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Notes -
Texas primary ballot propositions for 2024 released
https://texasgop.org/wp-content/uploads/2023/12/2024-Primary-Ballot-Propositions.pdf
You can read all thirteen of them above. They're not binding on the legislature, but in a dominant party system the results of referenda on the primary ballot have a strong say. You can read past year's propositions, and the results, here: https://texasgop.org/republican-primary-ballot-propositions/. All of the ones which aren't just fluffy signaling had at least a serious attempt to enact them by the government, except for the life amendment(this is probably because the Texas GOP isn't flat out delusional and realizes such an amendment would fail). Greg Abbott called two special sessions to address 2022's #9(school choice) and put 10,000 troops on the border to address #1(they're still there). The results of these referenda are a very strong guide to what Greg Abbott's priorities for the following legislative session are and have a lot of influence over other state officials as well- although not everything happens. And given that Texas has an economy the size of the Netherlands and the second largest population in the USA, it seems like Texas legislative priorities for the next session(Texas's legislature meets once every other year, so this is the 2025 session, not a 2024 session) are relevant culture war fodder.
To start with, a note on the secession proposal- the threshold for putting a proposition on the primary ballot is, under state law, signatures equivalent to 5% of the votes for the party's gubernatorial candidate in the last election, which for republicans turned out to be about 100k. The secessionists got 140k, then, well, read the rejection letter(https://texasgop.org/texit-prop/). To note Matt Rinaldi is not a rino; he's not using loopholes to reject this proposition because he loves Joe Biden or would be uncomfortable with the policy direction of a Texas that doesn't have to answer to DC. The Texas GOP seriously appears to want to not have to deal with the secession question right now, although a case can be made that most of the state party leadership wants to keep it in their back pocket for if a socialist gets elected or a Lebanon-style civil war breaks out or something. The Texas Nationalist Movement, which occasionally has success on less core issues, is posturing on twitter about wanting to sue the GOP to get a ballot referendum, but it'll probably just get dismissed if they do file it.
Onto the actual proposals-
1- Eliminating property taxes. Texas property taxes are legitimately too high and have to be brought under some sort of control(and the GOP primary electorate are very heavily homeowners); this proposition is probably going to pass at like 99/1. What the legislature actually does with it is unclear, but I'd expect a stricter regulation on raising property appraisals(although nothing like california's prop 13; there are enough technocrats in the legislature to avoid something so stupid) coupled with a buydown of rates.
2- Is about the border. So are 3, 4, and 5. I expect e-verify(system for checking workers to be US citizens) to be enacted, then evaded with temp agencies that never get prosecuted, the border to get tightened up, and in state tuition at state universities to require proof of citizenship. Public schools probably won't kick the illegal immigrants out.
6- Prohibiting overseas national guard deployment without a declaration of war. The national guard is technically federal troops, so there will be a very carefully worded bill about this one that winds up in court.
7- This is an interesting one. It's calling on the state government to create a metallic-standard currency through the Texas bullion depository(a real thing which already exists- https://www.texasbulliondepository.gov/). I think it's technically legal? Definitely an interesting one to watch- both the bill that gets drafted and what comptroller Glenn Hegar(who's perhaps best known for trying to shut down drag shows by sending them a bill for unpaid strip club taxes, and running an anti-ESG crusade) actually does with it if it passes.
8- Banning vaccine mandates. Boring, will pass, probably going to have a bunch of exceptions in it.
9- Closing the primary. I don't have a particularly strong opinion on this and I think it's to very mildly push the republican primary electorate towards nominating hardliners over moderates.
10- Giving the attorney general authority to prosecute election crimes. It seems like three things are notable about this- Harris county(the state's largest, it has Houston in it) is widely believed by republican primary voters to have rigged their 2022 election in favor of democrats, this is pushing a constitutional amendment so it needs to go to a public referendum after the legislature approves it, and the current attorney general is Ken Paxton.
11- School choice again. Greg Abbott is currently campaigning against republicans he blames for killing the schoolchoice bill last session; we'll see if it works this time.
12- Requiring proof of citizenship to register to vote. Tinkering with election rules is predictable drama and I expect whatever the legislature comes up with to result in a quorum bust again.
13- Ban citizens of x countries from owning land in Texas. This failed on a technicality in the last session.
Maybe I'm crazy but isn't this obviously unconstitutional? Arizona v. United States was still binding precedent last I checked. States can't just seize the authority to do federal immigration policy for themselves. I think Proposition 3 is probably fine. Proposition 4 is probably fine as applied to colleges but I think is just a repeat of Plyler v. Doe (which was also Texas) as applied to K-12 schools. Proposition 5 also seems fine.
