The Antiplanner has written several recent posts about Congressional reauthorization of transportation spending. But an even more imminent transportation reauthorization deadline is coming up: that for transportation revenue in the form of gas taxes. The law allowing such taxes is due to expire on September 30.
Recalcitrant Republicans held airline ticket taxes hostage for several weeks over subsidies to a baker’s dozen out-of-the-way airports. They let the debate over raising the debt limit go down to the wire. What’s to prevent them from refusing to reauthorize the federal gas tax?
Chiropractic method or techniques primarily specialize http://opacc.cv/documentos/Plano%20de%20Actividades%20e%20Orcamento-OPACC-2011.pdf on line cialis in manual and manipulative therapies with an emphasis on spinal manipulation. probe cialis generika For men it is easy to understand their sexual issue. buy generic viagra opacc.cv This inability to have an erection is referred to as an androgen blocker. Sometimes, a poor self-image due to physical factors can cause it and this can be prevented by taking herbal libido enhancement supplements pfizer online viagra for women.
Such a refusal would quickly shut down federal funding for state highways, urban transit, and a few other programs, some of which are not particularly related to transportation. A lot of that money is wasted anyway. Ending the gas tax would immediately reduce the price of gasoline by 18.4 cents a gallon, which would make drivers happy. State legislatures could decide whether to raise state gas taxes by that amount, which in most states would effectively preserve revenue to their highway programs (though many transit programs, particularly in cities building new rail projects, would lose out).
It probably won’t happen. But I can dream, can’t I?
We certainly can dream. At least delaying the re-authorization of the tax could shelve some stupid or wasteful projects currently under consideration, in exchange for authorization going forward.
Meaning mostly foolish transit projects that use money siphoned from car drivers to transit users. The Milwaukie light rail in Portland comes to mind. So does the California High Speed Rail to Nowhere and Back. Several wasteful, delusional light rail projects under consideration in Seattle should also be shelved.
I realize there is only limited space to list all of the wasteful rail projects, but we really MUST list the Columbia River Crossing light rail project. You know, the light rail line with a highway component to provide the toll revenue to act as a credit to the local match so as to get the Feds to pay 100% of the project.
Thanks
JK
You know, the light rail line with a highway component to provide the toll revenue to act as a credit to the local match so as to get the Feds to pay 100% of the project.
Aptly put. I completely forgot about our other local 1 billion + dollar rail boondoggle.
The Antiplanner wrote:
Such a refusal would quickly shut down federal funding for state highways, urban transit, and a few other programs, some of which are not particularly related to transportation. A lot of that money is wasted anyway. Ending the gas tax would immediately reduce the price of gasoline by 18.4 cents a gallon, which would make drivers happy.
A few thoughts (and I must disclose that a substantial part of my compensation comes (indirectly) from federal motor fuel taxes):
1. At the price that people are paying today, eliminating the federal 18.4 cent/gallon tax is not going to significantly reduce prices paid at the pump.
2. The Mica proposal to reauthorize apparently zeros-out the federal New Starts program, which (presumably) puts and end to federal funding of new rail transit projects. As I read it, there would still be federal funding for “capital” maintenance of existing rail systems, and those on which construction has already started would continue.
3. Spending money on unsexy things like repaving of highways and redecking of bridges (on the Interstate and NHS networks) is (at least in my opinion) not a waste of money.
While am not opposed to letting the federal gas tax expire it may not reduce the cost of gasoline by that much. Note that in the just past temporary lapse of the Federal aviation ticket price the airlines simply pocketed the money. If the price of gasoline is set by supply and demand the tax reduction might simply result in a greater demand and the price going up with more profit for oil companies.
Also in California there are many who if the federal gas tax was eliminated would immediately try to spend it on hopelessly cost inefficient rail systems.
Randal:
How would you like to see roads paid for? Private tolls? How does that work on city streets?
What CPZ said.
DS
The Federal Government has been involved in colecting revenues for and building transportation infrastructure with those revenues since roughly 1803, when the National Road program was started, with follow-ups like the Natchez Trace, the Transcontinental railroads, the US Highway system, the Mississippi lock and dam system, the Interstate Highway system, and the St. Lawrence Seaway.
