Yellen on Bitcoin: Fed Doesn’t Have Authority to Regulate It in Any Way
blogs.wsj.com
blogs.wsj.com
Edit: They do the targeting through a variety of ways--and none of them touch Bitcoin or in any way are influenced by Bitcoin. Just like the Fed has no authority nor mandate to regulate any other currency than the USD.
Digital currency is a huge threat to the Fed if successful, so it will need to be dealt with in some capacity. Right now, I suspect they are hoping it is a fad or a toy that will go away. Gox certainly doesn't help change that impression.
They believe this to be the case. If they didn't, they wouldn't believe in the need for central banking. :)
The primary function of the Fed is to be a stabilizing force in the market. There is absolutely no evidence that bitcoin will ever be a threat against this. Even the logical arguments in favor of that position have a hard time holding water.
> "so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."
Targeting 2% inflation means they're not even trying to promote stable prices. Unfortunately, there is no punishment for not keeping to the mandate.
http://www.bankofcanada.ca/wp-content/uploads/2010/11/why_ca...
Volker targeting [whatever it takes to kill inflation, eg 20%+] and Bernanke targeting [whatever it takes to prevent a Depression, eg 0%] maybe not so much, but at those times their mandate was even moreso price and economic stability, not interest rate stabilty.
The fact that 2% interest rates cause currency devaluation over time doesn't make it unstable, it's still quite predictable and hence stable. It's high-variance money and assets, like cryptocurrencies among other things, that are unstable (at least right now in their infancy, I'm sure that will be different 10-20yrs from now).
>The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.
>As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.
The member banks earn a 6% dividend on the amount of stock that they own in their regional Federal Reserve Bank. That amount of stock is determined by the member bank's balance sheet. They have to invest that money in the Federal Reserve.
The fed, is anything but federal. They are a group of private corporations owned by groups of banks within each reserve banks district. They can be somewhat controlled by congress by way of statute but rarely are and currently answer to no one but themselves. There is a lot of conspiracies around who or what group really owns the majority shares. I'm not going to go into the theory here as they are just that, theories.
In response to going by what they are not what they are called they very much are not a branch of government. They say this very plainly on their own website:
* Describes itself as "within government"
* Subject to congressional oversight
* Governors and Chair appointed by POTUS with oversight from the Senate
As for subject to congressional oversight, seems like pretty loose oversight if you ask me... https://www.youtube.com/watch?v=CY8xz3Q7aig
The system also includes 12 regional Federal Reserve Banks, which are quasi-private. There's a mixture of public and private control of them. The member banks in each region get to elect 6 of the 9 directors. Each member bank gets two votes and the vote is divided by bank size, so the big banks in each region choose two directors, the medium banks two, and the small banks two.
The remaining 3 directors are appointed by the Board of Governors (the federal agency).
The Federal Reserve Banks are considered federal entities for some purposes, but private entities for others.
The member banks in each region are required to own a certain amount of stock in their Federal Reserve Bank. They get paid a 6% annual dividend of the amount that they have invested in the Federal Reserve. All remaining profits (the vast majority) go to the federal government.
There's maybe about 5 people who do this...
I wish HN was actually this economically informed.
As someone closer to MR in thought, NGDP seems marginally less bad than the current way of doing things, but not all that much different.
It's just jurisdiction, and the Federal Reserve Chairwoman says they don't have it.
As for the rest of the government? Well, there's literally nothing they can't try to regulate.
You did say try, but according to the constitution they aren't allowed to regulate speech, religion or the press. (Congress "shall make no law .." abridging these rights).
Congress can disregard the constitution all they want, and the president can approve all he wants.
Only the Judicial branch can actually punish violations of the constitution.
(not saying the Court is always right, of course)
"during good behavior", actually.
Plenty of lower court judges have been (and one Supreme Court Justice resigned in the face of impeachment, and so was certainly driven by office by the power of Congress to remove him, even if he wasn't, strictly speaking, removed.)
There are other exemptions too for religion, where they decide what a real religion is. I think, for instance, conscientious objectors needed to have an approved religion.
