Neither sound money nor the free market comes from printing money into existence. Arguably the only thing worse than the Fed printing money out of thin air is Congress printing money out of thin air for the purpose of full employment and/or any other absurd ideas Congress has.
The last thing we need, the very last thing we need is Congress lending money into existence to pay the bills or to do anything it wants for any reason.
Bill Is Unconstitutional
Several readers, James Turk among them pointed out Kucinich's bill is unconstitutional because the proposal amounts to issuing "bills of credit", an act is forbidden by the constitution.
Inquiring minds may wish to consider the following articles regarding constitutional money and bills of credit.
Those wishing to read the definitive comprehensive guide on American monetary law and history should consider "Pieces of Eight", and James Turk's effort to reprint that guide.
Kucinich's bill is "To create a full employment economy as a matter of national economic defense; to provide for public investment in capital infrastructure; to provide for reducing the cost of public investment; to retire public debt; to stabilize the Social Security retirement system; to restore the authority of Congress to create and regulate money, modernize and provide stability for the monetary system of the United States, retire public debt and reduce the cost of public investment, and for other public purposes."
You cannot "restore" what was never there in the first place.
Gnazzo, Brown, and Kamenetsky point out these constitutional facts.
Article I, Section 8, Clause 5 of the Constitution states that Congress shall have the power "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."
Article I, Section 10, Clause 1 says "No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."
Reader Emails
Eugene Holloway writes ...
What could pose more potential financial calamity than putting a cartel of banks in charge of your country's currency, giving the fox the keys to the henhouse?
Answer: Putting the U.S. Congress in charge, locking a hungry fox in the henhouse with the chickens. There is no precedent in our country for giving the Congress the unfettered power to dictate how much money can be printed. None. None. It has never been done. Never.
If anyone -- libertarian, conservative, Republican or Tea Party person -- tries to tell you that this is a good concept, please help him understand the certain consequences that will follow such folly.
Hugo Salinas-Price writes ...
Hi Mish!
Having Congress create money - because "money is scarce" - was the idea picked up by firebrand revolutionaries in France in 1790.
Voices of reason tried to stop the idiots, but they would not listen.
The French economy was totally destroyed in the following inflation. The madness finally ended when the paper currency went to zero value against gold. Not one of the revolutionaries ever admitted that the cause of the whole catastrophe was caused by fiat money!
Good luck stopping the idiots this time. You have, of course, read "Fiat Money Inflation in France" (1896) by Andrew Dickson White.
It's deja vu all over again.
Best regards
Hugo
Click on the preceding link, added by me, for a synopsis of the book.
My friend "HB" writes ...
Fractional reserve banking must end as it violates property rights and is the driver for the boom-bust cycle. However, abolishing fractional reserve banking should be done in concert with establishing a free banking system without a central bank and with a complete denationalization of money.
It is not possible to rectify the situation by transforming Congress into the new 'money printing from thin air' authority.
Kucinich's proposal is hair-raising nonsense for numerous reasons.
As much as I oppose the Fed and the fractional reserves system, it is actually better than what Kucinich proposes. Direct political control over the printing press would be an unmitigated disaster.
From the standpoint of constitutional law, the constitution does not confer the right to 'create' money from thin air on Congress. Rather, the clear intent of the constitution is for Congress to regulate the weights and measures of gold and silver coins. Those coins the only lawful money mentioned in the constitution. Thus, the current fiat money system is unconstitutional, even if the Supreme Court has said otherwise.
His assertions regarding the health care system and 'solar panels' and other alternative energy schemes are the usual socialistic clap-trap and easily refuted because such projects cannot exist without government subsidies, which ipso facto proves that they are uneconomic and will make the energy related situation worse instead of better.
The alleged 'aversion to borrowing' clashes with the reality that the US government deficit is now one of the highest in history. An aversion to borrowing would be good, not bad.
There is also no 'aversion to hiring people', but rather an economic situation brought on by the government interventions of the past, which have been instrumental in creating a credit-financed boom that has turned to bust. The more additional interventions are undertaken, the worse the employment situation will become.
Finally, it is NOT the 'job of Congress' to get everyone a job or to invest in this or that. Government-directed investment schemes and 'make work' programs will only consume more scarce capital and further lower the standard of living for everyone except perhaps for the few recipients of make-shift work projects at the expense of everyone else.
No one in their right mind should support Kucinich's mad proposal, unless their intent is to purposely make matters far worse. Fortunately, that bill is going nowhere with Ron Paul as Chairman of the Monetary Policy Subcommittee. I fully expect Ron Paul to enter a valid proposal sometime in 2011.
Addendum:
Further clarification Email from Eugene Holloway:
Paper money is unconstitutional. Legal tender is unconstitutional. You and I know that as a historical fact. But the U.S. Supreme Court, exposing its nature as a political body, has ruled otherwise. All of this is explained in my essays at http://www.gold-eagle.com/research/hollowayndx.html.
