Posted by John Zmirak on February 15, 2008
Earlier this week, I mentioned the latest attempt by Michael Gerson to demonize conservatives by reviving the “Social Gospel,” a fuzzy pink mass of “idealism” coughed up by progressives who quickly mistook it for Jesus. And so they began to worship it instead. Along the way, Gerson tries to polish up the tainted name of Woodrow Wilson. In the past week news has emerged that Jesus seems to disagree.
On February 1, the Orlando Sentinel reported that the Catholic Church has recognized the final miracle required to make a saint of one of Wilson’s greatest enemies, Habsburg Emperor Karl I. It seems that a Florida Baptist from Kissimmee, at the encouragement of a Catholic friend, invoked Karl’s intercession for help with metastatic breast cancer. As the Sentinel notes: “A judicial tribunal convened by the Diocese of Orlando and officially concluded Thursday has found that there is no medical explanation for the woman’s dramatic recovery, and more than half a dozen doctors in two states—most of them non-Catholics – agreed.” That makes two miraculous interventions attributed to Karl, enough for the pope to certify that Karl is in heaven.
It’s rarely remembered now, but Woodrow Wilson set as one of the primary war aims of the U.S. as she entered (thanks to his careful maneuvering) World War I the destruction of the Austro-Hungarian monarchy. As a multi-ethnic state based not on 19th century nationalism but ancient dynastic loyalty cemented by a majority Catholic faith, it offended his modern notions of what should constitute a country—and as a good Princeton academic, who was in addition convinced that he personally embodied the Will of God, Wilson knew that he could do better.
On the other side of the conflict was Austro-Hungarian emperor Karl I, who took power during the war, and strove mightily to end it by negotiation. As I wrote in The Bad Catholic’s Guide to Good Living:
Karl is known for abolishing flogging, dueling, and other abuses in the army he briefly commanded, restricting the use of poison gas and civilian bombing, and attempting to decentralize power among the ethnic groups of his polyglot monarchy, which he came to rule in 1917. Karl insisted on eating the same rations as an ordinary civilian—refusing even white bread, which he handed out to his troops. His court photographer reported seeing the newly-crowned emperor visiting a battlefield full of corpses—and collapsing into tears. Karl murmured, audibly: “No man can any longer answer to God for this. As soon as possible I shall put a stop to it.”
Almost immediately, Karl began attempts to negotiate a “peace without recriminations” to end the criminal slaughter of World War I. He was the only sovereign in Europe to attempt such a peace. Had he succeeded, the world might never have witnessed a Bolshevik or Nazi regime, a Holocaust, a Ukrainian famine, a Dresden or a Hiroshima.
Karl’s clarity and charity, alas, were no match for the war parties that ruled in London and Berlin, Paris and Washington, from 1914-1918. President Woodrow Wilson insisted personally on the dismemberment of the Austrian monarchy. Fighting dragged on another fateful year—giving Lenin the chance to seize power in Russia—before it ended with the collapse of Germany and Austria. The victors’ peace imposed by the Allies sowed the bitterness which would someday bring the Nazis to prominence. The weak republics carved out of Austria’s corpse would all, one day, fall first to Hitler’s armies—and then to Stalin’s. So went this world “made safe for democracy.”
Exiled on the wintry island of Funchal with his young family, Karl soon succumbed to disease, and died while still a young man. The night before he passed, he whispered to his wife Zita: “All my aspiration has ever been to know as clearly as possible the will of God in all things and to follow it, and precisely in the most perfect manner.” By the Church’s infallible judgment, he succeeded.
Soon the Blessed Karl I will be St. Karl, while Wilson’s name continues its slow decline into disgrace. (Kudos to Jonah Goldberg’s Liberal Fascism for giving the toilet one more flush.) But not everyone is happy about this new canonization. The Sentinel reporter quotes leftist Jesuit Thomas Reese, whom the Vatican forced to resign as editor of America, emitting the following whine: “This is the kind of canonization I don’t think is terribly helpful. We don’t need any more kings or princes or bishops . . . We need to find saints that connect to ordinary people. The cult of beautiful people and royalty and superstars—that should not be what the church is about.”
Leave aside the fact that when Pope John Paul II was canonizing thousands of “ordinary people,” Reese’s modernist friends complained that John Paul had turned the Vatican into a “saint factory.” What about the fact that Karl I was not a “beautiful person” when he died, but a hunted exile trying to keep his family alive—persecuted for having followed his beliefs, and for interfering with Woodrow Wilson’s vision?
Let’s remember what the likes of Thomas Reese regard as “helpful.” Reese was one of the theologians involved in leaking criticisms of the comprehensive Catechism of the Catholic Church to the media—even as bishops were still examining an early, secret draft. Reese led a campaign to try to sink the Catechism, apparently concerned that it would clear away the fogs of obfuscation he and his faction had been wafting since Vatican II. It certainly is less than “helpful” to the likes of Thomas Reese for modern Catholics to see examples of sanctity like Karl—men who weren’t contemporary liberals, or progressive “reformers,” but rather sternly brave, true to the institutions to which they were born, and humbly loyal to the teachings of their Church. Such men no doubt scare the skin off creatures like Reese, as they appalled Woodrow Wilson. Against their sterile sophistry, we now have the verdict of sanctity.
Monday, February 18, 2008
Saturday, February 2, 2008
Why is Marijuana Illegal?
A brief history of the criminalization of cannabis
7000-8000 B.C.
First woven fabric believed to be from hemp.
1619
Jamestown Colony, Virginia passes law requiring farmers to grow hemp.
1700s
Hemp was the primary crop grown by George Washington at Mount Vernon, and a secondary crop grown by Thomas Jefferson at Monticello.
1884
Maine is the first state to outlaw alcohol.
1906
Pure Food and Drug Act is passed, forming the Food and Drug Administration. First time that drugs have any government oversight.
1914
Harrison Act passed, outlawing opiates and cocaine (taxing scheme)
1915
Utah passes first state anti-marijuana law.
1919
18th Amendment to the Constitution (alcohol prohibition) is ratified.
1930
Harry J. Anslinger given control of the new Federal Bureau of Narcotics (he remains in the position until 1962)
1933
21st Amendment to the Constitution is ratified, repealing alcohol prohibition.
1937
Marijuana Tax Act
1938
Food, Drug and Cosmetic Act
1951
Boggs Amendment to the Harrison Narcotic Act (mandatory sentences)
1956
Narcotics Control Act adds more severe penalties
1970
Comprehensive Drug Abuse Prevention and Control Act. Replaces and updates all previous laws concerning narcotics and other dangerous drugs. Empasis on law enforcement. Includes the Controlled Substances Act, where marijuana is classified a Schedule 1 drug (reserved for the most dangerous drugs that have no recognized medical use).
1972
Drug Abuse Office and Treatment Act. Establishes federally funded programs for prevention and treatment
1973
Drug Enforcement Administration (DEA) Changes Bureau of Narcotics and Dangerous Drugs into the DEA
1974 and 1978
Drug Abuse Treatment and Control Amendments. Extends 1972 act
1988
Anti-Drug Abuse Act. Establishes oversight office: National Office of Drug Control Policy and the Drug Czar
1992
ADAMHA Reorganization. Transfers NIDA, NIMH, and NIAAA to NIH and incorporates ADAMHA's programs into the Substance Abuse and Mental Health Services Administration (SAMHSA)
Many people assume that marijuana was made illegal through some kind of process involving scientific, medical, and government hearings; that it was to protect the citizens from what was determined to be a dangerous drug.
The actual story shows a much different picture. Those who voted on the legal fate of this plant never had the facts, but were dependent on information supplied by those who had a specific agenda to deceive lawmakers. You'll see below that the very first federal vote to prohibit marijuana was based entirely on a documented lie on the floor of the Senate.
You'll also see that the history of marijuana's criminalization is filled with:
Racism
Fear
Protection of Corporate Profits
Yellow Journalism
Ignorant, Incompetent, and/or Corrupt Legislators
Personal Career Advancement and Greed
These are the actual reasons marijuana is illegal.
Background
For most of human history, marijuana has been completely legal. It's not a recently discovered plant, nor is it a long-standing law. Marijuana has been illegal for less than 1% of the time that it's been in use. Its known uses go back further than 7,000 B.C. and it was legal as recently as when Ronald Reagan was a boy.
The marijuana (hemp) plant, of course, has an incredible number of uses. The earliest known woven fabric was apparently of hemp, and over the centuries the plant was used for food, incense, cloth, rope, and much more. This adds to some of the confusion over its introduction in the United States, as the plant was well known from the early 1600's, but did not reach public awareness as a recreational drug until the early 1900's.
America's first marijuana law was enacted at Jamestown Colony, Virginia in 1619. It was a law "ordering" all farmers to grow Indian hempseed. There were several other "must grow" laws over the next 200 years (you could be jailed for not growing hemp during times of shortage in Virginia between 1763 and 1767), and during most of that time, hemp was legal tender (you could even pay your taxes with hemp -- try that today!) Hemp was such a critical crop for a number of purposes (including essential war requirements - rope, etc.) that the government went out of its way to encourage growth.
The United States Census of 1850 counted 8,327 hemp "plantations" (minimum 2,000-acre farm) growing cannabis hemp for cloth, canvas and even the cordage used for baling cotton.
The Mexican Connection
In the early 1900s, the western states developed significant tensions regarding the influx of Mexican-Americans. The revolution in Mexico in 1910 spilled over the border, with General Pershing's army clashing with bandit Pancho Villa. Later in that decade, bad feelings developed between the small farmer and the large farms that used cheaper Mexican labor. Then, the depression came and increased tensions, as jobs and welfare resources became scarce.
One of the "differences" seized upon during this time was the fact that many Mexicans smoked marijuana and had brought the plant with them.
However, the first state law outlawing marijuana did so not because of Mexicans using the drug. Oddly enough, it was because of Mormons using it. Mormons who traveled to Mexico in 1910 came back to Salt Lake City with marijuana. The church was not pleased and ruled against use of the drug. Since the state of Utah automatically enshrined church doctrine into law, the first state marijuana prohibition was established in 1915. (Today, Senator Orrin Hatch serves as the prohibition arm of this heavily church-influenced state.)
Other states quickly followed suit with marijuana prohibition laws, including Wyoming (1915), Texas (1919), Iowa (1923), Nevada (1923), Oregon (1923), Washington (1923), Arkansas (1923), and Nebraska (1927). These laws tended to be specifically targeted against the Mexican-American population.
When Montana outlawed marijuana in 1927, the Butte Montana Standard reported a legislator's comment: "When some beet field peon takes a few traces of this stuff... he thinks he has just been elected president of Mexico, so he starts out to execute all his political enemies." In Texas, a senator said on the floor of the Senate: "All Mexicans are crazy, and this stuff [marijuana] is what makes them crazy."
Jazz and Assassins
In the eastern states, the "problem" was attributed to a combination of Latin Americans and black jazz musicians. Marijuana and jazz traveled from New Orleans to Chicago, and then to Harlem, where marijuana became an indispensable part of the music scene, even entering the language of the black hits of the time (Louis Armstrong's "Muggles", Cab Calloway's "That Funny Reefer Man", Fats Waller's "Viper's Drag").
Again, racism was part of the charge against marijuana, as newspapers in 1934 editorialized: "Marihuana influences Negroes to look at white people in the eye, step on white men's shadows and look at a white woman twice."
Two other fear-tactic rumors started to spread: one, that Mexicans, Blacks and other foreigners were snaring white children with marijuana; and two, the story of the "assassins." Early stories of Marco Polo had told of "hasheesh-eaters" or hashashin, from which derived the term "assassin." In the original stories, these professional killers were given large doses of hashish and brought to the ruler's garden (to give them a glimpse of the paradise that awaited them upon successful completion of their mission). Then, after the effects of the drug disappeared, the assassin would fulfill his ruler's wishes with cool, calculating loyalty.
By the 1930s, the story had changed. Dr. A. E. Fossier wrote in the 1931 New Orleans Medical and Surgical Journal: "Under the influence of hashish those fanatics would madly rush at their enemies, and ruthlessly massacre every one within their grasp." Within a very short time, marijuana started being linked to violent behavior.
Alcohol Prohibition and Federal Approaches to Drug Prohibition
During this time, the United States was also dealing with alcohol prohibition, which lasted from 1919 to 1933. Alcohol prohibition was extremely visible and debated at all levels, while drug laws were passed without the general public's knowledge. National alcohol prohibition happened through the mechanism of an amendment to the constitution.
Earlier (1914), the Harrison Act was passed, which provided federal tax penalties for opiates and cocaine.
The federal approach is important. It was considered at the time that the federal government did not have the constitutional power to outlaw alcohol or drugs. It is because of this that alcohol prohibition required a constitutional amendment.
At that time in our country's history, the judiciary regularly placed the tenth amendment in the path of congressional regulation of "local" affairs, and direct regulation of medical practice was considered beyond congressional power under the commerce clause (since then, both provisions have been weakened so far as to have almost no meaning).
Since drugs could not be outlawed at the federal level, the decision was made to use federal taxes as a way around the restriction. In the Harrison Act, legal uses of opiates and cocaine were taxed (supposedly as a revenue need by the federal government, which is the only way it would hold up in the courts), and those who didn't follow the law found themselves in trouble with the treasury department.
In 1930, a new division in the Treasury Department was established -- the Federal Bureau of Narcotics -- and Harry J. Anslinger was named director. This, if anything, marked the beginning of the all-out war against marijuana.
Harry J. Anslinger
Anslinger was an extremely ambitious man, and he recognized the Bureau of Narcotics as an amazing career opportunity -- a new government agency with the opportunity to define both the problem and the solution. He immediately realized that opiates and cocaine wouldn't be enough to help build his agency, so he latched on to marijuana and started to work on making it illegal at the federal level.
Anslinger immediately drew upon the themes of racism and violence to draw national attention to the problem he wanted to create. Some of his quotes regarding marijuana...
"There are 100,000 total marijuana smokers in the US, and most are Negroes, Hispanics, Filipinos, and entertainers. Their Satanic music, jazz, and swing, result from marijuana use. This marijuana causes white women to seek sexual relations with Negroes, entertainers, and any others."
"...the primary reason to outlaw marijuana is its effect on the degenerate races."
"Marijuana is an addictive drug which produces in its users insanity, criminality, and death."
"Reefer makes darkies think they're as good as white men."
"Marihuana leads to pacifism and communist brainwashing"
"You smoke a joint and you're likely to kill your brother."
"Marijuana is the most violence-causing drug in the history of mankind."
And he loved to pull out his own version of the "assassin" definition:
"In the year 1090, there was founded in Persia the religious and military order of the Assassins, whose history is one of cruelty, barbarity, and murder, and for good reason: the members were confirmed users of hashish, or marihuana, and it is from the Arabs' 'hashashin' that we have the English word 'assassin.'"
