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Friday, April 15, 2011

Economic Secession by Jay Adams

This nation is dealing with issues that are quite remarkable. Our economy has been severely compromised by the policies of the past which have restrained the ability of American labor to compete in the global market place, created debt that simply cannot be repaid within the context of our existing economic capabilities, nurtured an entitlement class that resolves with violent intent to preserve its 'nouveau rights', a fourth estate that has largely abrogated its fundamental responsibility to act as a counter to political mischief and a religion that has targeted our nation as the 'evil' that must be cleansed from the earth.

This represents quite a daunting scenario, but the most insidious and perhaps greatest threat is the loss of control of the Federal Government by the people. Government is spending at a rate that is simply disastrous according to many credible economists, but there appears to be little that can be done in the context of the American political system as it functions today. I am contemplating an abstract method of regaining control. It involves a concept of 'economic secession', that is a departure from the economy that operates exclusively on the US dollar. There is evidence that this is already underway.

As this is written in the spring of 2011 I have observed that Utah has adopted a policy of allowing taxes to be paid in precious metals and North Carolina legislation has been introduced that would create an intrastate currency. This is an indication that some folks are concerned that the US dollar is in peril and rightly so. (This is confused by the fact that people like Robert Reich and Paul Krugman claim that the concern is misplaced and the National Commission on Fiscal Responsibility and Reform appointed by, and ignored by, 0bama; chaired by Erskine Bowles and Alan Simpson say we are in a crisis situation, and in spite of the overwhelming evidence there is still a debate).

In this confused environment it is a daunting thought for a state to set up a credible currency and maintain it in a manner that preserves its integrity. However, the Federal Reserve is in the process of ruining the credibility of the US dollar and against that backdrop, perhaps there is a way of creating an improved means of trade on a local level. First off, I don't see a single state pulling this off, but perhaps a state that is well resourced like Texas might. However, a coalition of states might form under a set of stated principals. This is where things get interesting…..

Our country is deeply divided between Blue States and Red States (Left and Right). There are a small group of 'purple' states like NC that tend to switch back and forth. This proposal would establish criteria for states that wish to participate in a 'Red State Currency', if you don't meet the criteria…you use the US dollar exclusively. The criteria would, in effect, establish a set of principals that are felt to be economically sound. Much like other governing documents this 'Declaration of Economic Principals' would be similarly modified by the participating states. Through this exercise the participants would blend recognized Constitutional governance with a set of Economic Principals that focus attention on the essential activities that create and sustain a sound state in the economic sense. In the context of the 'red state'-'blue state' dynamic, this would be a unilateral action.

Of course the Federal Government would react very vigorously to block such an idea. No doubt the Feds would use all manner of tactics such as withholding all manner of Federal funds. So this plan would have much to overcome and must be developed in such a fashion that the component states are, in effect, more powerful than the Federal Government! Is this possible? Well the 'economic state of the union' is composed of many states like California, Michigan, Illinois, New York and others that are effectively bankrupt. There are other states that are troubled simply by the Federal mandates they must fund. If the relatively healthy states, which tend to be 'red' states, ban together would this coalition not be more economically healthy than the 'whole'?

If states were to follow Utah's lead and recognize precious metals as currency and establish a method of preserving and regulating the use of same, how will the public react to this option? If the public should embrace this "new currency" how will the Federal government react? Since the Federal Reserve is a separate entity, how would it react? How would such a move be regarded in the global economy? I am not an economist but I would think that countries would see this as an attack on the US dollar, although an internal one. This could weaken the dollar in their eyes and might erode its desirability. But how would the global economy view the emerging currency? How would the speculators react? I wonder about these things… and I am seeking illumination… Help me!

