Three cheers for not overreaching one's mandate. I know we rag a lot on Federal Reserve chairpeople for not doing NGDP level targeting, but in a lot of ways it's one of the most sensible branches of government.
The Fed isn't a branch of government. They also typically target 2% inflation, a la the ECB. The difference being that the Fed doesn't have a specific requirement to target it, whereas the ECB does.
Edit: They do the targeting through a variety of ways--and none of them touch Bitcoin or in any way are influenced by Bitcoin. Just like the Fed has no authority nor mandate to regulate any other currency than the USD.
Of course the Fed is a branch of the government, and one of the more powerful ones. Next you'll be telling me that the Supreme Court doesn't legislate civil rights because someone painted a word saying "judiciary" above it. I go by what things are, not by what they're called.
So by your reasoning, Federal Express is also a branch of government? From Wikipedia: "The Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations."
I don't believe anyone would define it as a branch of the government. It is true that it is not under the Legislative, the Judicial, or Executive branches (source http://www.federalreserve.gov/faqs/about_14986.htm), but it does not constitute some fourth branch of government.
>The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.
>As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.
I really like how they say it isn't owned or for profit when the next paragraph down they say it has "special" shares, of which pay 6% in dividends by law. Nope no profits there, just magic money. Technically that isn't ownership, they're not real shares, and technically they dont turn a profit, all that goes to shareholders..
Their goal isn't to turn a profit. Almost all of the profits that they do get go to the federal government.
The member banks earn a 6% dividend on the amount of stock that they own in their regional Federal Reserve Bank. That amount of stock is determined by the member bank's balance sheet. They have to invest that money in the Federal Reserve.
The fed, is anything but federal. They are a group of private corporations owned by groups of banks within each reserve banks district. They can be somewhat controlled by congress by way of statute but rarely are and currently answer to no one but themselves. There is a lot of conspiracies around who or what group really owns the majority shares. I'm not going to go into the theory here as they are just that, theories.
In response to going by what they are not what they are called they very much are not a branch of government. They say this very plainly on their own website:
In addition to not being a branch of government, it is also not clear that the Fed is at all "sensible". I don't doubt that the Fed is full of smart people, but they seem to use their smarts to find ways to put a band-aid on the mess the last Fed chair made by keeping interest rates too low, too long.
Digital currency is a huge threat to the Fed if successful, so it will need to be dealt with in some capacity. Right now, I suspect they are hoping it is a fad or a toy that will go away. Gox certainly doesn't help change that impression.
Digital currency is a huge threat to the Fed if successful, so it will need to be dealt with in some capacity. Right now, I suspect they are hoping it is a fad or a toy that will go away.
The primary function of the Fed is to be a stabilizing force in the market. There is absolutely no evidence that bitcoin will ever be a threat against this. Even the logical arguments in favor of that position have a hard time holding water.
Digital currency is a huge threat to the Fed if successful, so it will need to be dealt with in some capacity. Right now, I suspect they are hoping it is a fad or a toy that will go away. Gox certainly doesn't help change that impression.
They believe this to be the case. If they didn't, they wouldn't believe in the need for central banking. :)
Pedantic point, but US inflation has only climbed above 2% once in the past two years. If their target was 2 percent inflation, they should have been above it roughly half the time. It seems they are happy with 1.5 or so.
To be even more pedantic, surely their targets would consider the mean not the median, so it wouldn't necessarily have to be over the target half the time for that target to still be the average.
Because the Fed is not bound to 2% by its mandate, like the ECB is, they're free to alter that number as they see fit. Typically, during recession, you'll target a bit lower of inflation so as to stay the purchasing power of the unemployed's savings. The last thing you want to do is to have inflation take off on somebody who's living off of savings. Even to get to 1.5, they needed to do some QE, so it's not all rainbows and sparkles. Inflation's a difficult beast to tame, but they at least have more influence over that than, say, GDP.
The Board of Governor's of the Federal Reserve System is part of government. It's an independent federal agency, with about 2,000 employees
The system also includes 12 regional Federal Reserve Banks, which are quasi-private. There's a mixture of public and private control of them. The member banks in each region get to elect 6 of the 9 directors. Each member bank gets two votes and the vote is divided by bank size, so the big banks in each region choose two directors, the medium banks two, and the small banks two.
