Yukon Cornelius: You’re going to stay with me and we’ll all be rich with the biggest silver strike this side of Hudson Bay. Silver!
Hermey: I thought you wanted gold.
Yukon Cornelius: I changed my mind.
Senator Greg “the Flogger” Walker, the man who replaced the estimable Sen. Garton, has introduced SB 453 which would require state and local government to conduct transactions in gold. Among other things:
[A]fter December 31, 2009, the state and political subdivisions may not compel or require any person to recognize, receive, pay out, deliver, promise to pay, or otherwise use or employ anything but gold and silver coin (in that form or in the form of a designated electronic gold currency) as media of exchange with respect to [taxes, loans to the state or political subdivision, purchase or sale of real estate by the government, condemnation payments, court judgments, or contracts or wages with the government.]
. . .
[A]ll payments to the state required under IC 6-7 (tobacco taxes) must be made in electronic gold currency.
What’s next? The Ron Paul dollar to be the official currency of Indiana?
What kind of economic radical is this guy trying to equate silver with gold? Horsefeathers!!! Doesn’t he know that only gold is really real value?
He’s probably sucking up to the farmers in his district by trying to slip in silver as some crackpot salvation to their pecuniary woes.
Next, this nutterball will be giving campaign speeches against crucifying Hoosiers on crosses of gold. Pshaw!!!
I sense a new Masson’s Blog feature sure to take on the Interwebs – The Stupid Bill Of The Day.
That’s good. Ridicule without any substantial objection. Should we be content that the ridicule is it’s own analysis?
He said ‘gold’, ergo, he’s a *wingnut*.
Deep, man. Deep.
Most sixth-graders know why we went off the gold standard. It’s pretty basic math and economics.
When we have to take our elected officials back to go over their elementary school education again, they’re crackpots. We don’t need to have a debate about it here.
Mike – I see that you failed to offer any cogent analysis of why Senator Flogger’s proposal makes sense. Maybe you have a hidden gold/ silver mine from which you can extract a payment?
uh-oh, Doug. Now you’ve gone and woken up the Paulville residents. Maybe if we’re all reeeaaally quiet, they’ll leave…
You need to back the currency with things of real value.
Bring back beaver pelts and the local trading post!
Also, if there’s a ‘wingnuttery’ tag, where’s the ‘moonbattery’?
Bipartisanship should start here!
I’ve never understood the “moonbat” terminology. “Wingnut” is basically a merger of “right wing” and “nut” and “wingnuts” are an actual object, so it makes some sense.
As for critique of the bill requiring government transact its business in both gold and “legal tender,” I’ll start with the language of the bill. It’s wandering and incomprehensible.
Second, it makes a fetish out of gold. There is nothing inherently valuable about gold that makes it distinctly suitable as the basis of currency. It’s shiny, malleable, and conducts electricity I guess. Not bad things, at all, but not a sufficient basis for using it as the centerpiece of a modern economy.
At it’s root, currency is a means of storing and transporting value that is based on trust. Rather than demanding that you get something you want in particular before you provide something of value to someone else — a bartering economy — you trade goods or services for money with the trust that you can then turn around now or at some point in the future and get something with value more or less equal to the goods or services you provided in the first place. It provides flexibility to the economy because it allows for more complex exchanges of value and doesn’t require a fortuitous alignment of people who require exactly the goods or services another person possesses at exactly the same time before they can do business with one another. It’s the trust that the currency will more or less retain its value that matters, not the symbols we use to represent the currency; whether the currency is symbolized by gold or by greenbacks. And, really, this bill is not contemplating people hauling gold back and forth. Rather, it contemplates accounts drawn on the accounts of “electronic gold currency payment providers” — more promises, more trust. In this case, trust that the numbers represented by the electronic currency is redeemable in a specific good: gold; rather than merely redeemable generally for an equivalent value of goods and services as used to obtain money in the first place.