In case someone disagrees with the assertion, the reason I insisted that giving the Congress the unfettered power to print money is unprecedented is that, when the Treasury (approved by Congress) was in charge of the currency, the currency was convertible to gold or competed with it -- the Congress was thus limited. Today there is neither a Constitutional (according to the high court) nor a golden limitation. So the comments of Justice Field apply more than ever. And even more so the comments of the dissenters in the 1935 case in which the Court upheld the law invalidating gold clauses in private contracts: "Loss of reputation for honorable dealing will bring us unending humiliation; the impending legal and moral chaos is appalling."
I am a lawyer. When people consult me about probable consequences of proposed actions, I advise based upon the prevailing precedents and opinions of judges, which are indicative of likely results.
So when I wrote those articles, I painstakingly walked the reader through the documents and history of how the Constitution has been turned on it's head -- because simply saying that paper money, etc., is unconstitutional is not especially credible when the common assumption is that the Supreme Court is a bulwark that protects us against the Constitutional excesses of the other two branches.
The point of my essays is to demonstrate how, slowly, over decades and centuries, the Supreme Court can establish that anything is Constitutional, even if the clear intent and words of the founders are otherwise.
It's that time of year when it's not uncommon to be sitting by a fire, sipping a glass of Egg Nog (with brandy), and listening to A Charlie Brown Christmas on the stereo. Wait... that might only be me. Whatever your holiday traditions may be, SEOmoz is pleased to present the 'Top 10 Things We Learned About SEO in 2010', with special guest, Rand Claus. Sit back, relax, and enjoy the video (the Egg Nog is optional)! From all of us at SEOmoz, we hope you have a wonderful holiday!
Chestnuts roasting on an open fire. Oh, hi there, boys and girls! I didn't see you there. Welcome to White Beard Friday.
Every year here at SEOmoz we like to have a tradition where I don this ridiculous white beard and present some interesting SEO stuff to you. So, I want to do that again today. I figured it would be a good time, it's the end of the year, and 2010 is coming to a close. We have learned a lot about SEO this year. I think it would be a great idea to talk about some of the great things that we have learned. I even might have a bonus number 11 for you.
First off, number one, search is here to stay. I think that a lot of prognosticators for years have been saying, "Oh, this whole Web 2.0 thing and this social thing, these are going to take over the SEO world or the search world. People are not going to be searching as much. They're going to be using Twitter and Facebook to find the things that they want. They're going to use these alternative sources. Maybe they're going to turn to Q&A sites." Mm. Until the data shows otherwise, here's what we've seen. Basically, every year there are more searches, there are more searchers, and there are more searches per searcher. That suggests a behavior where people are happier, not more frustrated, with the results that they're getting. You and I and the tech elite set might be thinking to ourselves, "Yeah, you know, some of these results aren't as good and maybe I can get some better recommendations here or there." But for your vast majority of search users both in the U.S. and around the world, searches just keep going up. I think that's certainly a good thing from an SEO perspective. It's definitely a great thing if you are Google or Bing or you are thinking about competing in this area.
Number two, social and search are interconnected. In fact, in ways that I think we surmised but did not realize fully or did not have confirmation of until just recently. We now know that at least with Twitter and Facebook those two services, the tweets that you send, the links that are in those tweets, the Facebook shares that Google can see through their index, those are influencing SEO directly in Google and Bing's results. They're using those signals to help know which pages to rank and how to rank them. This experiment that Danny Dover performed recently with SEOmoz with the SeeYourImpact site showed that, boy, the one that got about 20 or 30 different links is not performing and the one that got 450 tweets is ranking number one. This strongly suggests that those Twitter signals could be quite powerful, in fact, more powerful than we might suspect today. Whether they last a long time is yet to be seen. We don't know whether over time their power fades.
Number three, mentions can trigger crawling and indexing. This is something I haven't presented data on yet. It is something very interesting that we've been able to observe. Now we have, in my mind, very good evidence. Very, very strong evidence, direct evidence that if a brand is mentioned or a website name is mentioned in the press, but it isn't linked to, that mention will trigger Googlebot to start crawling that site like crazy and perhaps even inflating their rankings. We've seen some data with some local startups here where their new brand was mentioned, specifically in The Wall Street Journal, literally within sub few minutes of the RSS feed pushing out, like less than five minutes, Googlebot hit their site very, very hard. They didn't have any other activity, and they don't usually get crawled like this. They sort of saw some extra search traffic from it. So, very good suspicion that Googlebot's a comin' to town if you get your brand mentioned in the press, even if they're not linking.
Number four, Bing and Yahoo are not a Google killer. I think that a lot of people thought, hey, you know, when Bing and Yahoo come together . . . maybe not a lot of people. Some people, some industry press folks thought when Bing and Yahoo came together, they're going to own 30% of the market share. Maybe they can start to grow that. Bing had been growing market share up to that point. It looks like Bing was mostly cannibalizing Yahoo's market share. By and large this year, Google has been the benefactor of most of the growth. Right now we're living in, according to comScore, something like a 70%-30% world where Bing and Yahoo are responsible for about 30%, and Google is about 70%. You know my take on comScore data. Basically, what they're showing is all the searches performed on the networks, not the traffic that's coming out. If you look at traffic coming out, this is more like maybe a 15% or 20%, and this is something like 80-85% for Google.