Yellow Journalism
Harry Anslinger got some additional help from William Randolf Hearst, owner of a huge chain of newspapers. Hearst had lots of reasons to help. First, he hated Mexicans. Second, he had invested heavily in the timber industry to support his newspaper chain and didn't want to see the development of hemp paper in competition. Third, he had lost 800,000 acres of timberland to Pancho Villa, so he hated Mexicans. Fourth, telling lurid lies about Mexicans (and the devil marijuana weed causing violence) sold newspapers, making him rich.
Some samples from the San Francisco Examiner:
"Marihuana makes fiends of boys in thirty days -- Hashish goads users to bloodlust."
"By the tons it is coming into this country -- the deadly, dreadful poison that racks and tears not only the body, but the very heart and soul of every human being who once becomes a slave to it in any of its cruel and devastating forms.... Marihuana is a short cut to the insane asylum. Smoke marihuana cigarettes for a month and what was once your brain will be nothing but a storehouse of horrid specters. Hasheesh makes a murderer who kills for the love of killing out of the mildest mannered man who ever laughed at the idea that any habit could ever get him...."
And other nationwide columns...
"Users of marijuana become STIMULATED as they inhale the drug and are LIKELY TO DO ANYTHING. Most crimes of violence in this section, especially in country districts are laid to users of that drug."
"Was it marijuana, the new Mexican drug, that nerved the murderous arm of Clara Phillips when she hammered out her victim's life in Los Angeles?... THREE-FOURTHS OF THE CRIMES of violence in this country today are committed by DOPE SLAVES -- that is a matter of cold record."
Hearst and Anslinger were then supported by Dupont chemical company and various pharmaceutical companies in the effort to outlaw cannabis. Dupont had patented nylon, and wanted hemp removed as competition. The pharmaceutical companies could neither identify nor standardize cannabis dosages, and besides, with cannabis, folks could grow their own medicine and not have to purchase it from large companies.
This all set the stage for...
The Marijuana Tax Act of 1937.
After two years of secret planning, Anslinger brought his plan to Congress -- complete with a scrapbook full of sensational Hearst editorials, stories of ax murderers who had supposedly smoked marijuana, and racial slurs.
It was a remarkably short set of hearings.
The one fly in Anslinger's ointment was the appearance by Dr. William C. Woodward, Legislative Council of the American Medical Association.
Woodward started by slamming Harry Anslinger and the Bureau of Narcotics for distorting earlier AMA statements that had nothing to do with marijuana and making them appear to be AMA endorsement for Anslinger's view.
He also reproached the legislature and the Bureau for using the term marijuana in the legislation and not publicizing it as a bill about cannabis or hemp. At this point, marijuana (or marihuana) was a sensationalist word used to refer to Mexicans smoking a drug and had not been connected in most people's minds to the existing cannabis/hemp plant. Thus, many who had legitimate reasons to oppose the bill weren't even aware of it.
Woodward went on to state that the AMA was opposed to the legislation and further questioned the approach of the hearings, coming close to outright accusation of misconduct by Anslinger and the committee:
"That there is a certain amount of narcotic addiction of an objectionable character no one will deny. The newspapers have called attention to it so prominently that there must be some grounds for [their] statements [even Woodward was partially taken in by Hearst's propaganda]. It has surprised me, however, that the facts on which these statements have been based have not been brought before this committee by competent primary evidence. We are referred to newspaper publications concerning the prevalence of marihuana addiction. We are told that the use of marihuana causes crime.
But yet no one has been produced from the Bureau of Prisons to show the number of prisoners who have been found addicted to the marihuana habit. An informed inquiry shows that the Bureau of Prisons has no evidence on that point.
You have been told that school children are great users of marihuana cigarettes. No one has been summoned from the Children's Bureau to show the nature and extent of the habit, among children.
Inquiry of the Children's Bureau shows that they have had no occasion to investigate it and know nothing particularly of it.
Inquiry of the Office of Education--- and they certainly should know something of the prevalence of the habit among the school children of the country, if there is a prevalent habit--- indicates that they have had no occasion to investigate and know nothing of it.
Moreover, there is in the Treasury Department itself, the Public Health Service, with its Division of Mental Hygiene. The Division of Mental Hygiene was, in the first place, the Division of Narcotics. It was converted into the Division of Mental Hygiene, I think, about 1930. That particular Bureau has control at the present time of the narcotics farms that were created about 1929 or 1930 and came into operation a few years later. No one has been summoned from that Bureau to give evidence on that point.
Informal inquiry by me indicates that they have had no record of any marihuana of Cannabis addicts who have ever been committed to those farms.
The bureau of Public Health Service has also a division of pharmacology. If you desire evidence as to the pharmacology of Cannabis, that obviously is the place where you can get direct and primary evidence, rather than the indirect hearsay evidence."
Committee members then proceeded to attack Dr. Woodward, questioning his motives in opposing the legislation. Even the Chairman joined in:
The Chairman: If you want to advise us on legislation, you ought to come here with some constructive proposals, rather than criticism, rather than trying to throw obstacles in the way of something that the Federal Government is trying to do. It has not only an unselfish motive in this, but they have a serious responsibility.
Dr. Woodward: We cannot understand yet, Mr. Chairman, why this bill should have been prepared in secret for 2 years without any intimation, even, to the profession, that it was being prepared.
After some further bantering...
The Chairman: I would like to read a quotation from a recent editorial in the Washington Times:
The marihuana cigarette is one of the most insidious of all forms of dope, largely because of the failure of the public to understand its fatal qualities.
The Nation is almost defenseless against it, having no Federal laws to cope with it and virtually no organized campaign for combating it.
The result is tragic.
School children are the prey of peddlers who infest school neighborhoods.
High school boys and girls buy the destructive weed without knowledge of its capacity of harm, and conscienceless dealers sell it with impunity.
This is a national problem, and it must have national attention.
The fatal marihuana cigarette must be recognized as a deadly drug, and American children must be protected against it.
That is a pretty severe indictment. They say it is a national question and that it requires effective legislation. Of course, in a general way, you have responded to all of these statements; but that indicates very clearly that it is an evil of such magnitude that it is recognized by the press of the country as such.
And that was basically it. Yellow journalism won over medical science.
The committee passed the legislation on. And on the floor of the house, the entire discussion was:
Member from upstate New York: "Mr. Speaker, what is this bill about?"
Speaker Rayburn: "I don't know. It has something to do with a thing called marihuana. I think it's a narcotic of some kind."
"Mr. Speaker, does the American Medical Association support this bill?"
Member on the committee jumps up and says: "Their Doctor Wentworth[sic] came down here. They support this bill 100 percent."
And on the basis of that lie, on August 2, 1937, marijuana became illegal at the federal level.
The entire coverage in the New York Times: "President Roosevelt signed today a bill to curb traffic in the narcotic, marihuana, through heavy taxes on transactions."
Anslinger as precursor to the Drug Czars
Anslinger was essentially the first Drug Czar. Even though the term didn't exist until William Bennett's position as director of the White House Office of National Drug Policy, Anslinger acted in a similar fashion. In fact, there are some amazing parallels between Anslinger and the current Drug Czar John Walters. Both had kind of a carte blanche to go around demonizing drugs and drug users. Both had resources and a large public podium for their voice to be heard and to promote their personal agenda. Both lied constantly, often when it was unnecessary. Both were racists. Both had the ear of lawmakers, and both realized that they could persuade legislators and others based on lies, particularly if they could co-opt the media into squelching or downplaying any opposition views.
Anslinger even had the ability to circumvent the First Amendment. He banned the Canadian movie "Drug Addict," a 1946 documentary that realistically depicted the drug addicts and law enforcement efforts. He even tried to get Canada to ban the movie in their own country, or failing that, to prevent U.S. citizens from seeing the movie in Canada. Canada refused. (Today, Drug Czar John Walters is trying to bully Canada into keeping harsh marijuana laws.)
Anslinger had 37 years to solidify the propaganda and stifle opposition. The lies continued the entire time (although the stories would adjust -- the 21 year old Florida boy who killed his family of five got younger each time he told it). In 1961, he looked back at his efforts:
"Much of the most irrational juvenile violence and that has written a new chapter of shame and tragedy is traceable directly to this hemp intoxication. A gang of boys tear the clothes from two school girls and rape the screaming girls, one boy after the other. A sixteen-year-old kills his entire family of five in Florida, a man in Minnesota puts a bullet through the head of a stranger on the road; in Colorado husband tries to shoot his wife, kills her grandmother instead and then kills himself. Every one of these crimes had been proceeded [sic] by the smoking of one or more marijuana "reefers." As the marijuana situation grew worse, I knew action had to be taken to get the proper legislation passed. By 1937 under my direction, the Bureau launched two important steps First, a legislative plan to seek from Congress a new law that would place marijuana and its distribution directly under federal control. Second, on radio and at major forums, such that presented annually by the New York Herald Tribune, I told the story of this evil weed of the fields and river beds and roadsides. I wrote articles for magazines; our agents gave hundreds of lectures to parents, educators, social and civic leaders. In network broadcasts I reported on the growing list of crimes, including murder and rape. I described the nature of marijuana and its close kinship to hashish. I continued to hammer at the facts.
I believe we did a thorough job, for the public was alerted and the laws to protect them were passed, both nationally and at the state level. We also brought under control the wild growing marijuana in this country. Working with local authorities, we cleaned up hundreds of acres of marijuana and we uprooted plants sprouting along the roadsides."
After Anslinger
On a break from college in the 70s, I was visiting a church in rural Illinois. There in the literature racks in the back of the church was a lurid pamphlet about the evils of marijuana -- all the old reefer madness propaganda about how it caused insanity and murder. I approached the minister and said "You can't have this in your church. It's all lies, and the church shouldn't be about promoting lies." Fortunately, my dad believed me, and he had the material removed. He didn't even know how it got there. But without me speaking up, neither he nor the other members of the church had any reason NOT to believe what the pamphlet said. The propaganda machine had been that effective.
The narrative since then has been a continual litany of:
Politicians wanting to appear tough on crime and passing tougher penalties
Constant increases in spending on law enforcement and prisons
Racist application of drug laws
Taxpayer funded propaganda
Stifling of opposition speech
Political contributions from corporations that profit from marijuana being illegal (pharmaceuticals, alcohol, etc.)
... but that's another whole story.
--------------------------------------------------------------------------------
This account only scratches the surface of the story. If you want to know more about the history of marijuana, Harry Anslinger, and the saga of criminalization in the United States and elsewhere, visit some of the excellent links below. (All data and quotes for this piece came from these sources as well).
The History of the Non-Medical Use of Drugs in the United States by Charles Whitebread, Professor of Law, USC Law School. A Speech to the California Judges Association 1995 annual conference.
THE FORBIDDEN FRUIT AND THE TREE OF KNOWLEDGE: AN INQUIRY INTO THE LEGAL HISTORY OF AMERICAN MARIJUANA PROHIBITION by Richard J. Bonnie & Charles H. Whitebread, II. VIRGINIA LAW REVIEW. VOLUME 56 OCTOBER 1970 NUMBER 6
The Consumers Union Report - Licit and Illicit Drugs by Edward M. Brecher and the Editors of Consumer Reports Magazine
The History of the Marihuana Tax Act of 1937 By David F. Musto, M.D., New Haven, Conn. Originally published in Arch. Gen. Psychiat. Volume 26, February, 1972
The Report of the National Commission on Marihuana and Drug Abuse I. Control of Marihuana, Alcohol and Tobacco. History of Marihuana Legislation
The Marihuana Tax Act of 1937. The history of how the Marihuana Tax Act came to be the law of the land.
Marijuana - The First Twelve Thousand Years by Ernest L. Abel, 1980
7000-8000 B.C.
First woven fabric believed to be from hemp.
1619
Jamestown Colony, Virginia passes law requiring farmers to grow hemp.
1700s
Hemp was the primary crop grown by George Washington at Mount Vernon, and a secondary crop grown by Thomas Jefferson at Monticello.
1884
Maine is the first state to outlaw alcohol.
1906
Pure Food and Drug Act is passed, forming the Food and Drug Administration. First time that drugs have any government oversight.
1914
Harrison Act passed, outlawing opiates and cocaine (taxing scheme)
1915
Utah passes first state anti-marijuana law.
1919
18th Amendment to the Constitution (alcohol prohibition) is ratified.
1930
Harry J. Anslinger given control of the new Federal Bureau of Narcotics (he remains in the position until 1962)
1933
21st Amendment to the Constitution is ratified, repealing alcohol prohibition.
1937
Marijuana Tax Act
1938
Food, Drug and Cosmetic Act
1951
Boggs Amendment to the Harrison Narcotic Act (mandatory sentences)
1956
Narcotics Control Act adds more severe penalties
1970
Comprehensive Drug Abuse Prevention and Control Act. Replaces and updates all previous laws concerning narcotics and other dangerous drugs. Empasis on law enforcement. Includes the Controlled Substances Act, where marijuana is classified a Schedule 1 drug (reserved for the most dangerous drugs that have no recognized medical use).
1972
Drug Abuse Office and Treatment Act. Establishes federally funded programs for prevention and treatment
1973
Drug Enforcement Administration (DEA) Changes Bureau of Narcotics and Dangerous Drugs into the DEA
1974 and 1978
Drug Abuse Treatment and Control Amendments. Extends 1972 act
1988
Anti-Drug Abuse Act. Establishes oversight office: National Office of Drug Control Policy and the Drug Czar
1992
ADAMHA Reorganization. Transfers NIDA, NIMH, and NIAAA to NIH and incorporates ADAMHA's programs into the Substance Abuse and Mental Health Services Administration (SAMHSA)
Many people assume that marijuana was made illegal through some kind of process involving scientific, medical, and government hearings; that it was to protect the citizens from what was determined to be a dangerous drug.
The actual story shows a much different picture. Those who voted on the legal fate of this plant never had the facts, but were dependent on information supplied by those who had a specific agenda to deceive lawmakers. You'll see below that the very first federal vote to prohibit marijuana was based entirely on a documented lie on the floor of the Senate.
You'll also see that the history of marijuana's criminalization is filled with:
Racism
Fear
Protection of Corporate Profits
Yellow Journalism
Ignorant, Incompetent, and/or Corrupt Legislators
Personal Career Advancement and Greed
These are the actual reasons marijuana is illegal.
Background
For most of human history, marijuana has been completely legal. It's not a recently discovered plant, nor is it a long-standing law. Marijuana has been illegal for less than 1% of the time that it's been in use. Its known uses go back further than 7,000 B.C. and it was legal as recently as when Ronald Reagan was a boy.
The marijuana (hemp) plant, of course, has an incredible number of uses. The earliest known woven fabric was apparently of hemp, and over the centuries the plant was used for food, incense, cloth, rope, and much more. This adds to some of the confusion over its introduction in the United States, as the plant was well known from the early 1600's, but did not reach public awareness as a recreational drug until the early 1900's.
America's first marijuana law was enacted at Jamestown Colony, Virginia in 1619. It was a law "ordering" all farmers to grow Indian hempseed. There were several other "must grow" laws over the next 200 years (you could be jailed for not growing hemp during times of shortage in Virginia between 1763 and 1767), and during most of that time, hemp was legal tender (you could even pay your taxes with hemp -- try that today!) Hemp was such a critical crop for a number of purposes (including essential war requirements - rope, etc.) that the government went out of its way to encourage growth.
