Monday, December 19, 2011

Denninger Attacks Wenzel

My comment about Bill Still monetary policy has resulted in his economic adviser Karl Denninger heading into battle station position to defend Still, who is seeking to be the presidential nominee of the Libertarian Party. Denninger sent me an email last night that said in part:
I'd be happy to engage you on this, if you'd care to before I rip you to shreds over at The Market Ticker for your commentary which you posted without (1) facts, and (2) understanding what Bill's actual position IS.

Happy to engage, if you do it before I decide to publicly excoriate you.
My response to Denninger was along the lines of I am really busy right now and headed out, maybe tomorrow.

Denninger couldn't wait and attacked me in a column late last night.

But before I get to the column, I want to make a point about what Denninger said in his email, when he wrote that I didn't have the facts and didn't understand Still's position.

My comments were based on Bill Still's press release announcing his bid for the Libertarian nomination! Indeed, I quote from the press release!!

Here's what was written in the release and the referenced video:
Pillar #1: End government borrowing. A sovereign nation does not have to borrow, in fact, being debt-free is the very definition of sovereignty. Pay off the existing bonds -- which is our National Debt -- as they come due, but pay them off with debt free U.S. Notes (or their electronic equivalents) instead of Federal Reserve Notes, which are all borrowed into existence. 
Please see my short (3 min 54 sec) YouTube on this topic:

Sure looks and sounds like Still wants to print up money (or coins) to pay off the debt, and that is very inflationary, as I stated in my original post. As for coins versus paper currency (or paper money with red insignias) that is created by the government, it doesn't really matter. If there is more money out there (that is accepted by the public) it will be more money out there bidding up prices.

Bizarrely Still's economic adviser Denninger seems to understand the inflationary consequences and says so in his attack on me!! He writes:
So what if Congress just emitted raw currency, as it is entitled to do under The Constitution? Why then there would be immediate inflation, and the people would see the damage right up front. There would be no Ponzi to be blown, as the people would have the harm "in their face" and shortly would, I'd expect, vote those critters out of office. Heh, there goes the overspending!...

Denninger's plan seems different than Still's. Here's more from Denninger:
This, however, is a vision for the future -- in other words, it's an endpoint. For obvious reasons were we to simply pay off all the debt with issued money in one fell swoop the impact would be insanely disruptive. But we don't have to do that -- there's a better way.

Instead, the intent is to run a budgetary surplus, ending new borrowing immediately. This will mean taking the hard decisions now while we still can instead of pretending we will never have to and that they won't be imposed on us if we refuse to act on our own. It is without question that doing so will lead to a short-term economic contraction, and as such repairing our trade, tax, immigration and energy policies along with fixing our medical system must occur at the same time to both blunt the blow where we can and position our nation for the future.

The debt will, in short, be paid down over time from tax receipts. Until it is, Treasury will have the authority to roll over existing debt, but not issue new debt. In other words, the budget will run an actual surplus. To the extent the economy begins to grow once the base adjustment has been taken Treasury can (and will, under Congressional direction) use the privilege of seigniorage to issue currency (as US Notes) in the amount of the economic expansion less the productivity increase, if any. Some of this will be used to retire more debt while the rest will be used for general spending (above tax revenues), as directed by Congress exactly as the founders intended and authorized in The Constitution. Over time US Notes will replace Federal Reserve Notes in circulation and they will remain fungible through the transition.
In other words, Denninger is calling for some shrinkage of government debt (which in part will occur via tax receipts) but he calls for the simultaneous printing of "US notes" based on an equation (economic expansion less productivity increase). Some of this newly printed money will be used to pay down debt and some for "general spending" by the government.

Bottom line: There is nothing libertarian about the proposals of Still or Denninger. The government should be out of the money printing business, number one. Number two, what exactly is this expansion of "government spending" above tax receipts all about. Libertarianism is about cutting taxes to the bone. Further, what is this obsession with paying off the debt?