(There should be no freedom of religion explicitly; it just opens things up for abuse and silly interpretations. Freedom of speech, thought, assembly and so on should be more than enough to include religion.)
* Where the preamble declares, that coercion is a departure from the plan of the holy author of our religion, an amendment was proposed by inserting "Jesus Christ," so that it would read "A departure from the plan of Jesus Christ, the holy author of our religion;" the insertion was rejected by the great majority, in proof that they meant to comprehend, within the mantle of its protection, the Jew and the Gentile, the Christian and Mohammedan, the Hindoo and Infidel of every denomination.
-Thomas Jefferson, Autobiography, in reference to the Virginia Act for Religious Freedom (from which the 1st amendment is derived)
The relationship between Native American Tribes and the US government is a bit more complicated than you are indicating here. Native American Tribes are afforded an extra degree of sovereignty and authority, and are actually recognized as "domestic dependent nations". This is where the exemptions for their religious ceremonies come from.
I'm going off a few quick searches, but the peyote bit seems to exclude it for any "bona fide ceremonies" for the Native American Church, regardless of race. I didn't see any mention that they must be on reservations either. Wikipedia also notes that some states have a "bona fide religious" exemption that's not related to the NAC (which is at least somewhat more consistent, but "bona fide" is still silly to apply in this scope).
I don't understand the full ramifications of the treaty and legal status myself. My point was just to indicate that the flippant remark about "some religions can use peyote" leaves out a lot of historical, political, and legal context.
That's the point of the Supreme Court, which did it's job and confirmed that the government is not supposed to determine what constitutes a religion.
The Sikh kirpan (knife) issue hasn't been argued before the supreme court. When it is, I expect a school's right to ban that weapon will be affirmed on the same grounds.
From wikipedia:
"Congress passed an amendment to the American Indian Religious Freedom Act of 1978 (42 U.S.C. § 1996), i.e., the American Indian Religious Freedom Act Amendments of 1994 (42 U.S.C. § 1996a), pertinent excerpts of which are given below: Use, possession, or transportation of peyote Notwithstanding any other provision of law, the use, possession, or transportation of peyote by an Indian for bona fide traditional ceremonial purposes in connection with the practice of a traditional Indian religion is lawful, and shall not be prohibited by the United States or any State. No Indian shall be penalized or discriminated against on the basis of such use, possession or transportation, including, but not limited to, denial of otherwise applicable benefits under public assistance programs. —42 U.S.C. 1996A(b)(1)."
Note that "bona fide" and "traditional" language.
You are probably going to ask who decides if use of peyote is actually protected under this act or not. The answer seems to be a jury of one's peers. Laws are often written to provide guidance for how one's actions should be judged, and do not provide a detailed "if-then" case for their application.
Whether or not peyote should just be fully legalized across the country is a different question.
Recognition of your religion would likely be determined at the time of your trial.
Should that be the courts right? I would argue no.
Sources: http://www.irs.gov/irm/part7/irm_07-025-003.html#d0e1146 http://en.wikipedia.org/wiki/Establishment_Clause
Technically, they shouldn't be accepting Federal Reserve Notes as payment for any state taxes, including sales taxes.
Note that this clause does not authorize the federal government to declare a legal tender or issue paper money; it simply prohibits the states from doing those things. Thanks to the 10th Amendment, those are reserved exclusively to the people. The wording is a bit tortured, but a logical parse is that powers not delegated to the federation are reserved to the states, and that powers prohibited to the states are reserved to the people. Legal tender, and paper money are not delegated to the federation, but prohibited to the states, therefore they remain the province of the people.
There should be no problem with the Federal Reserve printing its own notes, but there's no way in hell that making them legal tender or accepting them for payment on state or federal debts is constitutional. They do it anyway. Hardly anyone cares. Those who do are ignored.
As usual, they will do as they please, damn the consequences, and hang it all up under the interstate commerce clause.
