Your Gamble with Biden

Alexandria Ocasio Cortez, the "Modern Monetary Theorists," and now Joe Biden and his Democrat Party are gambling that trillions of dollars can be created out of "thin air" to fund their wishlist of programs — without causing hyper-inflation. They are asking every American who has worked a lifetime to save money to hazard their savings.

From very earlier times, governments have found ways to debase their coinage to benefit the government. A base metal, usually copper, was added to the gold melt. This increased the volume of the melt, and allowed the government to mint more "gold" coins. (The alloy also made the coins more durable).

The earliest "paper money" was what we today would call a "promissory note" — a written
unconditional promise to pay the bearer a sum certain. By the 7th century, merchants in China, who engaged in large commercial transactions, would deposit their money with a banker who would give them his note (a banknote), which required the banker to unconditionally repay the sum stated in the note to the person presenting the note for payment. It was a far more convenient to journey carrying a bank note than to lug about a horde of gold coins. 

In time, governments began issuing their own bank notes. These were also known as "bills," "notes," "paper currency," or "paper money." At first, paper money was backed by the government's promise to unconditionally pay the note in gold or silver. To induce acceptance, the paper money was made "legal tender," — it could be legally used to pay taxes and private debts. 

But with the benefits of paper money, came problems. One of the governmental benefits of using paper money was that it expanded the money supply. Before its use, the government's supply of gold and silver strictly limited the governments ability to coin. If it had a ton of gold, it could only issue a ton of coins -- unless it debased its coinage. But if it debased its coins too much, people wouldn't accept them at full value and inflation resulted.

With paper money, there was no such limit. A government ability to print currency was limited only by its supply of paper and ink. As long at the paper money could be unconditionally exchanged for gold coins, the public had confidence in the paper money. But there was only so much gold. When the face value of the paper money issued, exceeded the value of the gold on hand, then what? The promise to repay "in gold" was replaced by the promise that the paper money was "backed by the full faith and credit of the government." But what happens when so much paper money is printed that the public loses faith in the government's ability to make good its promise? Inflation, or worse hyper-inflation.

To finance our Revolutionary War, the Continental Congress printed paper money — "Continentals." The expression says it all: "Not worth a Continental." The Confederate Dollar fared no better. After WWI, hyperinflation destroyed the Weimar Republic; today it ravages Venezuela.

In the last few months, Presidents Trump and Biden have respectively signed into law "Covid Relief Bills" for $900B and $1.9T. Where will that money come from? What backs it?

Today, to put money into circulation, the government could run the presses, but the job is normally done by the Federal Reserve (the "Fed"). To put money into circulation, the Fed purchases "assets." The Fed is the bank for the bankers. The Fed holds deposits for banks rather like your bank holds the deposits you make. When a bank owns a government bond, the FED can purchase that bond ("asset") from the bank. First, with a computer key stroke, the Fed creates money out of thin air for itself. Then it
uses that key-stroke-made money to buy the bond from the bank. In doing so, it increases the amount of money in circulation.


During the Bank Crisis of the Obama/Bush II years, this is how the Fed saved the banks from their own imprudent investments. It was called Quantitative Easing ("QE"). It caused some moderate inflation — as you can see when you buy groceries.

But if key-stroke money can be used by the Fed to save banks by buying up worthless mortgage-backed securities, why can't it used to fund underfunded State and local pension plans, to rebuild decaying roads and bridges, to finance the Green New deal, and to provide every American a guaranteed monthly income?

Alexandria Ocasio-Cortez and the Modern Monetary Theorists believe key-stroke money can finance their schemes. They ask the American people to make a leap of faith. They assure us that creating hitherto unimaginable deficits will not lead America to hyper-inflation.

Those without savings have nothing to lose. If inflation wipes out all the savings of those who do, so what? The Progressives will have obtained their goal of perfect economic equality — everybody will be poor. This is the gamble you chose to take when you voted for Mr. Biden.