The debt was money borrowed by the government to fund banksters, the military-industrial complex and to buy the votes of the welfare block. This has nothing to do with the rest of us. The government should simply file bankruptcy and stiff those who funded the government extravaganza, if the assets held by the government after liquidation aren't enough to pay off the debt .

I don't follow the LP very closely, so I have no idea how much of a following Denninger and Still have in the Party, one would think not much, so I am not going to do much more commenting on their proposals. It is generally a waste of time. They speak in generalities, like "taxes" and don't mention whether they are discussing increases or decreases in taxes. It's sufficient to say that their programs are very unclear and where some detail is clear, such as on money printing, it is scary as hell.

If the LP embraces these two characters to any degree, it would be a deterioration of the LP beyond recognition.


  1. Denninger has virulent hatred for Ron Paul for some reason. Hatred for gold as well. I used to read his blog daily, until it just became too nauseating. He's what you would call -- nuts. In addition, he's not libertarian in any sense of the word. At best he's a "Constitutionalist" (except when it comes to gold and silver being money); which isn't libertarian. It's just his own preferred from of authoritarianism. In no way does he favor a voluntary society, or market determination of what is or isn't money.

  2. And he also likes the smell of his how farts...can you tell?

    "...before I decide to publicly excoriate you."


  3. 1. Sounds like the LP has become just as diluted and powerless as the Kochtopus wanted it to be.

    2. "So what if Congress just emitted raw currency, as it is entitled to do under The Constitution?"

    One. More. Time. Article 8, Section 1, Clause 5 states that the Congress shall have the power "[t]o coin money, regulate the value therof, and of foreign coin, and fix the standard of weights and measures." Edwin Viera has made distinctly clear that this does not in any way mean that the Congress is permitted to issue its own (paper) money. "Coinage" is the physical act of minting coins based on ready reserves of specie. Further, Article 1, Section 10, Clause 1 prohibits the States from emitting bills of Credit, i.e., fiat, paper currency, or from making anything but gold or silver as tender in payments of debt. Finally, the Coinage Act of 1792 set the silver dollar as the currency of the United States defining it as 371.25 grains/24.1 g of silver with the ratio of gold to silver at 15:1. This was overturned by the Coinage Act of 1873 which supplanted silver in favor of gold.

    Now, Article 1, Section 8, Clause 2 does give Congres the power "[t]o borrow money on the credit of the United States;" however, the issuance of bills of credit, i.e., fiat currency, is not an expressly enumerated power. This is essentially how the fiat system works, Constitutionally if you want to call it that, as Congress borrows money from the Federal Reserve Bank or sells bonds to it and uses its currency as legal tender.

    Bob, looks like you're going to have to do both a history, law, AND economics lesson for this one.

  4. How is allowing the government to print notes making a hard decision now? It seems like it is the government's ticket to a free pass to start all over again.

    I think the government should be allowed to print their notes and try to pass them off, The Federal Reserve should be able to print notes and try to pass them off, I should be allowed to print Rothbards(if someone didn't get there first) and try to pass them off, Wenzel should be allowed to print Wenzels and try pass them off(if he even wanted to), and gold and silver should continue to be minted into coins and be circulated as well. We could have an oil-backed currency or a redeemable gasoline based currency. Everyone who wants to get in the medium of exchange game should be allowed and we will see which one(s) maintains its value and which one(s) inflates to oblivion.

  5. Happy to engage, if you do it before I decide to publicly excoriate you.

    Internet tough guy schtick is for losers. You have evidence and you have argument. That is all. Ego means squat.

  6. Denninger is still complaining about Obama's birth certificate.

  7. Denninger says the Constitution permits Congress to just print up raw money. I'd like to see which part of it he's referring to. Probably not the part which states that "only gold and silver shall be legal tender".

  8. Denninger has some good insights, but overall he is an egomaniacal douchebag.

    He will threaten to "ban" anyone from his forum that disagrees with him, which basically leads to his forum being filled with loyal cult followers.

    Good luck ever getting that egomaniac to admit he was wrong about anything - not worth the time or effort.

