Fiat money. Constitutional?

Is the current federal reserve fiat money system constitutional?

 

Yes. If it isn’t, we and the world are in trouble. There is not enough gold and silver in existence to back a world-wide currency that wouldn’t choke the modern economy. “The commodity theory of money “ has long been discredited, at least among professional economists.

 

You say yes. Can you cite the language permitting the federal reserve and fiat money?

 

It’s a stretch which dates from creation of the First Bank of the United States in 1791. James Madison figured out he needed another national bank in 1816. After that, a lack of control over the banking system prompted Lincoln to create the Nation Bank System during the Civil War. That currency was backed by Union bonds, not gold. A short lived liquidity crisis in 1907 prompted the Federal Reserve.

The only time you had all of the U.S. Government money represented by gold and silver was from 1795 to 1861. It usually didn’t work out very well. There were chronic liquidity problems. All the gold standard does for you is limit the money supply. It sounds great to monetary conservatives, but historically it’s caused much more harm than good.

 

For which there was no constitutional authority.

For which there was no constitutional authority.

For which there was no constitutional authority.

Gold and silver have been money for multiple thousands of years. What is their weakness again?

 

A severely restricted money supply which would result in a severe economic depression which be further enhanced by the end of the U.S. dollar as the prime international currency. It would not be pretty. One of the contributing factors to the Panic of 1837 was Jackson’s specie circulator which pulled gold out of the important eastern banking system, if you want a historical example. Andrew Jackson was a hard money man. His successor, Martin Van Buren, paid the political price along with the American people in a far worse way.

 

I'm still looking for a reference to something in the constitution

 

And not to get off the constitutional issue, but what exactly is the correct amount of money?

 

I can’t help you with constructional issues. Good luck with winning a court case that gets the U.S. on the Gold Standard. They would rather make Trump president.

As for the correct amount of money (money supply) that’s the “64 billion dollar question.” The Federal Reserve has fought with that issue since it was opened. The Fed has caused inflation with too much money in circulation and caused busts with too little.

During the Obama and Trump administrations were in power, it looked like there was too much money in circulation, but the number of times a dollar was spent in the year (velocity of money) slowed down, well below when I was in undergraduate school, so there was no massive inflation. Biden screwed is up with his excessive spending.

 

What if I said that ANY quantity of money is the correct amount of money?

 

You would be wrong, but the Democrats would like to have people thinking like that way. The progressive theory is that inflation control is 100% the responsibility of the Federal Reserve. Congress and the president have NO RESPONSIBILITY for inflation because all of their spending is necessary for the good of humanity. YEA RIGHT!

 

How could a given quantity of money be the wrong quantity?

 

If there is too much money in circulation it will cause inflation, or if there is too little money, it will cause deflation or a recession or depression. Overall deflection is an indicator that the economy is really in the tank. Combatting deflation and increasing prices and wages was a big priority for the New Deal in the 1930s. The New Deal prosecuted companies for charging lower than prescribed prices in the ‘30s. That was what the NRA, the National Recovery Act, was about. The Supreme Court declared it unconstitutional, which got FDR’s panties in a wad. The progressives had a fit, and FDR tried to pack the Supreme Court.

Don’t ask me what the right amount of money is. If I could answer that one, I would be a long way toward getting a PhD in economics.

 

Inflation would occur if the quantity of money CHANGES. I'm talking about a stable money supply. In a stable money supply, any quantity of money works.

 

The money supply needs to grow as the economy grows. Otherwise a fixed stock of money will inhibit economic growth.

 

How?

 

Its a private banking cartel which managed to trick the Congress to grant them authority to print money for their banks. That being the case it should probably be abolished whether or not its Constitutional. The Constitution does not ask for such institution, but it does say

Article I, Section 8, Clause 5: The Congress shall have Power . . . To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

So, why was that power given to the private sector in guise of being a Federal agency?

 

More goods, same number of dollars. To remain stable, the velocity of the money must increase or increase the money supply. Milton Friedman called for this many years ago.

 

Or prices adjust. No need to increase the money supply..

 

I am not going around and around this. Money is like engine oil. If you overfill the crankcase, the seals burst (inflation). If you have too little oil, the parts rub together and the engine can seize (recession/depression). The exact five quarts for that engine is ideal. Engines, don’t grow, but if they did, they might need more oil.

Not increasing the money supply when it is warranted can be as bad as increasing it too much. The Panic of 1893 could have been made less severe, if the Federal Government had eased the money crunch caused by the flow of gold out of the government vaults. Everybody, including President Grover Cleveland believed in the gold standard so they didn’t.

 

Just because somehing isnt spelled out word for word in the constutition doesnt make it no legal.

 

No.

Just because it's entrenched and expedient doesn't make it Constitutional.

What you're really arguing for is inflation.

But, it AbsaByGodLutely IS spelled out in the Constitution, see Pro_Line's post #17.

 

Congress passing legislation for which is has no legitimate constitutiona authority IS illegal.

 

It is part of the standards doctrine in the US Constitution, Article 1, Section 8, which states "fix the standard of weights and measurement." This has been interpreted by the US Supreme Court to allow the establishment of the Dollar, the use of money as a uniform standard. And it would be hard if one had to exchange a chicken for some canned goods, now wouldn't it?

The US Constitution also says that Congress shall have the power to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. To coin money is not a literal interpretation here. But at the time of the Constitution was written, most people accepted coins as money. As we progressed, we changed to the paper dollar, or fiat money as you call it. And if you look at the history of fiat money, the first use was actually in China, over 1000 years ago. The value of paper money was that people could not shave off the coins, which was illegal at that time, and to pass the coins off less than what they were actually worth. But that is within the US Constitution. And no person who has challenged the use of fiat money legally in the courts has won in the US. Not even SCOTUS will agree with you here.

 

You are trying to take the US Constitution quite literally here. It is the same with the Bible and certain Christians who take the book quite literally, like the earth is only 6000 years old for instance. That's an anology in case you are wondering.