Monday, July 18, 2016

Health Risks of Banning Plastic Bags

It is becoming politically popular for cities and counties to ban single-use plastic bags for groceries and certain other items in the name of protecting the environment. People living in jurisdictions where such bans are being considered may benefit from my experience in Minneapolis.

Advocates of banning the bags claim they will be replaced by recyclable ones that will save money, energy and other resources in manufacturing and reduce municipal waste in landfills. Not true. Manufacturing the single-use plastic bags requires less than half the energy needed for compostable plastic or cloth bags and less than a third of what's required for paper bags. Making plastic bags requires less than 6 percent of the water needed to make paper bags. In a comparison of quantities of municipal waste by weight, the production, use and disposal of single-use plastic bags produced a net 15.51 pounds of municipal solid waste; compostable plastic bags, 42.32 pounds; paper bags, nearly 75 pounds.

I cited those facts in a letter to the Minneapolis Star Tribune when the city council was considering a ban on plastic bags. In that letter I first cited health risks because they are substantial and I thought council members would surely place human health above all other considerations. I was wrong. Nobody brought up the health issue at the city's meetings about banning the bags despite the Star Tribune having included on its editorial page some of my concerns about the health risk.

Not included was a warning that banning the single-use plastic bags was “creating a high risk of food poisoning,” according to Kofi Aidoo, probably the most highly qualified person in the world to speak on this issue. Here are his awesome credentials. He is president of the Royal Environmental Health Institute of Scotland, Professor of Food Safety and Microbiology at Glasgow Caledonian University (GCU) and program leader of the Food Bioscience Program at the University. He also leads GCU’s Food Research Laboratory, is a Fellow  of the Institute of Food Science and Technology (IFST) and of the Royal Society for Promotion of Health. He serves on the Joint Expert Committee on Food Additives, Contaminants and Natural Toxicants (JECFA) of the Food and Agriculture Organization/ World Health Organization. He is the author of 56 publications.

A reporter for the Sunday Post in the U.K. wrote: “We took a selection of reusable bags for analysis at GCU’s School of Health and Life Sciences. There were plastic and cloth types. Four of the nine fell into the heavily contaminated category.”

The lab analysis found staphylococcus aureus, a disease-causing bacteria that can grow and produce toxin. Yeasts and molds from food spoilage were regularly isolated. Asperigillus and Penicillium were the most common.” Professor Aidoo said, “Presence of these organisms on carrier bags could contaminate freshly-purchased open foods such as fruits and vegetables.”

Aidoo's concerns were echoed by Hugh Pennington, emeritus professor of bacteriology at Aberdeen University, who said banning plastic bags could result in “an increase in the number of cases of food poisoning”. Pennington has chaired two major inquiries into E. coli, including an outbreak in 1996 that killed 21 people. Although some studies report washing the bags is effective, Pennington says it “won't necessarily get rid of all of the bugs. The bag may look clean but you can still easily find these bugs." He also said flatly, “Any bag that's carrying meat, wrapped or unwrapped, shouldn't be used again.” Also, advocates of washing the recyclable bags don't include the cost of detergent, disinfectant or water hot enough to kill the bacteria.

Dr. Richard Summerbell is a professor at the School of Public Health at the University of Toronto and author of over 140 peer-reviewed scientific papers. He conducted a study which found “reusable grocery bags can become an active microbial habitat and a breeding ground for bacteria, yeast, mold, and coliforms.” The study also noted that the presence of yeast and mold may be of concern for people with compromised immune systems or allergies. In addition, the study showed that brand new bags, plastic or cloth, showed no evidence of bacteria, mold, yeast, or total coliform. It is important to note that the Canadian Department of Health validated the concerns of the Summerbell study.

In another study, microbiologist Dr. Charles Gerba said: “Our findings suggest a serious threat to health, especially from bacteria like E. coli, detected in half the bags sampled.”

USA TODAY reported a study conducted at a central California grocery store that “involved spraying bags with a bacteria not harmful to humans but transported in a similar way to norovirus, a leading cause of gastrointestinal disease linked to more than 19 million illnesses each year in the United States. The tracer bacteria was detected in high concentrations on shopping carts, at the checkout counter and on food items shoppers had touched but kept on the shelf.”

Reusable bags can transmit not only harmful bacteria but viruses. In Oregon, 9 of 13 members of a girls soccer team suffered vomiting and severe diarrhea from norovirus. Author of a study in the Journal of Infectious Diseases, epidemiologist Kimberly Repp explains “We demonstrated norovirus transmission without person-to-person contact. That’s why this is different.”

