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Exciting New Thinking in the Draft GOP Platform

Gerard Magliocca

Gerard N. Magliocca is the Samuel R. Rosen Professor at the Indiana University Robert H. McKinney School of Law. Professor Magliocca is the author of three books and over twenty articles on constitutional law and intellectual property. He received his undergraduate degree from Stanford, his law degree from Yale, and joined the faculty after two years as an attorney at Covington and Burling and one year as a law clerk for Judge Guido Calabresi on the United States Court of Appeals for the Second Circuit. Professor Magliocca has received the Best New Professor Award and the Black Cane (Most Outstanding Professor) from the student body, and in 2008 held the Fulbright-Dow Distinguished Research Chair of the Roosevelt Study Center in Middelburg, The Netherlands. He was elected to the American Law Institute (ALI) in 2013.

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30 Responses

  1. Shag from Brookline says:

    Re UPDATE: Or “Plates of Gold”?

  2. Brett Bellmore says:

    It’s never too late to undo a mistake. Under the gold standard, the value of the dollar, as measured by the price of a loaf of bread, held constant for nearly 200 years. Off the gold standard, it has lost 95 percent of it’s value just since the 1920′s.

    There’s no doubt a fiat currency has it’s usefulness. That usefulness mostly relates to how easy it is to debase…

  3. Shag from Brookline says:

    Brett seems at the Beck and call for the good old days of stocks and bonds. Maybe the GOP knows where the plates of gold can be found; perhaps in Mitt’s IRA?

    Alas, Brett demonstrates that it’s too late to undo at least one mistake, ….

  4. Shag from Brookline says:

    We need background music in the form of Heavy Metal while looking back with Brett through the wrong end of the telescope to originalism. Gerard’s post seems like a stream of consciousness notation, particularly with his cute UPDATE, rather than an effort by him for a serious discussion. Maybe Glenn Beck takes this as seriously as does Brett, but who else does, except those searching for the plates of gold. Maybe fracking in Utah will reveal the trove. Meanwhile, Brett remains lost in the maze (maize?) of Bretton Woods, perhaps looking for the ghost of Tricky Dick to off with his arsenal.

  5. Brett Bellmore says:

    There’s our answer, and quite prompt: “No.”

  6. Brian Sawers says:

    Some inflation is actually quite good for the economy. Nominal prices are sticky. But, markets depend on price signals to allocate resources. A little inflation facilitates price adjustments, since firms can disguise changes in real prices.

  7. Joe says:

    Congress has the power to regulate the value of “coin” which suggests there isn’t some “natural” fixed value regulated by the heavens.

    The Legal Tender Cases eventually determined that this regulation followed to “fiat money,” but determining that our currency should be set to a certain type of rock doesn’t seem THAT less arbitrary in the long run. If desired, you can ‘debase’ the value too. Nations have over the centuries.

    The value of fiat currency appears to me that it is more fluid and useful in the modern world, thus its growing use over the last century and a half. The economy not exactly ideal pre-New Deal, it “fluctuating” continually, if not as much controllable by the government (elected by us) as such, going back in time doesn’t seem ideal to me.

  8. Joe says:

    As to the link, WHY that occurred — especially since the Federal Reserve was created two decades before the end of the gold standard — is surely varied and no one thing will stop it.

  9. Shag from Brookline says:

    Ron Paul is the tail wagging the GOP Platform on this matter. What will the platform committee do for Newt Gingrich, Rick Sanctimonius, Donald Trump, Michelle Bachmann, and the other losers? This is not a serious platform issue, as it calls for a commission to study the matter. What happened with the 1980 study?

    Category: Lost in Brett-on Woods.

  10. Brett Bellmore says:

    “Congress has the power to regulate the value of “coin” which suggests there isn’t some “natural” fixed value regulated by the heavens.”

    “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;”

    Indeed, I’m having a tough time figuring out how these pieces of paper in my wallet were “coined”, or where the power to print money came from. But regulating their value seems simple enough: Half ounce gold coins are half as valuable as ounce gold coins.