The remaining 3 directors are appointed by the Board of Governors (the federal agency).
The Federal Reserve Banks are considered federal entities for some purposes, but private entities for others.
The member banks in each region are required to own a certain amount of stock in their Federal Reserve Bank. They get paid a 6% annual dividend of the amount that they have invested in the Federal Reserve. All remaining profits (the vast majority) go to the federal government.
Keep in mind the mandate is price stability, not interest rate stability. And anyway, targeting a static, transparent, openly published interest rate is very stable, at least when they are actually able to do it for extended periods. It's very predictable, which businesses need to plan and forecast future hiring and investment.
Volker targeting [whatever it takes to kill inflation, eg 20%+] and Bernanke targeting [whatever it takes to prevent a Depression, eg 0%] maybe not so much, but at those times their mandate was even moreso price and economic stability, not interest rate stabilty.
The fact that 2% interest rates cause currency devaluation over time doesn't make it unstable, it's still quite predictable and hence stable. It's high-variance money and assets, like cryptocurrencies among other things, that are unstable (at least right now in their infancy, I'm sure that will be different 10-20yrs from now).
For what it's worth, here is the Bank of Canada's explanation for why they target a 2% inflation rate as part of a broader goal of promoting price stability:
I know we rag a lot on Federal Reserve chairpeople for not doing NGDP level targeting, but in a lot of ways it's one of the most sensible branches of government.
This is an amazingly misleading article. What Yellen said was: the Fed only has the authority to regulate banks, and if Bitcoin stays extra-bank, then it has no authority to regulate it. However, she said, the Department of Treasury does have the authority to regulate it.
Some people may think "Fed" means "US Government", but it's explicitly stated in the article that “The Federal Reserve simply does not have authority to supervise or regulate bitcoin in any way.”
It's just jurisdiction, and the Federal Reserve Chairwoman says they don't have it.
As for the rest of the government? Well, there's literally nothing they can't try to regulate.
> Well, there's literally nothing they can't try to regulate.
You did say try, but according to the constitution they aren't allowed to regulate speech, religion or the press. (Congress "shall make no law .." abridging these rights).
They have regulated religion as well. Only certain religions can use, say, peyote in ceremonies. If tonight I get a vision that mandates I must use this chemical with my followers, I don't qualify.
There are other exemptions too for religion, where they decide what a real religion is. I think, for instance, conscientious objectors needed to have an approved religion.
(There should be no freedom of religion explicitly; it just opens things up for abuse and silly interpretations. Freedom of speech, thought, assembly and so on should be more than enough to include religion.)
I totally agree it has been misinterpreted, I'm pretty sure the intention of Jefferson and Madison was that the government is not supposed to be able to determine what constitutes a religion in addition the right to believe & practice it* . The inclusion of the word "religion" seems a practical response to the tendency of governments to ban practices that threatened their power.
* Where the preamble declares, that coercion is a departure from the plan of the holy author of our religion, an amendment was proposed by inserting "Jesus Christ," so that it would read "A departure from the plan of Jesus Christ, the holy author of our religion;" the insertion was rejected by the great majority, in proof that they meant to comprehend, within the mantle of its protection, the Jew and the Gentile, the Christian and Mohammedan, the Hindoo and Infidel of every denomination.
-Thomas Jefferson, Autobiography, in reference to the Virginia Act for Religious Freedom (from which the 1st amendment is derived)
Doesn't "we can't interfere with a religious practice" plus "we can't determine what is a legitimate religious practice" mean anyone can claim anything to be a religious practice? "Oh, I'm sorry, I'm engaged in the blessed sacrament of the mugging."
This is where it's worth remembering that humans are in the justice system by design. While the line is intrinsically fuzzy, one can at least agree that at one extreme a marijuana user coming up for charges who suddenly claims he has a marijuana-based religion in an attempt to get out of it isn't going to get very far. Judges are not required to be as stupid as computers interpreting the law.
On the one hand, judges are still part of the government. On the other, the first amendment says "Congress shall make no law regarding the establishment of religion", not that "judges shall make no rulings".
>> Only certain religions can use, say, peyote in ceremonies.