The United States Census of 1850 counted 8,327 hemp "plantations" (minimum 2,000-acre farm) growing cannabis hemp for cloth, canvas and even the cordage used for baling cotton.
The Mexican Connection
In the early 1900s, the western states developed significant tensions regarding the influx of Mexican-Americans. The revolution in Mexico in 1910 spilled over the border, with General Pershing's army clashing with bandit Pancho Villa. Later in that decade, bad feelings developed between the small farmer and the large farms that used cheaper Mexican labor. Then, the depression came and increased tensions, as jobs and welfare resources became scarce.
One of the "differences" seized upon during this time was the fact that many Mexicans smoked marijuana and had brought the plant with them.
However, the first state law outlawing marijuana did so not because of Mexicans using the drug. Oddly enough, it was because of Mormons using it. Mormons who traveled to Mexico in 1910 came back to Salt Lake City with marijuana. The church was not pleased and ruled against use of the drug. Since the state of Utah automatically enshrined church doctrine into law, the first state marijuana prohibition was established in 1915. (Today, Senator Orrin Hatch serves as the prohibition arm of this heavily church-influenced state.)
Other states quickly followed suit with marijuana prohibition laws, including Wyoming (1915), Texas (1919), Iowa (1923), Nevada (1923), Oregon (1923), Washington (1923), Arkansas (1923), and Nebraska (1927). These laws tended to be specifically targeted against the Mexican-American population.
When Montana outlawed marijuana in 1927, the Butte Montana Standard reported a legislator's comment: "When some beet field peon takes a few traces of this stuff... he thinks he has just been elected president of Mexico, so he starts out to execute all his political enemies." In Texas, a senator said on the floor of the Senate: "All Mexicans are crazy, and this stuff [marijuana] is what makes them crazy."
Jazz and Assassins
In the eastern states, the "problem" was attributed to a combination of Latin Americans and black jazz musicians. Marijuana and jazz traveled from New Orleans to Chicago, and then to Harlem, where marijuana became an indispensable part of the music scene, even entering the language of the black hits of the time (Louis Armstrong's "Muggles", Cab Calloway's "That Funny Reefer Man", Fats Waller's "Viper's Drag").
Again, racism was part of the charge against marijuana, as newspapers in 1934 editorialized: "Marihuana influences Negroes to look at white people in the eye, step on white men's shadows and look at a white woman twice."
Two other fear-tactic rumors started to spread: one, that Mexicans, Blacks and other foreigners were snaring white children with marijuana; and two, the story of the "assassins." Early stories of Marco Polo had told of "hasheesh-eaters" or hashashin, from which derived the term "assassin." In the original stories, these professional killers were given large doses of hashish and brought to the ruler's garden (to give them a glimpse of the paradise that awaited them upon successful completion of their mission). Then, after the effects of the drug disappeared, the assassin would fulfill his ruler's wishes with cool, calculating loyalty.
By the 1930s, the story had changed. Dr. A. E. Fossier wrote in the 1931 New Orleans Medical and Surgical Journal: "Under the influence of hashish those fanatics would madly rush at their enemies, and ruthlessly massacre every one within their grasp." Within a very short time, marijuana started being linked to violent behavior.
Alcohol Prohibition and Federal Approaches to Drug Prohibition
During this time, the United States was also dealing with alcohol prohibition, which lasted from 1919 to 1933. Alcohol prohibition was extremely visible and debated at all levels, while drug laws were passed without the general public's knowledge. National alcohol prohibition happened through the mechanism of an amendment to the constitution.
Earlier (1914), the Harrison Act was passed, which provided federal tax penalties for opiates and cocaine.
The federal approach is important. It was considered at the time that the federal government did not have the constitutional power to outlaw alcohol or drugs. It is because of this that alcohol prohibition required a constitutional amendment.
At that time in our country's history, the judiciary regularly placed the tenth amendment in the path of congressional regulation of "local" affairs, and direct regulation of medical practice was considered beyond congressional power under the commerce clause (since then, both provisions have been weakened so far as to have almost no meaning).
Since drugs could not be outlawed at the federal level, the decision was made to use federal taxes as a way around the restriction. In the Harrison Act, legal uses of opiates and cocaine were taxed (supposedly as a revenue need by the federal government, which is the only way it would hold up in the courts), and those who didn't follow the law found themselves in trouble with the treasury department.
In 1930, a new division in the Treasury Department was established -- the Federal Bureau of Narcotics -- and Harry J. Anslinger was named director. This, if anything, marked the beginning of the all-out war against marijuana.
Harry J. Anslinger
Anslinger was an extremely ambitious man, and he recognized the Bureau of Narcotics as an amazing career opportunity -- a new government agency with the opportunity to define both the problem and the solution. He immediately realized that opiates and cocaine wouldn't be enough to help build his agency, so he latched on to marijuana and started to work on making it illegal at the federal level.
Anslinger immediately drew upon the themes of racism and violence to draw national attention to the problem he wanted to create. Some of his quotes regarding marijuana...
"There are 100,000 total marijuana smokers in the US, and most are Negroes, Hispanics, Filipinos, and entertainers. Their Satanic music, jazz, and swing, result from marijuana use. This marijuana causes white women to seek sexual relations with Negroes, entertainers, and any others."
"...the primary reason to outlaw marijuana is its effect on the degenerate races."
"Marijuana is an addictive drug which produces in its users insanity, criminality, and death."
"Reefer makes darkies think they're as good as white men."
"Marihuana leads to pacifism and communist brainwashing"
"You smoke a joint and you're likely to kill your brother."
"Marijuana is the most violence-causing drug in the history of mankind."
And he loved to pull out his own version of the "assassin" definition:
"In the year 1090, there was founded in Persia the religious and military order of the Assassins, whose history is one of cruelty, barbarity, and murder, and for good reason: the members were confirmed users of hashish, or marihuana, and it is from the Arabs' 'hashashin' that we have the English word 'assassin.'"
Yellow Journalism
Harry Anslinger got some additional help from William Randolf Hearst, owner of a huge chain of newspapers. Hearst had lots of reasons to help. First, he hated Mexicans. Second, he had invested heavily in the timber industry to support his newspaper chain and didn't want to see the development of hemp paper in competition. Third, he had lost 800,000 acres of timberland to Pancho Villa, so he hated Mexicans. Fourth, telling lurid lies about Mexicans (and the devil marijuana weed causing violence) sold newspapers, making him rich.
Some samples from the San Francisco Examiner:
"Marihuana makes fiends of boys in thirty days -- Hashish goads users to bloodlust."
"By the tons it is coming into this country -- the deadly, dreadful poison that racks and tears not only the body, but the very heart and soul of every human being who once becomes a slave to it in any of its cruel and devastating forms.... Marihuana is a short cut to the insane asylum. Smoke marihuana cigarettes for a month and what was once your brain will be nothing but a storehouse of horrid specters. Hasheesh makes a murderer who kills for the love of killing out of the mildest mannered man who ever laughed at the idea that any habit could ever get him...."
And other nationwide columns...
"Users of marijuana become STIMULATED as they inhale the drug and are LIKELY TO DO ANYTHING. Most crimes of violence in this section, especially in country districts are laid to users of that drug."
"Was it marijuana, the new Mexican drug, that nerved the murderous arm of Clara Phillips when she hammered out her victim's life in Los Angeles?... THREE-FOURTHS OF THE CRIMES of violence in this country today are committed by DOPE SLAVES -- that is a matter of cold record."
Hearst and Anslinger were then supported by Dupont chemical company and various pharmaceutical companies in the effort to outlaw cannabis. Dupont had patented nylon, and wanted hemp removed as competition. The pharmaceutical companies could neither identify nor standardize cannabis dosages, and besides, with cannabis, folks could grow their own medicine and not have to purchase it from large companies.
This all set the stage for...
The Marijuana Tax Act of 1937.
After two years of secret planning, Anslinger brought his plan to Congress -- complete with a scrapbook full of sensational Hearst editorials, stories of ax murderers who had supposedly smoked marijuana, and racial slurs.
It was a remarkably short set of hearings.
The one fly in Anslinger's ointment was the appearance by Dr. William C. Woodward, Legislative Council of the American Medical Association.
Woodward started by slamming Harry Anslinger and the Bureau of Narcotics for distorting earlier AMA statements that had nothing to do with marijuana and making them appear to be AMA endorsement for Anslinger's view.
He also reproached the legislature and the Bureau for using the term marijuana in the legislation and not publicizing it as a bill about cannabis or hemp. At this point, marijuana (or marihuana) was a sensationalist word used to refer to Mexicans smoking a drug and had not been connected in most people's minds to the existing cannabis/hemp plant. Thus, many who had legitimate reasons to oppose the bill weren't even aware of it.
Woodward went on to state that the AMA was opposed to the legislation and further questioned the approach of the hearings, coming close to outright accusation of misconduct by Anslinger and the committee:
"That there is a certain amount of narcotic addiction of an objectionable character no one will deny. The newspapers have called attention to it so prominently that there must be some grounds for [their] statements [even Woodward was partially taken in by Hearst's propaganda]. It has surprised me, however, that the facts on which these statements have been based have not been brought before this committee by competent primary evidence. We are referred to newspaper publications concerning the prevalence of marihuana addiction. We are told that the use of marihuana causes crime.
But yet no one has been produced from the Bureau of Prisons to show the number of prisoners who have been found addicted to the marihuana habit. An informed inquiry shows that the Bureau of Prisons has no evidence on that point.
You have been told that school children are great users of marihuana cigarettes. No one has been summoned from the Children's Bureau to show the nature and extent of the habit, among children.
Inquiry of the Children's Bureau shows that they have had no occasion to investigate it and know nothing particularly of it.
Inquiry of the Office of Education--- and they certainly should know something of the prevalence of the habit among the school children of the country, if there is a prevalent habit--- indicates that they have had no occasion to investigate and know nothing of it.
Moreover, there is in the Treasury Department itself, the Public Health Service, with its Division of Mental Hygiene. The Division of Mental Hygiene was, in the first place, the Division of Narcotics. It was converted into the Division of Mental Hygiene, I think, about 1930. That particular Bureau has control at the present time of the narcotics farms that were created about 1929 or 1930 and came into operation a few years later. No one has been summoned from that Bureau to give evidence on that point.
Informal inquiry by me indicates that they have had no record of any marihuana of Cannabis addicts who have ever been committed to those farms.
The bureau of Public Health Service has also a division of pharmacology. If you desire evidence as to the pharmacology of Cannabis, that obviously is the place where you can get direct and primary evidence, rather than the indirect hearsay evidence."
Committee members then proceeded to attack Dr. Woodward, questioning his motives in opposing the legislation. Even the Chairman joined in:
The Chairman: If you want to advise us on legislation, you ought to come here with some constructive proposals, rather than criticism, rather than trying to throw obstacles in the way of something that the Federal Government is trying to do. It has not only an unselfish motive in this, but they have a serious responsibility.
Dr. Woodward: We cannot understand yet, Mr. Chairman, why this bill should have been prepared in secret for 2 years without any intimation, even, to the profession, that it was being prepared.
After some further bantering...
The Chairman: I would like to read a quotation from a recent editorial in the Washington Times:
The marihuana cigarette is one of the most insidious of all forms of dope, largely because of the failure of the public to understand its fatal qualities.
The Nation is almost defenseless against it, having no Federal laws to cope with it and virtually no organized campaign for combating it.
The result is tragic.
School children are the prey of peddlers who infest school neighborhoods.
High school boys and girls buy the destructive weed without knowledge of its capacity of harm, and conscienceless dealers sell it with impunity.
This is a national problem, and it must have national attention.
The fatal marihuana cigarette must be recognized as a deadly drug, and American children must be protected against it.
That is a pretty severe indictment. They say it is a national question and that it requires effective legislation. Of course, in a general way, you have responded to all of these statements; but that indicates very clearly that it is an evil of such magnitude that it is recognized by the press of the country as such.
And that was basically it. Yellow journalism won over medical science.
The committee passed the legislation on. And on the floor of the house, the entire discussion was:
Member from upstate New York: "Mr. Speaker, what is this bill about?"
Speaker Rayburn: "I don't know. It has something to do with a thing called marihuana. I think it's a narcotic of some kind."
"Mr. Speaker, does the American Medical Association support this bill?"
Member on the committee jumps up and says: "Their Doctor Wentworth[sic] came down here. They support this bill 100 percent."
And on the basis of that lie, on August 2, 1937, marijuana became illegal at the federal level.
The entire coverage in the New York Times: "President Roosevelt signed today a bill to curb traffic in the narcotic, marihuana, through heavy taxes on transactions."
Anslinger as precursor to the Drug Czars
Anslinger was essentially the first Drug Czar. Even though the term didn't exist until William Bennett's position as director of the White House Office of National Drug Policy, Anslinger acted in a similar fashion. In fact, there are some amazing parallels between Anslinger and the current Drug Czar John Walters. Both had kind of a carte blanche to go around demonizing drugs and drug users. Both had resources and a large public podium for their voice to be heard and to promote their personal agenda. Both lied constantly, often when it was unnecessary. Both were racists. Both had the ear of lawmakers, and both realized that they could persuade legislators and others based on lies, particularly if they could co-opt the media into squelching or downplaying any opposition views.
Anslinger even had the ability to circumvent the First Amendment. He banned the Canadian movie "Drug Addict," a 1946 documentary that realistically depicted the drug addicts and law enforcement efforts. He even tried to get Canada to ban the movie in their own country, or failing that, to prevent U.S. citizens from seeing the movie in Canada. Canada refused. (Today, Drug Czar John Walters is trying to bully Canada into keeping harsh marijuana laws.)
Anslinger had 37 years to solidify the propaganda and stifle opposition. The lies continued the entire time (although the stories would adjust -- the 21 year old Florida boy who killed his family of five got younger each time he told it). In 1961, he looked back at his efforts:
"Much of the most irrational juvenile violence and that has written a new chapter of shame and tragedy is traceable directly to this hemp intoxication. A gang of boys tear the clothes from two school girls and rape the screaming girls, one boy after the other. A sixteen-year-old kills his entire family of five in Florida, a man in Minnesota puts a bullet through the head of a stranger on the road; in Colorado husband tries to shoot his wife, kills her grandmother instead and then kills himself. Every one of these crimes had been proceeded [sic] by the smoking of one or more marijuana "reefers." As the marijuana situation grew worse, I knew action had to be taken to get the proper legislation passed. By 1937 under my direction, the Bureau launched two important steps First, a legislative plan to seek from Congress a new law that would place marijuana and its distribution directly under federal control. Second, on radio and at major forums, such that presented annually by the New York Herald Tribune, I told the story of this evil weed of the fields and river beds and roadsides. I wrote articles for magazines; our agents gave hundreds of lectures to parents, educators, social and civic leaders. In network broadcasts I reported on the growing list of crimes, including murder and rape. I described the nature of marijuana and its close kinship to hashish. I continued to hammer at the facts.
