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Who’s Afraid of America’s Constitution?

By from the March 2011 issue

Anyone, it appears, who would be driven up the wall by a reading of its enumerated powers. 

When historians look back on the predicament of American liberalism, no doubt they will regard with amazement the fracas that broke out when it became clear that the House of Representatives would open the 112th Congress with a reading of the United States Constitution. The hoots of derision, the outrage, the keening were such that one might have supposed a plan had been hatched for a reading of… well, it’s hard to think of what else could have ignited such a panic among liberals save the laws brought down from Sinai.

It is true that the plan to read the Constitution had been hatched in the wake of an election that was electrified by a Tea Party movement that had sought, above all, a revival of constitutional fundamentalism. Yet one might have expected the idea to be quickly embraced by the politicians and intelligentsia in the liberal camp. Liberals, after all, had won or secured many of their most famous victories — from the minimum wage to school integration to racial preferences in college admissions to abortion rights — by wielding the very text that the Congress would be reciting.

Yet instead of a joint celebration of our patriotic parchment, the plan to read its 8,000 or so words ignited in the liberal camp an outburst of sneering aimed not just at the conservatives but at the Constitution itself. “A ghastly waste of time” is how it was characterized by the New York Times in an editorial dripping with derision. A blogger for the Washington Post, Ezra Klein, seemed to suggest in a television appearance that the Constitution was confusing because it was written more than a century ago and “has no binding power.” In print, he quickly backpedalled to acknowledge that, in fact, it is binding. At the online magazine Salon, the headline over Michael Lind’s piece declared, “Let’s stop pretending the Constitution is sacred.”

“Freedom rests on a culture of constitutionalism, not a particular document,” the headline went on to say. To illustrate the piece, Salon ran a photograph identified as having been snapped in 2009 in Pleasanton, California, at a Tax Day Tea Party. It showed a person holding aloft a sign that said:

I Believe in the

CONSTITUTION

I’M A

‘Right-Wing Extremist’

David Corn, under the title “The House GOP Weaponizes the Constitution,” warned at PoliticsDaily.com that the Founding Fathers “wouldn’t cotton to lawmakers exploiting their well-crafted document and turning it into hollow political ammo.” Once the reading actually took place, it was set down in the Daily Kos as the “most boring circus ever.”

So what’s to account for this eruption of hostility and angst on the part of our most vocal liberals to our most important secular law? The answer, it is becoming ever more clear, is that the Constitution threatens the whole liberal project — and at a crucial time. I don’t mean to suggest that the Constitution is partisan; it’s neither a Republican nor a Democratic document. But the “change” that President Obama was referring to in his famous campaign cry turns out to be a vast expansion of government and of federal power. The only place the federal government gets any of its powers is in the Constitution. And in its plain language the Constitution grants the federal government only limited powers.

ONE OF THE WAYS the Founders limited the powers of Congress was that they enumerated them. They listed them carefully, one by one. And — the crafty critters — they did so in writing. Most of these enumerated powers are in Article I. It is the article that establishes the Congress and its two cameras, the Senate and the House. The actual enumeration of the powers is in Section 8. The more one reads that list and the powers that are granted, here and there, at other spots in the Constitution, the more it is clear how shrewd the decision to enumerate, and write down, the powers being granted really is.

This fact is marked powerfully in the Bill of Rights, which, in the 10th Amendment, so pointedly reserves all powers not specifically granted to the federal government, or prohibited to the states, to the states themselves or to the people. The way this has all been done sets up in our time a perfect storm of constitutional issues, on everything from Obamacare, to the war, to same-gender marriage, to the regulation of the Internet, to the financing of education, to immigration, to birthright citizenship, and even to — dast one mention it? — the question of who gets to decide whether a candidate seeking access to the presidential ballot can be required by a state to present a birth certificate.

A lot of elements of the Constitution are going to come into play in the coming storm, but the most exciting ground opening before us is enumerated powers. No sooner had America revoked the Democrats’ mandate in the House than the speaker-to-be, John Boehner, announced that henceforth all bills would require a citation of where in the Constitution the power was granted to Congress to do what it was being asked to do. The idea is to force the Congress to take a harder look at what it is doing to see where in the 20 or so powers enumerated in Article 1, Section 8, it is getting its authority.

My prediction is that four powers are the ones to watch: the power to tax; the power to regulate commerce among the several states; the power to establish “an uniform rule of naturalization”; and — your author’s favorite — the power to coin money and regulate its value. Potentially historic contests involving taxing, regulating interstate commerce, and controlling immigration are already moving through the courts. It is hard to predict how the fourth of those enumerated powers might erupt in controversy, but with the dollar having collapsed, at one point recently, to less than a 1,400th of an ounce of gold it is not hard to imagine the courts at some point testing whether our national currency has to be accepted as legal tender and even to take a new look at whether the Federal Reserve is constitutional.