The relationship between Native American Tribes and the US government is a bit more complicated than you are indicating here. Native American Tribes are afforded an extra degree of sovereignty and authority, and are actually recognized as "domestic dependent nations". This is where the exemptions for their religious ceremonies come from.
If we assume for the sake of argument that MichaelGG is a Native American who is a member of a recognized tribe, I believe that "If tonight I get a vision that mandates I must use this chemical with my followers, I don't qualify." would still be true. I believe that if he started a new religion in his tribe, he wouldn't automatically have a right to use peyote as other 'recognized' Native American religions do.
From wikipedia:
"Congress passed an amendment to the American Indian Religious Freedom Act of 1978 (42 U.S.C. § 1996), i.e., the American Indian Religious Freedom Act Amendments of 1994 (42 U.S.C. § 1996a), pertinent excerpts of which are given below:
Use, possession, or transportation of peyote
Notwithstanding any other provision of law, the use, possession, or transportation of peyote by an Indian for bona fide traditional ceremonial purposes in connection with the practice of a traditional Indian religion is lawful, and shall not be prohibited by the United States or any State. No Indian shall be penalized or discriminated against on the basis of such use, possession or transportation, including, but not limited to, denial of otherwise applicable benefits under public assistance programs.
—42 U.S.C. 1996A(b)(1)."
There is no list of "recognized" religions kept anywhere. "Bona Fide" means "honestly or sincerely", and is in there to prevent people who are caught with peyote from insincerely claiming a religious exemption as a get out of jail free card.
You are probably going to ask who decides if use of peyote is actually protected under this act or not. The answer seems to be a jury of one's peers. Laws are often written to provide guidance for how one's actions should be judged, and do not provide a detailed "if-then" case for their application.
Whether or not peyote should just be fully legalized across the country is a different question.
No. It would not. The court has no right to decide if your religion is legitimate or not. The IRS and the government does recognize certain religious _organizations_ (e.g. churches for tax exemptions), but the state cannot pass any judgement on the underlying belief system when they recognize these institutions. This is what the Establishment Clause clearly protects.
If the exemption came from the sovereignty of the Native states/tribes, why would it be narrowed down to just peyote? Versus letting those nations simply decide for themselves their own "scheduling" of medications?
I'm going off a few quick searches, but the peyote bit seems to exclude it for any "bona fide ceremonies" for the Native American Church, regardless of race. I didn't see any mention that they must be on reservations either. Wikipedia also notes that some states have a "bona fide religious" exemption that's not related to the NAC (which is at least somewhat more consistent, but "bona fide" is still silly to apply in this scope).
Nations are not necessarily tied to land, nor is the sovereignty of the Native nations full sovereignty.
I don't understand the full ramifications of the treaty and legal status myself. My point was just to indicate that the flippant remark about "some religions can use peyote" leaves out a lot of historical, political, and legal context.
OK, what about Sikhs and the dagger they are "required" wear at all times? I can't up and decide I must wear a knife (even if I put glue on it), then expect schools and the TSA to allow me to do so. The fact is that my "flippant" remark, while mentioning peyote specifically, applies to other such cases. Another example: conscientious objector status (which now has the religious part removed, but required a supreme court case to do so, AFAIK).
That's the point of the Supreme Court, which did it's job and confirmed that the government is not supposed to determine what constitutes a religion.
The Sikh kirpan (knife) issue hasn't been argued before the supreme court. When it is, I expect a school's right to ban that weapon will be affirmed on the same grounds.
That's too simplistic an implication. Yes, they are appointed by the executive in power, but they have to be approved by congress and it is for life, which means that no single executive/legislature determines the entirety of the SCOTUS.
They are also paid in dollars. If Bitcoin were an existential threat to the Federal Reserve banking system, I wouldn't expect them to rule in its favor. The dissenting opinion would probably be worth reading, but there's no way it wouldn't come down at least 5-4 in favor of their own paychecks.
> Interestingly, no justice has ever been removed for bad behavior.
Plenty of lower court judges have been (and one Supreme Court Justice resigned in the face of impeachment, and so was certainly driven by office by the power of Congress to remove him, even if he wasn't, strictly speaking, removed.)
The Constitution also says that the states cannot coin money, issue paper money, or make anything but gold and silver coin tender in payment of debts. (Article I, sect. 10, clause 1)
Technically, they shouldn't be accepting Federal Reserve Notes as payment for any state taxes, including sales taxes.