This concept might accomplish another needed action. Our country is deeply divided philosophically with regard to the purpose of government. On the Left the Constitution is openly rejected as a governing document (except when it serves their purpose, for example, the ACLU, ACORN, etc.). They use the notion that the Constitution is over 200 years old and is no longer completely relevant to the operation of a contemporary government. It is fairly clear that the Left is moving toward a global government and there is certainly a growing effort to position the US for that merger. I won't enumerate the events that suggest this as fact, but at this juncture the evidence is abundantly clear. This concept is extremely divisive to those on the Right (that are paying attention) and as more evidence emerges it has the potential to polarize the nation in a way that is truly hard to imagine. It appears that the Left is fully aware of this and is attempting to create a circumstance that effectively "springs a trap" rather than allows a decision. This isn't going to work… there are many folks on the Right that see the "light" and are going to shine it everywhere. The Left is pretty clever but they are not nearly as smart as they think (They 'deem' themselves intelligent). The Right must patiently overcome the guile of the Left. This proposition may create a useful counter action to the efforts of the Left…

By actually promoting a form of "economic secession," through the adoption of state by state economic principals, the states that adopt the fundamentals of conservative fiscal policies would strip away many of the entitlement programs required by the Federal Government. By weaning themselves from, or minimizing the use of, the US dollar the states could establish programs that use the "state currency" and theoretically disenfranchise themselves from the US dollar. This is a reversal of the mechanism I observed when my alma mater, The Citadel, was required to accept women because the school had accepted Federal funds. In my proposal, if The Citadel were to (in some form or fashion) operate without US dollars it would regain its autonomy as would all other entities that are under the gun of the Federal government through the poisonous use of its money. Of course this would be a compelling reason to use the "state currency".

Using the premise that this would segregate fiscally conservative states from the more liberal states, over time this would tend to 'move' the more liberally minded folks to the blue states and the more conservatively minded folks to the red states. As this occurs the red states would develop a "cultural fabric" that would be quite different from the blue states. Perhaps this might result in highly developed arts and culture in the blue states and more business development and wealth accumulation in the red states (which would no doubt, lead to more artistic endeavors and cultural development). In my opinion this would "segregate" the states along economic ideology. Segregation is ordinarily considered a bad thing, but in effect this would allow a form of "free market" for each philosophy.

What we have today is a Federal Government that has abrogated its responsibility to maintain a credible currency. There are a variety of arguments with regard to the Federal Reserve's actions and policies. Because of the uncertainty that has resulted in the circumstances of the past decade there have been calls for auditing the Fed or outright elimination of the Fed. Many believe that the US dollar on a trajectory toward collapse in the global marketplace. My proposal offers an alternative method of trade that would originate within the various states but may be extended by reciprocity or other agreement to allow some interstate use of an alternative currency.

This concept would, over time, create a competitive environment where the policies that govern the use of the US dollar would have to compete with the policies of the "state dollars". If the blue states have entitlement programs that require relatively severe redistributive tax and fee structures, the businesses and residents of those states may find a more favorable environment in a 'Red State'. If a person or business sees value in the entitlement programs of a blue state rather than the more Spartan programs of a 'red state,' they would go to the more favorable environment. As you can see this would uncouple the existing mechanisms within the Federal Government that transfer wealth from 'red states' to 'blue states' and, moreover, consolidate the citizens that embrace entitlement policies from folks that rely on and embrace free market policies.

This proposal may appear fanciful, but it is certainly less radical than the outright secession that some contemplate. The Federal Government is out of our control and it seems that our political system is incapable of coping with the economic reality we seem destine to realize. What I have proposed here is not a 'sweeping plan' to restructure the present economic system, it is intended to be an incremental 'movement' that will create economic pressures to clarify policies that are sustainable, and illuminate policies that are not, to identify economic realities with regard to health care, defense, unemployment insurance, minimum wage, building codes, workman's compensation, highway construction and all of the myriad of activities that state and local governments fund with the Federal government as the "rich uncle" that picks up the slack. Rather than continuing the academic debate this proposal creates an environment where these practices can be tested in the real world at the individual state level.