I do not understand the obsession with using precious metals as currency. Why is it better for the value of your currency to be at the whims of a commodity market as compared to managed by a central bank? Are the value of these coins (presumably) going to be pegged to some USD price? Free floating exchange rate? Why would anyone use these as opposed to USD?
Seems like this has obvious equal protection problems? My understanding is the 14th Amendment's guarantee of equal protection applies to citizens and non-citizens alike, as long as they're in the United States and subject to its jurisdiction. Seems like classic national origin discrimination that would be an equal protection violation.
Options are always nice. Central banks don't always do a great job managing their currencies and, while metallic standards aren't perfect, they're a workable alternative when your central bankers are having a live one.
Are you talking about state voluntary currencies specifically or about the gold standard in general?
I'll try to steelman a gold standard.
Most currencies collapse. Governments (either elected or autocratic) tend to spend too much money which requires money printing. The dollar has declined by 98% vs gold since the U.S. went off the gold standard in 1971. This is a success story. Within the last 100 years, most other currencies have succumbed to hyperinflation and collapse.
The widely touted boom and bust cycles of the 19th century led to higher growth. Keynesian economics has mostly solved the business cycle post WWII. Recessions have been few, far between, and extremely mild. But the elimination of the business cycle has stalled capitalism's engine of creative destruction. Governments and unprofitable companies lock up a greater share of capital. They need to be rooted out by bankruptcy and replaced. Low interest rates and money printing allow the can to be kicked down the road forever, allowing inefficient uses of capital to persist. The bust cycles caused by hard money limits are a good thing. Growth was much higher before 1971.
For hundreds of years in the Common Law system, the elected representatives of the people have controlled the purse strings. Unelected bureaucrats in the Federal Reserve printing money to buy trillions in mortgages or government debt is tyranny.
A gold standard makes it difficult for the government to spend more money that it can collect. It also allows the government to go bankrupt which can prevent the cancerous growth of bureaucracy.
Let me know if you'd like my case AGAINST precious metals as currency!
Inflation helps debtors and hurts savers and therefore you’d kind of suspect a country that money isn’t sound to become less interested in investing long term or perhaps more likely to invest in more volatile assets.
Also, you’d suspect bankers to become worth more as the Cantillion effects run rampant encouraging the financialization of the economy.
Maybe these things are good but seems like those could be side effects of depreciation
Yes. If your savings are literally a pile of bills under your mattress. But if your savings are invested in some non-cash manner, let's say an index fund for example, then you aren't hurt as a saver.
If invested in equities, then yes the nominal price will adjust for inflation. However, that means you will have taxable income on nominal but not real gain leaving you worse off.
If you invested in a fixed return (eg bonds) you are screwed.
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Unexpected inflation helps debtors and hurts savers. That's a pretty big difference, and I see no reason to expect the market to be biased in its inflation forecasting with either a gold standard or fiat currency.
Sure, price/inflation volatility is bad. The obvious next question is whether a gold standard makes inflation volatility smaller or larger. My money is on "larger" for the US, but I admit it's a hard question to answer.
I don't think so?
Per the Markowitz Model, if you are allocating your money between a risk free asset that returns R and a risky asset that returns Norm(µ, V), you should put this proportion in the risky asset to maximize expected utility:
where
eis a risk aversion parameter andtis the capital gains tax rate. Inflation should push bothµandrup the same, so it shouldn't affect how much is invested in risky assets. If you add extra variance,U, to both the risky and riskless investments, the formula doesn't change, either, so I'm skeptical price volatility changes asset allocation either.Again, I'm pretty sure the Cantillion effects are only worse if you believe the gold standard reduces CPI volatility. That has yet to be argued here, let alone proven.
Agreed with the broader point re gold standard. I’m making the more narrow point about whether depreciating dollar is good or bad.
As for volatility and pricing, sure academically. But I’m not sure people actual use models like that to invest — especially when it comes to highly uncertain returns. That is, venture capital is so uncertain trying to figure out expected return is a bit of a fools errand.
In that case, I think my points re savers-v-debtors and Cantillion effects still stand. More broadly, the main benefit of inflation imo is that it reduces the distortions created by sticky wages.
Re volatility, yeah - I agree it's only a model, but I'm going to consider it the best guess until someone gives me either (a) a more plausible model or (b) empirical evidence to the contrary.
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That would be the same mistake but in the opposite direction. The argument isn't in favor of economic volatility for volatility's sake, it's in favor of natural volatility. Creating volatility artificially would be as foolish as breaking windows for the purpose of generating demand for glass.
Why do you believe natural volatility equals optimal volatility?
ETA: Though, tbh, I'm not sure "natural" is even remotely well-enough defined to be useful to talk about.
