Minnesota Transportation Act a Horrible Idea
Somebody must point out why the Minnesota Transportation Act, though a clever political statement, is far from ideal in its implications. The bill was introduced into the Minnesota state legislature by a Minnesota citizen and seeks to make use of the “accepted ability of banks to create money.”
First of all we should remember that the bill is blatantly in violation of the plain language of the U.S. Constitution, but lets lay that aside for the moment and assume that it could be enacted. If enacted the bill would command Minnesota state chartered banks to create an unlimited amount of free U.S. currency upon demand for the use of the state (but only, interestingly enough, to pay for transportation projects). It represents no attempt to create a regulated currency system.
Whatever the benefits of the scheme may be, consider the legal implications: If Minnesota can legally grant herself the right to print money for all her transportation projects, then what would bar Mississippi, Massachusetts, Maine, Montana, and Missouri from granting themselves rights to print money not only for transportation projects but for their every need? Clearly not the basis for a sound and stable national currency system.
As much as I believe in federalism, I wouldn’t want Minn. printing money whenever it feels the urge to re-number all the exit ramps on the I-35.
The bill is a clever political statement: it shrewdly parodies the federal government for abusing its power to regulate the currency by creating money to pay for its own expenses. But if we make the mistake of taking the bill seriously, then it becomes nothing more than a tool of economic warfare: each state would hurry to pass similar bills allowing them, too, to print money enough to fulfill their every desire.
We already have the federal government destroying our currency and printing money out of thin air. Do we really need Minnesota’s help?
Here is a recent house version: http://wdoc.house.leg.state.mn.us/leg/LS86/HF0888.0.pdf
The way I understood the idea behind this, from digging into Byron Dale’s website, was that in building infrastructure projects and monetizing them, the money that was created from these projects was “wealth” based money, in contrast to our current debt based system.
I also believe that this system was planned to co-exist with our current fractional-reserve system and sort of counterbalance the “larger fool” mathematical improbability assiciated with our debt based currency creation where the debt can never really be paid off as the usury is never created within the system.
I do believe that if implemented, it should be at the federal level, as the MTA is borderline unconstitutional and if passed at the State level, would probably be struck down by the courts.
I could also see how this bill would be inflationary for materials and energy associated with those types of projects.
I’m glad to see more discussion of this topic, as I do not think its a horrible idea. It may have some flaws, but at least its a proposed solution.
It’s about time a thread was dedicated to pull this bill apart and expose its pieces, be they good, bad or ugly. I’m also glad this is coming from you, jrf29 as I believe you have one of the best legal and economic minds around here. Off to read the bill (finally).
[quote=crazyhorse] The way I understood the idea behind this, from digging into Byron Dale’s website, was that in building infrastructure projects and monetizing them, the money that was created from these projects was “wealth” based money, in contrast to our current debt based system. [/quote]
Hi crazyhorse. I submit that merely because funny-money is spent on something massive and physical doesn’t mean that the monetary system is sound. If it did, then why doesn’t even the poorest nation pave every road, and build bridges and canals using money freshly printed in its national basement? And why must we stop at just transportation projects? Why can’t factories, mines, and massive agricultural assets of all sorts be purchased in unlimited quantities with freshly-printed money?
Funny money is funny money, no matter what you spend it on. Devastating inflation would be the inevitable result of this bill (assuming, for the sake of argument, that it was in any real danger of being enacted).
Spending money directly into the economy as an alternative to loaning it into existence. This has been proposed as a very workable means of managing the economy. See the last part of Paul Grignon’s “Money as Debt” video. He asks a legitimate question: why should the government have to pay interest to private parties on its own public debt? Under a “direct money creation” system, dollars would not be loaned into existence, but rather <i>spent</i> into existence by the federal government. Under such a system, the government need not collect taxes. Public spending could be openly discussed in terms of the percent inflation that would result for that year. Its a very intriguing idea, and I’m not opposed to that idea – but I’m not an economics expert either.
But the Minnesota Transportation Act is radically deficient in three critical respects:
(1) It is not a federal plan, hence the constitutional problem. As much as we may disapprove of the fed’s handling of the currency, one must admit (as the constitution does) that money is truly an interstate thing, and we cannot have 50 separate governments competing with each other to see who can print the most money.
(2) The bill contains no mechanism whatsoever regulate or limit the amount of money printed. Theoretically, Minnesota could print and spend an unlimited amount of money as long as this money was spent on “transportation projects.” The union wants seven-figure salaries for all truck drivers involved in highway work. Well why not? After all, it will “stimulate” the Minnesota economy.
(3) If we assume that Minnesota can grant herself the right to pass this bill, then what stops every other state from printing their own money for whatever purpose they please?