THE POWER TO TAX hove into view as a thunderhead during the climactic weeks of the debate in the Senate over Obamacare. The Republicans, led by Senators John Ensign of Nevada and Jim DeMint of South Carolina, raised a rare, constitutional point of order, demanding to know where in the Constitution Congress could find the power to require someone to purchase health insurance. The query was quickly brushed aside by the Democrats, whose spokesman, Max Baucus, declared that one of the places they had the authority was over what is called the General Welfare Clause.

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About the Author

Seth Lipsky, founding editor of the New York Sun, is the author of The Citizen’s Constitution: An Annotated Guide (Basic Books).

Letter to the Editor View all comments (55) |

Brian Mc| 3.31.11 @ 7:38AM

There is a huge storm brewing and it will be found that its center is the decision coming in the Supreme Court over Obomacare. I, for one, do not hold out much hope for liberty concerning this point. A miracle is required.

Hillel| 3.31.11 @ 7:47AM

FDR was glad the NIRA was killed as it stood in the way of recovery,but he wanted the Supreme Court cowed. Thus "A switch in time saved nine". Will we end up with an Obama court that will keep us in bondage?

Dan Hirsch| 3.31.11 @ 8:11AM

In 2003 on PUBLIC radio in Chicago New Democrat candidate Barry Obama bitched, complained, whined about the fact that our Constitution was restrictive of the government's ability to act. He complained that it only listed 'negative rights' for the GOVERNMENT.

His idea of change has ALWAYS been the destruction of the fundamental contract of government by the consent of the people. I knew this in 2007 and told as many as I could at that time. The usual response, "Oh, he doesn't really mean that." Listen to Bill O'Reilly-he still thinks Obama doesn't 'mean it.'

Hogwash - this is intentional!

Don't tread on me...

Walking Horse| 3.31.11 @ 9:55AM

"One of the common failings among honorable people is a failure to appreciate how thoroughly dishonorable some other people can be, and how dangerous it is to trust them."
-- Thomas Sowell

LarryK| 3.31.11 @ 10:53AM

Your quote amended.
One of the common failings among honorable people is a failure to appreciate how thoroughly dishonorable the "honorable" people really are."

NedB| 3.31.11 @ 9:11AM

"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."
-- Thomas Jefferson
Are we approaching this point spoken of by Thomas Jefferson?

Ret. Marine| 3.31.11 @ 9:52AM

I for one certainly hope so, Not that I want to see our Nation dissolved into separate entities but it will separate the wheat from the chafed. That my patriotic friend is long overdue.

YeloStalyn| 3.31.11 @ 11:53AM

A TX congressional candidate from the Tea Party was staging a strong campaign last season until he mentioned this and that the citizens MUST keep this option on the table at all times in order to ensure their liberty. After he brought up Jefferson he was labled an extremist who promoted violence. His candidacy went into freefall and he lost... sadly.
He was the black gentleman who was on Glen Beck a number of times. He was a pastor in a church in Texas. Great guy... hated to see how he was treated for espousing truth. A real dark day for America in my opinion.

Len| 3.31.11 @ 9:30AM

Mr. Lipsky, I thank you for raising the point concerning honest money and the federal reserve. If enough people read history and understood how the banks have influenced government to use it for their benefit, how we have gone to war because of the banks, how they gave the Great Depression (along with meddling by Hoover and FDR), how the federal reserve is actually a tool for the wealthy to control the economy and steal from the middle class through legalized counterfeiting then I think people would be in the streets...

There is also another way that we can push toward honest money and that is through the states...Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts..

State governments can legislate that any payments to them be in gold and/or silver. Were this to happen people would start learning what real money is and begin to wonder what has been going in America.

Ken in Tyler| 3.31.11 @ 9:36AM

An excellent article and one which emphasizes my long-held position that we need not tinker with what the Founders wrote either by Amendment or Constitutional Convention. What is essential is a return to the Constitution as it was originally understood when ratified.
God alone knows what was in the minds of the black-robed fools who have twisted and distorted our marvelous social contract but the outcome of their meddling has brought us to the end of Liberty and the collapse of the economy.
Personally, I think we are beyond the tipping point because the entrenched bureaucracy and redistribution recipients will not transform back into independent thinkers unless forced to do so. But there is always hope...the real hope of the promise in II Chron 7:14.

Len| 3.31.11 @ 9:41AM

BTW, where was that pesky US constitution when Boehner was giving us NCLB, among others? I will say this again, so many conservatives claim to be constitutional conservatives, yet will not support the ONE man in the congress who has consistently supported the USC against the tide of both parties, Ron Paul. Take that for what you will.