A state may elect to adopt a completely "lean and mean" profile of nearly pure capitalism, while another chooses a package of governmental amenities that provide various levels of support and services, while another may choose a higher level of services. If the state can provide its "package" at a level of efficiency that keeps costs at an appropriate level, that state will enjoy economic success. If a state cannot operate as efficiently it will have to change its practices or reduce its services. Over time the state will achieve "equilibrium" that matches its natural features (coastline, weather, natural resources, available infrastructure, cultural amenities, etc) with the underlying "cost of operation". In effect this would "re-boot" the economy/culture, which is better than outright "destruction & creation".

Of course there would be monumental 'push-back' to such moves and I am surprised that the Feds haven't taken exception to Utah's legislation regarding the use of precious metals. Recently a gentleman in NC was found guilty of (I'm not sure of the charge) manufacturing coins made of gold and silver. The judge even remarked that he was a 'terrorist' for producing these coins. Apparently the fellow gave notice to all of the agencies he could identify that he intended to do this without objection. He then produced something like $7.5 M of these coins and folks began buying them and using them for barter. The Feds have now found him guilty of something and now they want to confiscate the coins!

So, the Federal Reserve is printing money that has no intrinsic value and we use that money for exchanging value. The Feds are reducing the value of those dollars every day they print more of them. A person creates coins that are made of 99.9% pure gold and silver to be used as barter and he is a terrorist….. what is wrong with this picture?

This is intended to pique your imagination…. Whatdayathink?

8 comments:

harryhipps said...

It is a great idea to use as leverage to force fiscal sanity upon those who either are economically inept or actively trying to weaken the US. The concern I have with this approach is the further fragmentation of America. On the one hand we have to deal with the weakening of the Nation/State as seen by global capital flows, multinational corporations who have no loyalty to any country, international bodies that want to usurp the sovereignty of Nations,etc.
Intra US, we have high levels of immigration and a multicultural point of view that seeks to have people retain their ethnic/religious/national identities instead of assimilating into the American way of life. Would this approach force fiscal sanity or just widen the divide?
We certainly need something besides the fiat currency and unrestrained spending we have now. It's an idea worthy of study.

Silence DoGood said...

Huh? I’m not a Constitutional scholar, but even so, I know enough to see what you propose is sedition. Article 1 §§ 8 and 10 respectively of The United States Constitution, restrict the coining and valuation of currency to the federal government and prohibit the states from coining and setting the value of currency. Now, you made reference to the rejection of that document by “liberals” when the notion suited them, but you choose advocacy for a course of action that is in clear and strict defiance thereof? You advocate the partitioning of one state against another on the grounds of economic ideology. I think the South fought one war and lost on the basis of such notions. The end result of which set the South back a century and kept an entire race of people enslaved until the latter half of the 20th Century simply because of the their skin pigmentation. What you propose seeks to do the same thing…except on the basis of economic well being instead of race...as a general theme.

There is an accepted method in place for ousting and replacing those that fail to represent the people. Those are the rules we all agree to live by. Is that the answer? 'I don’t like the way things are going, so we need to start this process anew.' We have too much debt. Ok, we have a huge debt. What I see the President did wrong was give the money to the banks to loan out to keep money in circulation; ala John Maynard Keynes. The banks sat on the money and depressed the economy even more than it was. Capitalism at its' finest.

Want to debate that whole conservative-good, liberal-bad idea? As I recall, George W. Bush, conservative bastion of ‘more for me and less for everybody else’ inherited a budget surplus from Bill Clinton in 2001. It took him how long to blow that and how many hundreds of billions more? With a conservative-good Congress to help right along with his capital spending ideas. Every bit of it perpetuated on the notion that the, “Terrorists will win”. I am less than enthralled with the conservative-good ideology.

Extremism, left or right, runs counter to the majority of people who live in the middle, de-void of the excesses of the fringes. Capitalism is no better or different than Communism. The only difference is who is in control. What you propose only takes into account those at the very top and those at the very bottom. And that is what I see as the end result of what is being strived for; a return to two classes. After all, if you’ve got money, nothing else matters, does it? And if you have money, well, we certainly don’t want to sit idly by while it’s worth dwindles without overthrowing and dividing the nation, do we?