Therefore I agree that the MTA is a stimulating basis for discussion, argument, and intellectual banter. It a represents the seed of a potentially good idea, and I do like the idea.
But my criticism is directed at this particular bill. If we want to talk about <i>actually passing the MTA</i> as it is written today, as some people have advocated doing, then for the three reasons above I argue that it could not fail to result in uncontrolled printing and the destruction of the currency.
Your subject line doesn’t invite discussion…discussion over in your mind.
I find it funny that if a state suggests something quite small in order to fight the completely unconstitutional DC government and fraudulent Federal Reserve, then we get all upset that “it’s unconstitutional!”
Quite the contrary. For much of US history local communities had forms of barter, people discovered gold (created their own currency), and states had their state chartered banks which printed their own notes. Article 1 just gives Congress a power to coin money and regulate its value, i.e. currency. That’s M0. It doesn’t say that no other institution (bank or state or local) can develop ways of engaging in commerce. Only after the rise of the imperial executive branch and the oligarchy behind the Fed have we been brainwashed to think all things come from DC/Wall St. Only after 20th century financial legislation and the rise of elitist jurisprudence that doesn’t believe in federalism would courts agree with you that nobody other than a few rich bankers behind the Fed can print notes and supposedly autonomous, powerful states can’t.
I guess Bank of America = Congress in your definition because they sure create a lot of money. A state would only be allowed to print money over your dead body, but BofA, Citi, JPM are allowed to no problem. Yeah…I’m pretty sure that’s consistent with the Constitution.
Well that was quick. Jrf29, I don’t believe your brain is needed here as there must be more important things to worry about. This thing is obviously just a political ploy to either make a statement, or force a constitutional crisis, or both.
I must applaud the brevity of the bill. At least they didn’t make the mistake of proposing something 1,000 pages long. As for being a way to make a political statement, I guess it is clever, but they should have come up with a more intriguing name.
The idea of printing up whatever we need for infrastructure is of course ridiculous. Infrastructure is not an asset in the conventional sense. You do not foreclose on a highway or a train system. Infrastructure is really a liability in that it has very high maintenance costs, and present a huge risk if the project does not result in an increase in productive capacity.
If the infrastructure project does not generate an increase in productive capacity enough to offset financing and maintenance costs, which are paid for via tolls, user fees, or taxes, then the end result is a net drain on the economy. At least financing costs keep our ever-ambitious politicians in check for creating too many ill-conceived projects, but even with that check, the list of ill-conceived infrastructure projects has a long and wide-spread history. The train system in Italy, of which I was a recent victim, is a great example.
This is not to say there are no good infrastructure projects, including many that have increased the productive capacity of the beneficiaries. In fact, most infrastructure projects probably are of the “good” variety. However, I do not want the government to have a blank check to do what it pleases with the limited labor and resources available in their jurisdictions, which it would consume in its drunken orgy of saving the rest of us from ourselves by building the next train, canal, or energy project.
[quote=strabes] Your subject line doesn’t invite discussion…discussion over in your mind. [/quote] Well, I thought better of that right after I posted the topic, but it was too late. My apologies.
While I’m not ashamed to admit that I do have affection for the U.S. Constitution as it is written, and I do not believe that one violation of the constitution should justify another, for the purposes of this discussion I am not wedded to the federal constitution as it’s written. I do suggest that regardless of what the constitution says, the control of any fiat current must be centrally controlled if it is to have any hope of working.
Again, I am not taking the side of the federal reserve. I’m not saying that I approve of how the currency is managed. The MTA sends a powerful political message and it is a poignant reminder that the federal government has been acting improperly. But that said, if we want a stable currency system, then this act is one more step in the wrong direction. Its one more giant step toward the unlimited and uncontrolled printing of paper money.
I believe the purpose of this bill is to cause people to realize the very things Strabes is pointing out. The bill, as ridiculous as it is, is no more ridiculous than our centralized, federalized system. I really am not familiar enough with Minn politics or the authors of the bill to know whether this is just a modern version of “A Modest Proposal”, or if they’re serious.
If they’re making a political statement, I applaud them. If they’re serious, then this is exactly the kind of thing I fear for when our system does collapse, the Fed abolished, what have you. I fear we’ll replace it with something even worse or more dangerous.
[quote=jtf](1) It is not a federal plan, hence the constitutional problem. As much as we may disapprove of the fed’s handling of the currency, one must admit (as the constitution does) that money is truly an interstate thing, and we cannot have 50 separate governments competing with each other to see who can print the most money.[/quote]
Only true given the course of 20th century jurisprudence where ATF/IRS/FBI/Secret Service/Customs and then the courts became enforcers for the Fed. What you’re saying isn’t true based on the original interpretation of the Constitution, the commerce clause, the money clause. Article 1 talks about currency…minting US coins at the West Point Mint. Banks/states/towns/people found gold, printed notes (same as M1/M2/M3 today) etc.