YeloStalyn| 3.31.11 @ 12:01PM

I think, and more accurately HOPE, that the Tea Party movement has brought many people out of the woodwork to start to question what we have been doing.
Republicans long have counted on conservatives. And conservatives have for some time described themselves as Republicans. But if you listne you will notice more and more people who traditionally would call themselves Republicans quickly denounce such a title and stake their claim as conservative and/or libertarian. Even Sean Hannity and Glenn Beck do this. They do not count themselves as Republicans.
It is high time for a culling in the GOP. We should leave people like Romney and Boehner, Snow and Collins battered and bleeding on the side of the political street left with nothign left to cling to other than one of the two groups which they truely belong... the statists/socialists or the corrupt and immoral.

John Navratil| 3.31.11 @ 9:57AM

While I generally agree with the entirety of this article, I am left a bit dissatisfied with honest money argument. As Friedman stated, every dollar spent by the government is a tax, regardless of how it is acquired. The value of the dollar against gold is, no doubt, affected by U.S. fiscal and monetary policy, but also by speculation. The judges were paid in a common currency which has the benefit of a parity with other dollars in the economy and the shared cost of the policies being foisted upon the economy by our government. They might well have been paid the $350,000 honest money mentioned in the article and taxed the $170,000, or so, directly. The argument evaporates, but the bad government policies remain.

Len| 3.31.11 @ 10:04AM

John then you don't understand what money is.

John Navratil| 3.31.11 @ 10:49AM

Len,

'splain it to me then.

Len| 3.31.11 @ 11:30AM

Let's just deal with the your argument that it would end up being a tax. That would be true were it only the government that was the issuer of legal tender (which BTW I don't believe should be a power of a government), but when it is a private entity that is issuing the paper and it has no competition, then that private entity is able to profit from controlling the issuance and also the first receivers. They are the first to have this new issuance at pre-inflation worth which means they can use it before the inevitable inflation hits the rest of us and our savings and property has lessened in value.

So it's not just a tax, but wealth redistribution in an upward manner, or legalized theft.

--------------------------------------------------------------On another point, would the federal government have as much ability to conduct those policies if they weren't enabled by all the accounting hijinks between them and the FED?

John Navratil| 3.31.11 @ 12:31PM

Len,

Money is a medium of exchange. Almost anything can be used for money so long as it is not easily counterfeited. Gold can be used but has practical difficulties in that it can be adulterated. A cheaply produced paper bill with counterfeit protection methods (the greenback) is much more practical.

The value of money is what you can exchange it for. Today you get less gold for a buck, but you get more house. Tomorrow that may change. Stable money is desirable not because it will always buy you the same amount of any given good, but that its overall value remains steady over time. How do you measure that value? Gold has been a standard over the years, but that is not without problems. Witness the wild commodity price fluctuations in the early 20th century U.S. when the dollar was on the gold standard. There is no panacea.

In the ideal world, there would be no inflation or deflation. Of the two, however, deflation is much worse than inflation as the incentive to spend is gone for anything but basic needs. Why buy that car today, when I can get it cheaper next week? For this reason, monetary policy errs on the side of modest inflation.

High inflation is a problem because the value of cash over time diminishes. Real property does not. Gold and houses both increase in price. Capital formation is discouraged and future investment suffers. This is the problem with Obama's policies.

I agree with you that, idealy, the government should not be the issuer of legal tender. That should be the province of banks. Banks are where money is created; it can be created nowhere else. The upside is that banks which do not pay their depositors in stable money lose their depositors to those that do. The downside is pricing the exchange rates between banks. Inflation of currency in such a scenario is relf-regulating; there is no inevitable inflation.

The government is not so constrained. The Fed, in principal, is supposed to be that constraint, but it is given the contradictory mandate "to promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates." That's a lot to concentrate in one place.

I take issue with your assessment that savings AND property have lessened in value - actually nominal dollar denominated value - due to inflation. Your savings do, but your real property appreciates. This is a transfer of wealth from to holding cash to those holding debt and has nothing to do with "wealth redistribution in an upward manner". The only "legalized theft" argument is that, as a holder of debt, the government benefits from inflation by not having to raise taxes. That is precisely why Friedman made the statement he did.

I can criticize Obama's monetary policies at the same time as I criticize Lipsky's "honest money" argument. If, in the end, the judges have the same amount of money in their wallet, it doesn't matter if the tax is direct or indirect through inflation.

Len| 3.31.11 @ 1:17PM

John, money is more than a medium of exchange. Real money is something that has intrinsic value in of itself, and this is why it can be used for indirect exchange. This is why gold among other commodities became used. I am not going to give you 5 bushels of wheat for 20 pieces of paper, unless that paper itself ultimately can be exchanged for something of value.

Gold can be adulterated? So can any product. I can always throw in cheap beef along with higher quality beef and charge the higher price.What is the mass printing of unsupported dollars. Sure gold can be adulterated, but in a free market those doing so can be prosecuted for fraud.