I believe we did a thorough job, for the public was alerted and the laws to protect them were passed, both nationally and at the state level. We also brought under control the wild growing marijuana in this country. Working with local authorities, we cleaned up hundreds of acres of marijuana and we uprooted plants sprouting along the roadsides."
After Anslinger
On a break from college in the 70s, I was visiting a church in rural Illinois. There in the literature racks in the back of the church was a lurid pamphlet about the evils of marijuana -- all the old reefer madness propaganda about how it caused insanity and murder. I approached the minister and said "You can't have this in your church. It's all lies, and the church shouldn't be about promoting lies." Fortunately, my dad believed me, and he had the material removed. He didn't even know how it got there. But without me speaking up, neither he nor the other members of the church had any reason NOT to believe what the pamphlet said. The propaganda machine had been that effective.
The narrative since then has been a continual litany of:
Politicians wanting to appear tough on crime and passing tougher penalties
Constant increases in spending on law enforcement and prisons
Racist application of drug laws
Taxpayer funded propaganda
Stifling of opposition speech
Political contributions from corporations that profit from marijuana being illegal (pharmaceuticals, alcohol, etc.)
... but that's another whole story.
--------------------------------------------------------------------------------
This account only scratches the surface of the story. If you want to know more about the history of marijuana, Harry Anslinger, and the saga of criminalization in the United States and elsewhere, visit some of the excellent links below. (All data and quotes for this piece came from these sources as well).
The History of the Non-Medical Use of Drugs in the United States by Charles Whitebread, Professor of Law, USC Law School. A Speech to the California Judges Association 1995 annual conference.
THE FORBIDDEN FRUIT AND THE TREE OF KNOWLEDGE: AN INQUIRY INTO THE LEGAL HISTORY OF AMERICAN MARIJUANA PROHIBITION by Richard J. Bonnie & Charles H. Whitebread, II. VIRGINIA LAW REVIEW. VOLUME 56 OCTOBER 1970 NUMBER 6
The Consumers Union Report - Licit and Illicit Drugs by Edward M. Brecher and the Editors of Consumer Reports Magazine
The History of the Marihuana Tax Act of 1937 By David F. Musto, M.D., New Haven, Conn. Originally published in Arch. Gen. Psychiat. Volume 26, February, 1972
The Report of the National Commission on Marihuana and Drug Abuse I. Control of Marihuana, Alcohol and Tobacco. History of Marihuana Legislation
The Marihuana Tax Act of 1937. The history of how the Marihuana Tax Act came to be the law of the land.
Marijuana - The First Twelve Thousand Years by Ernest L. Abel, 1980
Tuesday, January 29, 2008
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Ron Paul's Competing Currencies
Ron Paul's Competing Currencies
by Peter Brimelow
OK, I admit it: I tend to be early. The idea of private money – often referred to as "competing currencies" – has always fascinated me. I persuaded Jim Michaels, the late, great editor of Forbes Magazine, to let me translate the little-known academic literature into journalese in this article, which he published under the title Do You Want To Be Paid In Rockefellers? In Wristons? Or How About A Hayek? almost (ahem!) exactly twenty years ago. (May 30, 1988). The Great Inflation of the 1970s was then still a live memory. For some years, my account was regularly assigned in college courses. Now, GOP Presidential candidate Ron Paul seems to have single-handedly revived the issue with his relentless criticisms of the Federal Reserve. (Click here for Google web search). I still think it’s going to happen – just as there will eventually be an immigration cut-off.
The Federal Reserve System will be 75 years old in December. A small but growing band of academic economists proposes a special sort of birthday celebration: The Fed, they say, should be abolished.
Abolished? The sole bulwark we have against runaway inflation and fiscal irresponsibility?
Most people can't imagine life without a currency-issuing central bank, although in fact the Fed is younger than one of its most relentless critics, Nobel laureate Milton Friedman, still going strong at 76 [R. I. P. 1912–2006] and hard at work at California's Hoover Institution.
The Fed allegedly manages the country's money supply in order to prevent such economic disturbances as inflation, deflation and depression. But it is a matter of record that, since the Fed arrived, economic disturbances have been more severe than previously – notably the Great Depression of 1929 and the Great Inflation of the Seventies. In the process, the purchasing power of the dollar has almost completely eroded. Even now, inflation is still gnawing away at around 4% a year, compared with a mere 3.3% when President Richard Nixon first imposed wage and price controls in 1971.
Central banking distresses some. They argue that, far from preventing these disturbances, central banking may exacerbate them. The Fed has been accused of being too tight in the 1930s and too loose in the 1970s and of innumerable lesser errors. After bitter debate, most economists have come to accept at least a part of this critique.
For years, Milton Friedman has advocated doing away with some of the Fed's flexibility by forcing it to expand the money supply only at a fixed annual rate approximating the long-run growth of the economy. The Fed's new critics, however, go further. They think the government should be out of the money business altogether. They argue that money could and should be provided competitively by the private sector – just like baked beans, business magazines or any other goods.
What? Money is money, isn't it? How can you have different kinds of money in the same economy?
The idea of Citibank and Chase Manhattan issuing their own money may indeed seem mind-boggling. What would their currencies be called – Wristons and Rockefellers? But the truth is that there have been several episodes of private, competing monies in world economic history, including in the U.S. Recent research is suggesting they worked much better than had been thought.
Meanwhile, financial deregulations at home and floating exchanges rates abroad are creating an environmental in which elements of a competitive system are already emerging – without the permission of professors or politicians. In his forthcoming book, Free Banking and Monetary Reform, former Manhattan Institute economist David Glasner calls this phenomenon "the competitive breakthrough" that might eventually lead to the complete privatization of money.
Government money monopolies were effectively universal by the early 20th century. Even free market economists, with few exceptions, took them for granted. But these monopolies became much easier to question after Friedrich A. Hayek, who received the Nobel Prize for Economics in 1974, published his Denationalization of Money in 1976 and expanded upon it in 1978.
Hayek announced that, on reflection, he no longer thought government money monopolies were either necessary or desirable, given their record of inflation. Instead, private institutions such as banks should be allowed to issue their own monies, denominated as they wished.
Conventional wisdom had assumed that a profit-seeking bank would immediately print too much money. But Hayek pointed out that this course would be self-defeating. If a bank over-issued its currency, causing it to depreciate, people wouldn't want to accept or hold it, preferring that of more conservative banks. The offending bank's currency would go to a discount and, in short order, the bank would have to curb its enthusiasm. Competition, Hayek said, would do a better job of compelling private institutions to maintain their money's value than politics had with public institutions like the Fed.
Maybe – but let's be practical. How would I buy my groceries? Suppose the prices were marked in Rockefellers and all I had were Wristons? Suppose I'm a New Yorker in San Francisco? San Franciscans might prefer BankAmericas. What good would my Wristons be? How could a merchant function if his customers kept coming in with different kinds of currencies? How could a businessman keep his books?
The answer to these interesting questions depends partly on which of the several different proposals for privatizing money is under discussion. Hayek's version is particularly radical. In most historical episodes of private money, banks issued their own notes but denominated them in the national unit of account – the dollar, the pound. These notes usually exchanged at par and would be discounted only as a last resort in specific circumstances, such as overissue.
But more generally it is clear from the response of merchants in border zones like Tijuana or Toronto, and from inflation-racked countries like Israel or Argentina that are evolving a de facto U.S. dollar standard, the costs of handling parallel currencies can easily be exceeded by the benefits. Computers and hand-held calculators reduce the confusion, just as they have helped business to handle international floating exchange rates.
The fact is that free markets don't produce chaos. Efficiency will probably dictate that just a few kinds of monies, perhaps only one, will become universally accepted – exactly as the international computer industry has spontaneously evolved standard operating systems.
To understand Hayek's proposal and the whole competing currencies concept, you have to think about the nature of money. Most laymen, and some economists, assume that money is a collective convenience requiring government to organize, like national defense. But the historical evidence seems to be that in reality money developed all by itself. Merchants just agreed upon common stores of value and mediums of exchange because they found using them more efficient than barter – an example of what Hayek calls "spontaneous order."
Coins are traditionally supposed to have been invented in the 7th century B.C. by the Lydians, whose King Croesus became a legend for his wealth. But significantly, David Glasner reports, the earliest surviving coins appear to have been privately issued. The Lydian royal minting monopoly was only later imposed – by another king for whom the Greeks invented the word "tyrant."
Recent observations have tended to confirm the private origins of money. In one famous case, cigarettes spontaneously evolved as the medium of exchange in a World War II prisoner of war camp. In much of Europe after WWII, U.S. nylon stockings were a kind of sexual currency.
Whether or not governments were needed in the money business, however, they undeniably found getting into it an irresistible source of revenue and power, particularly in time of war or national emergency. Minting coins was easy and profitable. Most convenient of all for a spendthrift king, the coins could be debased – reissued with the same face value but a lesser amount of precious metal – or actually clipped of some of their gold and recirculated. Later, when money developed into a claim on some other asset rather than being intrinsically valuable in itself, governments discovered that they could simply overissue it.
Of course, all this would eventually result in too much money chasing too few goods and rising prices – a process still going on merrily today. But that's in the long run. And in the meantime, monkeying about with money produced interesting spasms in the economy that could be very useful politically – for example, to influence elections.
Market forces can be dammed but not destroyed. By the Middle Ages, even governments that monopolized money found themselves confronted with a burgeoning banking industry that was being summoned into existence by the growth of trade.
Banks not only accepted deposits of money from customers, on which they paid interest, but also made loans to other customers, on which they charged interest. A loan was made by a bookkeeping entry that created a deposit upon which this new debtor could draw. These new banks were able to incur multiple liabilities against the same hard cash, because bank IOUs were exchanged among the public in settlement of their own affairs and rarely presented for payment. In effect, the banks were creating money.
Governments tolerated this development largely because they needed to borrow money themselves, badly. For example, the Bank of England, the ancestor of all central banks, was first granted its charter in 1694 because it promised to buy William III's government bonds and finance his wars when Parliament would not.
Similarly in the U.S., the 1863 National Bank Act compelled qualifying banks to hold specified amounts of federal debt, helping to pay for the Civil War.
So even a government's monopoly over the issuance of currency gives it only indirect control over the entire money supply. In recent years in the U.S. this control has been exerted by a straitjacket of banking regulation – much of it dating from the New Deal and subsequently rotted away by inflation, and by the Fed's ability to alter the reserves that banks are required to maintain with it, thus affecting the size of the base upon which they can build their pyramids of credit.
But now "financial innovation" is producing a proliferation of irritatingly hard-to-categorize "near monies" – for example, traveler's checks, some of whose issuers are bound not by reserve regulations but only by their own self-interested prudence. Thus, in a sense, American Express is already issuing its own private money, although denominated in and convertible into Fed-produced dollars.
Hayek's proposal is particularly radical because it combines a number of distinct ideas that are already quite radical enough:
"Free banking" – banks ought to be able to issue currency and create deposits (conceptually the same thing), choose their own reserve ratios and generally operate entirely without regulation.
Different denominations – privately issued currencies need not be all denominated in the same unit: Citibank's Wristons and Chase Manhattan's Rockefellers would be traded against each other in a currency market just as the different national currencies are today.
Private fiat money – these private currencies need not necessarily be convertible into gold or any underlying commodity, but would trade entirely on the word of the issuing bank that it would not debauch its money.
Wouldn't this create chaos? Is Hayek serious?
Idea number one, free banking, is very serious. New York University's Lawrence H. White has recently attracted much attention with his book Free Banking in Britain, a documentation and formal analysis of the system's smooth working over a 128-year period in Scotland. Scottish free banking was suppressed in 1844, not because it didn't work, but in the course of legislation aimed at difficulties in the very different English banking system.
But didn't this cause chaos in the U.S.? What about the wildcat banks?
That bit of history is far from settled. Free banking briefly flourished under state charters in the U.S. from 1837 to the Civil War. "Wildcat banks" were accused of locating out in the frontier forests, with the wildcats, so that their notes could not easily be presented for redemption. But recent studies suggest that these problems have been much exaggerated. And most of them, it is argued, were caused by interfering state governments and inadequate enforcement of laws against fraud.
In both Scotland and the U.S. the private money thus issued was denominated in the national monetary unit and was theoretically interchangeable and redeemable into gold. In the U.S., unlike in Scotland, national branch banking was not allowed, so notes issued by unknown faraway banks, as well as those that were suspect for other reasons, sometimes traded at a discount. This was not, however, an impossible inconvenience: Bill brokers sprang up to act as middlemen. It would be even less of a problem in these days of instant communications – and, above all, if nationwide branch banking were allowed.
Still, the wildcat banks left their clawmarks on the U.S. economics profession. Many economists concluded that private banks had a theoretical incentive to behave badly: They would produce money until its value had been driven down to its cost of production, which is essentially zero. This would cause a price explosion – severe inflation.
David Glasner, however, rebuts this argument by pointing out that a bank can make profits only to the extent that the public will hold its money. Otherwise it will be driven into insolvency by adverse clearings with its competitors as the public converts out of its money and into their money. If people trust Wristons more than Rockefellers, Chase would have to either mend its ways or be driven out of business, and vice versa. Thus, for a bank like Chase Manhattan, the key question would be not the cost of physically creating Rockefellers but of keeping them in circulation. Chase's "cost of production" would be the resources it expended in maintaining sufficient balances of whatever was necessary in order to convince its customers that their Rockefellers could be redeemed whenever they wanted.
But doesn't bad money drive out good?
Everyone has heard of Gresham's law, but practically no one understands it. Queen Elizabeth I's financial adviser was talking about a situation where two monies exchange at a rate fixed by law – for example, if both are legal tender and must be accepted in discharge of debt. Under these circumstances, people will try to pass on the "bad" money – the money whose value is suspect, either because of debasement or overissue – and hoard the money that's "good." But if the rate of exchange between the monies is free to fluctuate, it is the debauched currency that will depreciate and be driven out.
Well, who would be the lender of last resort – as the Fed can be after disasters such as Oct. 19 last year or the 1970 Penn Central bankruptcy?
Nobody. A free banking system, its advocates insist, pointing to Scotland, is not inherently unstable. The celebrated 19th-century banking "panics" were relatively brief and self-correcting compared with the Great Depression, with the sound banks leading reserves to rescue unsound ones out of their own interest in preventing general collapse, as J.P. Morgan did in the panic of 1907. In Scotland, banks competed for the customers of failed banks by accepting their notes at par.
In fact, private money proponents think the Fed's activities as a lender of last resort, and the New Deal's deposit insurance programs, have actually made the U.S. banking system's problems worse. They have encouraged bankers to take risks, knowing that the feds would bail them out, and thus in effect subsidized imprudent banking. Ask anyone in Texas.
The advocates of private monies are still arguing among themselves about other aspects of the scheme, including Hayek's idea number two (different denominations) and idea number three (private fiat money). Lawrence H. White, for example, thinks that, as in Scotland, all monies should be denominated in the same unit, albeit visually distinguishable so that they could trade at a discount if necessary. And he predicts that the emerging successful money would probably turn out to be one offering convertibility into gold or silver.
