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Goldbugs and Tea Parties

So the Tea Party is usually thought to be hyper-conservative regarding the US Constitution. Which doesn’t seem to relate to its sudden fascination with states minting their own money, as the Tea Party Nation demonstrates:

In an era where the Federal Government is predisposed to the endless erosion of personal liberties and assaults on our freedoms, one government is getting something right. One of the legitimate purposes of government is to protect its citizens. While the Obama Regime believes that its purpose is to oppress the citizens, treating them like subjects, not citizens; …

Yeah, when you lead off with the premise that the Obama “Regime” is explicit in its determination to oppress and subjugate … well, you know this isn’t going to end well (or sanely).

… there is one government that has the right idea and is doing something to protect its citizens. What government is it and what are they doing? It is the Commonwealth of Virginia.  

What is Virginia doing?

Besides treating gays like criminals, Democratic voters like untouchables to be politically ghettoized, and women like baby-making machines, you mean?

Virginia is studying the idea of minting a Virginia state currency.

Because that worked so well last time.

Yes, with all the issues the state of Virginia faces, it’s spending time looking at minting its own money.

Virginia should study this issue and then act on it ASAP.

Virginia is not the first state to think of this.  Utah has already passed a law allowing a state currency and at least four other states are studying this idea.

Why should it be done?  Is this just another example of the old saying, “Save your confederate money boys, the South is going to rise again?” No. Assuming it is done correctly it is one of the most prudent things a state can do.

Because everyone’s going to want to collect them, right next to silver dollars with the World Trade Center painted on them in a commemorative fashion. Operators are standing by!

First in order for it to be done right, the state currencies cannot be a fiat currency.  They should be a commodity-based currency.

Actually, under the US Constitution, Article 1 Sec. 10, states can’t issue fiat currency. Indeed, there’s some question as to whether they are allowed to coin their own money at all. But, apparently, the Tea Party Nation isn’t interested in the Constitution when it interferes with what they want. If the states want to do it, that’s okay with them. (Unless it’s gay marriage or liberal abortion laws.)

What does that mean? It means that whatever currency is minted is actually backed by something.  This could be precious metals or another commodity.

Today, the American dollar has no value other than what we assign to it. Nothing backs the dollar.   The Treasury can print as much money as it wants and that is the problem America faces.  Commodity backed currencies cannot do that.  If you do not have any more gold for example, you cannot print any more money.

Which is, ultimately, why the gold standard was abandoned by … well, pretty much everyone.

First off, commodity-based money is no more objectively valuable than fiat money.  “But it’s backed by gold!”  So what? Gold has some useful technical properties, and it’s pretty, but gold prices are arbitrary, not intrinsic.  Gold is no more objectively valuable than a piece of paper. Instead, its value rises and falls based on both supply (how much gold is around) and demand (how much people want it, or want to speculate for it). That leads to unstable monetary value bound either by the vagaries of gold rushes or the whims of speculators.

Bottom line, why is this actually worth anything? Except as a bludgeon, of course.

Second, there is value in the government being able to print money as it needs to.  Are there risks? Sure. But there are also benefits, especially when the economy is slumping.

There are a lot of nations in the past that have believed they could print money so they could spend their way out of economic troubles or simply to buy everything they wanted.  These include Zimbabwe, Argentina and the Weimar Republic of Germany. 

In each of these instances, the debasing of the currency caused hyperinflation.  There is nothing more destructive to an economy or to freedom and liberty than hyperinflation.  

Yes, hyperinflation is a bad thing.It occurs when there is a rapid increase in the amount of money supply when not matched by an overall increase of production. This impacts the government’s ability to spend on what it needs to (because of lack of tax revenue or ability to borrow), leading it to print more money.

But, of course, that doesn’t describe the situation of the US. We have massive production capacity lying fallow. While tax revenue is constrained (by conscious political choice, not because tax sources are not available), there’s no sign of being unable to borrow (as treasury bonds continue to sell briskly to all comers).

In the example of, say, Weimar Germany, its hyperinflation was triggered by massive war reparation debts that had to be paid in gold or foreign currency. When the gold ran out (as the German government had decided to fight the war without any borrowing), the government had to buy foreign currency with German marks — which cause the value of the mark to plummet, worsening the ability to buy foreign currency, causing rising prices, which further impacted the government’s ability to operate, leading to the printing of large amounts of fiat money which had no actual backing. People rushing to spend their increasingly worthless money before it was worth less further increased inflation.

