not pretend that this is how things are in the fallen world. Even on a small scale, like the hippie communes of the 1960′s, such approaches failed very quickly. Even so, the proposed amendment says nothing about how natural resources are to be held or by whom.

    • Atticus, thanks for playing but your comment is not addressing the subject very well. It’s going to require a lot more disciplined study before you will have a handle on what the elimination of money means and the problems it tries to address. I don’t mean to be harsh or patronizing but that’s just the way it is.

      Sorry, couldn’t resist. :-)

      But seriously, i believe you could mount a better protest against the elimination of money if you more thoroughly understood what exactly the argument contains. I suggest doing some research on Resource Based Economy theory. There are excellent books by Buckminster Fuller (yes, the inventor of the geodesic dome), and a large body of work by Jacque Fresco of the Venus Project. For a quick 2 hour video introduction, you can watch the movie Zeitgeist: Addendum and see for yourself where this line of reasoning leads.

      I’ll warn you that having gone through the process myself of really understanding their argument against money is not easy. It creates a great deal of cognitive dissonance that may be difficult to process. I stuck with it because I wanted to understand what they were really talking about without putting my own filters over it. It has been an interesting exercise.

      • Jeremiah: Touche.

        I am encouraged that different alternatives are getting a hearing out there. Nevertheless, the ideas you are discussing are utopian. Paradise is the next world, not this one. While even this world offers many wonderful things, they all come with a cost, a price to be paid by someone. Forgetting this or denying it is very close to the root of the problem, not the solution. I tried to make this point in the introduction to the series of posts on the amendment.

        That there is always a price to be paid is a truth to which one must simply submit as self evident to right reason. The idea that we can transcend nature and this law, which nature itself imposes, is not new. It did not originate with Buckminster Fuller or Jaques Fresco or the movie Zeitgeist. It has never happened, not because no one has thought of it before, but because as neat as it sounds it can never happen in this world. You can’t absolve human beings of the struggle of this life any more than you can eradicate government, or sin, or money, or death or any other Bad Thing. These insights are ancient and genuine “progress” involves accepting them and working with what actually exists, not dreaming of a world without effort, which is not only impossible but a different form of the temptation towards the infatuation with power; for what is power but the ability to obtain your desires effortlessly?

        Tempus fugit, memento mori.

      • Zarepheth

        I watched the movie – the first parts regarding the problems with our current monetary system made good sense.

        As for my earlier comment regarding natural resources being held in trust for everyone – that’s because it echoes what Henry George wrote about in his book “Progress & Poverty” (http://www.econlib.org/library/YPDBooks/George/grgPP.html). Basically, that land (a natural resource) must be owned by society as a whole, or private owners will use their monopoly on the pieces they control to deprive others of their labor. Mr. George recognized that dircetly changing ownership of land from individuals and corporations to local governments might be politically impractical, but he did suggest that everyone who wishes exclusive use of land ought to pay property taxes equal to the full ground rent on the land. Thus the whole community (not merely a few individuals) would benefit from the land, even if only a few people could use a given parcel at a time. His logic for land applies equally well to ALL Natural Resouces – anything that exists without human intervention. It also applies to anything that comes from society itself, rather than from individual labor — such as the exclusive privilege to create money…

  8. Obsvr-1

    I like the thought behind this 28th amendment concept, however we do not need an amendment to achieve the desired results. Just repeal some of the enabling legislation that has created the beast (TBTF) FIRE industry.

    * Repeal the FRA 1913 and all legislation associated with FRA. End the FED
    — Nationalize the issuance of US money under the responsibility of the US Treasury, strict congressional oversight. Treasury takes on responsibility of “sound money” – neutral inflation/deflation policy.
    — End FDIC, OCC, OTS
    — Strength SEC, DOJ white collar enforcement laws and resources — investigate and prosecute severely those that commit fraud

    By ending the gov’t sponsored cartel of private bankers, then the TBTF moral hazard will be eliminated. Thus, enabling a competitive banking environment where sound banking will survive – no more TBTF and no more Fractional Lending as market forces (bank failure, bankruptcy) will push to a 100% reserve system. No gov’t support for bank failures, bank investors are 100% exposed to the risk of the bank business, consumers will migrate to strong banks. Banks restricted from creating US Money out of thin air.

    * Repeal gramm-leach-bliley
    * Repeal Commodity Futures Modernization Act
    * Repeal Sarbanes Oxley — didn’t do anything to prevent nor enable prosecution of fraud — just burdens small business with heavy regulatory burdens

    * Enact American Monetary Act — see http://www.ami.org

    * Repeal 16th amendment – end income tax
    * Enact tax reform based on consumption tax (e.g. fairtax.org)
    — consider secondary market taxes on non-earned speculative income – strawman: 25% tax on gains on stock in secondary market; 50% on gains on derivatives. These are not capital gains, these are speculative gains in a ‘casino’ market

    Our economic and monetary system can be fixed by not adding to the Constitution, rather by eliminating the enabling laws since 1913 and enforcing the existing Constitution — Since the term coining money has already been interpreted to being able to print money, then there wouldn’t need to be a Constitutional change, just a congressional law that empowers the Gov’t (Treasury) to take on that role.