Note that this clause does not authorize the federal government to declare a legal tender or issue paper money; it simply prohibits the states from doing those things. Thanks to the 10th Amendment, those are reserved exclusively to the people. The wording is a bit tortured, but a logical parse is that powers not delegated to the federation are reserved to the states, and that powers prohibited to the states are reserved to the people. Legal tender, and paper money are not delegated to the federation, but prohibited to the states, therefore they remain the province of the people.
There should be no problem with the Federal Reserve printing its own notes, but there's no way in hell that making them legal tender or accepting them for payment on state or federal debts is constitutional. They do it anyway. Hardly anyone cares. Those who do are ignored.
As usual, they will do as they please, damn the consequences, and hang it all up under the interstate commerce clause.
Edit: Article I, section 8, clause 5 does give the federation the power to coin money and standardize its value. It still doesn't give them the power to accept those coins as payment for debts unless they are gold or silver.
I mean there’s likely no convincing you - but there’s plenty of scholarship to disagree. The Constitution quite clearly gives Congress the power to “coin Money and regulate the value thereof.” It of course makes no additional statement as to how that should be done. It’s a pretty tortuous reading in my opinion and one that would basically be invalid going back to McCulloch v. Maryland to say that coin Money, must only mean metallic alloy coins.
Between Expressed Powers and Necessary and Proper there’s certainly enough justification - it relies even less on the Commerce clause.
Unfortunately, it doesn't matter one little bit if you can convince me or not, as I am neither a federal circuit court judge, appellate judge, or supreme court justice.
I think it is less important that our money be a particular commodity than it is that the government lack the power to manipulate its value for its own convenience.
In my opinion, it is clear that the power to "coin money and regulate the value thereof" is to standardize the exchange rates between coins, probably by weight of the metal, but not necessarily. It is also clear that the coins need not be metal, but also that no one could be forced to accept coins other than gold or silver coins.
Thus, they could stamp out wooden nickels, but that wouldn't make them worth anything to anybody, except possibly for payment of federal taxes. As long as we have those, it is only a short hop to rectangular paper "coins". They can do it, but nobody has to accept them.
But since nobody is trying to pay taxes with Bitcoin yet, and the federal government isn't mining them, as far as we know, there is no justification for them to be standardized or otherwise regulated whatsoever. It might arguably be authorized under whatever clause, but it certainly isn't justified.
> Thus, they could stamp out wooden nickels, but that wouldn't make them worth anything to anybody, except possibly for payment of federal taxes. As long as we have those, it is only a short hop to rectangular paper "coins". They can do it, but nobody has to accept them.
Nobody has to accept paper money, either. The only thing "legal tender" laws mean is that if you want to use the power of government to enforce debts, then the government gets to say that its job is done when government-declared legal tender has been presented, whether you accept it or not.
If you don't choose to involve the government in your affairs, then legal tender laws don't affect you.
What would be done if massive deposits of precious metals were found, rendering those metals little more valuable than perhaps copper or aluminum? You could still make coins with the same value of course, but they would be a bit impractical to carry around.
A copper coin worth $20 in todays USD would weight nearly 3 kilograms!
Surely at least paper gold and silver certificates would be a reasonable concession.
Gold and silver certs are negotiable debt instruments, covered by the government's power to borrow. You lend them a gold or silver coin, and they write you a note promising to repay the bearer of the note one gold or silver coin of equal weight on demand.
It's sort of a bogus loan, with a variable term and zero interest rate, but it's still allowed, and certainly makes things more convenient for a lot of people. And the government can still profit from the seignorage from the mint.
This is not a "no way in hell" issue. The issue of whether Congress should have the power to issue paper money or make them legal tender was debated at the Constitutional convention and left unresolved: http://en.wikipedia.org/wiki/Legal_Tender_Cases#Original_int.... An explicit part of the concern at the Constitutional convention was about not wanting to bind the hands of a future Congress with regards to paper money. Supreme Court cases in the 19th century determined that the power to make notes legal tender was incident to Congress's power to borrow money on the credit of the United States and to "coin Money" and to "regulate the Value thereof."