Dr. Gerba issued this statement: “This incident should serve as a warning bell: permitting shoppers to bring unwashed reusable bags into grocery and retail stores not only poses a health risk to baggers but also to the next shoppers in the checkout line." [Bold type is Dr. Gerba's] He also stated: “In reality, reusable bags are likely at fault much more often than we realize: cases often go unreported and uninvestigated.”

Like the norovirus, the influenza virus can by spread by contact with contaminated surfaces. An infected person who has touched his nose or eyes (conjunctiva) will transfer the virus to his hands and subsequently to other surfaces he touches, including a reusable shopping bag. The bag will then be able to transfer the influenza virus to others. A reusable bag coming from a home where there is illness, may be contaminated with the influenza virus. In the event of an influenza outbreak, it has even been suggested it may be necessary to require people to wash their bags before coming into the store or require clerks who handle bags to wear gloves.

Other diseases that can be caused by contaminated reusable bags include common cold, cold sores, conjunctivitis, croup, Giardia infection, lice, meningitis, rotavirus diarrhea, Respiratory syncytial virus (RSV), and strep.

Call7Investigators in Denver took several reusable bags from 7NEWS colleagues and a woman entering a grocery store and brought them to the University of Colorado Hospital for testing. Dr. Michelle Barron, the infectious disease expert there who analyzes lab results for a living, exclaimed, “Wow. Wow. That's pretty impressive.” Then, “Oh my goodness! This is definitely the highest count." She admitted she was shocked. “We're talking in the million range of bacteria," she said. Three of the samples had relatively low bacteria counts, posing little risk. Two had moderate risk, and two others had extremely high counts—330,000 to nearly 1 million colonies of bacteria. Four of the samples also had relatively high levels of yeast and mold.
 
To demonstrate the risk, the grocery bags were dusted with a substance that glows in the dark to show how harmful germs can travel. With the lights off, it was clear the Glo-Germ had not only stuck to our groceries, it was also on Marchetta's hands, the counter top, and in the cupboard and refrigerator.”

"We're trying to be environmental. I fully support that,” said Barron. “But not at the cost of your health."

At the very least,” says Aidoo, “people have to be given advice to clean these bags every time they use them." I doubt that many of the people who supported the ban would have done so if they had known they were going to have to wash them every time. Also, those most likely not to wash their bags are the homeless people, if for no other reason than they lack facilities to do so. So when they plunk down their unwashed reusable bag in a shopping cart or on the checkout counter, they pose a danger of infecting these surfaces for other customers.

The Keep America Beautiful campaign does not even rank plastic bags in the top ten sources of nationwide litter. Many major cities report less than 1 percent of municipal litter is from plastic bags, and many studies show that banning plastic bags has little or no effect on the total. In Minneapolis, Council Member Andrew Johnson spent an hour picking up litter in Minneapolis. He collected 498 items of which only 7 were plastic bags. He was one of only three members of the council to vote against the ban, which passed 10 to 3.

The campaign to outlaw plastic bags in the name of improving the environment is based on ignorance and misinformation. It will do the exact opposite and create health risks in the process. It will waste energy, water, and money. It will create inconvenience, waste people's time, deprive people of the liberty to exercise choice which has produced a more efficient, economical and safer product. Banning plastic bags is an attempt to achieve by political means what cannot be achieved by economic means, because it is unrealistic. It means government against the economy! Which means government against reality. There is nothing government can do to make an economic function more efficient than a free market; its only power is to make it less efficient and more costly—and, yes, environmentally inferior as well as dangerous to human health.

Wednesday, June 15, 2016

Article V Constitutional Amendments, Part 1

Like a lot of Americans, I have been thinking for a long time that our nation is on the wrong track. Not only do things seem to be getting worse rather than better, but it seems the system itself is broken so it is no longer possible to get it back on track. People are disgusted but don't know what to do. The two presumptive presidential nominees of the major political parties show that both parties are out of touch with the American people. I don't think we have ever seen the two leading candidates have such high disapproval ratings from the public as those of Hillary Clinton and Donald Trump. And the public has an even worse opinion of Congress. The latest poll shows only 11 percent of the public approves of Congress. That's only two points above the lowest number every recorded, in 2013 also under the Obama administration.