The cover charges were outrageous, but aside from that they had great cabarets

None of that, by the way, describes the American economic situation.  Though I suppose if the Tea Party types keep holding the debt ceiling hostage, further hurting the government’s credit rating and making it harder to borrow money, that could have an inflationary effect.  Well played!

When you have hyperinflation, people become desperate.  When the average person receives their weekly wages and it is just enough to buy a loaf of bread for their family and they face the prospect of seeing their children go hungry, they will demand someone fix the problem.  And when people are that desperate, they do desperate things, like grabbing on to demagogues who will promise them salvation in exchange for their freedom.

See? It must be a plot!

Under the Obama Regime, the Treasury has been printing money like it is going out of style.  Sooner or later, the end result of this will be massive inflation.  We are already starting to see some inflation.   If you go to the grocery store you are already seeing inflation in the prices of food.  The prices of gold, silver, other precious metals and oil have skyrocketed.  Part of this is a function of supply and demand and part of it is the debasing of our currency. 

In plain English, the Dollar is now worth much less than it was four years ago.

Really? Because let’s look at the US inflation rate for the last 14 years:

US Inflation, 1999-2013. Nope, no hyper-inflation here

Okay, that doesn’t look like crazy-ass inflation during the Obama Administration, except for the skews up and down during the Great Recession (where inflation actually became negative for a while).

Or, put another way, if we look at the rise in prices in just the last four years, something costing $20 in 2009 would cost … (gasp) $21.40, a 7% rise. Given that in the mid-70s to early 80s we were seeing annual inflation rates in the double digits, I’m not quaking with fear at this point.

Why? Among other things, the government is printing too much money.  Today, we do not even know what the money supply is.   This is another important piece of data the government no longer releases.

Not surprisingly, this is untrue. The Federal Reserve issues regular (weekly) monthly reports on the M1 and M2 money supplies. One measurement that used to be compiled, the M3 supply, is no longer reported by the Fed; that stopped in 2006. (More explanation of the different money supplies here.)

All of this leads up back to Virginia and the other states.  If Virginia, Utah and other states start minting commodity based currencies, Americans will quickly flee the devalued Dollar in favor of these currencies.

Except the dollar isn’t devalued.

And, yeah, like that won’t have any sort of destabilizing effect on the economy. 

Constitutional matters (you know, Tea Party, that document you keep touting as the most important thing in the world) aside, are you expecting that businesses, banks, credit companies, etc., are going to accept (or pay out) money in Virginia Dollars, Utah Dollars, etc.?

And, beside that, what sort of gold reserves does the State of Virginia have? Or silver? Or platinum?  Are VA and UT going to use the same commodity? What will be the conversion rate?

Because these currencies will hold their value and will not be victims of the inflationary spikes that are the inevitable result of the economic policies of the Obama Regime.

Except the economic policies of the Obama Administration are not fundamentally different from the economic policies of past governments. And we’ve not seen any inflationary spikes.

But you know what we have seen oscillate wildly in value?

There's GOLD in them thar spikes!

So tell me again how gold is more stable and reliable?  Or how the price of gold is somehow magically real and not just the product of speculation?

Heck, if you’re worried, TPN, just tell your folks to start investing in gold themselves.  Then their state governments, blue or red, won’t have to do it for you (freedom!) and when the Great Collapse happens, your side will be rich as kings!

Or maybe you already have made that suggestion, and are hoping that states will somehow shift to a gold standard, start buying up gold themselves, and increase the value of your holdings.  No, that would be an underhanded and manipulative move on your part.

For the legislators in Virginia, I have one simple message.  Study this quickly and implement it.  For those of you who live in other states, it is up to you to get your legislators on this quickly.

Or, y’know, don’t.

Inflation is coming.

Yeah, I'm getting tired of that meme, too.

The Dollar will be battered and maybe even destroyed by the Obama Regime.

I will make you a deal. If the “Obama Regime” destroys the US Dollar in the next 3½ years, I will personally pay you ten (10) Virginny Goldug Dollars, even if I have to carry it across the apocalypse-ravaged countryside to Richmond itself.

This is a shining opportunity for states to do what they are supposed to do. That is to protect us against an overbearing and out of control Federal Government.

Really? Because it looks like your boys have effective control of at least one key branch of that federal government — and “overbearing and out of control” is just the way to describe that.

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