First Published in the Moline Dispatch and Rock Island Argus on April 30, 2021

Copyright 2021

John Donald O'Shea 

A Poorly Thought out Bill

Rep. Curtis Tarver, D-Chicago, has introduced House Bill 1727 in Springfield. His bill would abolish qualified immunity for police officers, and immunity for the governmental bodies that employ them, if the officers deprive any person of "rights" guaranteed in the Illinois Constitution, or fail to intervene to prevent the deprivation.

So what exactly is this qualified immunity that presently protects police officers?

The 1982 U.S. Supreme Court decision Harlow v. Fitzgerald created the rule and remains operative today. Prior to Harlow, a public official enjoyed qualified immunity only if the official believed in good faith that his conduct was lawful, and the conduct was objectively reasonable.

But that rule created a serious problem if there was an allegation that the police officer acted in bad faith. What a person's state of mind was as he acted, is almost always a question of fact. Where a question of fact exists, either party is entitled to a jury trial and full pretrial discovery. The Supreme Court found that these jury proceedings distracted officials from performing their duties, inhibited discretionary action, and deterred able people from entering public service.

For those reasons, the court fashioned the current rule for qualified immunity: "We therefore hold that government officials performing discretionary functions, generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.

"Reliance on the objective reasonableness of an official's conduct, as measured by reference to clearly established law, should avoid excessive disruption of government and permit the resolution of many insubstantial claims on summary judgment. On summary judgment, the judge appropriately may determine not only the currently applicable law, but whether that law was clearly established at the time an action occurred.

"If the law at that time was not clearly established, an official could not reasonably be expected to anticipate subsequent legal developments, nor could he fairly be said to 'know' that the law forbade conduct not previously identified as unlawful. Until this threshold immunity question is resolved, discovery should not be allowed.

"If the law was clearly established, the immunity defense ordinarily should fail, since a reasonably competent public official should know the law governing his conduct.

"Nevertheless, if the official pleading the defense claims extraordinary circumstances and can prove that he neither knew nor should have known of the relevant legal standard, the defense should be sustained. But again, the defense would turn primarily on objective factors."

Rep. Tarver's poorly thought-out "bad apple" bill would deprive a police officer who exists to be sent into harm's way of all legal immunities. He could be sued not only for making a mistake, but also for his inaction. And he could be sued, even if he made no mistake, anytime a person he had dealings with believed himself aggrieved.

By the very nature of the job, police officers are the ones who are sent to deal with life-threatening emergencies. The primary purpose of having police officers is to protect the law-abiding citizens from criminals. In almost all cases, that is exactly what they do.

When a woman calls 911 pleading for police assistance because her husband is beating the hell out of her, it is the police officer who is dispatched. When there is a shooting spree in a school, it is the police officer who answers the desperate call. When there is an armed robbery in progress, when an alarm comes in, it is the police officer who responds. Even the speeder is stopped by a cop.

Every one of these situations has the potential for escalation — for the responding officer to be seriously injured or killed. Weekly we hear reports of an officer being shot or killed while responding to a domestic abuse call, an armed robbery, or a school shooting in progress. Even as they issue speeding tickets.

Without qualified immunity, every officer's traffic stop, every arrest, every use of force has the potential of seeing the responding officer facing a jury trial. All that is required is that the aggrieved person makes the allegation that the officer acted with an improper state of mind. A jury trial will probably follow — even if the allegation is entirely baseless.

The chance of the officer being sued is substantially aggravated because he is very often dealing with irrational people, major and minor criminals, and people who hate cops.

Tarver finds the necessity for HB 1727 in the George Floyd case in Minnesota. But Floyd's civil suit was just settled for $27 million, even though the officer enjoyed qualified immunity. So what is the necessity to deprive all good cops of their qualified immunity?

If an officer has to worry about being sued every time he believes he has cause to arrest, or to use force to stop a bar fight, or fire his weapon to stop a school shooting, why would he act? Why would he even take the job?

First Published in the Moline Dispatch and Rock Island Argus on April 9, 2021

Copyright 2021

John Donald O'Shea