I am curious what the reasoning is today that a national interest in transportation is no longer relevant or needed.
“Spending money on unsexy things like repaving of highways and redecking of bridges (on the Interstate and NHS networks) is (at least in my opinion) not a waste of money.”
Not a waste of OUR money at least. If anything, a waste of the next generation’s money, since they’re the ones who will have to pay for it. Oh, wait. Maybe not. Maybe we’ve run up our credit card to the max, but we keep calling in and requesting a credit limit increase, but like the good Americans we are, we’re just going to run it up as high as we can and then refuse to pay it. Or we’ll just print, print, print some funny money and give it to our creditors. And the ratings agencies know that’s the course we’re on. AA+ is far too high for our indebted nation.
All the paving in Oregon didn’t save that state from the recession. But, hey, when the rich pay $9 a gallon for gas because the dollar has been completely debased by monitization of the debt, they’ll have some purdy roads to drive on.
Frank. . . are you suggesting that we just stop maintaining our roads altogether? Or did you have a point?
I think what Frank is trying to say is that some of these re-paving gigs are make work projects for the local construction companies, not necessary maintenance that was needed at the time.
Spelled out for those who struggle with reading comprehension:
1. The money spent on stimulus road projects was borrowed.
2. Either the next generation will pay for the roads we’ve fixed and used or the country will go bankrupt/experience a monetary crisis.
3. Borrowing money to fix roads did lead to an economic recovery.
4. Some of the money spent to “fix” roads in Oregon was strictly cosmetic. (Readers with high enough reading comprehension can infer that cosmetic road projects are a waste of borrowed money.)
Number 3 should read “did not lead”; what happened to the edit option?
Frank:
The inflation occurs when the debt is issued, because money is being spent which does not exist. Debt creation = money creation. This holds for your personal debt too. When a bank sends you a credit card with a $20,000 limit and you go and proceed to spend it all, you’ve just witnessed the birth of $20,000 of new money into our economic system. You never have to pay that money off so long as you pay the going interest to carry the debt.
Monetizing the debt once the debt is incurred does not change anything at all except that a stream of interest payments is no longer owed to anyone. Look at it objectively. You hold $100,000 in debt from the US Government. The government obtained your money and spent it and issued you a bond. This bond is as good as cash and can be easily exchanged for small bills at a bank. It obviously does not need to be paid off, because the debt has not been paid off since 1835, at which point the US Economy collapsed into a depression from a lack of money. Now Congress authorizes $100,000 in Treasury Notes to be printed by the Bureau of Engraving and Printing and the notes are placed in a vault and credited to your account, while they take back your Bond and shred it. You still have $100,000, and the government has still spent $100,000 and has nothing, but the debt is gone. No net money was created by monetizing your debt instrument, but debt was destroyed.
The obvious conclusion is that the constitutional power “to borrow money on the Credit of the United States” is the power to issue paper money, and that new money is in fact issued whenever debt is incurred. Logically then, the entire US Debt could be paid off by issuing Treasury Notes to all debt holders. The only harm that would follow would be mopping up the tears on Wall Street over their loss of billion in interest payments they were expecting to milk from the American cow. Even more logically, the US Treasury could simply print up money to cover annual deficits instead of going through the charade of issuing bonds. The real effect is the same since bonds are a form of money.
Wow, Andrew, just wow. Thank you for enlightening me.
Please explain about this depression in 1835. Are you referencing the Panic of 1937? The Austrian School holds that was caused by “the Second Bank of the United States, Mexican bimetallism (which drove Mexican silver out of Mexican circulation according to Gresham’s Law, and into America where it was legal tender), legal tender law, fractional reserve banking, and state government deficit spending, which dramatically increased the money and credit supply, decreased interest rates, and led to erroneous investment decisions before and up to 1837”.
Sounds mighty familiar to me!
Please explain how borrowing “money” on the credit of the United States (in your interpretation that meaning the US can print specie) reconciles with the fact that the federal government is not explicitly enumerated the power replace money (gold, silver) with paper.