We had a gold-exchange standard, not a gold standard, which still allows for banks to issue unredeemable notes, not to mention the practice of fractional reserve banking whereby no real money is being loaned, yet the banks profit.

Deflation is bad? No, that's an old canard that gets tossed around to support the FED's inflation. In fact deflation means that the consumer is getting more bang for their buck, so to speak. Deflation in fact greatly rewards the savers and has nothing to do with depressions. Once the savers start spending, then the economy will be stimulated. I am guessing you are going by the unproven and indeed refuted claim that depressions are the result of deflation.

As for upward wealth redistribution, if I can buy something for 100K with money given to me before inflation occurs as a result of the printing of money, but that person who was given the 100k due to inflation only has the purchasing power of 90K, how is that not upward wealth redistribution when it the power of printing money is confined to a select entity? When corporations can have their mistakes forgiven through that printed money being given to them and not everyone?

I am going to suggest that rather than looking to Friedman who was monetarist, you read Mises or Rothbard. An easy read by Rothbard is What has government done with our money, a harder read (oy, so dry) is Mises' Theory of Money and Credit.

John Navratil| 3.31.11 @ 1:16PM

I should clarify that real property appreciates NOMINALLY, not that its intrinsic value is changed. However, it's value does not drop, in real terms, due to inflation.

minuteman| 3.31.11 @ 10:23AM

The leftists need to be afraid, very afraid, of the day when the honorable military sees them crossing the line that causes every officer to have to say to themselves, "I shall live up to my oath to defend this document". That's how the Constitution is. And to say that the oath is superseded by civilian control would be the same legal structure the Nuremburg defense was based upon.

minuteman| 3.31.11 @ 10:24AM

Correct line to read: "That's how important the Constitution is."

Stefan Stackhouse| 3.31.11 @ 10:23AM

There are huge swaths of federal activity - education, health care, housing, just to name a few - that really should be devolved to the states. It is indeed questionable whether these things truly fall under the limited enumerated powers in the constitution. It has also been really, really stupid for congress to load its plate so full with all of these things. The truth is that any unit of government can really only do a few things well. When too many things are on the plate, then government tends to do none of them well, including the things it could do well if only it were more focused. The founders knew this, which is exactly why they did enumerate the powers. They wanted the congress to only focus on the few important things that it really did have to do.

YeloStalyn| 3.31.11 @ 12:03PM

But by overloading the "plate" is how many politicians do very well the only thing they desire to do... control and manipulate.

Gary| 3.31.11 @ 11:17AM

Excellent article...

"Can the Court cast aside precedent to decide such a sweeping issue as legal tender?"

It certainly can. Didn't it just sweep aside 200 years of bankruptcy precedent to wipe out the holders of GM bonds?

It's not very reassuring that we, the people, can not trust this court and these justices. Judges are our last line of defense against those who, for unexplained reasons, prefer tyranny over individual liberty.

Walking Horse| 3.31.11 @ 12:45PM

The judiciary is no longer a reliable defense, as it has been as corrupted as the rest of the Federal government. The last line of defense are the sovereign States. The States are the signatories to the contract that formed the United States, and the Federal government is a creature of that contract. They have the power if they simply choose to take it.

Reasonable people will rightly observe that is a thin reed upon which to cling. Failing that, we have an armed populace ..

fwb| 3.31.11 @ 11:39AM

Like many people, those who read the "general Welfare" clause always leave out the object. The clause ends with the direct object of the general Welfare. The direct object is the body-politic known as "the United States". This is not individuals. This is not the several States. This is solely and explicitly the entity created by the Constitution, the United States. The feds cannot constitutionally spend for the needs of individuals. The feds cannot constitutionally spend for the needs of any of the States. The feds cannot constitutionally spend for foreign aid. The feds can only spend on objects that are of the general Welfare of the political body known as the United States.

And neither Congress nor the President nor the Courts may decide what the words, "genreal Welfare", mean simply because IF any body created by the Constitution can define one word, that body can define all the words in any manner wished. Should that be accepted as proper those in power can redefine each and every part of the Constitution and the Constitution becomes moot.

Oh right, they already did and it already has.

We're so screwed.

VBMax| 3.31.11 @ 11:57AM

You make some great points

YeloStalyn| 3.31.11 @ 12:05PM

You nailed it.

George S| 3.31.11 @ 1:34PM

Can the Congress spend money to build a wall on the border with Mexico? That would be serving the general welfare of the United States as the Constitution intends. But who is doing the defining? Certainly, pro-amnesty groups will say that wall is not in the general welfare of the US; you and I will see it as the very definition of the term. So, who ultimately makes the determination? If we are not allowed to politically define General Welfare (or the Courts must stay silent), then the clause has no purpose. All it means is that Congress cannot raise revenue for purposes such as building monuments to themselves. But Congress, over the years, justified transfer of wealth via the tax code as general welfare, intentionally ignoring the Constitution. The sad thing is that the general public agreed, leading the way to raiding the Treasury. That is the root of our problem; not six little words.