But these disputes are not conducted with the usual academic acerbity. This is because all private-money advocates agree that such questions can really be settled only by allowing competition to begin. Then the free market, to employ a key Hayekian concept, will search out the best solution.
The privatization of money has important macroeconomic implications. It offers, according to its advocates, a way out of the current grand impasse of monetary policy.
For most of its existence, the Fed has focused on interest rates, the price of credit, assuming that the amount of money it was supplying to the economy was less important. But interest rates are affected by many factors, and the Fed often ended up supplying so much money that the resulting inflation could not be ignored.
But by the time the Fed finally admitted to the importance of the money supply, in the early 1980s, it turned out that the demand for money – its "velocity of circulation" – was jumping about unpredictably, too. Thus, judged by the usual measures, the Fed supplied massive quantities of money to the economy after 1982. But, contrary to what Friedman and like-minded monetarists predicted, it did not boil off into inflation. The velocity simply slowed.
So now the Fed appears to be flying blind, following neither a price rule nor a quantity rule, responding to ad hoc considerations such as the beliefs of the Fed chairman or whatever exchange rate influential politicians happen to feel would be convenient for the dollar.
Monetary policy would not be a problem if banks issued their own monies; it would cease to exist. Banks would automatically extend credit to the extent that they and their customers agree it is economically productive. If business conditions deteriorated, loans would be liquidated, liabilities written down to match, and the banks' balance sheets would shrink. Thus the quantity of money demanded by the economy would be automatically supplied by the market, just as it now supplies the appropriate number of automobiles. (Imagine the mess if an outfit like the Fed were to control auto production, based on its best guesses of what demand ought to be.)
Occasionally, of course, banks and customers would make mistakes. But this should be no more disruptive than a mistake in any other business. Auto factories do overproduce. So do builders of office buildings. But the economy adjusts.
A much-loved answer to the mystery of monetary policy is to link the dollar in some way to gold. But gold standard advocates have always had a problem with gold's moderate but real fluctuations in price, which would inflict involuntary deflations and inflations upon the economy. Competing currencies would tend to solve this problem. Joe Cobb, senior economist for the U.S. Congress' Joint Economic committee, believes that a private money convertible into gold would eventually become dominant. "But with free banking, other types of money would come in at the margin if there were too little or too much gold-backed money," Cobb says. Silver-backed, maybe, or oil-backed. These monies would either supplement the gold-backed currency (if the gold price had risen, causing deflation) or displace it (if the gold price had fallen, causing inflation).
Recently, the young economists in the private-money subculture have been electrified by hints that the leader of the monetarist school, Milton Friedman himself, is being converted. In 1986 Friedman coauthored a paper significantly softening his view that governments necessarily have a role in money. Even more significantly, he has abandoned his long-held position that the Fed should aim for a fixed rate of growth in the monetary aggregates. Now he argues that the monetary base – Fed deposits plus currency – should be frozen and complete free banking be allowed to pyramid upon this reserve base.
This looks like a revised monetary rule, but in fact it isn't. Under Friedman's new proposal the free market, rather than the Fed, would dictate the size of the money supply-based on the banks' feel for the legitimate demand for money.
Friedman stoutly denies that his new proposal has anything to do with the volatile velocities of the 1980s, which he blames on Fed policy. Instead, he says he is now convinced that central bankers will never accept moderate restraint, so he proposes to eliminate their power. However, he agrees that under free banking the troublesome issue of velocity would be neatly bypassed.
The proponents of private money take Friedman's shift as confirmation that their position is just the logical extension of market principles. "Once the question is put, there's only one answer," says the University of Sheffield's Kevin Dowd, whose book The State and the Monetary System is being published by the Vancouver-based Fraser Institute.
Milton Friedman has an estimate of the chances of money being denationalized: "Zero." But then, he recalls, for years economists were derided for arguing about the feasibility of floating exchange rates. Then suddenly the idea became reality. So, maybe the chances are better than zero.
The first victory of the competing currency school may well be negative. By stressing the fundamental flaws of central banking, they may help derail the diametrically opposed proposal: to develop one world currency centrally managed by the International Monetary Fund. This idea was the subject of a recent cover story in the Economist magazine, and a version of it has recently been advocated by Harvard economist and former Carter Administration official Richard Cooper. The single-currency proposal appalls the private-money people, since it would mean an immensely powerful world central bank, able to manipulate its money without the minimal discipline existing now because investors can flee into other currencies. The single-currency proposal, says Lawrence H. White, would be "suicide after prolonged self-torture."
It's even possible that competing currencies may come into existence on their own. Richard W. Rahn, chief economist of the U.S. Chamber of Commerce, has actually sketched out a proposal to launch a private currency convertible into commodities or government currencies under prevailing laws. He suggests using commodity futures markets to lower operating costs, and overseas tax havens to avoid the tax problems preventing wider use of the 1977 "gold clause" legislation that made contracts based on gold legally enforceable. "Private money is not just an abstract idea, but an idea whose time has come," Rahn says. "It's technologically and legally feasible."
Meanwhile, a small network of economists attracted by competing currencies is quietly establishing itself. Books and articles are being published, sympathizers located (including outposts in Britain, France and Germany) and eminent authorities intrigued. "It's an intellectually very respectable idea," says Sir Alan Walters of Johns Hopkins University, a leading monetarist and formerly economic adviser to Prime Minister Margaret Thatcher. "I think free banking could work quite well."
But seriously: Can a handful of thinkers change the world?
Strange things happen in the idea business. When Adam Smith (who did not regard money as necessarily a government function) wrote The Wealth of Nations in 1776, he commented that to expect free trade to be established in Britain was "as absurd as to expect that an Oceana or Utopia should be established in it." But his ideas prevailed in spite of the odds against them, and some 90 years later not one British tariff was left.
January 29, 2008
Peter Brimelow [send him mail] is editor of VDARE.com, columist with MarketWatch, and author of Alien Nation and Worm In The Apple.
Copyright © 2008 LewRockwell.com
by Peter Brimelow
OK, I admit it: I tend to be early. The idea of private money – often referred to as "competing currencies" – has always fascinated me. I persuaded Jim Michaels, the late, great editor of Forbes Magazine, to let me translate the little-known academic literature into journalese in this article, which he published under the title Do You Want To Be Paid In Rockefellers? In Wristons? Or How About A Hayek? almost (ahem!) exactly twenty years ago. (May 30, 1988). The Great Inflation of the 1970s was then still a live memory. For some years, my account was regularly assigned in college courses. Now, GOP Presidential candidate Ron Paul seems to have single-handedly revived the issue with his relentless criticisms of the Federal Reserve. (Click here for Google web search). I still think it’s going to happen – just as there will eventually be an immigration cut-off.
The Federal Reserve System will be 75 years old in December. A small but growing band of academic economists proposes a special sort of birthday celebration: The Fed, they say, should be abolished.
Abolished? The sole bulwark we have against runaway inflation and fiscal irresponsibility?
Most people can't imagine life without a currency-issuing central bank, although in fact the Fed is younger than one of its most relentless critics, Nobel laureate Milton Friedman, still going strong at 76 [R. I. P. 1912–2006] and hard at work at California's Hoover Institution.
The Fed allegedly manages the country's money supply in order to prevent such economic disturbances as inflation, deflation and depression. But it is a matter of record that, since the Fed arrived, economic disturbances have been more severe than previously – notably the Great Depression of 1929 and the Great Inflation of the Seventies. In the process, the purchasing power of the dollar has almost completely eroded. Even now, inflation is still gnawing away at around 4% a year, compared with a mere 3.3% when President Richard Nixon first imposed wage and price controls in 1971.
Central banking distresses some. They argue that, far from preventing these disturbances, central banking may exacerbate them. The Fed has been accused of being too tight in the 1930s and too loose in the 1970s and of innumerable lesser errors. After bitter debate, most economists have come to accept at least a part of this critique.
For years, Milton Friedman has advocated doing away with some of the Fed's flexibility by forcing it to expand the money supply only at a fixed annual rate approximating the long-run growth of the economy. The Fed's new critics, however, go further. They think the government should be out of the money business altogether. They argue that money could and should be provided competitively by the private sector – just like baked beans, business magazines or any other goods.
What? Money is money, isn't it? How can you have different kinds of money in the same economy?
The idea of Citibank and Chase Manhattan issuing their own money may indeed seem mind-boggling. What would their currencies be called – Wristons and Rockefellers? But the truth is that there have been several episodes of private, competing monies in world economic history, including in the U.S. Recent research is suggesting they worked much better than had been thought.
Meanwhile, financial deregulations at home and floating exchanges rates abroad are creating an environmental in which elements of a competitive system are already emerging – without the permission of professors or politicians. In his forthcoming book, Free Banking and Monetary Reform, former Manhattan Institute economist David Glasner calls this phenomenon "the competitive breakthrough" that might eventually lead to the complete privatization of money.
Government money monopolies were effectively universal by the early 20th century. Even free market economists, with few exceptions, took them for granted. But these monopolies became much easier to question after Friedrich A. Hayek, who received the Nobel Prize for Economics in 1974, published his Denationalization of Money in 1976 and expanded upon it in 1978.
Hayek announced that, on reflection, he no longer thought government money monopolies were either necessary or desirable, given their record of inflation. Instead, private institutions such as banks should be allowed to issue their own monies, denominated as they wished.
Conventional wisdom had assumed that a profit-seeking bank would immediately print too much money. But Hayek pointed out that this course would be self-defeating. If a bank over-issued its currency, causing it to depreciate, people wouldn't want to accept or hold it, preferring that of more conservative banks. The offending bank's currency would go to a discount and, in short order, the bank would have to curb its enthusiasm. Competition, Hayek said, would do a better job of compelling private institutions to maintain their money's value than politics had with public institutions like the Fed.
Maybe – but let's be practical. How would I buy my groceries? Suppose the prices were marked in Rockefellers and all I had were Wristons? Suppose I'm a New Yorker in San Francisco? San Franciscans might prefer BankAmericas. What good would my Wristons be? How could a merchant function if his customers kept coming in with different kinds of currencies? How could a businessman keep his books?
The answer to these interesting questions depends partly on which of the several different proposals for privatizing money is under discussion. Hayek's version is particularly radical. In most historical episodes of private money, banks issued their own notes but denominated them in the national unit of account – the dollar, the pound. These notes usually exchanged at par and would be discounted only as a last resort in specific circumstances, such as overissue.
But more generally it is clear from the response of merchants in border zones like Tijuana or Toronto, and from inflation-racked countries like Israel or Argentina that are evolving a de facto U.S. dollar standard, the costs of handling parallel currencies can easily be exceeded by the benefits. Computers and hand-held calculators reduce the confusion, just as they have helped business to handle international floating exchange rates.
The fact is that free markets don't produce chaos. Efficiency will probably dictate that just a few kinds of monies, perhaps only one, will become universally accepted – exactly as the international computer industry has spontaneously evolved standard operating systems.
To understand Hayek's proposal and the whole competing currencies concept, you have to think about the nature of money. Most laymen, and some economists, assume that money is a collective convenience requiring government to organize, like national defense. But the historical evidence seems to be that in reality money developed all by itself. Merchants just agreed upon common stores of value and mediums of exchange because they found using them more efficient than barter – an example of what Hayek calls "spontaneous order."
Coins are traditionally supposed to have been invented in the 7th century B.C. by the Lydians, whose King Croesus became a legend for his wealth. But significantly, David Glasner reports, the earliest surviving coins appear to have been privately issued. The Lydian royal minting monopoly was only later imposed – by another king for whom the Greeks invented the word "tyrant."
Recent observations have tended to confirm the private origins of money. In one famous case, cigarettes spontaneously evolved as the medium of exchange in a World War II prisoner of war camp. In much of Europe after WWII, U.S. nylon stockings were a kind of sexual currency.
Whether or not governments were needed in the money business, however, they undeniably found getting into it an irresistible source of revenue and power, particularly in time of war or national emergency. Minting coins was easy and profitable. Most convenient of all for a spendthrift king, the coins could be debased – reissued with the same face value but a lesser amount of precious metal – or actually clipped of some of their gold and recirculated. Later, when money developed into a claim on some other asset rather than being intrinsically valuable in itself, governments discovered that they could simply overissue it.
Of course, all this would eventually result in too much money chasing too few goods and rising prices – a process still going on merrily today. But that's in the long run. And in the meantime, monkeying about with money produced interesting spasms in the economy that could be very useful politically – for example, to influence elections.
Market forces can be dammed but not destroyed. By the Middle Ages, even governments that monopolized money found themselves confronted with a burgeoning banking industry that was being summoned into existence by the growth of trade.
Banks not only accepted deposits of money from customers, on which they paid interest, but also made loans to other customers, on which they charged interest. A loan was made by a bookkeeping entry that created a deposit upon which this new debtor could draw. These new banks were able to incur multiple liabilities against the same hard cash, because bank IOUs were exchanged among the public in settlement of their own affairs and rarely presented for payment. In effect, the banks were creating money.
Governments tolerated this development largely because they needed to borrow money themselves, badly. For example, the Bank of England, the ancestor of all central banks, was first granted its charter in 1694 because it promised to buy William III's government bonds and finance his wars when Parliament would not.
Similarly in the U.S., the 1863 National Bank Act compelled qualifying banks to hold specified amounts of federal debt, helping to pay for the Civil War.
So even a government's monopoly over the issuance of currency gives it only indirect control over the entire money supply. In recent years in the U.S. this control has been exerted by a straitjacket of banking regulation – much of it dating from the New Deal and subsequently rotted away by inflation, and by the Fed's ability to alter the reserves that banks are required to maintain with it, thus affecting the size of the base upon which they can build their pyramids of credit.
But now "financial innovation" is producing a proliferation of irritatingly hard-to-categorize "near monies" – for example, traveler's checks, some of whose issuers are bound not by reserve regulations but only by their own self-interested prudence. Thus, in a sense, American Express is already issuing its own private money, although denominated in and convertible into Fed-produced dollars.
Hayek's proposal is particularly radical because it combines a number of distinct ideas that are already quite radical enough:
"Free banking" – banks ought to be able to issue currency and create deposits (conceptually the same thing), choose their own reserve ratios and generally operate entirely without regulation.
Different denominations – privately issued currencies need not be all denominated in the same unit: Citibank's Wristons and Chase Manhattan's Rockefellers would be traded against each other in a currency market just as the different national currencies are today.
Private fiat money – these private currencies need not necessarily be convertible into gold or any underlying commodity, but would trade entirely on the word of the issuing bank that it would not debauch its money.
Wouldn't this create chaos? Is Hayek serious?
Idea number one, free banking, is very serious. New York University's Lawrence H. White has recently attracted much attention with his book Free Banking in Britain, a documentation and formal analysis of the system's smooth working over a 128-year period in Scotland. Scottish free banking was suppressed in 1844, not because it didn't work, but in the course of legislation aimed at difficulties in the very different English banking system.
But didn't this cause chaos in the U.S.? What about the wildcat banks?