Third, there is the federalism problem wherein the United States Government, via Article I, section 8 of the United States Constitution is given the authority “To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” This bill seems to be seeking to create a de facto alternate form of currency.
Fourth, because of the arbitrary fetish over gold, you create this weird system where suddenly South Africa is wealthy, not because of the value created by the resourcefulness and wealth of its people, but because of the metal it happens to have in its mines. Why not conduct transactions in oil as a substance which has even more useful properties than gold?
Fifth, the sorts of people who start ranting about gold often tend to be the same sorts of people who rant about the illegality of the income tax and how the government has no right to impose taxes. (As opposed to simply policy arguments about whether the government *should* impose taxes at one level or another.) They tend to miss a point I take as fundamental: without government there are no rights, there are just bands of people who can bring greater or lesser levels of force to bear. In Hobbes formulation, the state of man in nature (i.e. absent government) is solitary, poor, nasty, brutish, and short. Without government, there is no law, and without law there are no rights. This idea of “natural rights” is magical thinking. What good is your “natural right” to property when a guy with a club is determined to kill you for your stuff and you lack the force to stop him from doing it? This is getting a little far afield from gold, but the extreme libertarian knee-jerk anti-government stance seems to ignore that the alternative to government is a state of war of all against all. Now, we can certainly argue about what level of government is necessary and desirable, but then we’ve accepted the legitimacy of government power. We’ve established what we are and are merely haggling over the price.
Jeez, these Paultards are still around? I figured they’d have sacrificed themselves on the Altar of Paul after their New Lord God Paul didn’t get nominated, or when the whole country didn’t suddenly vote for him.
National Geographic had an excellent cover story about gold last month. In it was the factoid that all the gold ever mined in history would barely fill two olympic-sized swimming pools. That seemed low to me, but whatever. A small amount of the gold is actually used for electronics. The rest we keep around because it’s shiny, rare, and people perceive that it was always be in demand because it is shiny and rare.
Doug,
That has to be one of the most cogent, literate and sensible expositions I think I have ever seen on a blog. Thank you!
High praise, indeed!
So says the President of the Yukon Cornelius Fan Club! ;)
For all the bashing and name-calling I don’t hear too many actual arguments regarding monetary theory — probably because nobody ever read any in 6th grade, very few by 12th, and most don’t get exposed to it in even in college.
I haven’t read the bill in question and I’m no gold bug, but I do think commodity-backed currency is more tenable than fiat. I think it would be great if the people had the ability to freely choose from competing currencies.
*sigh*
Here’s an idea. Lets have civil, thoughtful, honest discussion that is geared toward discovering and/or defending truth on its own grounds without all the ad hominem.
Given my prior statement, I should make the effort to recognize the best argument laid out here:
Yes, exactly — trust that the currency may be exchanged for something of value comparable to that which was exchanged for it in the first place. With the government’s experimentation in monetary policy, that trust is sometimes elusive for fiat currencies. Heard any discussion of uncertainty as a force preventing market recovery lately?
Oops…skimmed over the fourth argument in Doug’s post, which also makes some sense.
Sure. For that matter, why not have freely competing currencies and let shifting sentiments determine the appropriate store of value for the time? In the past one could argue this as chaotic. With our current technology, I don’t think the feasibility of this idea is beyond conjecture and reasonable debate. Again, I haven’t read the bill myself so I can’t comment on its ability to employ the proper means for attaining this end.
I’d encourage you to read the text of the bill. For me — and I try to read a lot of proposed legislation — it’s less comprehensible than most. While it could be that I am simply not familiar enough with the subject matter to parse it, I think it’s more likely a sign that the proposed law is not well articulated which, in turn, usually means that it isn’t well thought out. But, if someone wants to correct me on this, I’d be o.k. with that.
For what it’s worth…going with a gold currency is “pure Ayn Rand.”
As I said, for what it is worth.
(Source is an Ayn Rand fan who happens to be a member of my family and an amateur economist).