Habu| 3.31.11 @ 11:40AM

If the liberal, Marxists oriented politicians and their following in our country have abandoned the rule of law as outlined in the Constitution (which they have since FDR's communist infiltrated government) then it is with crystal clarity that it is up to those of us who revere the form of government we have, our sacred Republic, that we will have to make a civil war against them. The charges against King George were less egregious than the liberal’s subversive actions against this nation.

Make no mistake, I am not proposing a verbal debate but a bloody, killing fight that will rid this country of those self-professed individuals who do not believe in our Constitution, for in doing so they are making a sub rosa attack on our government and our Constitution in an effort to dismantle it. This we cannot allow to stand. It is our moral responsibility to dispatch them. They are terrorists of the most cunning type, using the institutions they hate to destroy them with increasingly corrosive policies they know will weaken the structure of the Constitution. If this is their position, and the past seventy years have given us a clear window through which to view their positions and tactics then the tocsin has already sounded that the Republic is in peril from within and war is the only antiseptic to heal the wound. So let it begin.

Len| 3.31.11 @ 12:08PM

For anyone interested, here is Ron Paul answering a democrat as to why welfare is bad and actually helps the corporations....

http://www.youtube.com/watch?v.....ture=feedu

YeloStalyn| 3.31.11 @ 12:09PM

It is only by virtue of staking one's blood and life on the ideals one beleives in that one can say, with any real honesty, that he does believe in them.

I would love to see how many people who currently suck at the tit of the government would be willing to defend, with their life, their "entitlement."

I would wager that they would rise up, quickly, and quickly fade away when the first shots ring out by those who declare, "NO MORE!"

Sadly... there is no means to organize such a movement with safety. No way to profess it with a real intent without jack boots quickly crushing it before the movement can gain size or respect.

Len| 3.31.11 @ 12:43PM

Yelo, I think that unfortunately you are going to get your wish concerning entitlement junkies. Who is it that has been protesting about spending cuts? When the economy gets worse and there is no more accounting tricks, no more money that be printed, no more municipal bonds being bought, cities and states declaring bankruptcy, or the dollar no longer being the World reserve currency, there will be riots, and there will be large, large mobs of people on food marches that will wreak much destruction.

uncle curmudgeon| 3.31.11 @ 12:38PM

Excelent artice, Mr. Lipsky. First rule of politics: follow the money.

Habu| 3.31.11 @ 1:06PM

YeloStalyn| 3.31.11 @ 12:09PM

 You are correct. Should a substantial movement, composed of the common citizenry armed themselves to rid the nation of the fifth columnists who wave the Constitution not as man’s best hope but as a curtain behind which they blot their sinister demolition then the jack booted "enforcers" of the power elite would crush such a movement. Perhaps.

But events are rapidly forming whereby a spontaneous uprising could occur, especially in the age of the “flash mob”, communications being what it is today.  I read enough and talk to enough people from coast to coast who feel similar visceral hatred for the “left”, and although they are not necessarily sophisticated citizens they intuitively understand that things are not as they should be. The polls consistently bear this truth.

Additionally the “enforcers “ took an oath to support the Constitution, not a maybe-US-citizen-poltroon-president. It is highly problematic that in a large enough “flash” moment they would not follow an illegal order, which they are obligated to do.  That is the way of civil wars. My wonder is what the “spark” will be? A reelection of our current presidential  poseur? The collapse of our financial structure, which would at minimum spark “bread riots” within days?Many are simply waiting for as I said, the war tocsin has already sounded and the people are growing restless.

And make no mistake, the “authorities” are reading this right now, but what worth do you put on the Constitution if that knowledge would scare you from it's defense?

peteywheatsraw| 4.3.11 @ 11:21AM

There are some folks out there (like myself) who have taken the oath in thier lives. These people are currentlly police officers, military and others who have pledged to defend the constitution and will not follow orders to attack the mobs fighting for the constitution. They are called the oath keepers and have a website. Check them out. So not all orders will be obeyed. BTW i came here from England and am a proud U.S. citizen , i demand nothing from my country (except freedom and liberty) infact i served proudly under the steady hand of the Gipper. Lets restore this nation to it's founding principles.

Len| 3.31.11 @ 1:31PM

Mises' Theory of Money and Credit as a PDF...

http://mises.org/books/tmc.pdf

Conservative View| 3.31.11 @ 1:35PM

Walking Horse:
You are absolutely right. The contract is with the States, and there in must lie the great fear of the Supreme Court. Obamacare, and several other liberal programs like medicade and unemployment take monies directly out of State budgets. The several states are broke or just about broke. They can do only so much through regulating their public unions. It will soon reach the point where the States to perserve their funds must constrain the Federal Government.