That bit of history is far from settled. Free banking briefly flourished under state charters in the U.S. from 1837 to the Civil War. "Wildcat banks" were accused of locating out in the frontier forests, with the wildcats, so that their notes could not easily be presented for redemption. But recent studies suggest that these problems have been much exaggerated. And most of them, it is argued, were caused by interfering state governments and inadequate enforcement of laws against fraud.
In both Scotland and the U.S. the private money thus issued was denominated in the national monetary unit and was theoretically interchangeable and redeemable into gold. In the U.S., unlike in Scotland, national branch banking was not allowed, so notes issued by unknown faraway banks, as well as those that were suspect for other reasons, sometimes traded at a discount. This was not, however, an impossible inconvenience: Bill brokers sprang up to act as middlemen. It would be even less of a problem in these days of instant communications – and, above all, if nationwide branch banking were allowed.
Still, the wildcat banks left their clawmarks on the U.S. economics profession. Many economists concluded that private banks had a theoretical incentive to behave badly: They would produce money until its value had been driven down to its cost of production, which is essentially zero. This would cause a price explosion – severe inflation.
David Glasner, however, rebuts this argument by pointing out that a bank can make profits only to the extent that the public will hold its money. Otherwise it will be driven into insolvency by adverse clearings with its competitors as the public converts out of its money and into their money. If people trust Wristons more than Rockefellers, Chase would have to either mend its ways or be driven out of business, and vice versa. Thus, for a bank like Chase Manhattan, the key question would be not the cost of physically creating Rockefellers but of keeping them in circulation. Chase's "cost of production" would be the resources it expended in maintaining sufficient balances of whatever was necessary in order to convince its customers that their Rockefellers could be redeemed whenever they wanted.
But doesn't bad money drive out good?
Everyone has heard of Gresham's law, but practically no one understands it. Queen Elizabeth I's financial adviser was talking about a situation where two monies exchange at a rate fixed by law – for example, if both are legal tender and must be accepted in discharge of debt. Under these circumstances, people will try to pass on the "bad" money – the money whose value is suspect, either because of debasement or overissue – and hoard the money that's "good." But if the rate of exchange between the monies is free to fluctuate, it is the debauched currency that will depreciate and be driven out.
Well, who would be the lender of last resort – as the Fed can be after disasters such as Oct. 19 last year or the 1970 Penn Central bankruptcy?
Nobody. A free banking system, its advocates insist, pointing to Scotland, is not inherently unstable. The celebrated 19th-century banking "panics" were relatively brief and self-correcting compared with the Great Depression, with the sound banks leading reserves to rescue unsound ones out of their own interest in preventing general collapse, as J.P. Morgan did in the panic of 1907. In Scotland, banks competed for the customers of failed banks by accepting their notes at par.
In fact, private money proponents think the Fed's activities as a lender of last resort, and the New Deal's deposit insurance programs, have actually made the U.S. banking system's problems worse. They have encouraged bankers to take risks, knowing that the feds would bail them out, and thus in effect subsidized imprudent banking. Ask anyone in Texas.
The advocates of private monies are still arguing among themselves about other aspects of the scheme, including Hayek's idea number two (different denominations) and idea number three (private fiat money). Lawrence H. White, for example, thinks that, as in Scotland, all monies should be denominated in the same unit, albeit visually distinguishable so that they could trade at a discount if necessary. And he predicts that the emerging successful money would probably turn out to be one offering convertibility into gold or silver.
But these disputes are not conducted with the usual academic acerbity. This is because all private-money advocates agree that such questions can really be settled only by allowing competition to begin. Then the free market, to employ a key Hayekian concept, will search out the best solution.
The privatization of money has important macroeconomic implications. It offers, according to its advocates, a way out of the current grand impasse of monetary policy.
For most of its existence, the Fed has focused on interest rates, the price of credit, assuming that the amount of money it was supplying to the economy was less important. But interest rates are affected by many factors, and the Fed often ended up supplying so much money that the resulting inflation could not be ignored.
But by the time the Fed finally admitted to the importance of the money supply, in the early 1980s, it turned out that the demand for money – its "velocity of circulation" – was jumping about unpredictably, too. Thus, judged by the usual measures, the Fed supplied massive quantities of money to the economy after 1982. But, contrary to what Friedman and like-minded monetarists predicted, it did not boil off into inflation. The velocity simply slowed.
So now the Fed appears to be flying blind, following neither a price rule nor a quantity rule, responding to ad hoc considerations such as the beliefs of the Fed chairman or whatever exchange rate influential politicians happen to feel would be convenient for the dollar.
Monetary policy would not be a problem if banks issued their own monies; it would cease to exist. Banks would automatically extend credit to the extent that they and their customers agree it is economically productive. If business conditions deteriorated, loans would be liquidated, liabilities written down to match, and the banks' balance sheets would shrink. Thus the quantity of money demanded by the economy would be automatically supplied by the market, just as it now supplies the appropriate number of automobiles. (Imagine the mess if an outfit like the Fed were to control auto production, based on its best guesses of what demand ought to be.)
Occasionally, of course, banks and customers would make mistakes. But this should be no more disruptive than a mistake in any other business. Auto factories do overproduce. So do builders of office buildings. But the economy adjusts.
A much-loved answer to the mystery of monetary policy is to link the dollar in some way to gold. But gold standard advocates have always had a problem with gold's moderate but real fluctuations in price, which would inflict involuntary deflations and inflations upon the economy. Competing currencies would tend to solve this problem. Joe Cobb, senior economist for the U.S. Congress' Joint Economic committee, believes that a private money convertible into gold would eventually become dominant. "But with free banking, other types of money would come in at the margin if there were too little or too much gold-backed money," Cobb says. Silver-backed, maybe, or oil-backed. These monies would either supplement the gold-backed currency (if the gold price had risen, causing deflation) or displace it (if the gold price had fallen, causing inflation).
Recently, the young economists in the private-money subculture have been electrified by hints that the leader of the monetarist school, Milton Friedman himself, is being converted. In 1986 Friedman coauthored a paper significantly softening his view that governments necessarily have a role in money. Even more significantly, he has abandoned his long-held position that the Fed should aim for a fixed rate of growth in the monetary aggregates. Now he argues that the monetary base – Fed deposits plus currency – should be frozen and complete free banking be allowed to pyramid upon this reserve base.
This looks like a revised monetary rule, but in fact it isn't. Under Friedman's new proposal the free market, rather than the Fed, would dictate the size of the money supply-based on the banks' feel for the legitimate demand for money.
Friedman stoutly denies that his new proposal has anything to do with the volatile velocities of the 1980s, which he blames on Fed policy. Instead, he says he is now convinced that central bankers will never accept moderate restraint, so he proposes to eliminate their power. However, he agrees that under free banking the troublesome issue of velocity would be neatly bypassed.
The proponents of private money take Friedman's shift as confirmation that their position is just the logical extension of market principles. "Once the question is put, there's only one answer," says the University of Sheffield's Kevin Dowd, whose book The State and the Monetary System is being published by the Vancouver-based Fraser Institute.
Milton Friedman has an estimate of the chances of money being denationalized: "Zero." But then, he recalls, for years economists were derided for arguing about the feasibility of floating exchange rates. Then suddenly the idea became reality. So, maybe the chances are better than zero.
The first victory of the competing currency school may well be negative. By stressing the fundamental flaws of central banking, they may help derail the diametrically opposed proposal: to develop one world currency centrally managed by the International Monetary Fund. This idea was the subject of a recent cover story in the Economist magazine, and a version of it has recently been advocated by Harvard economist and former Carter Administration official Richard Cooper. The single-currency proposal appalls the private-money people, since it would mean an immensely powerful world central bank, able to manipulate its money without the minimal discipline existing now because investors can flee into other currencies. The single-currency proposal, says Lawrence H. White, would be "suicide after prolonged self-torture."
It's even possible that competing currencies may come into existence on their own. Richard W. Rahn, chief economist of the U.S. Chamber of Commerce, has actually sketched out a proposal to launch a private currency convertible into commodities or government currencies under prevailing laws. He suggests using commodity futures markets to lower operating costs, and overseas tax havens to avoid the tax problems preventing wider use of the 1977 "gold clause" legislation that made contracts based on gold legally enforceable. "Private money is not just an abstract idea, but an idea whose time has come," Rahn says. "It's technologically and legally feasible."
Meanwhile, a small network of economists attracted by competing currencies is quietly establishing itself. Books and articles are being published, sympathizers located (including outposts in Britain, France and Germany) and eminent authorities intrigued. "It's an intellectually very respectable idea," says Sir Alan Walters of Johns Hopkins University, a leading monetarist and formerly economic adviser to Prime Minister Margaret Thatcher. "I think free banking could work quite well."
But seriously: Can a handful of thinkers change the world?
Strange things happen in the idea business. When Adam Smith (who did not regard money as necessarily a government function) wrote The Wealth of Nations in 1776, he commented that to expect free trade to be established in Britain was "as absurd as to expect that an Oceana or Utopia should be established in it." But his ideas prevailed in spite of the odds against them, and some 90 years later not one British tariff was left.
January 29, 2008
Peter Brimelow [send him mail] is editor of VDARE.com, columist with MarketWatch, and author of Alien Nation and Worm In The Apple.
Copyright © 2008 LewRockwell.com
The Great Credit Unwind of '08
The Great Credit Unwind of '08
by Mike Whitney
"The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. Now the rest of the world is increasingly unwilling to accumulate dollars.''
~ George Soros, World Economic Forum, Davos, Switzerland
Global market turmoil continued into a second week as stock markets in Asia and Europe took another tumble on Monday on growing fears of a recession in the United States. China's benchmark index plummeted 7.2% to its lowest point in six months, while Japan's Nikkei index slipped another 4.3%. Equities markets across Asia recorded similar results and, by midmorning in Europe, all three major indexes – the UK FTSE "Footsie," France's CAC 40, and the German DAX – were recording heavy losses. It's now clear that Fed Chairman Bernanke's "surprise" announcement of a 75 basis points cut to the Fed Funds rate last Tuesday has neither stabilized the markets nor restored confidence among jittery investors.
At the time of this writing, the storm clouds are swiftly moving towards Wall Street where markets are likely to be roiled on the very day that President Bush will give his farewell State of the Union speech.
In Monday's Financial Times, Harvard economics professor, Lawrence Summers, made an impassioned plea for further government action in addition to the Fed's rate cuts and Bush's $150 billion "stimulus plan." Summers believes that steps must be taken immediately to mitigate the damage from the sharp downturn in housing and persistent troubles in the credit markets. He suggests a "global coordination of policy" with the other foreign central banks. It is a tacit admission that the Fed has lost control of the system and cannot solve the problem by itself.
Summers is right; although it's easy to wonder why he remained silent for so long while the markets were soaring and the investment banks were reaping trillions of dollars in profits on a "structured investment" swindle which has left the global financial system teetering on the brink of catastrophe. Now that the US economy is sliding towards recession; Summers has suddenly found his voice and is calling for "transparency." How convenient.
"Financial institutions are holding all sorts of credit instruments that are impaired but are difficult to value, creating uncertainty and freezing new lending. Without more visibility, the economy and financial system risk freezing up as Japan’s did in the 1990s."
Right again. The banks are "capital impaired" because they are holding nearly $600 billion in mortgage-backed assets which are declining in value every month. This is forcing many banks to conceal their real condition from investors while they scour the planet for the extra capital they need to continue operations. As long as the banks are in distress, consumer and business lending will dwindle and the economy will continue to shrink. The main gear in the credit-generating mechanism is now broken. The rate cuts can provide liquidity, but they cannot bring insolvent banks back from the dead. Summers is expecting too much.
The United States has led the world into the greatest credit bust in history, and yet, few people have any idea of what has transpired. The US current account deficit – nearly $800 billion – has been recycling into US Treasuries and securities from foreign investors. Up to this point, American markets were an attractive place to put one's savings. The dollar was strong, and the stock market had a proven record of profitability and transparency. But since President Bill Clinton repealed Glass-Steagall in 1999, the markets have been reconfigured according to an entirely new model, "structured finance." Glass-Steagall was the last of the Depression-era bulwarks against the merging of commercial and investment banks. As a result banking has changed from a culture of "protection" (of deposits) to "risk taking," which is the securities business. Through "financial innovation" the investment banks created myriad structured debt instruments which they sold through their Enron-like "off balance" sheets operations (SIVs and Conduits) to credulous investors. Now, trillions of dollars of these subprime and mortgage-backed bonds – many of which were rated triple A – are held by foreign banks, retirement funds, insurance companies, and hedge funds. They are steadily losing value with every rating's downgrade. Here is a graph which illustrates how the scam works.
Summers, of course, understands the enormity of the swindle that has taken place beneath the noses of US regulators, but chooses not to hold any of the main actors accountable. Instead, he draws our attention to a little-known part of the market which will probably lead the way to a stock market crash and a system-wide meltdown.
Here's Summers:
"It is critical that sufficient capital is infused into the bond insurance industry as soon as possible. Their failure or loss of a AAA rating is a potential source of systemic risk. Probably it will be necessary to turn in part to those companies that have a stake in guarantees remaining credible because they have large holdings of guaranteed paper. It appears unlikely that repair will take place without some encouragement and involvement by financial authorities. Though there are many differences and the current problem is more complex, the Long-Term Capital Management work-out is an example of successful public sector involvement."
Some of the largest bond insurers are currently unable to cover the losses that are piling up from the meltdown in mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs). Their business model is hopelessly broken and they will require an immediate $143 billion bailout to maintain operations. The largest of the bond insurers is MBIA.
"MBIA's total exposure to bonds backed by mortgages and CDOs was disclosed to be $30.6 billion, including $8.14 billion of holdings of CDO-squareds (eds. note; pure garbage). MBIA was being priced as a weak CCC-rated credit when it issued its bonds last week; it is now being priced for a bankruptcy. MBIA's stock, which traded just under $68 per share last October, dropped another $3.50 this morning to under $10.00 per share." (Stock analyst Michael Lewitt, quoted in Bloomberg)
Barclay's estimates that the investment banks alone are holding as much as $615 billion of structured securities guaranteed by bond insurers. If the insurers default, hundreds of billions will be lost via downgrades.
So, in practical terms, what does it mean if the bond insurers go under?
It means that the system will freeze and the stock market will crash. Here's how TV stock guru Jim Cramer summed it up last week in an interview with MSNBC's Chris Matthews:
But, Chris, there is something I would urge all the candidates to think about and our Treasury Secretary, which is that there are a group of insurance companies which insure all these bad mortgages and, Cris, I think they are all about to go belly-up, and that will cause the Dow Jones to decline 2,000 points. They've got to be shut down and the insurance given to a New Resolution Trust. This is going to happen in maybe two or three weeks, Chris, it going to on the front of every newspaper and no one in Washington is even willing to admit it.
Chris Matthews: "So who are you including in these mortgage companies that are going to go belly-up; give me a description?"