Markets have proven to be very robust decentralized systems for allocating resources: if it is true that growth was higher before central banks started recession proofing, then there's an argument to be made that natural volatility is more optimal then our current level of volatility.
I want to ask "In what sense is a gold standard more 'natural' than fiat currency?".
I feel like the actual intuition is that the gold standard leads to an economy that is closer to the Econ 101 Textbook Competitive Economy (E1TCE). I think this intuition lacks sufficient evidence to be believed. As a counter-argument, one of the most important differences between the actual economy and the E1TCE is that wages are sticky downwards. This stickiness is necessary for cyclical unemployment and, therefore, is largely the cause of recessions as we know them. A fiat currency with low and consistent inflation significantly reduces this problem and therefore makes the economy more like the E1TCE. A gold-standard-currency is typically deflationary and therefore makes the problem even worse. Is there a similarly important reality-E1TCE discrepancy the gold standard improves on?
Alternatively, imagine a parallel universe in which gold deposits were more randomly distributed, resulting in more volatility in the supply of gold. Is the optimal economic volatility for growth higher in that universe merely because of the distribution of gold deposits? Obviously not. So, we have no reason to think the distribution of gold deposits should predict optimal monetary policy in this universe either.
Fine, you might say - the point isn't "gold" per-se, the point is a fixed money supply, which we use gold to imperfectly enforce. But, we're still privileging the hypothesis that the volatility created fixed money supply is somehow optimal for economic growth without any justification. [Edit: also why a gold standard then? Just have the constitution forbid making more dollars instead]
That argument is literally correlation-implies-causation, and, given the enormous number of other differences between the 19th and 21st centuries, extremely unpersuasive.
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I think there are great arguments against the gold standard, but I disagree with these.
Perhaps. But that's not what tends to happen to fiat currencies. Most decline precipitously or fail entirely. The USD is the exception not the rule.
The government shouldn't artificially create recessions but they should allow them to happen. I think the same thing about forest fires, BTW.
I will admit that the Federal Reserve has, to date, consisted of people doing their best in a mostly apolitical way. But just because today's king is good doesn't mean tomorrow's king will be.
I think this is somewhat contradicted by the evidence. The U.S. government actually received large amounts of gold from the debtor countries as collateral. By the end of the war, the US owned 75% of the world's gold reserves.
To be fair, these aren't my arguments against the gold standard; these are my counterarguments against @jeroboam's arguments in favor of the gold standard.
I suppose the main problem is we haven't framed the discussion sufficiently. Are we talking about
Why?
I could say the same thing about the "king of gold". Say China starts buying it all up in the 2030s, causing mass deflation. Say China starts offloading in the 2040s, causing mass inflation. Or we discover a huge gold deposit. etc.
I'm tempted to debate the historical facts, but I think it'd be more fruitful to ask you to explain the mechanism by which the gold standard constrains government borrowing.
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It's not clear to me how much a commodity standard actually constrains government spending. Presumably the redemption ratio between paper currency and the commodity is fixed by law and therefore can be changed. It's somewhat more explicit than the process today but it's not obvious to me how strong a check it would be substantively.
Its not clear to me how much of that economic growth is attributable to our particular currency scheme. Lots of things were different pre-1971 (including some pretty large technological developments) compared to what came after.
Sure. And the government can go just go off the gold standard like they did during the Civil War: https://en.wikipedia.org/wiki/Greenback_(1860s_money)
But this at least requires a vote of congress unlike now where the Fed can just print money out of thin air.
Its not clear to me either and I would be skeptical of anyone expressing certainty. Nevertheless, productivity growth was higher back then so clearly the gold standard was not a huge impediment to long-term growth.
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I would be very interested to read that case. My understanding was that you get a problem where the amount of precious metals stays constant while your economy grows, leading to either re-evaluation of all currency or a lack of money. More rarely the opposite can happen, as in the case wheee the Spanish discovered a silver mine and suddenly had a mass inflation of their silver currency.
It looks like others beat me to it, but IMO the gold standard wouldn't work today because there isn't a sufficient amount of bullion in the world.
There are only about 200,000 tons of gold that have ever been mined. This increases by less than 2% per year. Already by the Middle Ages in Europe there was a shortage of monetary metals due to a trade deficit with China and India. Since Roman times, Europe had shipped gold and silver eastward in exchange for luxury goods. By the 1400s, this led to the so-called Great Bullion Famine in which gold was nearly impossible to come by.
https://en.wikipedia.org/wiki/Great_Bullion_Famine
Without a means of exchange, commerce suffered greatly as people were forced to barter and use other commodities like pepper as currency.
The Great Bullion Famine only came to and end with the discovery of the New World, its plundered gold, and a literal mountain of silver at Potosi which even today accounts for half the silver ever mined.