I am certain that in the back of the minds of every member of SCOTUS there is the thought that to grant unlimited power to the Federal Goverment through an acceptance of Obamacare is to invite a revolution amongst the States. If the States revolt, what mischief might they do the court? My guess is, quite a lot.

So, all that remains, really, if for the States to grow a set, to demand a Constitional Convention as laid out in the Constitution. In that convention they might address the issues of the Commerce clause, general welfair, the appointment of Federal Judges, and the election of Senators. No liberal in America would want such a convention to take place, it might well be that no State in our Country could long survive without it.

John Navratil| 3.31.11 @ 2:14PM

Len,

(Something has change on the site and I cannot reply under your message of 1:17PM)

I had to dust off my old copy of von Mises' Theory of Money and Credit (it's been almost thirty years). In the first page of Chapter One von Mises says "The function of money is to facilitate the business of the market by acting as a common medium of exchange." Specifically, it facilitates indirect transactions. That is its value. Perhaps I am picking nits, but it doesn't have to have intrinsic value in and of itself or the Fed wouldn't burn old notes. I think we are in agreement that the government devaluation of that dollar is not good. However, we protect ourselves from that devaluation by charging varying rates of interest for the lending and borrowing of the currency in response to the monetary policies of the government. During an inflationary period you can put your cash into a CD and receive higher interest rates precisely to preserve that asset. Of course if the economy is in the tank and no one wants your cash you have a problem (stagflation in the 70's).

I think you are being overly picayune to point of the difference between a gold standard and a gold-exchange standard as if there were a whit of difference. Correct me if I am wrong, but wasn't it actually a "gold bullion" standard which we were on, after all at $35/ounce, we could not own gold which was used to stabilize exchange rates between countries.

And yes, deflation IS bad; any deviation from a stable currency is an inefficiency. I am not arguing that deflations necessarily result in depressions. As you point out, deflation rewards savers and punishes debtors. So who borrows money during a deflationary period to expand a plant when consumers are dis-incentivized from purchasing in anticipation of a cheaper price tomorrow? On the other hand, during the Weimar hyper-inflation people were taking their wages and spending them immediately to avoid paying higher prices only an hour or two later. It's worth of note that inflation tends drive interest rates higher and idle cash into the banks, but the opposite behaviour of negative interest rates to counter deflation doesn't exist. What bank would you put your money in which promised to give you less in the future. You put your money in the mattress where is has absolutely no economic benefit. Call it a canard if you like, but it would be more rewarding, to me at least, if you explained why I am wrong.

Inflation is, contra deflation, a transfer of wealth from savers to debtors. You argue that inflation rewards the rich because they control the printing of money. I'm sorry, you can argue that crony capitalism is bad (I agree) and the rent seeking results in market diseconomies (I agree), but the idea that the few connected rich control the printing presses is not something I have any evidence to support. Perhaps you do.

Thanks for the reading suggestion. Might I suggest Thomas Sowell's "Basic Economics".

Nancy in NC| 3.31.11 @ 3:11PM

Seeing the disdain the left and most Dims have for the Constitution, how do they balance the fact they swear to uphold and defend it? Hypocritical, ya think?

Len| 3.31.11 @ 3:30PM

John you are quoting Mises and then adding your own interpretation of that. It may not be intentional, but it nonetheless results in distorting what Mises was conveying. The basis of his book is that money came to be because it was something of value that could be exchanged, but you managed with your commentary out of context to take his words and use them to favor your position.

--------------------------------------------------------------

but the idea that the few connected rich control the printing presses is not something I have any evidence to support.

John it is happening right in front of us, how can you say there is no evidence? You do realize that the FED made a profit, that first receivers are given new money at rates so low as to not be rates, that then use that money to increase their wealth? If someone can just go around printing money and not actually labor and produce something to exchange how is that not redistribution of wealth?

Why do think that the Morgan and Rockefeller interests pushed for the Federal Reserve in the first place? Sheer benevolence, or the ability to manipulate the economy in their favor. There is never a need to print more money, true money is something that only occurs as a result of labor, such as gold, tobacco, furs, whatever, and that then can be used with others in exchange. Somehow you seem to think that someone can magically make something up, call it money and that others will just go along with it. The only reason that the paper dollar we use now can be used (not for much longer though), is that has it's origin as a claim to real money, gold. The dollar was merely a name for a certain weight of gold, but as people came to accept that paper claim or receipt then it was possible to move away from actual gold, and NOT ACTUALLY produce money, other than through printing it, and coupled with fractional reserve banking where money is not actually given, YES, of course the wealthy are using monopolistic grants of privilege to profit at our expense, and yes they control the printing presses. Do you seriously think that the reserves boards are chosen on the basis of anything other than their willingness to continue to the system?