“The only harm that would follow would be mopping up the tears on Wall Street …”
Wow. How incredible is the narrow focus here. If we default by paying off the entire debt to our foreign creditors with worthless paper, do you honestly believe they’re going to accept that and that there wouldn’t be ripple effects–make that tsunamis–felt around the world and by American producers and consumers. How naive.
Andrew, you have been reading too much Greenspan lately!!
Though most road funding comes from property taxes.
One of the good things about the collapse of government finances will be no more money for rail!
Not to stir controversy, but I am wondering if people know of other broad taxes that are quasi-user fees like the gas tax.
There is a federal telephone tax, but that goes to subsidize getting phone and internet services to a minority of the people.
There are federal airline ticket taxes which go to airports and TSA security. You might think TSA is a joke, but at least the people who get molested are the ones paying for the molesters.
I suppose there are port fees and lock fees and other fees for shipping.
Any others?
Frank wrote:
Not a waste of OUR money at least. If anything, a waste of the next generation’s money, since they’re the ones who will have to pay for it.
They will assuredly pay more if the national highway system is not maintained.
Oh, wait. Maybe not. Maybe we’ve run up our credit card to the max, but we keep calling in and requesting a credit limit increase, but like the good Americans we are, we’re just going to run it up as high as we can and then refuse to pay it.
Failing to maintain the highway infrastructure will pass along massive debt to future generations as well. And unlike federal outlays to the elderly for Social Security and Medicare, those highways will benefit future generations.
Or we’ll just print, print, print some funny money and give it to our creditors. And the ratings agencies know that’s the course we’re on. AA+ is far too high for our indebted nation.
As a nation, we do not spend enough on infrastructure that we use (in other words, I exclude federally-funded Smart Growth and related programs, most passenger rail transit and Amtrak when I say infrastructure but include the Interstate system and the NHS system, freight railroads, aviation (and airports) and sea and inland ports) which are vital to the functioning of the national economy. The percentage of public outlays for those things is quite small when compared to the large programs of federal-level entitlements (including the Republic Party’s unfunded Medicare D prescription benefit).
Frank also wrote:
4. Some of the money spent to “fix†roads in Oregon was strictly cosmetic. (Readers with high enough reading comprehension can infer that cosmetic road projects are a waste of borrowed money.)
I am not including cosmetic or “make work” road projects when I discuss highway maintenance. I am talking about repaving roads, redecking and otherwise rehabilitating bridges when needed – and in some cases about tearing pavement out to the subgrade and replacing it. I am also talking about remediation of high-crash-rate locations and reconstructing interchanges where needed.
Note that I am aggressively indifferent about how these things are funded. They can be funded by motor fuel taxes and excise taxes (which is how maintenance of most “free” Interstates and NHS roads are funded), they can be funded by tolls collected by public-sector toll authorities (pretty common in some states, including (but not limited to) New Jersey, Florida, Oklahoma and my home state of Maryland) or they can be funded by privately-owned toll operators under a concession agreement, as is common in France and found in a few U.S. states, including Virginia and Indiana.
I may disagree with CPZ on occasion, but for the record the man often has his facts straight, and his arguments. Like now.
DS
Jeez, Randal, it seems that you are betraying your principles.
The Federal gas tax is rare for a connection to usage, but feds neither build, maintain nor decide routes.
(There is a connection w/SS retirement (not medical), in higher payouts to previous taxes, on avg, but still off.)
Examples of no connection:
. Schools:parents NO
. Defense:person NO
. Transit:users LITTLE <1/3 cost, <2% of miles, paid by others
. Medicaid:patient OPPOSITE
Not to suggest no temporary help.
Connections w/bailouts & other crony (fake) capitalism.
Re: Federal power & state responsibility:
There should not be a HUD, DOT, Dept of Ed, Labor, etcetera nor many other agencies & <power in EPA, NLRB & others.
Dispense w/the extra taxes from states, which are "given/granted" back.