Edit: Article I, section 8, clause 5 does give the federation the power to coin money and standardize its value. It still doesn't give them the power to accept those coins as payment for debts unless they are gold or silver.
Between Expressed Powers and Necessary and Proper there’s certainly enough justification - it relies even less on the Commerce clause.
I think it is less important that our money be a particular commodity than it is that the government lack the power to manipulate its value for its own convenience.
In my opinion, it is clear that the power to "coin money and regulate the value thereof" is to standardize the exchange rates between coins, probably by weight of the metal, but not necessarily. It is also clear that the coins need not be metal, but also that no one could be forced to accept coins other than gold or silver coins.
Thus, they could stamp out wooden nickels, but that wouldn't make them worth anything to anybody, except possibly for payment of federal taxes. As long as we have those, it is only a short hop to rectangular paper "coins". They can do it, but nobody has to accept them.
But since nobody is trying to pay taxes with Bitcoin yet, and the federal government isn't mining them, as far as we know, there is no justification for them to be standardized or otherwise regulated whatsoever. It might arguably be authorized under whatever clause, but it certainly isn't justified.
A copper coin worth $20 in todays USD would weight nearly 3 kilograms!
Surely at least paper gold and silver certificates would be a reasonable concession.
It's sort of a bogus loan, with a variable term and zero interest rate, but it's still allowed, and certainly makes things more convenient for a lot of people. And the government can still profit from the seignorage from the mint.
Nobody has to accept paper money, either. The only thing "legal tender" laws mean is that if you want to use the power of government to enforce debts, then the government gets to say that its job is done when government-declared legal tender has been presented, whether you accept it or not.
If you don't choose to involve the government in your affairs, then legal tender laws don't affect you.
People are totally allowed to make their own money and you can use it as you like.
EDIT: About the commerce clause.
Forgot to mention, if you want to bag on the federal government, don't bag on the commerce clause, bag on stipulating federal funding is only available if you do this completely unrelated thing.
"If you handle more medicaid people we will cover part of the cost", that makes sense. "If you raise your minimum drinking age to 21 we will help pay for your roads". WTF?
I think it would be completely warranted to have a constitutional amendment that controls how the federal government manages the treasury. It should not be giving money to the states except by apportioning the funds by census populations. If the Wisconsin drinking age is 18, too bad. As long as you are paying for highways at all, you have to pay them 1.817% of that money, because they have 1.817% of the US population.
That would prevent an awful lot of political lever-pulling in the form that you mentioned. You couldn't tie federal highway funding to anything other than the actual upkeep of the highways. And you couldn't make school lunch subsidies contingent on serving corn at least 3 times per week, or declare ketchup a vegetable.
Revisionism. The word "regulate" was interpreted in more or less its modern sense in Gibbons v Ogden, in 1824, merely 35 years after ratification.
"[T]he power to regulate; that is, to prescribe the rule by which commerce is to be governed. This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the Constitution."
This is not a case where the meaning of the word has drifted from what it meant at the time of the founding. I'm quite conservative in my Constitutional interpretation, but I think conservatives get the Commerce Clause wrong. Its broad and was intended to be. The anti-federalist framers thought the "interstate" part would be a limit, but didn't concieve of a world where every transaction would cross state borders. Indeed, they lived in a world where market transactions were the exception. But saying that we should interpret the plain text more narrowly because the world has changed since then is a very "living Constitution" thing to do.
I would certainly include defining a singular version to be under the power granted by standardize. Heck most standards are singular in nature. That isn't a stretch at all.
> so Delaware couldn't charge a $1 tariff on a widget imported from New Jersey and two bits on the same thing from Pennsylvania
We are talking about minting coins, not interstate taxes.
> It should not be giving money to the states except by apportioning the funds by census populations.
That only works for some very basic things. Maybe roads (I doubt it) and certainly not a lot of things such as National Forests.
> declare ketchup a vegetable.
Vegetables in school lunches are measured exclusively by volume, not by nutritional content. Most of the tomato jokes are related to concentrated versions that get a pass because serving a kid a cup of ketchup or tomato sauce is silly.