    I understand the argument that a little inflation is a good thing. Pity nobody has found a way to have a fiat currency with only a little inflation.

  11. PrometheeFeu says:

    @Brett Bellmore

    And what do we do when demand for currency rises? Just let an unexpected deflation happen and ride sticky prices into recession or depression?

  12. Brett Bellmore says:

    Are you under the impression that we stopped having recessions after the gold standard was abandoned? We’ve actually managed to shed more jobs during the current “recovery” than we did in the “recession” which supposedly just ended.

    Indeed, the worse depression in history involved the gold standard being abandoned shortly after it began. Maybe that’s why it lasted so freakishly long?

    But, hey, compared to Shag, you’re a paragon of reason, I salute you.

    My own opinion is that a fiat currency is theoretically superior to a gold standard, in essentially the same sense dictatorship can be superior to democracy: It can work better if the people in charge are the right people.

    But they won’t be… In either case.

  13. Shag from Brookline says:

    Our own Brett-on Woods will surely challenge Paul Krugman’s NYTimes blog post earlier today on the gold standard. I wonder if Brett minored in economics? Or is Brett-on Woods challenging the concept of paper money on constitutional grounds? Frankly, Brett-on Woods sounds like an alchemist. Of course, he’s in good company with Paul Ryan, Ron Paul and particularly his guru of gelt Mr. Beck. Also, perhaps Brett-on Woods remains under the influence of Ayn Rand’s “Atlas Shrugged” on the role of gold and Galt (pluperfect of gelt?). I’ll check on Brett-on Woods’ critique of Krugman when I check in early tomorrow A.M.

  14. PrometheeFeu says:

    @Brett Bellmore:

    No. You’re lacking in imagination and aren’t very well read in monetary policy. The gold standard is just one of many different rules that a central bank could apply. For instance, a central bank could be mandated to hit a certain exchange rate, or a certain inflation rate (like the ECB) or an NGDP growth path. (my preference if we have a central bank) A central bank could have nominal discretion but be bound by history and tradition to hitting certain targets. Or my preference, we could have competitive currency issue under a free-banking environment.

    The gold standard is a terrible idea. When demand for currency rises, we get deflation and a recession. Yes, rules are better than discretion (that’s the consensus in monetary policy, btw, where gold standard advocates are fringe) but we need good rules, not bad rules. If we’re going to have a central bank (and it looks like we are going to for a while) we need them to adopt rules that will ensure that the money supply responds to changes in demand for money, otherwise, we’re going to have either inflation or recession.

  15. Brett Bellmore says:

    Sounds like you agree with me on what basis fiat currencies are better than a gold standard, and just happen to believe it’s possible to have the right people in charge. (Because the “right” people aren’t the same for the general population, and those running the government.) While I believe that, sooner or later, the wrong people inevitably end up in charge, and you get screwed. Either in slow motion, or when they sense the end game approaching, with a hyperinflation.

  16. Shag from Brookline says:

    Does Brett-on Woods with this:

    “While I believe that, sooner or later, the wrong people inevitably end up in charge, ….”

    remind us of the 8 years of Bush/Cheney that started with a surplus and ended with the 2008 Great Recession? I don’t recall that he reminded us of this during those 8 years.

    I have to disagree with this portion of PrometheeFeu’s response to Brett-on Woods:

    “You’re [Brett-on Woods] lacking in imagination and aren’t very well read in monetary policy.”

    Brett-on Woods has claimed to have read Ayn Rand’s novels “Atlas Shrugged” and “The Fountainhead,” as well as much of Rand’s fictional non-fiction, demonstrating that he has read quite a bit of imaginary stuff on monetary policy. Brett-on Woods claims to be a libertarian, just like Ayn Rand, who, by the way, was also a libertine.

    It should also be noted that Brett-on Woods tosses around inflation and hyperinflation with frequency. Perhaps with his science/engineering skills he can provide us with facts of such during Obama’s Administration.

    I await Brett-on Woods’ critique of Paul Krugman’s blog item of yesterday on the gold standard.