Although, Rid the federal gas tax (many reasons) & each state collect a minimum of $1/gallon from gas, for roads. (No diversions)
Even $1.50 would be great — going to roads only — more lanes, higher efficiency, better mpg, & it would lead to less driving & maybe push some to live where there is more transit.
The disdain for the higher gas tax is a big thing that is disappointing about Grover Norquist & the no-tax pledge, plus his CA Proposition 13 on property taxes, which has screwed CA, due to inflation & price differentials, based upon when a property was purchased.
“As a nation, we do not spend enough on infrastructure that we use…which are vital to the functioning of the national economy.”
How do you know “we do not spend enough on infrastructure”? That sounds like pure unsubstantiated opinion to me, especially since a recent study lamented that “[d]espite the importance of infrastructure, empirical economists have been hindered by the lack of infrastructure performance measures.”
The original claim was that infra work isn’t a waste. That depends on which rubric you use to measure success. These debt-financed projects did not save the economy in Oregon or anywhere else, so by that measure, the were a waste.
Clarification [phrase added] to previous sentence:
“The Federal gas tax is rare for [being one of few fed taxes having] a connection to usage”
Additionally, who can really disagree w/the connection to driving?
Except for the many who want others to pay?
. Alternatives of tolls & tracking are cost-prohibitive & have other drawbacks.
Yes, fed gas tax is siphoned (15-25% ?) for non-roads, but can be eliminated. Hypocritical to be against “user-based” charges for one’s uses?
The highly pro-transit (10% of all people, but <1% of all as riders ?) seem to think of magic (if a subway stop under my lot), & like to discourage & demonize petroleum use, despite its huge benefits to development, regardless of their car.
Little do they know how much energy goes for everything/person, regardless of car-usage. (Oh, AGW is a hoax; please read, especially data & science)
How about each state solely funds roads & public transit?
Federal money is a ruse: 50 states pay in, & each gets back an average of ~90%, but when not directly from residents, is seen as gift or exchange for ____, & there is more propensity to spend w/disregard.
Metrosucks; One of the good things about the collapse of government will be no more money for rail!
THWM: There will be no more money for roads either, you’ll have to do road work your self.
CP’s comments:
1. At the price that people are paying today, eliminating the federal 18.4 cent/gallon tax is not going to significantly reduce prices paid at the pump.
Agreed. In fact, a reduction may never occur. Merchants may charge the same amount for gas and pocket the difference, as what happened with the FAA.
2. The Mica proposal to reauthorize apparently zeros-out the federal New Starts program, which (presumably) puts and end to federal funding of new rail transit projects. As I read it, there would still be federal funding for “capital†maintenance of existing rail systems, and those on which construction has already started would continue.
About time. Too bad there’s no provision to shut down anything they’ve already started. Better to shut it down now and lose a couple million, than build it, then run it for 20 years and lose billions.
3. Spending money on unsexy things like repaving of highways and redecking of bridges (on the Interstate and NHS networks) is (at least in my opinion) not a waste of money.
Agreed. However, let’s be realistic. Re-authorization will happen, sooner or later. In the end, I think that threatening to block re-authorization to get pork stripped out is the best one can wish for.
Frank wrote:
How do you know “we do not spend enough on infrastructureâ€? That sounds like pure unsubstantiated opinion to me, especially since a recent study lamented that “[d]espite the importance of infrastructure, empirical economists have been hindered by the lack of infrastructure performance measures.â€
(1) Traffic congestion that wastes time and energy (and yes, I know some elected officials deliberately set out to cause traffic congestion in the hope that some of the people stuck in the traffic will be forced onto transit, but that’s a strategy that does not generally work).
(2) Many of the older (especially pre-1970) Interstate highways are in bad shape. Some examples (most of this is based on my driving of (mostly non-tolled) East Coast Interstates and other freeways):
– Potholes and ruts, especially in bridge decks
– Structural steel that’s damaged from rust and deicing chemicals
– Cracks and joints “looking through” asphalt wearing surfaces
– Bridge decks that are too narrow and do not include shoulders
– Signalized at-grade intersections that should be replaced by grade separations
– steel guardrails that should be replaced by concrete “Jersey” barriers
– Highway lighting systems that have large-scale failures
(3) Unsafe conditions, such as the following:
– Lack of deceleration and acceleration lanes
– Lack of shoulders even on some short bridges
– Curves that sharper than they should be
– Overpasses that do not meet current standards
The original claim was that infra work isn’t a waste. That depends on which rubric you use to measure success. These debt-financed projects did not save the economy in Oregon or anywhere else, so by that measure, the were a waste.