I will read the bill. From what I understand, it is a ‘translation’ of another bill proposed in another state that was adapted to Indiana standards, and wasn’t written by Mr. Walker but rather an activist citizen who is trying to encourage legalization of an alternative to the FRN. Again, I’m probably speaking out of my element here, as I haven’t followed it all that closely but do know some of the people involved.
Agree that Ayn Rand would’ve supported a gold standard, though dismissal or acceptance based on what Ayn Rand thought of something is crazy and/or cult-like (don’t mean to sound attacking here).
I’m not a huge fan of a gold standard myself, although I think it would beat fiat. I prefer a decentralized solution. Then people who want to hold gold can do so without penalty and those who prefer whatever else can hold what they want — assuming we ensure a means of economic calculation (an admitted issue which I feel could be overcome), everyone’s happy.
Ha! Came back to this with more time on my hands and followed the flogger link. Is that for real? Okay, reading the bill now…
I don’t find it incomprehensible; however, I don’t think I’ll be advocating it.
I think the issue needs to see some daylight and legitimate discussion, but I don’t think this is the best approach.
However, I would (and do) advocate these at the federal level:
Free Competition in Currency Act
http://thomas.loc.gov/cgi-bin/query/C?c110:./temp/~c110QzUweN
Honest Money Act
http://thomas.loc.gov/cgi-bin/query/C?c110:./temp/~c110Q6J3b8
Steph- We went off the gold standard so that the federal government would have freedom to inflate. Having currency backed 1-to-1 by gold and silver made inflation a very difficult task. In particular, Nixon vacated the gold standard in 1971, largely to pay for Vietnam.
Thanks for your ad hominem ridicule, tho. Pretty worthless, really. This is not taught by 6th grade, much less at any point in high school. Our nation suffers greatly at monetary ignorance.
I’m with Eric H on this. I don’t think this is the best approach, but I do think bringing the issue to a wider audience is quite valuable.
I tracked down some info on the source of the bill, and how it got to Senator Walker in the first place.
A Kokomo resident named Jerry Titus apparently forwarded model legislation to Walker, who then introduced it. Here are the things Titus has to say about his interest:
“Recently, I recompiled model legislation created by Dr. Edwin Vieira and Mr. James Turk for New Hampshire, and forwarded it to Senator Greg Walker, of which he introduced. It is before your committee as Senate Bill 453.
I first became interested in gold and silver last July – shortly after reviewing a 401k statement. I had lost 20% of my investment in three months time (now 40% to date in 1 year). After some research, I was led to precious metals to be undeniably and historically proven the best investment in times of recession and economic uncertainty.
Unfortunately I had no options for precious metals in any of my ‘traditional’ investment accounts. Further research put me on to Digital Gold Currency (wikipedia has an excellent article), and then in conversation with a friend, Paul Caudell of Nashville, I found that he had been working towards a Sound Money bill here in Indiana for a number of years. At the urging of a mutual friend we collaborated, proceeded and are at this point today.
There are a number of misconceptions about the bill I would like to first clear up.
SB 453 Does NOT:
o Replace the Federal Reserve Note (the dollar).
o Reestablish a gold standard.
o Modify in any way any federal monetary law.
o Interfere with, change or hamper the Federal Reserve or its operations.
o Set gold or silver prices or tie any currency to same.
o Require the State to hold or payout any more gold or silver than she collects.
o Redefine or change any federal ‘legal currency’ laws.
In summary – we aren’t messing with the Fed, nor asking the State to take on or assume adverse risk.
SB 453 Does:
o Set standards for operation and business for specie (precious metal) exchanges, vaults and account providers. Codifies, introduces and makes more readily available a fast growing, new industry – digital gold currency, to Hoosiers. Which by the way, we are free to use, with or without SB 453.
o Sets standards for specific bullion coins for use as hard currency in transactions with the State and species exchanges.
o Establishes rank of priority payment for the State when demand exceeds stocks of ‘hard’ currency.
o Establish the State Treasurer’s responsibilities and authority.
o Establishes and codifies the States options to use gold and silver as optional payment methods in other areas.
o Is OPTIONAL for transactions for all but Tobacco license and tax revenue contributions.
