Federal Reserve nominee suggests abolishing paper money

CaptHenway

Per Coin World Online:

https://www.coinworld.com/news/paper-money/2017/12/federal-reserve-appointee-wants-to-abolish-paper-money.html

SaorAlba

The person in the Executive office seems to prefer to appoint people willing to undo the mission of the departments they are appointed to. Think Betsy Devos as the Secretary of Education.

Timbuk3

!!!

gnat

More of the same thinking from the same people who brought you supply side (trickle down, job creator, and other "tax reform") economics.

Don't let people actually save money (whether in a bank account or cash), but force more money into the investment markets.

boimre1972

What will happen to strippers if this goes into effect?

rbethea

@gnat - you do realize that he is opposed by the Austrian School think tank, right?

sellitstore

This nominee's views are still very much in the minority. I expect that he will be questioned on this subject during the confirmation process. He will have to get confirmed first and then convince many others before this would even be considered. We'll see.

coinkat

Unconstitutional

uzuiwek

@coinkat said:
Unconstitutional

The general feeling for the first 80+ years of the US was that federal currency was, indeed, unconstitutional. Not sure if that's what you're getting at, but it's why we predominantly had individual bank-issued currency until the Civil War (War of 1812 and small issuances in the 1830's and 1850's aside).

coinkat

No that was not the direction I was going. The Federal Government has a Constitutional obligation to provide coinage and a currency in a form that is considered legal tender by which commerce can be undertaken. The federal government cannot rely on a currency that it does not control or authorize.

sellitstore

I don't think that the Federal Government has any constitutional obligation to provide any circulating medium. I think that they should do so, as they have been doing, under our laws but I don't believe that the Constitution mandates this.

There will be other obstacles in the way of getting rid of currency but I don't think that there is a constitutional problem. However, I'm not an expert in this area, so I'd like to hear from someone who can speak to this point with greater confidence.

gnat

@coinkat said:
The Federal Government has a Constitutional obligation to provide coinage and a currency in a form that is considered legal tender by which commerce can be undertaken. The federal government cannot rely on a currency that it does not control or authorize.

This is entirely incorrect.

The Constitution allows the Government the power to coin money (which has been interpreted to include the power to issue paper money - [see: Knox v. Lee, 79 U.S. 457 (1871) & Juilliard v. Greenman, 110 U.S. 421 (1884)]). There is no "obligation" to provide paper money.

There is simply no Constitutional, legal or other grounds for your proposition that the Federal Gov't can't relay on the Federal Reserve to regulate the currency supply. The Federal Reserve Act was enacted by Congress and its Constitutionality is really only questioned by so-called "hard money" thinkers, "Originalists" and others who really do not understand economics, economic history or what "money" really is.

uzuiwek

The real impact of the explicit allowance of the Constitution for the Federal government to coin money is that the states cannot. It was for this reason that there are no "state bank notes" - even the State Banks (Ohio, Indiana, etc.) were private concerns, chartered by the states much as any other corporation. Southern State currency was (I believe) only issued while those states were outside the Union.

coinkat

gnat

What I wrote is clearly not entirely incorrect. Instead, your commentary seems clear in that you either did not read or just do not understand what I wrote. The Judicial precedence you cite support that the Federal Government has the power to coin money which is inclusive of paper money. And that paper money in the form of notes was essentially backed by Gold or Silver or the Federal Government. So the Obligation of the Federal Government to essentially create money for commerce was clearly AFFIRMED by various Courts.

Next, I never challenged or even questioned the constitutionality of the Federal Reserve Act of 1913 or the role of the Federal Reserve Bank in issuing Federal Reserve Notes or in controlling money supply. Is it not true that the Federal Reserve Act of 1913 was adopted by Congress and signed into law by President Wilson? So would it not be reasonable to conclude that the Federal Reserve Banking System was created for the purpose of meeting the Federal Government's monetary obligation?

Your commentary is sadly misplaced. In the future, please do not create statements that I did not make and then suggest that I am entirely incorrect.

uzuiwek

I think his citations were in response to my comments above that initially there was a belief that the Federal government did not have the power to issue paper, a (reasonable) response to the bad experience of the continental currency. Obviously, Lincoln did, but I hadn't been aware of any rulings on the matter.

You're right, I don't see how the Federal Reserve got dragged into the conversation. At the same time, I do agree with gnat and Russell that an allowance doesn't constitute an obligation. Even if it did, it wouldn't surprise me if there were a reasonable argument to be made that a national currency can be made to be separate from a physical object.

coinkat

Article 1 section 8 clauses 5 and 6

uzuiwek

Right. "Shall have the power to". That's not an obligation.

coinkat

"Shall have the power to" standing alone falls well short of an obligation. But there is significantly more at stake in setting forth the foundation for governing. Article 1 Section 8 read in its totality breaths life into the purpose of government. Power was extended to Congress with the expectation to create and establish a framework for the general welfare, commerce and trade which includes coinage and currency. Reasonable minds may differ as to possible limitations to the meaning and intent of "Shall have the power to". But there remains a common theme which is the expectation set forth that Congress will act that has the appearance of an implied obligation.

sellitstore

During the nearly 100 years between the Revolutionary War and the Civil War nobody was making the argument that the Federal government needed to issue paper money in order to be in compliance with the Constitution.

Why, coinkat?

It because there is no constitutional obligation for the government to issue paper money.

The Constitution was written right at the time that all of that US Govt. Continental currency had become almost worthless. The last thing that anyone would want to put in the Constitution was the requirement of the government to issue paper money. That's why it isn't in there.

When money was needed to fight the War of 1812, Congress authorized large sums of currency to be issued. But it was all retired shortly after the end of the War. Federal currency was only to be used for a specific emergency and banks should be the entity that issued currency for everyday circulation. And that's the way it was until the Civil War.

Being from a coin background I think you are confusing the Federal Mint's continuous operations since 1792 with the reality of the history of paper money in the U.S. since the Revolutionary War. The US Government didn't issue paper money for circulation (except 1812-15) until the Civil War. There was no constitutional obligation then nor is there now.

coinkat

My involvement in this thread began with a one word response to a Federal Reserve Nominee that involved abolishing paper money. And my response was...Short and to the point... Unconstitutional

I stand by my initial position as delineated above.

I stand by my subsequent positions with respect to the implied obligation of Congress to establish a general framework for the general welfare, commerce, taxation among other implied duties including the coinage of money as set forth in Article 1 section 8 to make it happen.

For those of you who wrote that what I have written is entirely incorrect and that I am confusing the Federal Mint's continuous operations since 1792 with the reality of the history of paper money in the U.S. since the Revolutionary War, you have missed the entire premise of my argument.

So let's agree to disagree and move on