Projects that correct one or more of the items listed above would certainly not be on my list of wasteful items.
As far as debt-financed projects, if at least some of that debt is to be liquidated by highway users paying fees (be they tolls or motor fuel taxes – or other taxes), then what’s wrong with that?
But let’s talk about how to finance these projects. Tolls and taxes are the only two ways that I can think of. Do you have other ideas?
If you are ever in Southern California, take a drive down I-5 (Santa Ana Freeway) south from downtown Los Angeles in the direction of Irvine and San Diego. The contrast between the terrible condition of the road in Los Angeles County, and the gleaming and nearly-new conditions in Orange County (where county officials have funded significant upgrades (using tax money) to a freeway that should probably not be their responsibility) is almost shocking.
Dan wrote:
I may disagree with CPZ on occasion, but for the record the man often has his facts straight, and his arguments. Like now.
Thank you for your kind comment, Dan.
metrosucks wrote:
One of the good things about the collapse of government finances will be no more money for rail!
I think you know that I am not especially a fan of government-funded passenger rail projects – perhaps for some of the same reasons that you don’t care for them.
But as much as I dislike most of the rail projects planned and built (Randal’s Forward into the past phrase from some years ago to describe them still rings true), trashing the entire federal system of transportation finance because of some grievous policy mistakes made during the Nixon and Reagan Administrations does not make much sense.
Why Nixon and Reagan?
Because it was during the Nixon Administration that “flexing” of federal dollars collected for highway construction to urban rail transit projects was first permitted (this mechanism was used to cancel several planned but never built freeways in Washington, D.C. with the funds then used to build part of the Metrorail system); and during the Reagan Administration the Surface Transportation Assistance Act of 1982 was signed into law, which established, for the first time, that federal motor fuel tax revenues were to be systematically diverted to transit subsidies.
If we want to go to a different system of paying for transportation infrastructure, that’s fine, but those details need to be worked out in advance.
Frank:
Please explain how borrowing “money†on the credit of the United States (in your interpretation that meaning the US can print specie) reconciles with the fact that the federal government is not explicitly enumerated the power replace money (gold, silver) with paper.
I don’t need to explain this. The US Supreme Court’s Legal Tender cases in the 1870’s did that in a perfectly adequate manner. See Knox vs. Lee, Parker vs. Davis, and especially Julliard vs. Greenman. Thomas Jefferson also understood this, as he wanted to remove the power of borrowing from the US Constitution so as to “deny their power to make paper money or anything else a legal tender” (Letter to John Taylor). He wanted to do this to force the government ot live within its means and thus reduce the incidence of war, which is the main cause of borrowing money.
The First Bank of the US started issuing paper money in 1791. If this was some sort of unconstitutional endeavor, its a bit queer that it was undertaken by the Founding Father’s themselves.
Gold and silver are not “money”. Those commodities can be coined as money, but it is only by coining them that they become legal tender money.
Just to remind people here, during the Civil War, the US Government issued Treasury Notes as essentially 0% interest bonds and paid for its expenses directly with this new money. It also used National Bank Notes to monetize debt in a more complex set of transactions with chartered National Banks.
CPZ:
during the Reagan Administration the Surface Transportation Assistance Act of 1982 was signed into law, which established, for the first time, that federal motor fuel tax revenues were to be systematically diverted to transit subsidies.
That is a matter of semantics. If you were not anti-transit, you shoudl correctly describe this measure as “for the first time, that federal motor fuel tax revenues were to be systematically assigned to transit investments.” You could also use the word pledged, promised, dedicated, etc., like you would use to describe the use of the fuels tax for roadway spending.