These are MBIA and Ambac remember the companies that Merrill Lynch and Citigroup wrote down a lot of stuff the other day? All these companies are relying on insurance to save them. The insurers don't have the money. There's also personal mortgage insurance; that's PMI, is one company; MGIC is another. Chris, I am telling you that these companies do not have the capital to "make good." And when they do fall, and I believe it is when – if the government does not have a plan in action; you will not be able to open the stock market when they collapse. No one is even talking about the fact that these major insurers, who insure $450 billion of mortgages are all about to go under. (See the whole video.)
Cramer is correct in assuming that the market won't open. And yet, so far, nothing has been done to avert the disaster which lies just ahead. Maybe nothing can be done?
So, how did things get so bad, so fast? How could the world's most resilient and profitable markets be transformed into a carnival sideshow peddling poisonous "mortgage-backed" snake-oil to every gullible investor?
Author and stock market soothsayer Pam Martens puts it like this:
How could a layered concoction of questionable debt pools, many of dubious origin, achieve the equivalent AAA rating as U.S. Treasury securities, backed by the full faith and credit of the U.S. government, and time-tested over a century of panics, crashes and the Great Depression?
How did a 200-year-old "efficient" market model that priced its securities based on regular price discovery through transparent trading morph into an opaque manufacturing and warehousing complex of products that didn't trade or rarely traded, necessitating pricing based on statistical models? (The Free Market Myth Dissolves into Chaos, Pam Martens, CounterPunch.)
How, indeed?
The answer to all these questions is "deregulation." The financial system has been handed over to scam-artists and fraudsters who've created a multi-trillion dollar inverted pyramid of shaky, hyper-inflated, subprime slop that they've sold around the world with the tacit support of the ratings agencies and the US political establishment. (wink, wink) Now that system is about to collapse and there's nothing that the Federal Reserve can do to stop the Great Credit Unwind of '08. As economist Ludwig von Mises said:
"There is no means of avoiding the final collapse of a boom brought on by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
January 29, 2008
Mike Whitney's [send him mail] lives in Washington state.
Copyright © 2008 LewRockwell.com
by Mike Whitney
"The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. Now the rest of the world is increasingly unwilling to accumulate dollars.''
~ George Soros, World Economic Forum, Davos, Switzerland
Global market turmoil continued into a second week as stock markets in Asia and Europe took another tumble on Monday on growing fears of a recession in the United States. China's benchmark index plummeted 7.2% to its lowest point in six months, while Japan's Nikkei index slipped another 4.3%. Equities markets across Asia recorded similar results and, by midmorning in Europe, all three major indexes – the UK FTSE "Footsie," France's CAC 40, and the German DAX – were recording heavy losses. It's now clear that Fed Chairman Bernanke's "surprise" announcement of a 75 basis points cut to the Fed Funds rate last Tuesday has neither stabilized the markets nor restored confidence among jittery investors.
At the time of this writing, the storm clouds are swiftly moving towards Wall Street where markets are likely to be roiled on the very day that President Bush will give his farewell State of the Union speech.
In Monday's Financial Times, Harvard economics professor, Lawrence Summers, made an impassioned plea for further government action in addition to the Fed's rate cuts and Bush's $150 billion "stimulus plan." Summers believes that steps must be taken immediately to mitigate the damage from the sharp downturn in housing and persistent troubles in the credit markets. He suggests a "global coordination of policy" with the other foreign central banks. It is a tacit admission that the Fed has lost control of the system and cannot solve the problem by itself.
Summers is right; although it's easy to wonder why he remained silent for so long while the markets were soaring and the investment banks were reaping trillions of dollars in profits on a "structured investment" swindle which has left the global financial system teetering on the brink of catastrophe. Now that the US economy is sliding towards recession; Summers has suddenly found his voice and is calling for "transparency." How convenient.
"Financial institutions are holding all sorts of credit instruments that are impaired but are difficult to value, creating uncertainty and freezing new lending. Without more visibility, the economy and financial system risk freezing up as Japan’s did in the 1990s."
Right again. The banks are "capital impaired" because they are holding nearly $600 billion in mortgage-backed assets which are declining in value every month. This is forcing many banks to conceal their real condition from investors while they scour the planet for the extra capital they need to continue operations. As long as the banks are in distress, consumer and business lending will dwindle and the economy will continue to shrink. The main gear in the credit-generating mechanism is now broken. The rate cuts can provide liquidity, but they cannot bring insolvent banks back from the dead. Summers is expecting too much.
The United States has led the world into the greatest credit bust in history, and yet, few people have any idea of what has transpired. The US current account deficit – nearly $800 billion – has been recycling into US Treasuries and securities from foreign investors. Up to this point, American markets were an attractive place to put one's savings. The dollar was strong, and the stock market had a proven record of profitability and transparency. But since President Bill Clinton repealed Glass-Steagall in 1999, the markets have been reconfigured according to an entirely new model, "structured finance." Glass-Steagall was the last of the Depression-era bulwarks against the merging of commercial and investment banks. As a result banking has changed from a culture of "protection" (of deposits) to "risk taking," which is the securities business. Through "financial innovation" the investment banks created myriad structured debt instruments which they sold through their Enron-like "off balance" sheets operations (SIVs and Conduits) to credulous investors. Now, trillions of dollars of these subprime and mortgage-backed bonds – many of which were rated triple A – are held by foreign banks, retirement funds, insurance companies, and hedge funds. They are steadily losing value with every rating's downgrade. Here is a graph which illustrates how the scam works.
Summers, of course, understands the enormity of the swindle that has taken place beneath the noses of US regulators, but chooses not to hold any of the main actors accountable. Instead, he draws our attention to a little-known part of the market which will probably lead the way to a stock market crash and a system-wide meltdown.
Here's Summers:
"It is critical that sufficient capital is infused into the bond insurance industry as soon as possible. Their failure or loss of a AAA rating is a potential source of systemic risk. Probably it will be necessary to turn in part to those companies that have a stake in guarantees remaining credible because they have large holdings of guaranteed paper. It appears unlikely that repair will take place without some encouragement and involvement by financial authorities. Though there are many differences and the current problem is more complex, the Long-Term Capital Management work-out is an example of successful public sector involvement."
Some of the largest bond insurers are currently unable to cover the losses that are piling up from the meltdown in mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs). Their business model is hopelessly broken and they will require an immediate $143 billion bailout to maintain operations. The largest of the bond insurers is MBIA.
"MBIA's total exposure to bonds backed by mortgages and CDOs was disclosed to be $30.6 billion, including $8.14 billion of holdings of CDO-squareds (eds. note; pure garbage). MBIA was being priced as a weak CCC-rated credit when it issued its bonds last week; it is now being priced for a bankruptcy. MBIA's stock, which traded just under $68 per share last October, dropped another $3.50 this morning to under $10.00 per share." (Stock analyst Michael Lewitt, quoted in Bloomberg)
Barclay's estimates that the investment banks alone are holding as much as $615 billion of structured securities guaranteed by bond insurers. If the insurers default, hundreds of billions will be lost via downgrades.
So, in practical terms, what does it mean if the bond insurers go under?
It means that the system will freeze and the stock market will crash. Here's how TV stock guru Jim Cramer summed it up last week in an interview with MSNBC's Chris Matthews:
But, Chris, there is something I would urge all the candidates to think about and our Treasury Secretary, which is that there are a group of insurance companies which insure all these bad mortgages and, Cris, I think they are all about to go belly-up, and that will cause the Dow Jones to decline 2,000 points. They've got to be shut down and the insurance given to a New Resolution Trust. This is going to happen in maybe two or three weeks, Chris, it going to on the front of every newspaper and no one in Washington is even willing to admit it.
Chris Matthews: "So who are you including in these mortgage companies that are going to go belly-up; give me a description?"
These are MBIA and Ambac remember the companies that Merrill Lynch and Citigroup wrote down a lot of stuff the other day? All these companies are relying on insurance to save them. The insurers don't have the money. There's also personal mortgage insurance; that's PMI, is one company; MGIC is another. Chris, I am telling you that these companies do not have the capital to "make good." And when they do fall, and I believe it is when – if the government does not have a plan in action; you will not be able to open the stock market when they collapse. No one is even talking about the fact that these major insurers, who insure $450 billion of mortgages are all about to go under. (See the whole video.)
Cramer is correct in assuming that the market won't open. And yet, so far, nothing has been done to avert the disaster which lies just ahead. Maybe nothing can be done?
So, how did things get so bad, so fast? How could the world's most resilient and profitable markets be transformed into a carnival sideshow peddling poisonous "mortgage-backed" snake-oil to every gullible investor?
Author and stock market soothsayer Pam Martens puts it like this:
How could a layered concoction of questionable debt pools, many of dubious origin, achieve the equivalent AAA rating as U.S. Treasury securities, backed by the full faith and credit of the U.S. government, and time-tested over a century of panics, crashes and the Great Depression?
How did a 200-year-old "efficient" market model that priced its securities based on regular price discovery through transparent trading morph into an opaque manufacturing and warehousing complex of products that didn't trade or rarely traded, necessitating pricing based on statistical models? (The Free Market Myth Dissolves into Chaos, Pam Martens, CounterPunch.)
How, indeed?
The answer to all these questions is "deregulation." The financial system has been handed over to scam-artists and fraudsters who've created a multi-trillion dollar inverted pyramid of shaky, hyper-inflated, subprime slop that they've sold around the world with the tacit support of the ratings agencies and the US political establishment. (wink, wink) Now that system is about to collapse and there's nothing that the Federal Reserve can do to stop the Great Credit Unwind of '08. As economist Ludwig von Mises said:
"There is no means of avoiding the final collapse of a boom brought on by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
January 29, 2008
Mike Whitney's [send him mail] lives in Washington state.
Copyright © 2008 LewRockwell.com
Sunday, January 27, 2008
Republicans have no respect for the 2nd Amendment either.
Public 'threatened' by private-firearms ownership.
Government argues gun restrictions 'permitted by the 2nd Amendment.'
by Stewart Rhodes
A faithful apprentice strikes again. Yet another fake conservative legal tool gleefully guts the Constitution for his Master - this time coldly disemboweling the Second Amendment.
Here is an excerpt of the Worldnetdaily.com article:
Since "unrestricted" private ownership of guns clearly threatens the public safety, the 2nd Amendment can be interpreted to allow a variety of gun restrictions, according to the Bush administration.
The argument was delivered by U.S. Solicitor General Paul D. Clement in a brief filed with the U.S. Supreme Court in the ongoing arguments over the legality of a District of Columbia ban on handguns in homes, according to a report from the Los Angeles Times.
Clement suggested that gun rights are limited and subject to "reasonable regulation" and said all federal limits on guns should be upheld.
"Given the unquestionable threat to public safety that unrestricted private firearm possession would entail, various categories of firearm-related regulation are permitted by the 2nd Amendment," he wrote in the brief, the Times reported.
He noted especially the federal ban on machine guns and those many other "particularly dangerous types of firearms," and endorsed restrictions on gun ownership by felons, those subject to restraining orders, drug users and "mental defectives."
His arguments came in the closely watched Washington, D.C., ban that would prevent residents from keeping handguns in their homes for self-defense.
Paul Helmke, of the pro-gun control Brady Campaign to Prevent Handgun Violence, told the Times he salutes the administration for its position.
Read the rest here.
My Comments:
There you go! Bush lawyers have sided with the District of Columbia against gun owners, not only arguing that D.C.'s total ban on handguns is constitutional but that all current federal gun laws should be upheld, winning praise (a salute no less!) from the gun grabbing victim disarmament crowd over at the Brady Campaign. So nice to see yet another "bipartisan" assault on the American people.
So much for the old saw that Republican politicians, if only they could, would get rid of all of those unconstitutional federal gun laws, but we just need to be patient until they are in a position to do so. Now, when a case is before the Supreme Court, and they actually have a chance (however remote) of striking down those federal gun laws by convincing the Supreme Court to rule those laws unconstitutional, we have the US government, in the form of the Bush Administration controlled Justice Department, chock full of Republican lawyers, arguing to the Court that all of those federal gun laws are perfectly constitutional and nothing in the Second Amendment can be used to strike them down. To the contrary, doing so would be "dangerous"!
We now see the final nails being hammered in the coffin of the right to bear arms in America.
First, we had the Gonzales v.Raich decision, where the Republican lawyers of the Bush Administration argued that there is no limit whatsoever to Congress's law making power since Congress can even regulate what a person does in her own back yard, growing a plant, not for sale, but for personal consumption. That decision had a direct and almost immediate impact on gun rights.
In United States v. Stewart, before the Ninth Circuit Court of Appeals, Mr. Stewart argued that his manufacture of homemade machine-guns was not for interstate commerce and was therefore beyond the power of Congress to regulate. He won! The Ninth Circuit agreed! That's right, the Ninth Circuit ruled that Congress lacked the power, under the Article I, Section 8 commerce clause, to regulate homemade machine-guns. An amazing decision, which truly surprised many a constitutionalist who thought the federal courts were beyond hope.
But then came the Supreme Court's Raich decision. In the aftermath of Raich, the U.S. government, once again with Republican Bush appointed lawyers leading the charge against the Constitution, appealed the Ninth Circuit's decision to the Supreme Court. the Supreme Court ordered the Ninth Circuit to follow Raich, and to reverse its decision in Stewart, because lo and behold, Congress could regulate even home-made machine guns (and any other home-made firearms). So now Mr. Stewart, an American gun owning patriot, is still in federal prison thanks to the Bush lawyers and thanks to the Raich decision the Bush Administration pushed for.
So now Congress can make any law it likes. There is no longer a commerce clause challenge to the power of Congress to pass any law, much less a gun law. Forget about pointing out that the federal government is only supposed to have certain, limited, enumerated powers. Your only remaining way to challenge such laws is to argue it violates your rights.
And now here comes the Bush Admin arguing that not only can Congress pass any law it pleases, but you cannot challenge the constitutionality of those laws by evoking the Second Amendment. Sure, they throw us a bone by saying that the Second Amendment somehow protects an individual right, but then they argue that your right to bear arms can be regulated by Congress, and that none of Congress's regulations violate that right. That's right. Not one of the current multitude of federal gun laws and regulations violates your rights - not even outright bans on whole classes of firearms. I'm not clear on what restriction these so-called conservative lawyers would find to ever violate the Second Amendment. Perhaps a total ban on any and all private possession of firearms? Would that do it? So, short of that, any restriction is constitutional so long as you are at least theoretically "permitted" to own some kind of firearm?
This is like saying in grand language that "the powers of Congress are few and defined, and limited to those enumerated," but then saying that among the powers enumerated is the power to regulate commerce and everything is commerce, so Congress can go ahead and regulate whatever it wants. What a farce of the concept of limited and enumerated powers. What an empty limit on the power of the federal government.
Same here: The Second Amendment protects an "individual right" but that right may be regulated in any way Congress pleases, including banning entire categories of firearms and ammunition, and may track you and your arms at will. What an empty right and a non-existent limit on power.
So now we have a "conservative" administration that argues that the federal government may pass any damn law it pleases, and any damn gun law it pleases.