James Thomas Shell said...

But what NotHaus did should not have been considered the coinage of money. What he was doing was stamping out precious metals and assigning a value to it. You see this done many times across the country.

Let's look at these facts

*** To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.

Who is doing creating the value of money? The Congress or the independent agency that answers to no one called the Federal Reserve.

*** make anything but gold and silver coin a tender in payment of debts;

How is this happening now. The Federal Government has allowed the Federal Reserve to issue a Fiat Currency, which has no intrinsic value and therefore does not allow States to carry out their duty of paying proportional taxes directly to the state with currency directly linked to an asset of some value, which at the time of the Constitution was determined to be Gold and Silver.
----------------------------------

You make a valid point about the need to make sure that any measure relating to coinage meets constitutional muster. I believe that a Constitutional Amendment should be passed related to coinage/money supply and that would have to be ratified by 3/4 of the States, if it were able proposed and passed by 2/3's of legislatures or both houses of Congress.

Something needs to be done about the power that the Federal Government usurped in 1913 with the creation of the Federal Reserve and the direct election of Senators. This power grab has essentially taken away the control that States had over their Senators and allowed them to be controlled by Federal Special Interests and made them Cohorts of the Corporatocracy, especially since their terms last so long.

And if we are going to punish someone like NotHaus for selling silver and gold, then they can come along and nail you for trading vegetables with your neighbor or bartering anything, because you are usurping the Dollar system and they will deem that you are doing this to avoid taxes.

Big Brother is the Federal Reserve System!

Silence DoGood said...

Agreed. NotHaus should not have been charged on the basis of changing material he owned into a different shape...absent his intent to do only that. However, prima facie discussion shows that his intent was to institute his coins as currency based on the value of the gold/silver in his coins to satisfy debt and/or purchases goods and services. Now, people have traded items between themselves for a very long time. I'm not opposed to that at all. But when you just up and decide one day to make your own money...nah, I'm not on board and NotHaus got what he had coming.

Paper money used to be on a Gold or Silver standard to back up the value thereof. I've got some old silver certificates somehwere. Then that changed to Federal Reserve Notes. Insofar as the Government printing more and more money, I'm not fully convinced of that either. Now, borrowing money, yes. Simply printing money, not so much. Doing so would make the currency utterly worthless. Hyperinflation would set in, and a loaf of bread would be selling for around $400. Even the geeks over at the Federal Reserve know that and know that they can't keep a lid on such an activity, if they were so in fact engaged in it.

As far as oversight on the Federal Reserve is concerned. Yes, Congress needs to keep better tabs on our finances. An economics professor I had once opined, "there are 3 kinds of people; liars, damn liars, and statisticians." You could apply that same maxim by substituting 'accountant' for 'statistician'. But I think the Federal Reserve needs to be reined in by the Government instead of just dangling out there as its own little entity. It answers to no one and is responsible to...who/whom?

As far as debt is concerned, well, this nation has always carried a debt. Granted, not one this large. Want to make an impact? Start cutting subsidies to companies that outsource. Cut subsidies to farmers and let the market rule. Institute a flat tax for everybody and abolish the IRS except for collections and compliance agents. Cut the military back to being just a defense force, as opposed to a rapid reaction force for the UN. Throttle back on development of better neater ways of killing each other. Why do you need a smart bomb when a dumb one will suffice? Both kill after all, one just makes defense contractors more money. Duct tape every lobbyist in Washington nude to a street lamp on Constitution Avenue with the legislators they bought taped to the same pole on the lobbyists' head. You want to set term limits for legislators? I think we should likewise set expiration times on articles of incorporation. No more monolithic perpetual corporations. Ok, that's enough for a Sunday. I'm going to need absolution for thinking things I didn't write as it is.

James Thomas Shell said...

Good points and valid DoGood. Where I differ is that the Federal Reserve is printing money. They are just doing it digitally. They are giving the money to financial institutions that are taking it and buying derivatives in the commodities market that are driving up the cost of goods and that therefore is creating competition for the purchase of those commodities and therefore driving up price.