  17. Brett Bellmore says:

    Shag, I’ll probably regret attempting a substantive response to you, but since you did go so far as saying something kind of relevant, instead of your usual inane comments, I’ll throw you a bone.

    Read it. Notice that Krugman’s evidence of the price instability under the gold standard is a graph of the price of gold starting in 1968? Didn’t that strike you as even the tiniest bit odd? I mean, I was under the impression that the gold standard ended in the 1930′s…

    I generally assume that when somebody’s central evidence of a proposition is blatantly irrelevant, that it’s because they haven’t got anything better. A heuristic, I suppose, and tomorrow Krugman could produce the same graph from a time when the gold standard was actually in effect. But there you go, he didn’t, and presumably that wasn’t a random choice. I mean, the guy isn’t stupid, he knows when the gold standard ended.

    Now, the O’Brien essay that Krugman links to is somewhat better in that respect, though he does more than a little cherry picking, comparing outlier periods from before and after the gold standard. Just outliers in opposite directions; The wild swings you get in the context of a major war, (WWI, in this case.) contrasted with an atypical period of low inflation. Dubiously low, as anyone who actually buys groceries can tell you.

    Again I direct your attention to a graph which shows the entire relevant period in context. Not that you get spikes of inflation right around major wars under either system, but that under the gold standard inflation averages out to close to zero. While there’s no averaging out under the fiat currency system, you just get inflation, and usually plenty of it.

    And generally finish up with a hyperinflation. All the interest in a gold standard today is because people notice we’re accumulating the preconditions for a hyperinflation, and that’s one very destructive thing gold is good at preventing.

  18. Shag from Brookline says:

    By providing the link to O’Brien’s piece, Krugman was providing details that he would not have to repeat. Thus, Krugman’s graph beginning in 1968. As to when the gold standard ended, a little history is in order. While it may have begun in the 1930s, with FDR’s action limiting the private ownership of gold, it was not until 1971 with Nixon, long after Bretton Woods (1944?) that the gold standard ended.

    With respect to the link Brett-on Woods provides, it seems to resemble graphs on the real estate market, perhaps replacing the gold standard.

    Yes, Brett-on Woods is cavorting with the gold nuts. O’Brien piece is most effective in putting the lie to claims of gold standard magnificence. Where is the hyperinflation? Brett-on Woods weasels with ” … because people notice we’re accumulating the preconditions for a hyperinflation, … ” So when will this hyperinflation actually come about? What are these preconditions? Who are these people so noticing? Brett-on Woods continues with his usual in-Ayn-al theories, based upon the fiction of her Rand-iness, rather than facts, evidence.

  19. Brett Bellmore says:

    Shag, if anybody could predict exactly when a hyperinflation was going to kick in, in advance, they wouldn’t be so scary. Instead they’re rather like landslides. You can notice that the slope is steep, that it’s been raining heavily for days, even that there’s water oozing out of the hillside. But you can’t pinpoint when the hillside is going to come sliding down to bury you.

    Hyperinflation is much the same. You can notice that debt service is consuming an ever larger portion of the budget even in times of remarkably low interest rates, that deficits scarcely slowed after the recession that excused them ‘ended’, and so forth. But you can’t say in advance when your nation’s money is going to become worthless.

    You can only see that it’s going to happen sooner or later, and see reason to expect the sooner.

  20. Shag from Brookline says:

    Can we expect Brett-on Woods with his science/engineering background to warn us of global warming? Or income/asset inequality?

    I don’t think so, as his hyperinflation fears seem to match his fears of demographic changes, aynalized with a wet finger in the air:

    “You can only see that it’s going to happen sooner or later, and see reason to expect the sooner.”

    Sort of like Chicken Little (aka Ron Paul).

  21. Brett Bellmore says:

    Right, it’s like Chicken Little. Because, you know, the sky has literally fallen in dozens of countries, sometimes more than once. Just like hyperinflation has happened in so many countries. Perfectly comparable, really, only a madman would expect the past to repeat itself yet again.