There are no more Potosi's to be found. As the economy grows faster than the supply of monetary metals, the value of gold and silver would need to grow apace. Already, 1 ounce of gold is worth $2,000 and is completely impractical to spend. How much worse if it was worth $100,000?
There is 10 times as much silver as gold (God's ratio) but even the smaller silver coins would likely be too valuable to spend. Of course, we could create paper substitutes like we used to do. But the increased demand for gold (with built-in deflation) would lead to hoarding and the need for ever larger reserves. And how can we be sure that the gold is really in the government vaults?
The hoarding of monetary metals would crowd out valuable industrial uses. And the high prices would lead to wasteful mining that would destroy the environment and incentivize slave labor (as it did in Soviet Russia).
In a way, the Earth is fortunate. Gold is something that is rare, impossible to create, difficult to extract, perceived as uniquely valuable by nearly all cultures, and otherwise mostly useless. It's the perfect medium of exchange and store of value. Without it, trade might have been nearly impossible in ancient times. And without a store of value, capitalism might have never got off the ground.
But modernity caught up. There just isn't enough gold. WWI saw the end of the gold standard in Europe. Much of Europe's gold ended up in the United States, but even so the U.S. government couldn't keep up the show for long. In 1933, The U.S. government seized all the privately held bullion and didn't let private individuals hold it again until we went off the gold standard.
TLDR; We tried it before and didn't work.
That isn’t true- you can buy 1/10 Oz silver coins pretty easily, which would be worth $2.40, a completely practical amount to spend. And anyways this is about transferable certificates of deposit, aka paper money, which could be issued in denominations of 1/500 Oz or whatever as needed.
Obviously there’s no good answer to the inherent deflationary effect, but in a double(or realistically triple) currency system deflation is probably not the evil it is in a single currency system.
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No it's not. It's $24
Yes, gold not silver. Fixed the oopsy.
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If the economy grows but the supply of precious metal doesn't grow at the same rate, the result is monetary deflation, which is generally undesirable for currency for a variety of reasons having mostly to do with discouraging investment.
That's price deflation. Monetary deflation is an actual contraction of the money supply. A lot of arguments against deflationary currencies rely on conflating the two.
Price deflation is still pretty bad because it shifts gains towards capital and away from workers. Actual contraction of the money supply is even worse, partly because it necessarily causes price deflation.
While economists seem pretty convinced that modest inflation is preferable to modest deflation, I'm personally unconvinced that for modest, predictable rates (which plausibly excludes Gold or Bitcoin) it matters much either direction. There are examples of specific commodities deflating (specifically, "for the same price in dollars next year I can get more/better product": computers, flat-panel TVs, cell phones, even cars) and none of the promised miserly spending habits have really appeared that I can tell. Apple didn't become a trillion dollar company because everyone is patiently waiting to get a better iPhone next year rather than this year.
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I don't buy that. Workers are the last to see their salaries increase in an inflationary environment, while capital tends to be the first that has it's value increased, so I think it's the opposite of what you're saying.
Also contraction of the monetary supply is way worse than anything that come out of it's effects on prices.
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How much of an option is it really? Unless the US federal government decides to accept Texas' new currency everyone in Texas is going to have some expenses (federal taxes) they'll need to pay in USD. Seems like a significant effect of the currency would be exposing Texas merchants to forex/commodity market volatility they probably don't want to be exposed to.
Can they not buy USD from other people? Or setup a Eurodollar?
Honestly I actually doubt that a gold backed currency would be much more volatile than a fiat one in a context of constant generalized inflation. Not in real terms anyhow.
They can (indeed must) buy USD from others but what others will sell to them? Texas will still be part of the United States and so USD will still be legal tender. If you have USD you can transact anywhere in the United States, Texas included. If you have TexasBucks you can probably only transact in Texas. Why use the TexasBucks instead of USD? Why would I want to sell my USD for TexasBucks, except maybe for speculative purposes?
Well yes, this would probably just be shiny shiny bitcoins. If there was a government that could issue a stable currency within the constraints set by the U.S. constitution on state level currencies, it’d be Texas or Utah, albeit it’s unclear what the benefit of having one is(potentially enabling low interest rate loans within state?).
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The gold backing is the sole reason to use TexasBucks in a world where USD exists. And I won't do the goldbug schtick of explaining why you would want to use a deflationary currency, the words have been said enough.
Most likely this will end up being a shitty gold instrument nobody uses and a political stunt. But in these times of economic turmoil, you never know.
If they don\t bungle the implementation I might buy some TexasBucks. Hell, I might even open a busines that accepts TexasBucks in exchange for bullets, cigars and whiskey. Hell, maybe they should do away with the whole gold thing and just transact in bullets directly. Add that extra meaning to buckshot.
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