To be fair, this is actually one of the more plausible ones of the various "everything is unconstitutional" myths. At least some of the framers clearly did want to tie the hands of the federal government when it came to making paper money legal tender.
There is good reason for the Constitution to override the status quo of the Articles of Confederation on the subject of minting coinage, but I'm not certain a debate left unresolved regarding paper money is indicative of anything when they did actually agree that a person could be owned, and that was worth 3/5 of a vote. It was either less important than slavery, or more difficult to resolve. I'm inclined to believe the latter.
Before descending into full-on libertarded ranting, let's just say that leaving the matter as ambiguous effectively grants the government license to do whatever it pleases and interpret the ambiguity in favor of that.
Failing to bind the hands of a future Congress is what allowed them to pick up that grenade and pull the pin.
Why not, if the debate is still valid? These issues weren't so much "resolved" as put aside in favor of more government power or postponed (in the case of slavery, equal protection). The mere fact that the debate is 200 years old is simply more credit to its importance.
The constitution is imperfect (like our government), as it itself acknowledges, and is "correct" only as Lincoln said that it serves a nation "conceived in liberty and dedicated to the proposition that all (men) are created equal".
As someone else once said, don't take refuge in the false security of consensus.
No, it usually means one side lost and can't get over it. Half the country still disagrees with Darwin, it doesn't make the debate important despite it being well over 100 years old. The same applies here.
If you don't think that debate is still important, you are essentially conceding it to the half the country you disagree with (because they sure as hell think its important). I'm sure you don't want your kids being taught creationism just because you consider yourself "above" the argument.
And regardless, the same does not apply here, because unlike the overwhelming evidence we have for evolution by natural selection, there simply is not enough data on the usefulness of central banking to the prosperity of the nation.
No I'm not. The debate was over 100 years ago, the ignorant just haven't figured it out yet. They simply get laughed at now for trying to argue the case. Mockery is not concession.
> there simply is not enough data on the usefulness of central banking to the prosperity of the nation.
Not what I was referring to. I was referring to this, " For better or worse, most of the latent ambiguities in the Constitution were resolved in favor of the interpretation espoused by Hamilton and the Federalists."
You can't ignore 200 years of judicial interpretation and case law simply because you prefer to interpret the text differently, that was his point and he's correct. That debate is over.
If it's actually half the country, and they actually think it's substantially more important than the other half the country, there's an argument that it's effective concession. But, at the risk of putting words in your mouth, I more understood you to be saying that having the argument wasn't important - conveying the understanding behind your "your side" of that argument you might consider quite a bit more important.
On hearing that, it becomes obvious. There is no quest for truth or spirit of inquiry in the opposition. They are simply obstacles to progress that must be routed around. The debate is not over; it never took place, and it never will.
If you can't get someone to support rational argumentation by means of rational arguments, you're better off talking to someone--anyone--else.
Unfortunately that's basically false.
If half the population becomes slightly over than half the population out of random chance (or say, the "ignorant" having a few more babies as they are wont to do), mockery would be political concession.
It's far better to convince who you deem ignorant of your own views. This means treating their arguments seriously in the fashion of http://www.paulgraham.com/disagree.html .
Mockery is unlikely to succeed (as are downvotes), and pretty much fails pg's 1st test.
Your next claim, that "200 years of judicial interpretation and case law" ends the debate fails pg's second test. It's an ad hominem attack, that any disagreement with legal precedent (admittedly strong in this case) should be ignored.
By the same token, legal precedent prior to the civil war dictated that human beings could be property. I presume you are glad that some individuals within that society begged to differ.
Debates should be conducted on first principles and supported by objective evidence. I myself agree with Rayiner in that there is no constitutional dictate either way, only saying that the debate is valid on the grounds of 1st principle regardless of how old the arguments are.
Perhaps you should read more of what he wrote, and watch the dozens of debates he conducted with priests, rabbis etc. Of course, you can use ridicule in an argument, but you cannot put yourself above the debate (or you will lose).