  9. The LP did nominate that idiot Bob Barr who has now endorsed Newt, so I don't think the party is relevant at all anymore. About the only way they could be is if they convinced RP to run third party if he is screwed over by the GOP in the primaries.

  10. Oh lord, I seem to have started another blog war. Obviously, there was no possible reason I could see this happening, and I most definitely did not send RW the link with hopes that he would pick up the thread and we would get to see a nice blog-rumble.

    There are no popcorn stains on my shirt!

  11. Karl is a hypocrite moron, who demands that you boycott any product made in China, and then boasts of his new laptop bought direct from China.

    The hypocrite advocates that public schools be dismantled, yet sends his own daughter to one.

    For some reason he is a member of the Libertarian party, yet wishes to occupy other countries for oil, close all the borders, and dictate who you may or may not employ.

    This fraudster only appeals to the mentally deficient, such as the hard-core of his readership, who upon reading this comment will not bother to google any of the facts stated here.

    Did I mention he was a high-ranking member of a Chicago Santeria cult, and is twice divorced from fellow cultists, both of which became lesbians after marriage to him?

    In short, his sole purpose on this earth is to be laughed at.

  12. This is nothing more then a hidden tax scheme where deficits would be paid for with deprecating currency values. The compounding effect by year 5 or 6 of such a system would make for Zimbabwe style inflation. Forgetting the idea of paying off the debt at all and assuming that deficit spending remained constant in real terms, his system would grow the base money supply to $13T in year 5 and 18T in year 6 and a whopping 77T in year 10!

  13. Bill Still for president?! Bwaaaahahahahaha!!!!

    That being said, there isn't anything the LP could at this point that would surprise me.

  14. Denninger is incapable of manners or courtesy.

    And he's dead wrong about the Constitution and money, as is Still, who thinks the power to "regulate" money means the power to increase its quantity. No, the power to regulate money was placed in the "weights and measures" clause because that's what "regulating" money meant. Silver dollar coins were the U.S. standard from the very beginning, and "regulating" the currency meant establishing a radio between the silver dollar and other precious-metal coins that may circulate alongside it.

  15. Denninger isn't to be messed with unless your completely on top of your brief. Krugman's like a small child compared to him..

  16. Karl made a clownsuit bet with Krugman about when the last recession ended. Krugman won the bet, yet Karl is so untrustworthy, he refuses to wear his clownsuit on Youtube, and bans any mention of this on his forum.

    But, keep on defending Karl. I will be delighted to destroy him on yet another part of the internet, using the contradictory, hypocritical and nonsensical rubbish he so foolishly spouts.

    The silly old fool didn't even remember to buy his own domain name:

    Interwebs expert indeed!!!

  17. Hey Karl, Loved all of your calls on Gold. Also, why do you so enjoy the mindless shills holding your nuts so lovingly at your blog? It's a bit creepy.

    You have severe control issues, hence all of your references to the anus. I bet you had a very controlling mother.

  18. As Tom Woods has said, "incapable of manners or courtesy," and that's putting it very nicely. The guy is an a**hole, period. He's got an unnatural urge to lock up everyone who doesn't conform to his worldview. Yeah, Karl, let's strengthen the SEC and increase financial regulations, that'll fix our problems. That, and he says the same stuff over and over again in 90% of his posts. I follow him for the other 10%. To his credit, he's not wrong about everything.

  19. Karl Denninger Angered, Bans Everyone

  20. Inter-webs battle 100000.21
    Reading Denniger is like hanging at the monkey cages watching them slinging poo.

  21. At least with the federal reserve system the money theoretically has to be paid back, and that can keep some of the inflation in check. This plan by Still and Denninger doesn't even have that mitigating factor.

  22. The criticism of Denninger's ego and behavior is justified, but I'd like to give him credit for "doing the math" and showing people the magnitude of the debt crisis with clear charts, clear arguments, and posts that laymen can understand.

    Denninger is a kind of mad genius when it comes to analyzing numbers and explaining trends, but this stuff about printing money is baffling to me.