LiveFreeOrDie | 3.31.11 @ 3:34PM

http://mises.org/

Good source.

Habu| 3.31.11 @ 4:38PM

Nancy in NC

It's called lying.
All the great tyrants and their minions have used it as a tool and with great effectiveness. WIthin their cadres I'm sure they talk of the Constitution with total distain while feeding their constituencies simply some criticsm of the document but knowing they can't go too far because they need some of the "useful idiots" in the middle who haven't aclue they're being played.

John Navratil| 3.31.11 @ 4:49PM

Len,

(Still cannot seem to reply to you directly.)

Money is a scrip. It is a measure of what you have contributed. If it had intrinsic value all transactions would be direct. The whole purpose was to get away from a barter society. If it had intrinsic value, the government would not be able to devalue it. It seems we have come full-circle on this one with no agreement.

As to the issue of evidence that the rich control the printing presses, you will have to take my word that I do not see such evidence. Perhaps I am blind. Perhaps I am deluded. Money is created through the sale of assets (government bonds, treasury bills sold at auction or other assets such as foreign currency holdings). The actual printing of physical notes and coins is barely related to this activity and only done to support the relatively limited cash transactions required on a personal and day-to-day basis. The requirement for a stable currency which we both seem to desire depends on the amount of money (M2).

Were one to tie the value of the dollar to gold, would one be bound to limit the number of dollars to the gold on hand? All the gold every mined in history is only a few trillion dollars. What about other commodities which are produced? Is there no other wealth than gold? Does the mining of gold devalue the dollar? This is precisely what led to wild commodity price swings in the run-up to the depression.

You state that true money (and by that, I think you mean wealth) is only the result of labor. Was the invention of the computer not wealth increasing. If I go to my clients and devise a method which improves his quality control or (Marx redux) create a machine which permits him to increase output without hiring, did I not create wealth? What should that do to the value of the dollar in the absence of a change in gold reserves?

In history the paper note as a certificate redeemable for a physical commodity gold established the value of the note. You can do the same thing today by buying commodities or even commodity futures. Is the paper valueless because it is not backed by gold? No! This is no defence of current administration policy or any action by Bernanke, but a paper backed the wealth of the U.S. economy is as valuable as one backed by gold.

Where I think we will come to agreement again is that a note backed by the "full faith and credit" of the U.S. government is piffle when that "full faith and credit" is pissed away. Gold is better than a promise, but it is not up to the task.

You close with: "YES, of course the wealthy are using monopolistic grants of privilege to profit at our expense, and yes they control the printing presses. Do you seriously think that the reserves boards are chosen on the basis of anything other than their willingness to continue to the system?" If you believe this, fine, but you can hedge. Buy the yuan. Buy gold. Buy oil futures. All these options are available if you think the dollar is circling the drain.

Habu| 3.31.11 @ 5:00PM

Some of you are familiar with the name Morris Dees. He runs The Souther Poverty Law Center which purports to aid "victims" of discrimination and to identify groups that promote "hate". He is a bona fide "hero" of the left.

You would be, I am sure, interested to know that the von Mises org is on Dees list. Although now moved to a more benign "hate" area it was for years simply in a long alphabetical listing of" "hate" organizations.
Dees is a notorious leftest. take a look:

http://tinyurl.com/46g6krd

Amazing.

Len| 3.31.11 @ 6:03PM

John all your fallacies have been dealt with by Mises and Rothbard, but this one line here has so many by itself I will deal with it......Money is a scrip. It is a measure of what you have contributed. If it had intrinsic value all transactions would be direct.

1)If it had intrinsic value all transactions would be direct.

You apparently don't understand what indirect exchange is, and why it is necessary. If I have 50 bushels of wheat, it is difficult for me to transport them all, and it is not guaranteed that someone else will want or need them, so this makes direct exchange difficult or wasteful. So then how do I get 30 pounds of butter if the butter owner doesn't want or need the wheat I have produced? I need to have something else that butter owner will accept for those 30 pounds of butter, something that he says is of equal value. So the butter owner must place both a value on his butter and something else. Likely he doesn't value my wheat as he himself can also produce that, so there must something that we both hold as of having value to use as exchange, and whatever that is, is money. Money is that commodity that someone produced through labor that has common value ( and is easily transportable and divisible) to enough parties that they will be willing to use it to conduct exchange.