On your points 2 and 3, boom/bust cycle is what regulates it, just like it does today. Only today’s boom/bust is going to kill millions of people around the world because it became so much of a grander scale than it always was when it was local/state levels (contrary to the idea that the dollar is the US system regulated by Congress, it is the global system regulated by international bankers).
[quote=jtf]Therefore I agree that the MTA is a stimulating basis for discussion, argument, and intellectual banter. It a represents the seed of a potentially good idea, and I do like the idea.[/quote]
Guess I overreacted to your subject line.
Thanks for bringing up this important bill, I hope others will take a closer look at what could happen in Minnesota and it’s national implications. I agree with some of the things that you said, but I look at it from a different perspective that I’d like to share.
First of all we should remember that the bill is blatantly in violation of the plain language of the U.S. Constitution.
I’m not a constitutional attorney but I would suggest that our current system is a violation of the constitution. As to legality of the MTA, Ellen Brown (an attorney) suggests it is constitutional and presents a legal argument in her article entitled “ANOTHER WAY AROUND THE CREDIT CRISIS: MINNESOTA BILL WOULD AUTHORIZE:STATE BANKS TO “MONETIZE” PRODUCTIVITY.” (scroll 2/3 down on the page).
If enacted the bill would command Minnesota state chartered banks to create an unlimited amount of free U.S. currency upon demand for the use of the state (but only, interestingly enough, to pay for transportation projects). It represents no attempt to create a regulated currency system.
First, as you said, it would allow state chartered banks to create money. As it stands now, the private non-Federal Reserve system creates all of our money, the banks have a legal monopoly. This could be justified if the banks were lending their money or at least backing it up. But they aren’t; every dollar created is backed solely by the people and property of the United States.
For example, this 1957 “Silver Certificate” clearly states that the dollar may be redeemed by the U.S. Treasury:
This tells us that while the banks in 1957 were creating “free” money through profitable fractional lending; all money was backed by the silver held by the United States. They were lending money that we alone backed with collateral, every dollar they lent at virtually no cost, cost us a dollar in silver. What a huge conflict of interest – every dollar that they create for profit, costs us a dollar in collateral.
For the gold backed system to work, “We the People” would be required to constantly buy more gold and silver to back up the profitable loans made by banks. Of course that system never worked and eventually it was abandoned but the fact remains that we are backing up every dollar the banks create by our property and people.
Only sovereign nations have the power to issue currency, the non-constitutional “loop-hole” is that we may outsource this power to a private banking cartel. People in the U.S. have been shielded from the benefits of a nation issuing it’s own currency direct. As Thomas Edison said, “if a nation may directly issue a dollar bond, it may issue a dollar bill the same way.” The difference is that the dollar bond pays interest to private banks while the dollar bill is issued free from any debt.
The MTA restores the right of the people to issue their own money free from banker debt. While the MTA goes further, we know that North Dakota has had a state bank since the early 1900’s. Not coincidentally, they are unique in running a budget surplus while other states are close to bankruptcy.
Whatever the benefits of the scheme may be, consider the legal implications: If Minnesota can legally grant herself the right to print money for all her transportation projects, then what would bar Mississippi, Massachusetts, Maine, Montana, and Missouri from granting themselves rights to print money not only for transportation projects but for their every need?
I agree with your logic, if one state creates money free from private banker debt, it would be a boon to their economy and other states would surely follow. What’s wrong with that?
Issuing currency is our most important prerogative other than declaring war. As Lincoln said:
“The government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers.
The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government’s greatest creative opportunity. The financing of all public enterprise, and the conduct of the treasury will become matters of practical administration. Money will cease to be master and will then become servant of humanity.”
I hope your post draws a lot of interest because it asks the question; who should issue, control and benefit from a national currency…the people or the private non-Federal and no Reserve banks?
The bill is a clever political statement: it shrewdly parodies the federal government for abusing its power to regulate the currency by creating money to pay for its own expenses.
Yes, government should pay for itself. Did you know that the U.S. government paid all of it’s expenses, without any income or sales tax, up until the early 20th century? Do you think it was a coincidence that both the non-Federal Reserve Act and Income tax came about within months of one another, in 1913? The income tax is the means for the private banking cartel to directly collect interest on the national debt in defiance of constitutional law.
We already have the federal government destroying our currency and printing money out of thin air.
No sir, this statement is wrong. The federal government has not created any money since 1963. All of our money is created by private banks, the government simply provides the collateral and relinquishes the power.
Byron Dale, the genius behind the MTA has a much more important message. He takes something terribly complex (monetary theory) and explains the key in the most simple terms. That is that, the most important attribute of a monetary system is to have money issued as national wealth, and not as banker debt.