    On the Fiscal side – this is a debate for another thread — however if We the People could mandate an End of the FED, then the pressure on the congress from the People would force constraints on the Executive (pres) branch and the legislative branch (congress) to balance budgets and reduce the size of gov’t, size of budgets, and reign in the Military Industrial Complex.

  9. Ron

    You might want to read this article, if it is true then the FEDs owe the Treasury some very big bucks Plus interest!

    It also has some pretty damning, although circumstantial, evidence surrounding the Kennedy Assassination.

    http://thecountyguard.org/jfk-vs-fed.html

  10. Hmm, I’ve been thinking on this some more.

    IMHO, It suffers from the same rhetoric as past articles.
    Gold should not be the standard, nor any other metal (Note I deliberately left out the word precious).

    What I am about to point out, most if not all of you will reject, and even get upset over. It’s because most of you have been programmed to think inside the matrix, and the few who are left are the controllers of the matrix.

    The only fair standard at all is not something you dig out of the ground, not that worthless paper the banker have been printing for years while they dupe you all into believing it is worth your very lives, they all ought to be dragged from their homes screaming and executed in the middle of the street as an example.

    The only real standard that should be implemented it TIME, what makes the president time and more important than the garbage mans time?
    When we strip off the illusions we have been fed. They are both trading a commodity of equal and same value… Their time!

    We all only have so much time to live and each and every second is the most valuable commodity in the universe, and to each and all it has an equal and unwavering value. Time makes sense in so many ways to be the standard, and elaborate further I am speaking about the time as measured in the minutes of of a persons life, not the time it takes to build, say, a car, ore house, or bridge, but the time given out of the lives of the people performing those tasks. Time, is a constant throughout the universe and does not fluctuate at all, ever.

    At this point most of your are nay saying, some are calling me names ranging from commie to lunatic, but all are in denial because you have been brainwashed by the bankers who started the matrix i the first place. Even now they have you talking about a central bank, this has always been their primary goal and now after centuries they are close to achieving it.

    I am not talking about communism, nor socialism, but I am talking about equality and many of you lazy f#*%! that do nothing of value are fuming right now, I think it is because you hate it when someone see the truth, well I was or smart, in fact by your own standards of measuring
    intelligence, gifted, so get over it.

    The rest of you, wake up, you are worth every bit as much as the next guy no matter who they are and ought to receive equal reward for it.

    This is not to say you get paid for living either. You need to WORK to get credit for time traded and you should only receive credit for the amount of time given in work. Quality control standards need to be in placed to make sure you perform equally your time does not receive credit.

    THAT IS TRUE EQUALITY.

    Personally I am a programmer, I don’t work hard physically, but I admin I don’t like manual labor, or serving some asshole with a smile on my face at a local fast food join.

    I deserve this because I put in the time to become highly skilled at it, but I do not deserve to be paid more than the guy working at McDonald’s, but then again neither does the F$%#ing president. As far as bankers, they need to get a real job, because the job they are doing now is a product of their own self serving illusion and therefore WORTHLESS, you receive no credit. Now go and do something useful or starve.

    If you have read this all the way through, thank you for at least considering this.

    It wont happen though, because we are born with a flaw, we are competitive and most define who they are by who they consider themselves better than. Sad but True.

    I’ll stop ranting now and go back to work.
    Thanks for Listening

    • Zarepheth

      The negative name calling and negative assumptions about other people need to stop.

      I agree that time is more important than just about anything else. And for the most part, one person’s time ought to be as valuable as another person’s time. But some people are able to produce more in the same amount of time as other people. Should the person who can produce 10 widgets in an hour be paid the same as the person who only produces 5 widgets?

      I believe laborers should receive the product of their labor as their reward. So someone who can produce 10 widgets in an hour should be paid twice as much as someone who only produces 5 widgets during that hour. Assuming that the widgets are useful items for the laborer or the community, this ensures that the laborers are fully rewarded for the useful work they do. People who do more useful work in a given period of time than other people will receive a greater reward for their time.

      Many people might claim that our current economy already does this. And that is where I part paths with them. In our current economy, those who control land, natural resources, and special privileges are able to “earn” without doing any labor. That means their “earnings” come from other people’s labor. In our current system, the laborer has to hand over portions of their labor to other private individuals in order to have the right to do productive labor. At this point, I believe that 100% of those gatekeeper’s “earnings” should be given to the community and equally divided amongst all members of the community. That way, everyone benefits equally from land, natural resources, and special privileges – but incentives to perform actual labor exist because after paying for access to the raw inputs of a person’s labor, the laborer keeps the value added to those inputs.

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