To be fair, this is actually one of the more plausible ones of the various "everything is unconstitutional" myths. At least some of the framers clearly did want to tie the hands of the federal government when it came to making paper money legal tender.
I find the arguments of Alexander Hamilton and his central bank supporters to be self-serving and destructive to the ends of the people. And in my biased and prejudiced opinion, central banking in the US has been an unmitigated disaster every time it has been tried. I don't believe JM Keynes can be used as a foundation for a sound economy, and I don't think monetary inflation is good for anybody except the person doing the inflating.
There is good reason for the Constitution to override the status quo of the Articles of Confederation on the subject of minting coinage, but I'm not certain a debate left unresolved regarding paper money is indicative of anything when they did actually agree that a person could be owned, and that was worth 3/5 of a vote. It was either less important than slavery, or more difficult to resolve. I'm inclined to believe the latter.
Before descending into full-on libertarded ranting, let's just say that leaving the matter as ambiguous effectively grants the government license to do whatever it pleases and interpret the ambiguity in favor of that.
Failing to bind the hands of a future Congress is what allowed them to pick up that grenade and pull the pin.
I'm not really interested in getting pulled into a 200 year old debate. For better or worse, most of the latent ambiguities in the Constitution were resolved in favor of the interpretation espoused by Hamilton and the Federalists. All I'm saying is that it's not the case that there was this clear Constitutional dictate in one direction that we callously ignored in modern times.
I'm saying that even if it was clear, it probably would have been ignored (maybe even amended) anyway. Control over the nation's currency is so powerful that it is inevitable that someone will try to usurp it.
If you're trying to create a limited government, there are ample reasons to dig a deep moat around money, fill it with poisonous snakes and spiders, and line the walls with Dementors.
> I'm not really interested in getting pulled into a 200 year old debate.
Why not, if the debate is still valid? These issues weren't so much "resolved" as put aside in favor of more government power or postponed (in the case of slavery, equal protection). The mere fact that the debate is 200 years old is simply more credit to its importance.
The constitution is imperfect (like our government), as it itself acknowledges, and is "correct" only as Lincoln said that it serves a nation "conceived in liberty and dedicated to the proposition that all (men) are created equal".
As someone else once said, don't take refuge in the false security of consensus.
> The mere fact that the debate is 200 years old is simply more credit to its importance.
No, it usually means one side lost and can't get over it. Half the country still disagrees with Darwin, it doesn't make the debate important despite it being well over 100 years old. The same applies here.
If you don't think that debate is still important, you are essentially conceding it to the half the country you disagree with (because they sure as hell think its important). I'm sure you don't want your kids being taught creationism just because you consider yourself "above" the argument.
And regardless, the same does not apply here, because unlike the overwhelming evidence we have for evolution by natural selection, there simply is not enough data on the usefulness of central banking to the prosperity of the nation.
> If you don't think that debate is still important, you are essentially conceding it to the half the country you disagree with
No I'm not. The debate was over 100 years ago, the ignorant just haven't figured it out yet. They simply get laughed at now for trying to argue the case. Mockery is not concession.
> there simply is not enough data on the usefulness of central banking to the prosperity of the nation.
Not what I was referring to. I was referring to this, " For better or worse, most of the latent ambiguities in the Constitution were resolved in favor of the interpretation espoused by Hamilton and the Federalists."
You can't ignore 200 years of judicial interpretation and case law simply because you prefer to interpret the text differently, that was his point and he's correct. That debate is over.
If half the population becomes slightly over than half the population out of random chance (or say, the "ignorant" having a few more babies as they are wont to do), mockery would be political concession.
It's far better to convince who you deem ignorant of your own views. This means treating their arguments seriously in the fashion of http://www.paulgraham.com/disagree.html .
Mockery is unlikely to succeed (as are downvotes), and pretty much fails pg's 1st test.
Your next claim, that "200 years of judicial interpretation and case law" ends the debate fails pg's second test. It's an ad hominem attack, that any disagreement with legal precedent (admittedly strong in this case) should be ignored.
By the same token, legal precedent prior to the civil war dictated that human beings could be property. I presume you are glad that some individuals within that society begged to differ.
Debates should be conducted on first principles and supported by objective evidence. I myself agree with Rayiner in that there is no constitutional dictate either way, only saying that the debate is valid on the grounds of 1st principle regardless of how old the arguments are.
