Thursday, August 9, 2012

Harry Bradford  — Cheaters Get 'High' From Breaking The Rules: Study

Why law, regulation PLUS oversight and accountability are required to address the free rider problem.

The Huffington Post
Cheaters Get 'High' From Breaking The Rules: Study
Harry Bradford


Bob Roddis said...

So, do you MMTers get high from breaking the rules of morality and the Constitutional limits on the issuance of money with your theft via funny money schemes? Is that the source of the problem?

JK said...


Leaving aside your beliefs about right and wrong, is there anything in the constitution that says that the U.S. government can't create new (funny) money?

"The Congress shall have Power To... provide for the...general Welfare of the United States...To borrow Money on the credit of the United States...To coin Money, regulate the Value thereof…"

Does the Consitution not give the U.S. government power to administer (funny) money?

Bob Roddis said...

If you look at the original draft of the Constitution in the Constitutional Convention, the Federal Convention of 1787, it said, "Congress shall have the power to borrow money and emit bills on the credit of the United States."

That language was taken from the Articles of Confederation. The Congress operating under those articles had the power to borrow money and emit bills – emit paper currency – and they did it. They emitted the so-called continental currency from which came the phrase "not worth a continental" because they emitted so much of it that it depreciated very close to worthlessness.

At the Constitutional Convention, you had people in attendance who had been members of the Continental Congress. They had been members of various state legislatures. These were the leading political figures in the country. They had to a large extent been the ones who had emitted continental currency or had emitted various state bills of credit. So this was a question that wasn't in some way alien to them as they had been involved in it only a few years earlier.

So the first draft of the Constitution was put forward with the same power that the Continental Congress had, and there was a debate. You look at Madison's notes, and it was a rather vociferous debate, and they threw out the words "emit bills," so that now that provision of the Constitution says, "Congress shall have the power to borrow money on the credit of the United States." It says nothing about emitting bills.

Well, by hypothesis, if the power is proposed and then stricken from the final version, it doesn’t exist, right? You don’t need to be a Harvard law school graduate to understand that.

So we look at those two provisions of the Constitution: One explicitly prohibiting the states from emitting bills of credit, because otherwise the states would retain that power. And the other with respect to Congress, where they didn’t grant the power, even though the power was proposed to be granted and that proposal was overruled, and so it wasn't granted. Based on that it is clear, I would say, that there is no power in Congress or in the states to issue bills of credit.

JK said...

Doesn't that still ignore the power to "coin Money, regulate the value thereof…"

Isn't that pretty explicit that Congress can create/issue (funny) money?

Bob Roddis said...

The term "dollar" in the Constitution has a definitive meaning, well known at the time the Constitution was drafted.

(2) The Coinage Act of 1792. Little more than a year after Hamilton's Report, Congress enacted its principles into law. The Coinage Act of 1792[43] initiated a new statutory system embodying the constitutional principles that Hamilton had reaffirmed. First, Congress followed consistent American common-law tradition by continuing the use of silver, gold, and copper as "Money.”44 Second, it reiterated the judgment of the Continental Congress and the Constitution that "the money of account of the United States shall be expressed in dollars or units,”45 and defined the "DOLLARS OR UNITS" in terms of weight, as "of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure * * * silver.”46

Recognizing that to adopt Hamilton's suggestion of a "gold dollar" would cause confusion and require constant governmental supervision to "regulate * * * Value[s],"47 Congress created no such coin, instead mandating the coinage of "EAGLES,” "each to be of the value of ten dollars or units,”48 that is, of the weight of fine gold equivalent in the marketplace to 3,712.50 grains of fine silver. Following Hamilton's recommendation, though, it fixed "the proportional value of gold to silver in all coins which shall by law be current as money within the United States" at "fifteen to one, according to quantity in weight, of pure gold or pure silver.”49 And it made "all the gold and silver coins * * * issued from the * * * mint * * * a lawful tender in all payments whatsoever, those of full weight according to the respective values [established in the Act], and those of less than full weight at values proportional to their respective weights.”50

Thus, Congress did not establish a "gold dollar,” or enact a "gold standard,” as the popular misconception holds. For example, the Encyclopaedia Britannica erroneously reports that the "dollar * * * was defined in the Coinage Act of 1792 as either 24.75 gr. (troy) of fine gold or 371.25 gr. (troy) of fine silver.”51 The Act did no such thing. It explicitly defined the "dollar" as a fixed weight of silver, and "regulate[d] the Value" of gold coins according to this standard unit (or money of account) and the market exchange-ratio between the two metals. Nowhere did the Act refer to a "gold dollar,” only to various gold coins of other names that it valued in "dollars.”52

Congress also provided free coinage "for any person or persons,”53 and affixed the penalty of death for the crime of debasing the coinage.54

Thus did the first Congress - which knew what the Constitution meant if any Congress ever did - rigorously apply the Constitution's mandate: It determined as a fact "the value of a Spanish milled dollar as the same is now current,” and thereby permanently fixed the constitutional standard of value, or "money of account,” as a unit of weight consisting of 371.25 grains of fine silver in the form of coin. It coined American "dollars" as "Money,” containing this intrinsic value of silver. It coined American "eagles" as "Money,” containing a fixed weight of pure gold - and regulate[d]" their "Value" at so-many "dollars" by comparing their intrinsic value in (weight of) fine gold to the market-equivalent of silver. It gave both the silver and gold coins legal-tender character for their intrinsic values in all payments. It opened the mint to free coinage of the precious metals. And it outlawed debasement of the nation's new "Money.”

JK said...

Bob, interesting links. No doubt the words in the constitution had different meaning around origination than they do now. I can't honestly comment with any certainty about it because I'm just not familiar with the topic.

With that said…

What I like about MMT, and the Modern Money community in general, is there attemtpt to look at the system we have, and "go from there" …. it's practical….

Meanwhile, what you describe is an economic system that does not exist, and in all likelyhood will not exist anytime soon. Therefore, your analysis often seems unpractical and unuseful.

Essentially, you're doing philosophy. That's fine. It's interesting. But its not "practical" and "useful" as a foundation for econmic analysis of what we've got "right now"...

Carry on as you wish. MMT will do the same.

Tom Hickey said...

JK, all this has been elaborated by court decisions that set precedent. There is also a norm of stare decisis, meaning to stand by things decided to provide historical consistency and relative certainty over time, so that decision makers have precise criteria.

Time moves on, Bob and the people that argue this way haven't.

Rob Boddis said...

Bob Roddis is completely ignorant about all of this. His reading of the coinage act is completely wrong.

Supreme court: Fiat money is totally constitutional.

When are you going to get bored with being so wrong all the time, Bob?