The fuel tax money is not being “diverted” because it does not “belong” by divine right to the road system. You cannot “divert” something from a thing which has no inherent title or claim to the thing.
Moreover, the money put towards transit use originated from raising the gas tax, and thus was new revenue to the US Treasury, as opposed to already pledged ad valorem pennies of gas tax. The roadway account has always received all of the gas tax money it is entitled to receive by law, and the law does not entitle it to receive any of the gas taxes raised to support transit systems.
In essence there are two gas taxes – one stream of revenue dedicated towards roads, and another stream dedicated towards transit. At times the Congress has also dedicated streams of fuel tax revenues towards deficit reduction instead of spending, most recently in the 1990’s.
As I keep saying, there is nothing inherent in the gas tax which entitles the road system to receive it at all. It is just another means of raising revenue needed for government operations, nothing more, and nothing less.
Andrew, stop smoking whatever Greenspan has in his pipe, please. Your monetary theories are pure lunacy. Doesn’t matter that some old white men gave it credibility in the past.
metrosucks:
As opposed to what? Bi-mettalic gold standard lunatics? Because that worked so well in the past, right?
Scott:
The disdain for the higher gas tax is a big thing that is disappointing about Grover Norquist & the no-tax pledge, plus his CA Proposition 13 on property taxes, which has screwed CA, due to inflation & price differentials, based upon when a property was purchased.
Careful there son. You are rapidly becoming a Republican heretic like me by saying such things.
Actually, the gold standard, for what it was, worked well. But feel free to elucidate how it has failed, if you wish. The Wiemar Republic and Zimbabwe are eagerly awaiting the explanation.
metrosucks:
The Gold Standard lasted all of a few decades internationally – roughly 1873 to 1914, with feeble attempts to maintain it beyond then to around 1933. Attempting to go back on the Gold Standard in the 1920’s crippled a number of economies, and clinging to it in the 1930’s prevented economic recovery.
http://delong.typepad.com/sdj/2009/03/lessons-from-the-great-depression-i.html
Shall I go on?
Historically around the globe, gold was not the base coin of money, silver was. This was true in Europe, Rome, Greece, China, Japan, India, Persia, Israel, and other places, and of course the US. Gold is rather like diamonds, in that it is very pretty and expensive, very rare, and very shiny and exciting, and otherwise useless apart from ornamentation. Silver on the other hand, has a number of other uses besides as money, giving it an intrinsic value. This is why silver does not follow gold in the free market, and why attempts at circulating coins of both metals invariable brings Gresham’s Law into play.
Of course for explanation vis-a-vis Weimar and Zimbabwe, why not instead counterpose the present gold bubble and the gold bubble of 1980 which are effectively deflationary catastrophes had gold been money? The price of most goods has not gone up 6 fold in the past 6 years, but gold has. Similarly prices of most goods did not quadruple from 1977 to 1980. Gold is obviously just as subject to bubbles relative to the prices of consumer goods as paper money. Was an ounce of gold really worth 150 loaves of bread in 2004 but now it is worth 900 loaves? What has changed in the value of a loaf of bread in that time to cause the poor baker to have to essentially offer buy one get 5 free? I could also ask you to explain the long and illustrious history of coinage debasement by kings and mints.
Maybe you had best go back to first principles and ask what is money and who should get to make more of it to permit economic growth?
Dan: I may disagree with CPZ on occasion, but for the record the man often has his facts straight, and his arguments. Like now.
THWM: Dan that’s bullshit. CPZ wants a loaded deck just like O’Toole, Cox, Rubin, Karlock, Scott & Metrosucks.
They don’t even want to come clean that roads are socialist/communist.
“Free markets” are pure fantasy, though we could strive for a fairer market place. Where rail lines are treated the same way roads.
Andrew: I was going to respond to the strangeness of seeing gold as “real” money while seeing paper tender as “illegitimate” money, when both ONLY have value because users believe that they have value, but you left nothing unsaid on the topic.
Golf clap.
the highwayman asserted:
Dan that’s bullshit. CPZ wants a loaded deck just like O’Toole, Cox, Rubin, Karlock, Scott & Metrosucks.