Keep your idol worship to yourself; pg is not the authority on how disagreement should work, he's a VC for tech companies, not the authoritative source on how things should be. I happen to agree with the Hitchens approach of mocking religious ignorance and don't give a crap about being reasonable about it. I don't care about pg's tests. Debate is not relevant and only lends status to non-sense. Mockery is the appropriate response to evolution deniers, not reasoned debate. You cannot reason someone out a position they were not reasoned into.
I don't think you have a clue about Christopher Hitchens (who I actually quoted in this thread: "don't take refuge in the false security of consensus").
Perhaps you should read more of what he wrote, and watch the dozens of debates he conducted with priests, rabbis etc. Of course, you can use ridicule in an argument, but you cannot put yourself above the debate (or you will lose).
Perhaps it's you who don't have a clue. Perhaps you should read more of what he wrote, and watch the dozens of debates he conducted with priests, rabbis etc, because I already have. Listen to the man himself[1] on the importance of mocking religion.
"No I'm not. The debate was over 100 years ago, the ignorant just haven't figured it out yet. They simply get laughed at now for trying to argue the case. Mockery is not concession."
If it's actually half the country, and they actually think it's substantially more important than the other half the country, there's an argument that it's effective concession. But, at the risk of putting words in your mouth, I more understood you to be saying that having the argument wasn't important - conveying the understanding behind your "your side" of that argument you might consider quite a bit more important.
There never was a debate. Having a debate presumes that it is possible for one side to concede. The public discussion between Bill Nye and Religiousguy Whatsisface showed that one side is not debating; they're just baiting. Bill Nye said all it would take to change his mind is just one piece of real evidence. The other guy said that nothing anyone could ever say or do would change his mind.
On hearing that, it becomes obvious. There is no quest for truth or spirit of inquiry in the opposition. They are simply obstacles to progress that must be routed around. The debate is not over; it never took place, and it never will.
If you can't get someone to support rational argumentation by means of rational arguments, you're better off talking to someone--anyone--else.
There are some people who claim to be beyond convincing. There are probably some people who are beyond convincing - and there's probably some overlap between those two groups. It's just not the case that either of these sets includes everyone who doesn't "believe in" evolution.
You can't have a reasoned debate about evolution; reasonable people already know it's a fact and don't dispute it. Only unreasonable people are still disputing a basic fact of the world discovered well over 100 years ago.
You're presuming a lot about people's exposure to various ideas. A reasonable person surrounded by unreasonable people, who has - of course - encountered talk of evolution but almost exclusively absurd caricatures isn't going to "already know it's a fact".
If they graduated high school, they were exposed to the facts regardless of who they're around. Anyone who doesn't know evolution is reality is not a person of reason.
It complicates all economic calculations by unnecessarily introducing time and rate variables into the equation, and puts the entire economy on a treadmill, so people have to work just to stay in one place. Since those variables are often only rough guesses, they can be wrong, and cause misallocation of funds.
When you print an additional 2% of the money supply, you are essentially taking about 2% of the entire economy and assigning it to yourself.
Back when money was gold, and gold was money, in order to increase the money supply by 2%, you had to mine 2% of all gold already in the marketplace, which required a lot of labor and capital. If the price of gold was high, you worked more expensive mines. If it was low, you idled them as temporarily unprofitable. The effect of the increase on the money supply was diffused throughout the economy by virtue of the sheer amount of work required to accomplish it.
With paper money, all that is required is a press and anti-counterfeiting measures. The transfer of value into the new money is far more concentrated, both in terms of actors and time. The buying power of the new money is higher, because people don't necessarily know how much you printed until you start spending it.
It is a great virtue for Bitcoin to make public the exact amount of new money added to the economy. Monetary inflation can therefore be predicted exactly. It's still inflationary, and does not account for changes in demand to achieve a stable money price. What it needs is a feedback loop that connects mining rewards with demand for the currency. I imagine that could key from the hash rate of the whole network, but I'm not certain how.
Assumption: The value of money is the aggregate value of market transactions divided by the product of the available quantity of money and its velocity.