Number five, there's new search engines still emerging. I think after the death of Cuil, a lot of people were sort of like, "Oh man, no one's going to try to compete in that space unless they're huge." And yet, this year we saw the launch of Blekko. We saw the launch of Yandex's English language results. And we've seen continued popularity and growth for DuckDuckGo, which is sort of a relatively long-standing search engine. It's been around for a few years now from Gabriel on Hacker News. There's quite a bit of popularity around it. All of these are potentially interesting. I think a lot of people would say maybe the most interesting among these for SEOs is Blekko, which is sort of opening up how they do their search results' calculations, how their algorithm works, providing some link data. It could be very interesting. Their index is still small right now, but it could get really interesting over time.
Number six, Google is very intent on competing in the local space. The Places launch. The move of Marissa Meyer over to local from running search strongly suggests that Google cares a tremendous amount about the maps and the local space and that they really want to invest there. They tried to buy Groupon. They made that offer last year to Yelp. They clearly care about local. But, I think I'm going to argue, Yelp is still way, way better at this. If I'm looking for a restaurant, a salon, an office supply store, Yelp just has, not more business listings necessarily, but the fact that they are willing to show how they filter and organize results and how you can sort things and filter, how you can find reviews about the place, etc., it's just a much better experience than Maps has today. So, I think Google Maps has a long way to go if they want to catch up and play in this space. They're really winning right now on the fact that lots of people just use Google as a search engine source and then get to these results, so Google can put their stuff in front of them.
Number seven, alternative data sources are going to be found for what's gone missing with Yahoo and Yahoo Sites bar. As Yahoo has gone into the Bing world and as they spin down Site Explorer this year, the Site Explorer API's going to turn off, Yahoo will no longer be maintaining a web index at the end of 2012, people have turned to other places to get this sort of link domain stuff. They've done clever stuff with Linkscape data from here at SEOmoz through Open Site Explorer and that kind of stuff. There is also Majestic SEO. Blekko is now providing some link data. People are starting to do some crawls on their own. There are lots of sources. I don't think that the death of Yahoo Site Explorer will be quite as painful once it does hit as we might have presumed previously.
Number eight, we did some cool topic modeling. Remember the stuff around LDA this year, and found that, yes, there is probably a good chance that topic modeling is something the engines are doing and are using to rank results. Over time, we as SEOs might be able to learn more about this process and do a better job at serving both engines and users with the content we provide to both. Just being more relevant with the words and phrases we're employing. Making sure to talk about the things that people care about when they are researching a topic.
Number nine, Google is still struggling, struggling hard, against link spam manipulation. But, on the plus side, depending on your position, maybe it's on the bad side, they know it. They know that they're having a tough time. Matt has talked about this at PubCon that the webspam team is coming back together and they're going to be working very hard on this for the next few months or few years. So it's possible that in 2012 we'll see a lot more action being taken against this link spam issue, buying links, getting manipulative links, using link farms, and these kinds of things. I think it remains to be seen whether Google can pull this one out. It's going to be a tough battle. Adversarial information retrieval is just an incredibly tough art and science.
Number ten, last but not least, SEOs, man, we still don't get no respect. I don't know what's up. It's the Rodney Dangerfield here for us. In 2010, estimates are that between Bing and Google there's going to be about 20 billion advertising dollars spent on paid search and that receives about, maybe around 15% of all the clicks, so 15% of traffic. SEO, which receives about 85% of all the clicks, the spend is predicted by some people to be around $2 billion, maybe a little under $2 billion this year. That includes consulting, software, in-house SEOs. Man! We've got a long way to go. On the plus side, if you're in SEO and you're looking at this and you're getting depressed, you shouldn't be. This is a growth industry. There is no way that something like this lasts forever. You know how you can trust it? Because look how big this beard is.
All right. Well, everyone, it has been a great year. It's been our pleasure to join you for it. We're looking forward to seeing you again next week and next year for another edition of Whiteboard Friday. Ho, ho, ho!
West Wing Week is your guide to everything that's happening at 1600 Pennsylvania Ave. Walk step by step with the President as he signs the repeal of “Don’t Ask Don’t Tell,” looks back at an historic lame duck session, reads to kids for the Holiday season, and receives the Census report.
Here are some of the top stories from the White House blog.
5 Post-Election Achievements You Should Know About As the President said, it’s been the most productive post-election period we’ve seen in decades, capping off two of the most productive years in the history of Congress. Here are five post-election achievements that you need to know about.
We’ve created an infographic to help celebrate Christmas with our readers and clients this year:
Have a great Christmas and a happy New Year everyone! Also, stay tuned to our Facebook fan page for some very embarrassing photos and videos from our Christmas party last week.
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