Why thank you, highwayman. I consider comments like that (coming from you) to be a complement.
The value of gold or silver as money vs paper, of course, for one, is that there is a limited amount of either metal coming out of the ground. Paper money can be printed endlessly, giving us inflation. I shouldn’t have to explain this. There is *nothing* beneficial about inflation, despite propaganda from the government/Fed. It just benefits the first users of the money (ie, the banks and contractors), as Frank has pointed out. I’m disappointed in you, Andrew. If you are listening to Greenspan or Krugman, stop. Both are nothing more than Big Government/Fed shills.
metrosucks:
Gold and silver can provide inflation too. See the results of the Spanish conquest of S. America and Mexico, or the California/Nevada Gold Rushes. Or the endless debasement of coinage by those who control the mint. A British Pound was called that because it used to be one pound of silver. It hasn’t been close to that for a millenium.
Inflation is most certainly beneficial to debtors, which in this day and age is most people. The natural tendency of things during gold standard days was constant deflation due to economic growth exceeding monetary growth, which was of course brutal to debtors.
One needn’t look far to notice the constant severe panics and recessions during gold standard days – 1873-1879, 1882-1885, 1893-1896, 1902-1904, 1907-1908, 1913-1914, 1920-1921, 1923-1924, 1929-1933. Most of these downturns saw business activity fall 10-40% and unemployment rocket up to 10-15%. Imagine, if you will, a 2008-2009 type of economic crisis occurring every 5-6 years.
Paper money can be printed endlessly if not controlled. That is the purpose of the national debt, in that it limits the creation of new money to what the economy can afford to carry by paying interest.
“A British Pound was called that because it used to be one pound of silver. It hasn’t been close to that for a millenium.”
Andrew, this one paragraph, found just by searching Wiki, makes it impossible to take anything else in your pontification above seriously:
“There is some uncertainty as to the origin of the term “pound sterling”. Some sources say it dates back to Anglo-Saxon times, when coins called sterlings were minted from silver; 240 of these sterlings weighed one pound, and large payments came to be made in “pounds of sterlings”.[9] Other references, including the Oxford English Dictionary, say a sterling was a silver penny used in England by the Normans, and date the term to around 1300. For more discussion of the etymology of “sterling” see Sterling silver.”
The recessions you list above were created largely by banks issuing credit beyond their reserves, and there were issues with a bi-metallurgical standard. It got worse after 1913 as the Fed began debasement, which you so aptly point out, is only available “by those who control the mint”, which is government.
This is a great Keynesian summary/talking point, littered with half-truths and inaccuracies.
Money is just a means exchange, in the end it all comes down to what you believe with what is a good trade.
“Attempting to go back on the Gold Standard in the 1920?s crippled a number of economies, and clinging to it in the 1930?s prevented economic recovery.”
OK. You’ve written a lot of ridiculous stuff here today, but I can’t let this one pass. The Europeans attempted, it’s true, to return to the gold standard in the mid-20’s. But it was not, by any shape or color, the classical gold standard that existed before WWI.
To start with, the British, out of pride alone, insisted on pegging Sterling at its pre-war weight even though it had inflated during the war years by some 10-20%. Now, this was no consequence of any gold standard, it was just a stupid, move.
Instantly, British export goods were priced out of competitiveness. Only a grinding deflation could fix the situation, but labor unions blocked any attempt to allow wages to drop and massive layoffs ensued. To top it off, the Brits convinced most of Europe to follow suit and the continental currencies were also defined at their pre-war values causing the entire continent’s economy to falter.
And, to add insult to the gold standard’s injury, there was no ability by European citizens to exchange their paper for gold. Only governments could do so — and, at that, were cajoled into using Sterling as a reserve so as to preserve Britain’s dwindling gold stocks.
Eventually, this ersatz gold exchange standard was abandoned and Europe recovered — only because foreign exchange rates could finally float back to reflect the true devalued nature of the paper currencies. This episode had absolutely nothing to do with gold — just politicians manipulating the money while hiding behind gold’s respectability.
Brad Delong often doesn’t know what the hell he’s writing about.