Assumption: The money itself has zero intrinsic value. It is only worth what you can trade for it. Thanks to the previous assumption, that is a fraction of all goods and services on the market.
When you change the size of the money supply from 100 to 102, the 2 new notes increase in value from 0 to 1/102 of everything on the market, and all of the 100 old notes decrease from 1/100 to 1/102 of everything. The guy that prints the new notes gets 2/102 of everything for free. That value is not created; it is taken. Everyone who held any old note has their buying power reduced by 1.96%.
Is it justifiable? Yes. Is it a gross simplification because economics is a dismal, dismal science? Also yes.
Section 8 says very explicitly: To coin Money, regulate the Value thereof
People are totally allowed to make their own money and you can use it as you like.
EDIT: About the commerce clause.
Forgot to mention, if you want to bag on the federal government, don't bag on the commerce clause, bag on stipulating federal funding is only available if you do this completely unrelated thing.
"If you handle more medicaid people we will cover part of the cost", that makes sense. "If you raise your minimum drinking age to 21 we will help pay for your roads". WTF?
I'll bag on the commerce clause from here to next week and back, thank you very much. The original meaning of regulate was "standardize", so most of what They claim to be doing with it is overreach. As far as intent goes, it was supposed to eliminate border friction on interstate trade, so Delaware couldn't charge a $1 tariff on a widget imported from New Jersey and two bits on the same thing from Pennsylvania, or other assorted trade-barrier nonsense.
I think it would be completely warranted to have a constitutional amendment that controls how the federal government manages the treasury. It should not be giving money to the states except by apportioning the funds by census populations. If the Wisconsin drinking age is 18, too bad. As long as you are paying for highways at all, you have to pay them 1.817% of that money, because they have 1.817% of the US population.
That would prevent an awful lot of political lever-pulling in the form that you mentioned. You couldn't tie federal highway funding to anything other than the actual upkeep of the highways. And you couldn't make school lunch subsidies contingent on serving corn at least 3 times per week, or declare ketchup a vegetable.
> I'll bag on the commerce clause from here to next week and back, thank you very much. The original meaning of regulate was "standardize"
Revisionism. The word "regulate" was interpreted in more or less its modern sense in Gibbons v Ogden, in 1824, merely 35 years after ratification.
"[T]he power to regulate; that is, to prescribe the rule by which commerce is to be governed. This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the Constitution."
This is not a case where the meaning of the word has drifted from what it meant at the time of the founding. I'm quite conservative in my Constitutional interpretation, but I think conservatives get the Commerce Clause wrong. Its broad and was intended to be. The anti-federalist framers thought the "interstate" part would be a limit, but didn't concieve of a world where every transaction would cross state borders. Indeed, they lived in a world where market transactions were the exception. But saying that we should interpret the plain text more narrowly because the world has changed since then is a very "living Constitution" thing to do.
> The original meaning of regulate was "standardize"
I would certainly include defining a singular version to be under the power granted by standardize. Heck most standards are singular in nature. That isn't a stretch at all.
> so Delaware couldn't charge a $1 tariff on a widget imported from New Jersey and two bits on the same thing from Pennsylvania
We are talking about minting coins, not interstate taxes.
> It should not be giving money to the states except by apportioning the funds by census populations.
That only works for some very basic things. Maybe roads (I doubt it) and certainly not a lot of things such as National Forests.
> declare ketchup a vegetable.
Vegetables in school lunches are measured exclusively by volume, not by nutritional content. Most of the tomato jokes are related to concentrated versions that get a pass because serving a kid a cup of ketchup or tomato sauce is silly.
The statement does not refer to how states may pay their debts - it refers to their power to issue currencies.
"...make any Thing but gold and silver Coin a Tender in Payment of Debts... " means states cannot issue their own currencies as legal tender. They can only make gold or silver legal tenders for debts. The federal government can make paper dollars a legal tender, and the states can pay their debts in that.
Denying a power to the states is not the same as granting it to the federation. The federal government was never authorized to declare anything a legal tender. It was authorized to manufacture coins and say what they are worth.
It would be nice to think that the supremes would strike down legal tender laws for that reason, but as they are paid in paper, I don't think it likely in this millennium.
> Legal tender, and paper money are not delegated to the federation, but prohibited to the states, therefore they remain the province of the people.