The money is also going to perpetually bail out Banks, such as JP Morgan who have made bad bets and this money is being used to manipulate positions in the Silver Market and the Real Estate market. The money is also being used by Goldman Sachs to consolidate positions of strength in several markets and basically cover up fraud. This is our nations currency and it is being used against the people. The value is basically being stolen in broad daylight.

I agree with your ways of recouping some of these revenues. Everyone says we can't raise taxes or we need to raise taxes. We need to tighten up the system. I don't advocate raising taxes on people making $250,000 per year, but people making $1 million or $10 million?

When you allow people to make that kind of money during these economic times, it allows them to consolidate more and more wealth from the middle class. That is what I believe is happening in a nutshell. The mega rich are lowball buying middle class assets, because the poor and middle class people need the money. This is not good for the long term viability of the country and what the idiots need to realize is that they are destroying the marketplace and thus the value of their holdings. Never overestimate the intelligence of people who have money!

Silence DoGood said...

I was unaware of the precise intricities of the Fed in relation to the banks. So I recognize and acknowledge the validity of what you said, since I see it in the same context. We seem to be arriving at the same general conclusions, albeit by different roads. I was watching "Sunday Morning" today with Bill Osgood. Spotlighting two economists, one on either side of the issue, then the reporter spoke with a group of millionaires. They said they were not being taxed enough. They talked of their money giving them influence with legislators. And they talked about how when tax breaks are granted, they don't re-invest that windfall; it merely makes them richer. So the entire argument of tax breaks sparking the economy is as mythical as the Easter Bunny. I listened rather intently as one of the economists talked about how wealth was flowing up, rather than down. So you are spot on with regard to the accumulation of wealth by those with so much. I think I may have touched on that concept somewhere else here, with different words. Even Ben Stein, uber conservative that he is, downplayed the black picture that the debt is being portrayed as to frighten the masses. No one embraced the size of the debt, but it is being used as a means to influence and play partisan politics; the boogeyman cometh. But instead of appearing with horns and cloven hooves, it has dollar signs and Gucci shoes. Thanks for the insight on the Fed. Opened my eyes even wider.

Anonymous said...

"Laws are the tools of despots"....What part of the Constitution authorizes the Federal Reserve?

Silence DoGood said...

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof. Article I, Section 8, United States Constitution. That’s the authority and the legislation establishing it was The Federal Reserve Act of 1913.

Was God a despot when he passed the 10 commandments to Moses? Was Hammurabi a despot as he devised his Code? Was Sir Isaac Newton a despot as he formulated his laws of physics? Were the framers of the Constitution despots as they envisioned a better government and opportunity for this nation? One of the founding premises by John Adams said, “A government of laws, not men.” Because he knew that those of privilege and favor with the King was above the law or the law didn’t apply to them or the king. The rule of law is precisely what that is supposed to be. So in that regard, there is nothing wrong with law, but the men (masculine pronoun, not intended to be devisive) who apply them.

No, it doesn’t always work that way. I realize that. However, if you removed lobbyists and narcicistic politicians from the mix, that would go a long way to resolving this issue of despotism you perceive. Wealth has provided an atmosphere of access and privilege. Greed of the politicians have given these people the tax shelters and ability to economically rape this nation and not even kiss it. But that doesn’t make a despot. Doesn’t make a despotic ruler either.

Now, if you don’t like the way things are going, vote, talk, put your message out there. If it’s worthy, it’ll catch on. But that is the whole idea, the free exchange of ideas, thought, concepts, with regard to government. To criticize and seek redress therefrom. But we don’t have the ability to do that anymore. We can’t debate and discuss concepts any more and walk away without hating the other person and holding a grudge against them. But we can do that. We can discuss and debate issues without resorting to name calling and bullyboy tactics. Civility is a desireable trait. But you don’t preach secessation, sedition, or revolution. Those are powerful words with powerful meanings. The context of which we, as a nation, have not perceived of since 1865.