    I think we're missing a big part of his position, like the printing is a necessary evil to show the American people the error of their ways.

    Denninger thinks a gold standard is irrelevant unless you have the rule of law and the will of the people behind it. I think that's a valid point, since the entire history of the gold standard is marred with compromises, workarounds, devaluations and outright theft.

    Denninger's big thing is leverage, and hard money won't solve that problem unless you fix the laws at the same time.

    I think the money printing is part of a larger master plan to destroy the banksters and teach the American people a lesson, but I'm not clear about what the plan is.

  23. Karl used to be insightful, especially over '07-'08, but he is too painful -- unhinged, almost, and wrong on trade, gold, 9/11, Muslims, etc. -- to read now.

    But, he is right on -- and did a fine technical analysis of -- Obama's birth certificate.

    Karl, take a nice, long break over Christmas, and regain your bearings, man.

  24. I generally support Wenzel over Denninger. However, a historical error seems to have crept into this discussion. Some contend that issuing bills of credit by the federal government is unconstitutional. In the timeframe of the constitution, the power to borrow money on the credit of the United States would seem to require issuing a promissory note (bill of credit). During that time, the promissory notes of debtors with a reputation of solvency were routinely used as a medium of exchange. ("I don't any silver right now. Will you take the note of the Bank of Philadelphia instead?" and the seller usually would). The government created the (unconstitutional- sorry Hamilton) Bank of the US in part to facilitate issuance of notes. Most of the "cash" in late-18th and early-19th century was bank notes. This may actually be a legitimate application of the necessary and proper clause(the notes, not the Bank-:)). However, those notes were backed by the issuer's promise to honor them in gold or silver. The legality of fractional reserve banking together with the ease with which state governments passed laws "suspending" this promise was the proximate cause of a series of panics.

    I believe that a bill of credit would normally have been a bearer note that can circulate easily. I suppose the US could have borrowed money by issuing some sort of non-negotiable notes (or even a bookkeeping entry, if the lender really trusted the fledgling USA), but I can't think of any reason why this is more "necessary and proper" than a bill of credit and would, surely, have required a much higher interest rate.

  25. Greenbackers love big government. They don't see anything morally wrong with the government confiscating wealth through inflation. They also don't realize they live in a Fascist country and the bankers buy the politicians anyway. I got some good information from Bill Still and Ellen Brown early on, but later I realized they're Socialists.

  26. You should try checking out his yearly predictions. For 2010 he made 17 predictions on subjects he himself chose and at the end of the year his score, which he tabulated himself, was 8.5 out of 17. Had he not been ridiculously generous with himself, it would have been 7 out of 17.

    Plus, he's a jackass.

  27. It's interesting that you can spend so much time writing about this without bothering to spend half as much time to understand what you are writing about, Wenzel.

  28. While I’m sure I agree more with the “gold bugs” than the Greenbackers, it seems to me that the Greenbacker distinction between fiat Treasury notes and Federal Reserve debt instrument banknotes is a real one. While both are inflationary, at least every fiat Treasury note wouldn’t grease the palms of the banksters who launder them into the system. This is an important rhetorical/conceptual point IMO even if it isn’t much of a practical one. Am I missing something here? Is the fiat Treasury note/Federal Reserve debt instrument banknote distinction not a real one. If not why not?

  29. Mr.Denninger seems to lack a basic grasp of the vocabulary of money. He wants the government to stop going into "debt", but he wants it to issue "U.S. Notes" to retire the current Federal Reserve Notes. When I was in law school they taught us that a "note" is simply a written instrument evidencing a promise to pay a "debt". No debts, no notes. The original concept of currency, or bank notes, was that people deposited their gold and silver coins, whose value was determined by the quantity of precious metals they contained in banks they trusted to keep them safely, and the banks would issue notes to those depositors promising to pay them, or whoever presented that note, the equivalent amount of coin "money". When the government started issuing its own bank notes, it made this same promise. Later the Federal Reserve Banks did the same. But those promises were repudiated under FDR, and the Federal Reserve notes - currency - issued today have no more value than what the public is willing to accord them. Declaring "bankruptcy", as you recommend, or, in fact, repudiating the debt owed on Treasury Notes, would render Federal Reserve Notes as valueless as Confederate money. Following this course, I suspect, would prostrate our nation, not just our "banksters", about as abjectly as were the Confederate States during Reconstruction. I wouldn't recommend it.