The power to emit debt instruments, including in the form of paper money, is, to the extent it is not included in the power to coin money and regulate its value (Art. I, Sec. 8, cl. 5) a necessary part of the power to borrow (Art. I, Sec. 8, cl. 3). See, inter alia, Juilliard v. Greenman, 110 U.S. 421.
That's rather disingenuous. When you borrow, the counterparty must have something to lend to you. The creation of new fiat paper money has no counterparty.
The power to borrow is to write a promissory note in exchange for a real something, that is later redeemable by giving real somethings to the holder of the note. I can write a note promising to pay a hamburger and a half on Tuesday for a hamburger today. In order for that note to have any sort of economic effect, someone has to give me a hamburger for it.
Once it's out there, that's worth 1.5 burgers, and can be traded around at will, but come Tuesday, I need to have 1.5 hamburgers on hand to redeem the note.
The paper money notes now circulating in the economy have nothing to do with borrowing. Where is the promise to pay? What is the term of the loan? Why is the US paying the Fed interest to take and use their note?
If it were borrowing, the Treasury would print the notes and give them to the Fed in exchange for something. Those are T-bills. The something they get in return is Fed scrip. That is what circulates. That is what they made into legal tender. Do you buy groceries with T-bills? US notes? Gold or silver certificates? No? The federal power to borrow does not apply here. You are not exchanging federal instruments, but notes issued by a private (but legislatively controlled) banking system.
If you contract to be paid only in federal coins or instruments, and someone pays you in private bank notes created from thin air instead, the courts will not decide in your favor.
I think if banks started doing it, the Fed could regulate the banks with respect to bitcoin. I don't believe it would magically apply to anyone else, though.
Fed doesn't have authority to regulate jack. Fed is a private organization, set up by banks in the '30s to self-regulate themselves, presumably to stave off the government descending on this industry and regulating it to the ground. I still don't understand why they weren't disbanded in 2008.
Agreed. Additionally, Janet Yellen must have been feeling quite annoyed, since the lawmakers asking her about this probably know full well that the Fed has nothing to do with that sort of thing.
It's kind of funny, but on one hand, that statement is probably the best thing a libertarian reader could imagine hearing from Yellen. That's how I read it at first, and was thinking, "wow, that's pretty radical for the government to intentionally take itself out". Yet, upon second reading, I think the intention was probably more to cast Bitcoin as a wild-west, do-at-your-own-risk, good-luck-to-ya type of asset to work with. I think the message was meant more for banks and investors. The real subtext being, "if you lose your shirt, get defrauded, or there's large scale tampering, don't come crying to the Fed".
Proponents of Bitcoin tend to view the lack of regulation as a feature, not a bug. With that lack of regulation comes higher risk of losing everything in the event of a catastrophe. It's hard to have it both ways.
Governments don't regulate technologies, they regulate people. There are a million ways governments (who are also made up of people) can and will regulate bitcoin and the like. The persistent belief among some cryptocurrency proponents that they're invincible to the powers of government is really naive.
Just because there isn't regulation now means jack squat. It's not a feature, it's a side effect of newness and reactionary politics.
But there's no lack of regulatory power here. What Yellen was saying is the Fed can't regulate bitcoin. But the Treasury Department can do anything from nothing to an outright ban.
Yet, upon second reading, I think the intention was probably more to cast Bitcoin as a wild-west, do-at-your-own-risk, good-luck-to-ya type of asset to work with. I think the message was meant more for banks and investors.
Isn't that also the thing the libertarian reader is looking for?
Fair warning: she means the Federal Reserve doesn't have the authority to regulate Bitcoin. The Federal Reserve is not the nexus of financial regulation in the US Government, and Congress can delegate additional authority to the Fed any time it wants.
Yup, no mention of the Treasury Department, the Securities and Exchange Commission, and for that matter the US Congress. And it certainly seems the SEC would have some authority over entities that seek to act like banks or exchanges.
The letter Manchin wrote was not to the Fed but to the secretary of the Treasury and a few other Treasury-related officials. They haven't responded, as far as I know. This is a separate (and very dumb) line he is pursuing. I consider myself fairly ignorant of government issues like this but even I could tell you the Fed would be the wrong institution to ask about regulating Bitcoin (already a foolish notion).