Forget the illusion that the men in the Bush Administration care about the Constitution. Forget the illusion that your rights are somehow safer with Republicans in office. You have been fooled. Many of us knew that long, long ago. But now perhaps other Americans, especially those who consider themselves conservatives, will finally, after all these years, wake up to this fact.
We are seeing before us a constitutional republic in its final death throes, killed by a thousand treacherous cuts, and we are now seeing the final slashes being inflicted by cold reptilian lawyers who fancy themselves "conservatives" working for a man who truly does treat the Constitution like it is "just a goddamn piece of paper."
Stewart Rhodes
Government argues gun restrictions 'permitted by the 2nd Amendment.'
by Stewart Rhodes
A faithful apprentice strikes again. Yet another fake conservative legal tool gleefully guts the Constitution for his Master - this time coldly disemboweling the Second Amendment.
Here is an excerpt of the Worldnetdaily.com article:
Since "unrestricted" private ownership of guns clearly threatens the public safety, the 2nd Amendment can be interpreted to allow a variety of gun restrictions, according to the Bush administration.
The argument was delivered by U.S. Solicitor General Paul D. Clement in a brief filed with the U.S. Supreme Court in the ongoing arguments over the legality of a District of Columbia ban on handguns in homes, according to a report from the Los Angeles Times.
Clement suggested that gun rights are limited and subject to "reasonable regulation" and said all federal limits on guns should be upheld.
"Given the unquestionable threat to public safety that unrestricted private firearm possession would entail, various categories of firearm-related regulation are permitted by the 2nd Amendment," he wrote in the brief, the Times reported.
He noted especially the federal ban on machine guns and those many other "particularly dangerous types of firearms," and endorsed restrictions on gun ownership by felons, those subject to restraining orders, drug users and "mental defectives."
His arguments came in the closely watched Washington, D.C., ban that would prevent residents from keeping handguns in their homes for self-defense.
Paul Helmke, of the pro-gun control Brady Campaign to Prevent Handgun Violence, told the Times he salutes the administration for its position.
Read the rest here.
My Comments:
There you go! Bush lawyers have sided with the District of Columbia against gun owners, not only arguing that D.C.'s total ban on handguns is constitutional but that all current federal gun laws should be upheld, winning praise (a salute no less!) from the gun grabbing victim disarmament crowd over at the Brady Campaign. So nice to see yet another "bipartisan" assault on the American people.
So much for the old saw that Republican politicians, if only they could, would get rid of all of those unconstitutional federal gun laws, but we just need to be patient until they are in a position to do so. Now, when a case is before the Supreme Court, and they actually have a chance (however remote) of striking down those federal gun laws by convincing the Supreme Court to rule those laws unconstitutional, we have the US government, in the form of the Bush Administration controlled Justice Department, chock full of Republican lawyers, arguing to the Court that all of those federal gun laws are perfectly constitutional and nothing in the Second Amendment can be used to strike them down. To the contrary, doing so would be "dangerous"!
We now see the final nails being hammered in the coffin of the right to bear arms in America.
First, we had the Gonzales v.Raich decision, where the Republican lawyers of the Bush Administration argued that there is no limit whatsoever to Congress's law making power since Congress can even regulate what a person does in her own back yard, growing a plant, not for sale, but for personal consumption. That decision had a direct and almost immediate impact on gun rights.
In United States v. Stewart, before the Ninth Circuit Court of Appeals, Mr. Stewart argued that his manufacture of homemade machine-guns was not for interstate commerce and was therefore beyond the power of Congress to regulate. He won! The Ninth Circuit agreed! That's right, the Ninth Circuit ruled that Congress lacked the power, under the Article I, Section 8 commerce clause, to regulate homemade machine-guns. An amazing decision, which truly surprised many a constitutionalist who thought the federal courts were beyond hope.
But then came the Supreme Court's Raich decision. In the aftermath of Raich, the U.S. government, once again with Republican Bush appointed lawyers leading the charge against the Constitution, appealed the Ninth Circuit's decision to the Supreme Court. the Supreme Court ordered the Ninth Circuit to follow Raich, and to reverse its decision in Stewart, because lo and behold, Congress could regulate even home-made machine guns (and any other home-made firearms). So now Mr. Stewart, an American gun owning patriot, is still in federal prison thanks to the Bush lawyers and thanks to the Raich decision the Bush Administration pushed for.
So now Congress can make any law it likes. There is no longer a commerce clause challenge to the power of Congress to pass any law, much less a gun law. Forget about pointing out that the federal government is only supposed to have certain, limited, enumerated powers. Your only remaining way to challenge such laws is to argue it violates your rights.
And now here comes the Bush Admin arguing that not only can Congress pass any law it pleases, but you cannot challenge the constitutionality of those laws by evoking the Second Amendment. Sure, they throw us a bone by saying that the Second Amendment somehow protects an individual right, but then they argue that your right to bear arms can be regulated by Congress, and that none of Congress's regulations violate that right. That's right. Not one of the current multitude of federal gun laws and regulations violates your rights - not even outright bans on whole classes of firearms. I'm not clear on what restriction these so-called conservative lawyers would find to ever violate the Second Amendment. Perhaps a total ban on any and all private possession of firearms? Would that do it? So, short of that, any restriction is constitutional so long as you are at least theoretically "permitted" to own some kind of firearm?
This is like saying in grand language that "the powers of Congress are few and defined, and limited to those enumerated," but then saying that among the powers enumerated is the power to regulate commerce and everything is commerce, so Congress can go ahead and regulate whatever it wants. What a farce of the concept of limited and enumerated powers. What an empty limit on the power of the federal government.
Same here: The Second Amendment protects an "individual right" but that right may be regulated in any way Congress pleases, including banning entire categories of firearms and ammunition, and may track you and your arms at will. What an empty right and a non-existent limit on power.
So now we have a "conservative" administration that argues that the federal government may pass any damn law it pleases, and any damn gun law it pleases.
Forget the illusion that the men in the Bush Administration care about the Constitution. Forget the illusion that your rights are somehow safer with Republicans in office. You have been fooled. Many of us knew that long, long ago. But now perhaps other Americans, especially those who consider themselves conservatives, will finally, after all these years, wake up to this fact.
We are seeing before us a constitutional republic in its final death throes, killed by a thousand treacherous cuts, and we are now seeing the final slashes being inflicted by cold reptilian lawyers who fancy themselves "conservatives" working for a man who truly does treat the Constitution like it is "just a goddamn piece of paper."
Stewart Rhodes
Banning Guns in Britain has backfired
Banning Guns Has Backfired
by John R. Lott, Jr.
by John R. Lott, Jr.
Worried that even showing a starting pistol in a car ad might encourage gun crime in Britain, the British communications regulator has banned a Ford Motor Co. television spot because in it a woman is pictured holding such a "weapon." According to a report by Bloomberg News, the ad was said by regulators to "normalize" the use of guns and "must not be shown again."
What's next? Toy guns? Actually, the British government this year has been debating whether to ban toy guns. As a middle course, some unspecified number of imitation guns will be banned, and it will be illegal to take imitation guns into public places.
And in July a new debate erupted over whether those who own shotguns must now justify their continued ownership to the government before they will get a license.
The irony is that after gun laws are passed and crime rises, no one asks whether the original laws actually accomplished their purpose. Instead, it is automatically assumed that the only "problem" with past laws was they didn't go far enough. But now what is there left to do? Perhaps the country can follow Australia's recent lead and ban ceremonial swords.
Despite the attention that imitation weapons are getting, they account for a miniscule fraction of all violent crime (0.02%) and in recent years only about 6% of firearms offenses. But with crime so serious, Labor needs to be seen as doing something. The government recently reported that gun crime in England and Wales nearly doubled in the four years from 1998–99 to 2002–03.
Crime was not supposed to rise after handguns were banned in 1997. Yet, since 1996 the serious violent crime rate has soared by 69%: robbery is up by 45% and murders up by 54%. Before the law, armed robberies had fallen by 50% from 1993 to 1997, but as soon as handguns were banned the robbery rate shot back up, almost back to their 1993 levels.
The 2000 International Crime Victimization Survey, the last survey done, shows the violent-crime rate in England and Wales was twice the rate in the U.S. When the new survey for 2004 comes out, that gap will undoubtedly have widened even further as crimes reported to British police have since soared by 35%, while declining 6% in the U.S.
The high crime rates have so strained resources that 29% of the time in London it takes police longer than 12 minutes to arrive at the scene. No wonder police nearly always arrive on the crime scene after the crime has been committed.
As understandable as the desire to "do something" is, Britain seems to have already banned most weapons that can help commit a crime. Yet, it is hard to see how the latest proposals will accomplish anything.
Banning guns that fire blanks and some imitation guns. Even if guns that fire blanks are converted to fire bullets, they would be lucky to fire one or two bullets and most likely pose more danger to the shooter than the victim. Rather than replace the barrel and the breach, it probably makes more sense to simply build a new gun.
Making it very difficult to get a license for a shotgun and banning those under 18 from using shotguns also adds little. Ignoring the fact that shotguns make excellent self-defense weapons, they are so rarely used in crime, that the Home Office's report doesn't even provide a breakdown of crimes committed with shotguns.
Britain is not alone in its experience with banning guns. Australia has also seen its violent crime rates soar to rates similar to Britain's after its 1996 Port Arthur gun control measures. Violent crime rates averaged 32% higher in the six years after the law was passed (from 1997 to 2002) than they did the year before the law in 1995. The same comparisons for armed robbery rates showed increases of 74%.
During the 1990s, just as Britain and Australia were more severely regulating guns, the U.S. was greatly liberalizing individuals' abilities to carry guns. Thirty-seven of the 50 states now have so-called right-to-carry laws that let law-abiding adults carry concealed handguns once they pass a criminal background check and pay a fee. Only half the states require some training, usually around three to five hours' worth. Yet crime has fallen even faster in these states than the national average. Overall, the states in the U.S. that have experienced the fastest growth rates in gun ownership during the 1990s have experienced the biggest drops in murder rates and other violent crimes.
Many things affect crime; the rise of drug-gang violence in Britain is an important part of the story, just as it has long been important in explaining the U.S.'s rates. Drug gangs also help explain one of the many reasons it is so difficult to stop the flow of guns into a country. Drug gangs can't simply call up the police when another gang encroaches on their turf, so they end up essentially setting up their own armies. And just as they can smuggle drugs into the country, they can smuggle in weapons to defend their turf.
Everyone wants to take guns away from criminals. The problem is that if the law-abiding citizens obey the law and the criminals don't, the rules create sitting ducks who cannot defend themselves. This is especially true for those who are physically weaker, women and the elderly.
September 6, 2004
John Lott [send him mail], a resident scholar at the American Enterprise Institute, is the author of The Bias Against Guns (Regnery 2003).
Copyright © 2004 John Lott
by John R. Lott, Jr.
by John R. Lott, Jr.
Worried that even showing a starting pistol in a car ad might encourage gun crime in Britain, the British communications regulator has banned a Ford Motor Co. television spot because in it a woman is pictured holding such a "weapon." According to a report by Bloomberg News, the ad was said by regulators to "normalize" the use of guns and "must not be shown again."
What's next? Toy guns? Actually, the British government this year has been debating whether to ban toy guns. As a middle course, some unspecified number of imitation guns will be banned, and it will be illegal to take imitation guns into public places.
And in July a new debate erupted over whether those who own shotguns must now justify their continued ownership to the government before they will get a license.
The irony is that after gun laws are passed and crime rises, no one asks whether the original laws actually accomplished their purpose. Instead, it is automatically assumed that the only "problem" with past laws was they didn't go far enough. But now what is there left to do? Perhaps the country can follow Australia's recent lead and ban ceremonial swords.
Despite the attention that imitation weapons are getting, they account for a miniscule fraction of all violent crime (0.02%) and in recent years only about 6% of firearms offenses. But with crime so serious, Labor needs to be seen as doing something. The government recently reported that gun crime in England and Wales nearly doubled in the four years from 1998–99 to 2002–03.
Crime was not supposed to rise after handguns were banned in 1997. Yet, since 1996 the serious violent crime rate has soared by 69%: robbery is up by 45% and murders up by 54%. Before the law, armed robberies had fallen by 50% from 1993 to 1997, but as soon as handguns were banned the robbery rate shot back up, almost back to their 1993 levels.
The 2000 International Crime Victimization Survey, the last survey done, shows the violent-crime rate in England and Wales was twice the rate in the U.S. When the new survey for 2004 comes out, that gap will undoubtedly have widened even further as crimes reported to British police have since soared by 35%, while declining 6% in the U.S.
The high crime rates have so strained resources that 29% of the time in London it takes police longer than 12 minutes to arrive at the scene. No wonder police nearly always arrive on the crime scene after the crime has been committed.
As understandable as the desire to "do something" is, Britain seems to have already banned most weapons that can help commit a crime. Yet, it is hard to see how the latest proposals will accomplish anything.
Banning guns that fire blanks and some imitation guns. Even if guns that fire blanks are converted to fire bullets, they would be lucky to fire one or two bullets and most likely pose more danger to the shooter than the victim. Rather than replace the barrel and the breach, it probably makes more sense to simply build a new gun.
Making it very difficult to get a license for a shotgun and banning those under 18 from using shotguns also adds little. Ignoring the fact that shotguns make excellent self-defense weapons, they are so rarely used in crime, that the Home Office's report doesn't even provide a breakdown of crimes committed with shotguns.
Britain is not alone in its experience with banning guns. Australia has also seen its violent crime rates soar to rates similar to Britain's after its 1996 Port Arthur gun control measures. Violent crime rates averaged 32% higher in the six years after the law was passed (from 1997 to 2002) than they did the year before the law in 1995. The same comparisons for armed robbery rates showed increases of 74%.
During the 1990s, just as Britain and Australia were more severely regulating guns, the U.S. was greatly liberalizing individuals' abilities to carry guns. Thirty-seven of the 50 states now have so-called right-to-carry laws that let law-abiding adults carry concealed handguns once they pass a criminal background check and pay a fee. Only half the states require some training, usually around three to five hours' worth. Yet crime has fallen even faster in these states than the national average. Overall, the states in the U.S. that have experienced the fastest growth rates in gun ownership during the 1990s have experienced the biggest drops in murder rates and other violent crimes.
Many things affect crime; the rise of drug-gang violence in Britain is an important part of the story, just as it has long been important in explaining the U.S.'s rates. Drug gangs also help explain one of the many reasons it is so difficult to stop the flow of guns into a country. Drug gangs can't simply call up the police when another gang encroaches on their turf, so they end up essentially setting up their own armies. And just as they can smuggle drugs into the country, they can smuggle in weapons to defend their turf.
Everyone wants to take guns away from criminals. The problem is that if the law-abiding citizens obey the law and the criminals don't, the rules create sitting ducks who cannot defend themselves. This is especially true for those who are physically weaker, women and the elderly.
September 6, 2004
John Lott [send him mail], a resident scholar at the American Enterprise Institute, is the author of The Bias Against Guns (Regnery 2003).
Copyright © 2004 John Lott
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