In full intent and purposes, SB 453 establishes an ALTERNATE currency in both hard and digital form that operates in parallel, and in competition with the Federal Reserve Note. A currency that is proven to protect wealth and earnings in the event of fiat currency debasement or failure, and one which also is constitutionally correct by both our Federal and State Constitutions. It encourages the development of an alternative currency in order to protect the citizenry and the State government against a market meltdown. That such a statute may cost something now, which in reality is little more than time, is nothing compared to what it could possibly help save in the future.
At the Minneapolis Federal Reserve site, (http://www.minneapolisfed.org/) there is a very nice little calculator – ‘What is a dollar worth?’. With it you can enter a number for a year and tell what purchasing power that figure, adjusted for inflation, had at another point in time.
I enter $1.00 and 2008 for my starting amount and year. When I enter 1931 as my target year, (the year the Federal Reserve began ‘managing’ our money supply in earnest), I get .07 cents as what it would cost in 1931 money for the same goods a dollar purchases in 2008. That corresponds to a 93% debasement in the value of the dollar over 77 years. When I enter 1960, the year of my birth, I get .14 cents. 86% debasement in my lifetime. Lastly, I enter 1980, the year I entered the workforce, and receive .38 cents. A 62% devaluation in my adult lifetime. Are you beginning to understand why many of us have no confidence in the ‘dollar’ or the Federal government’s management of the same?
Our Federal government is failing us. They have added four trillion dollars in federal debt in the last five years, and the Federal Reserve’s printing presses are going as fast as they ever have with no end in sight thanks to the openly socialist agenda our Federal leaders have embarked upon. In many ways I believe they pose the gravest threat to the future of our country with their spend lust ways. They are failing to protect our personal wealth and that of our children, not to mention placing unbelievable tax burdens on unborn generations of Americans. I don’t think I need to tell you that the threat for near-term economic meltdown is very, very real. Many believe inevitable.
It is not by happenstance that both the United States and Indiana constitutions specify gold and silver as the only ‘legal tender’. Our forefathers knew the benefits of hard, sound currency as well as the dangers of fiat currency. What we are proposing isn’t new or radical – but rather a time tested and proven method to protect personal wealth and individual economic liberty. We know we can’t affect radical change overnight, and we aren’t trying. This bill is but one small step that affects a return to constitutional mandates, and provides an alternative, competing currency to the mismanaged fiat based Federal Reserve Note for those Hoosiers who so desire.
In closing, I hope that you will review SB453 in detail and give it serious consideration. In it we have at hand a method to provide Hoosiers with an alternative currency that can protect their wealth and earnings and at the same time provide the State with a sound base of ‘hard’ currency to weather economic hubris and calamity.”
I have sympathy for some parts of this- especially recognition of the devaluation of our money over time and the adverse effects this has on savings. The ability of the government to print money with reckless abandon, as it has been doing for the entire 2nd Bush Administration and now immediately again with the Obama Administration, is racking up a debt that may damage our economy for years to come- especially if foreign nations at last stop buying our debt, as they have been doing.
Doug is right that the root issue is trust. There is increasing reason to not have faith in the dollar. Printing it with abandon isn’t going to help. Getting it under control will, or, offering people other means of exchange, can. It could be gold. Heck, it could be electronic ‘credits’ based on barter. The idea here, as I take it, is to help restore faith in the value of the currency.
I’m not sure that there is much that a state law can do to affect monetary policy, but the discussion can be valuable- if the participants actually care to engage their intellects a little and consider the merits and disadvantages.
Some interesting data for consideration by the curious.
http://mises.org/markets.asp
The significance of these measurements is explained in this audio:
http://mises.org/multimedia/mp3/interviews/Thornton_12-15-2008.mp3