If you're trying to create a limited government, there are ample reasons to dig a deep moat around money, fill it with poisonous snakes and spiders, and line the walls with Dementors.
Isn't it good for persons with dollar-denominated debt exceeding their dollar-denominated assets?
When you print an additional 2% of the money supply, you are essentially taking about 2% of the entire economy and assigning it to yourself.
Back when money was gold, and gold was money, in order to increase the money supply by 2%, you had to mine 2% of all gold already in the marketplace, which required a lot of labor and capital. If the price of gold was high, you worked more expensive mines. If it was low, you idled them as temporarily unprofitable. The effect of the increase on the money supply was diffused throughout the economy by virtue of the sheer amount of work required to accomplish it.
With paper money, all that is required is a press and anti-counterfeiting measures. The transfer of value into the new money is far more concentrated, both in terms of actors and time. The buying power of the new money is higher, because people don't necessarily know how much you printed until you start spending it.
It is a great virtue for Bitcoin to make public the exact amount of new money added to the economy. Monetary inflation can therefore be predicted exactly. It's still inflationary, and does not account for changes in demand to achieve a stable money price. What it needs is a feedback loop that connects mining rewards with demand for the currency. I imagine that could key from the hash rate of the whole network, but I'm not certain how.
There is no basis for the assumptions about demand for money vs. other goods that are necessary for this to be a justifiable claim.
Assumption: The money itself has zero intrinsic value. It is only worth what you can trade for it. Thanks to the previous assumption, that is a fraction of all goods and services on the market.
When you change the size of the money supply from 100 to 102, the 2 new notes increase in value from 0 to 1/102 of everything on the market, and all of the 100 old notes decrease from 1/100 to 1/102 of everything. The guy that prints the new notes gets 2/102 of everything for free. That value is not created; it is taken. Everyone who held any old note has their buying power reduced by 1.96%.
Is it justifiable? Yes. Is it a gross simplification because economics is a dismal, dismal science? Also yes.
"...make any Thing but gold and silver Coin a Tender in Payment of Debts... " means states cannot issue their own currencies as legal tender. They can only make gold or silver legal tenders for debts. The federal government can make paper dollars a legal tender, and the states can pay their debts in that.
It would be nice to think that the supremes would strike down legal tender laws for that reason, but as they are paid in paper, I don't think it likely in this millennium.
The power to emit debt instruments, including in the form of paper money, is, to the extent it is not included in the power to coin money and regulate its value (Art. I, Sec. 8, cl. 5) a necessary part of the power to borrow (Art. I, Sec. 8, cl. 3). See, inter alia, Juilliard v. Greenman, 110 U.S. 421.
The power to borrow is to write a promissory note in exchange for a real something, that is later redeemable by giving real somethings to the holder of the note. I can write a note promising to pay a hamburger and a half on Tuesday for a hamburger today. In order for that note to have any sort of economic effect, someone has to give me a hamburger for it.
Once it's out there, that's worth 1.5 burgers, and can be traded around at will, but come Tuesday, I need to have 1.5 hamburgers on hand to redeem the note.
The paper money notes now circulating in the economy have nothing to do with borrowing. Where is the promise to pay? What is the term of the loan? Why is the US paying the Fed interest to take and use their note?
If it were borrowing, the Treasury would print the notes and give them to the Fed in exchange for something. Those are T-bills. The something they get in return is Fed scrip. That is what circulates. That is what they made into legal tender. Do you buy groceries with T-bills? US notes? Gold or silver certificates? No? The federal power to borrow does not apply here. You are not exchanging federal instruments, but notes issued by a private (but legislatively controlled) banking system.
If you contract to be paid only in federal coins or instruments, and someone pays you in private bank notes created from thin air instead, the courts will not decide in your favor.
Will you read it?
Admittedly I don't follow finance, though.
That's exactly what it is, and exactly what it should remain.
Just because there isn't regulation now means jack squat. It's not a feature, it's a side effect of newness and reactionary politics.
Isn't that also the thing the libertarian reader is looking for?