Now let's say that in lieu of even gold, to make matters easier, someone credible enough starts issuing receipts for gold (or whatever) that someone has warehoused with them (banking), and that people take these receipts with the confidence that they can exchange them at any time for gold. So at this point there is the proper balance of receipts for gold. But hey, someone else comes along and prints more of these receipts. What has happened? That person has now counterfeited gold receipts and can profit through using the accepted receipts with others without having labored, or at least other than through counterfeiting the receipts(but that labor has, in your words, contributed nothing). Through this he has profited from other people's labor and redistributed wealth to himself.

THIS IS WHAT THE FED DOES!!!!!!!!

Every time they print money they are printing false receipts, these false receipts dilute our labor, and allow those first using these false receipts to participate in the economy at our eventual expense, thus inflation.

If you don't get this, and you certainly seem intelligent, then yes you are blind, or perhaps have too much mis-education too properly understand economics.

You dusted off The Theory of Money and Credit by Mises? I suggest you read it through.

I was going to go on, but honestly I don't know whether this is productive and how receptive you are to what I'm saying. I frankly get tired of dialogue that all too often comes to down to "that's your opinion (unspoken..you ignoramus)".

jgo| 3.31.11 @ 6:58PM

The US Constitution threatens the whole leftist project -- and at a crucial time... the 'change' that President Obama was referring to in his famous campaign cry turns out to be a vast anti-constitutional expansion of government and of federal power. The only place the federal government gets any of its powers is from the people, as set down in the Constitution. And in its plain language the Constitution delineates that the people granted the the federal government only limited powers.

The Southern Poverty Law Center promotes hate, and they try to smear non-racist thinking as being racist.

"Can the Congress spend money to build a wall on the border with Mexico?"

Actually, the important part is that the federal government is required to help defend the states from invasion and guarantee that they are republican.

"State governments can legislate that any payments to them be in gold and/or silver."

The courts buckled during the Raw Deal, allowing the federal government to set aside all contract specifications that require payment in hard metal.

John Navratil| 3.31.11 @ 9:00PM

Len,

We are confusing so many things. Scrip and counterfeit scrip. The intrinsic value of money (not wealth). I'll agree that we are not going to agree in this forum.

Come on down to Houston, I'll grill you a streak that will make you cry and we can retire with Cognac and cigars and beat each other bloody.

Resolved:
(1) Money has no intrinsic value.
(2) Money is a bet on the future.
(3) A functioning economy does not, in theory, require money but it does make accounting a lot easier.
(4) Money is not wealth.
(5) The value of money requires a stable economy and the rule of law.
(6) Bonus round: The Chicago school and the Austrian school are not in fundamental disagreement.

I bet I'll win. Deal?

Impeach Don't Wait| 3.31.11 @ 9:52PM

Sure wish I were bright enough to keep up with the discussions above. :)

Anyway,...

Just want to say, Mr. Lipsky, I love the way you write, very enlightening to a novice like me...

I believe I had read that the Commerce Clause was used to prohibit a farmer from growing crops on his own farm for his own use. But I didn't know that prior to that The Supreme Court unanimously concluded the feds didn't have the authority to regulate the Schechters' business in New York. Nor did I know that the change to the former position was due to FDR's threat to pack the court. If it is as you report, it just confirms that men will wobble under pressure sure as the sun rises. So the question: If the Court's at such risk, who will enforce the dictates of the written document? Up 'til now, none of the three branches of government are trustworthy candidates.

michigander_sandusky| 3.31.11 @ 11:26PM

I would like to thank "Ken in Tyler" for his reference to 2 Chronicles 7:14. All the political manuevering in the world is useless unless our nation recognizes its need for God. With that in mind I would add another scripture reference to ponder: Daniel 4:17.

Dee See| 4.1.11 @ 7:30AM

---MEANWHILE, as the Globalists of BOTH
parties roam unchallenged, largely unexposed,
and completely, globally, at large.

One and all, start posting crisp dignified copies
of BOTH the Constitution and the Declaration
of Independence.

DEMAND that they are prominently posted in all restaurants and cafes you patronize.

If they refuse, when possible, take your business elsewhere.

UNTIL we get that HUAC meets NUREMBERG
second chapter--------

Mike| 4.1.11 @ 11:01AM

Never forget: the (D) after their name means "Domestic enemy of the Constitution."

Richard Baker| 4.3.11 @ 11:03AM

To understand the long running argument on the value of money, I'd suggest one and all find a recording of someone giving William Jenning Bryan's "Cross of Gold" speech which he originally gave in 1896 at the Democratic National Convention in Chicago. This is a problem that we've had for some time in this country.

Christian Louboutin | 6.23.11 @ 5:49AM

It is true that the plan to read the Constitution had been hatched in the wake of an election that was electrified by a Tea Party movement that had sought, above all, a revival of constitutional fundamentalism. Yet one might have expected the idea to be quickly embraced by the politicians and intelligentsia in the liberal camp.

Creative Recreation | 8.10.11 @ 11:07PM

is good

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