  22. Shag from Brookline says:

    ” … literally fallen … “?

    ” … only a madman …”?

    Is this a Mayan or an Aynan prophecy?

  23. Brett Bellmore says:

    No, this is me being properly sarcastic in response to your “Chicken Little” remark. Yelling “Chicken Little” concerning something that actually happens, sometimes repeatedly in the same place, is deserving of nothing more than sarcasm.

    Go stand on a hill in a lightning storm. If anyone warns you of lightning, call them Chicken Little… You’ll either be vindicated, or not care.

  24. Shag from Brookline says:

    And just what has actually happened, repeatedly, in the United States, regarding hyperinflation, that would justify Brett-on Woods to Chicken Little warn us? Or is America to be governed by what literally – or figuratively – might have happened, over and over again, in some unidentified nation? What is this symbolic lightning storm? Of course, gold is a good conductor of electricity, so it would be wise not to bring your gold stash with you on that hill during a lightning storm.

  25. Brett Bellmore says:

    What makes you think the lightning storm was intended to be symbolic?

    Here, look at a list of the nations where your sky has fallen, sometimes more than once.

    “Chicken Little” is a reference to somebody hysterically warning of a nonexistent threat. It is entirely inappropriate to invoke Chicken Little in regards to things which actually do happen in the real world. The sky may not fall, but hyperinflation happens.

    I knew I’d regret attempting to have a serious discussion with you. You don’t do serious.

  26. PrometheeFeu says:

    “Sounds like you agree with me on what basis fiat currencies are better than a gold standard, and just happen to believe it’s possible to have the right people in charge.”

    No Brett, that is not what I said at all. What I said was that we can have a rules-based approach to monetary policy which is not the gold-standard. You seem to labor under the illusion that the gold standard is some sort of platonic ideal of monetary policy divorced from any central banker. You are wrong. The gold standard is merely a rule that central bankers must implement. If you believe that central bankers can be trusted to implement the rules of the gold standard, why would you not believe them capable of implementing a different rule set? It’s not like the gold standard rules are special.

  27. Brett Bellmore says:

    I agree that the gold standard is just another rules based system for central bankers to implement, and it is not necessarilly the best system, if you assume all of the systems being compared are going to be honestly implemented.

    But I think history shows that it’s foolish to expect any of the other rules to be honestly implemented over a long period of time. Look at that list I linked to; It’s a tribute to how reliably untrustworthy central banks really are, in the long run.

    Or perhaps untrustworthy is the wrong word; Central bankers aren’t working for us, they may be fairly trustworthy from the viewpoint of the people they do work for. Who, as I’ve remarked, find advantages in debasing the currency, as it’s a really handy way to implement a covert tax.

    If the owner of a bus company tells the driver of the bus to drive it over a cliff, I suppose going over a cliff is not evidence the bus driver wasn’t reliable. It’s just evidence he wasn’t working for the passengers.

    And the gold standard is different from them in one respect: It’s rather more difficult to fudge how much gold you’ve got sitting in a vault, than whether you’re meeting some computed target. Really, that’s it’s only advantage.

    But history proves it’s a big one.

  28. Shag from Brookline says:

    Here’s my variation on Brett-on Woods’ advantage of the gold standard “But history proves it’s a big one.”:

    “No, it bites the big one.”

    I’ll put Brett-on Woods on on my serious list with Ron Paul.

    Lightning storms, bus drivers going over cliffs, sarcasm, that’s it for the gold standard?

    Brett-on Woods says ” … history shows ….” But history of discrimination against African-Americans is in the past, it’s history, and with constitutional equality that history is no longer relevant even though it continued after the Civil War Amendments. The gold standard is history.

  29. PrometheeFeu says:

    Brett,

    History is also repleat with central bankers monkeying around with the gold standard. For instance, look at the way monetary policy was carried out in France under the gold standard around the start of the Great Depression.

    I actually find that some targets would be much harder to fudge. For instance, fudging the TIPS spread would require widespread market manipulation and would most likely fail anyways. Market-based targets in general would be very hard to cheat.