  30. Unfortunately after record high numbers of people in public office in 2006 the LP got taken over by right-wing fruitcakes who struck back. The last Libertarians are barely hanging on and trying to re-group. This guy is Aristotle compared to most of their candidates now. 80% of the members and people in public office have left or been purged. All but one of the presidential candidates want to change the tattered platform for the worse--and the national committeee tried to kick him out.

    In some cases GOP "members for a day" simply walked into State Conventions and took control, destroying websites, money, records, affiliates, platforms, ballot access. Sadly a few were masquerading as Ron Pual supporters.

    In the once voluntarist LP Florida they purged the Libertarians using a state law and now denounce anarchists and run candidates who spend their time saying the LP Founders weren't "real" Libertarians. Other once large parties like Orgegon are a by-laws mess thanks to the takeovers. 2/3rds of the state parties are non-functional, though national staff denies this, claiming it's only half. Many are lawsuits waiting to happen. Wes Benedict, the director, is leaving to plaudits for doing a good job.

    Nolan had denounced the current platfor as 1/3rd anti-Libertarian and was about to resign and call for an outside audit when he suddenly died. I could go on but just check around the e-forums for denunciation after denunciation. I'm signing anonymous because I've had it with late-night phone calls and threats by the takeover artists. That;s how they work, and it's a shame.

  31. I had a run in with KD myself after making the mistake of posting on his forum. He's a smart, funny writer, but he has blind spots you could drive a truck through. For instance, he flatly denied that fractional reserve lending by banks created credit out of thin air for YEARS despite the evidence being right in front of him. No surprise to me he's on the wrong side of the monetary reform issue. My advice is to ignore him, as he is a bully and lacks class.

    Mr. Still is attempting to make a comeback now that "The Money Masters" has reached a wider audience thanks to the internet. Good video, but terrible solutions to the problem. He can only appeal to those who are ignorant of economics and rest of monetary history he excluded from his video. He has found an ally in Mrs. Brown who is just as flawed a thinker as himself. The only people advocating the Bank of North Dakota as a solution have no idea of its history or how it actually works.

    I once thought that all the monetary reformers should team up to change our system before it crashed. A temporary alliance to avoid catastrophe, but I can see now that it was horribly naive of me. Protect yourself, enlighten your neighbors, and prepare to ride out the storm.

  32. "He wants the government to stop going into "debt", but he wants it to issue "U.S. Notes" to retire the current Federal Reserve Notes. When I was in law school they taught us that a "note" is simply a written instrument evidencing a promise to pay a "debt"."

    Anon@1:37, that is the point I was trying to make. My understanding is that Still wants fiat Treasury notes as legal tender which aren't a promise to pay anything or based on debt at all. While this is still inflationary, I think the distinction between fiat Treasury note and Federal Reserve bank note is important conceptually. Am I missing something?

  33. Quote: "When I was in law school they taught us that a "note" is simply a written instrument evidencing a promise to pay a "debt". No debts, no notes."

    Did your kind old law professor bother to tell you that there 23 other definitions of the word "note", when used as a noun? Here's one directly from the dictionary, obviously the one to which Denninger referred:

    9. a certificate, as of a government or a bank, accepted as money.

  34. "a note is simply a written instrument evidencing a promise to pay a "debt."

    This is not true in the case of a fiat currency as there is no underlying other than common acceptance and faith that the issuer will regulate quantity as an assured medium of exchange.

  35. Those who are making the personal attacks against Denninger are the usual cast of characters from the suckerforum site. Everyone else seems capable of a rational discussion.