The economy is sputtering. Growth averaged 3 percent between 1980 and 2007. Since then it has averaged 1.2 percent. In the first quarter 2016, the economy grew only 0.8 percent, even less than the disappointing 4th quarter of 2015 at 1.4 percent. In April 2016, employment grew a paltry 160,000 jobs while the adult population grew by 200,000 people. In May only 38,000 new jobs were created, far below the 162,000 expected. That was the worst monthly jobs report in five years. At the same time, downward revisions to the previous numbers for April and March subtracted 59,000 jobs.

David Stockman, former head of the Office of Management and Budget, calculates 2.3 million jobs paying an average of $58,000 per year have been lost in manufacturing, mining/energy and construction since 2008 and have been replaced by 1.9 million jobs is leisure and hospitality paying less than $20,000 per year. In May 2016, manufacturing lost 18,000 jobs; mining lost 10,000; construction lost 5,000; and even temporary workers backtracked, losing 21,000 jobs. Meanwhile a half million more people quit looking for work that month, bringing the number of Americans of working age who aren't working to 94.7 million. There are now fewer full-time, full-pay jobs than in December 2007.

According to the Conference Board, productivity in the U.S. is now MINUS 0.2 percent. For the first time in more than three decades, we produced less GDP per hour worked. We got poorer.

Figure 1

Wages are flat. The stock market looks vulnerable. It, along with the rest of the economy, looks more like it is rolling over, ready to topple, rather than perking up. Business sales have been declining for two years and are now 5 percent below their peak in 2014; meanwhile inventories have been building up—not a good sign for the economy. Corporate debt is now $6.7 trillion, more than double what is was prior to the last crisis. Most of that increase has gone into stock buybacks, mergers and acquisitions, and various leveraged-buyout recapitalizations rather than productive investments. Last year buybacks and mergers and acquisitions were $2 trillion while all R&D and office equipment spending was $1.8 trillion.

Household debt has now climbed to $13 trillion, comparable to its peak before the recession. Our national debt has now ballooned to $19 trillion. It just keeps on growing, and government is doing nothing about it even though everyone recognizes it is a time bomb that could blow up the whole economy, impoverish us and destroy our future.

The Obama administration and the Federal Reserve have been attempting to stimulate the economy with “quantitative easing” (a scholarly-sounding term for printing money) to increase spending in accordance with Keynesian theory. This is the same idea that was employed early in the Obama administration with its $770 billion (later adjusted to $831 billion) stimulus program, the American Recovery and Reinvestment Act of 2009 . That program failed:


Adminstration's Projected Unemployment Rate
With/without Obama's Stimulus Program


Source: Bureau of Labor Statistics: “The Job Impact of
the American Recovery and Reinvestment Act” [Stimulus Act]
Figure 2
The red line in the above graph is the Obama administration's projection that the stimulus program would hold unemployment under 8 percent, compared to the administration's projection without the stimulus program (middle line on the chart). Instead, unemployment actually rose higher than it would have been without the stimulus, and it remained above 8 percent for four years. The stimulus program was far worse than doing nothing!

Influential economist John Maynard Keynes claimed spending—for anything—was the driver of the economy and that government spending produced a multiplier effect as the dollars were, in turn, spent again and again throughout the economy. He had no evidence to support this. Keynes' biographer Hunter Lewis says, “There is no evidence” that spending ever cured a recession, and Keynes “wasn't particularly interested in evidence.”

Keynes theory provided the rationale for Franklin Roosevelt's New Deal program of massive spending to try to pull the country out of the Great Depression. It failed. On May 9, 1939, FDR's treasury secretary and good friend Henry Morgenthau testified before the House Ways and Means Committee: “We have tried spending money. We are spending more than we have ever spent before and it does not work....After eight years of this administration we have just as much unemployment as when we started....And an enormous debt to boot.”

The Keynesian rationale that failed with Obama's 2009 stimulus bill, just as it had with FDR's program in the 1930s, was based on a multiplier of 1.5. That meant the GDP would increase by $1.50 for every additional dollar spent by government. If the multiplier were really larger than 1.0, the GDP would rise even more than the rise in government spending. The U.S., Greece, and other spendthrift nations wouldn't be going broke—they'd be getting richer the more they spent! The reality is that the multiplier is always less than 1.0. In my book The Impending Monetary Revolution, the Dollar and Gold, Second Edition, I cite several research studies which document this.

Quantitative easing” is now the favored term for making more money available, supposedly leading to more spending, which would create economic growth. If more money was available for, say, housing or construction or alternative energy development etc., it was thought this would stimulate growth in other sectors of the economy and lo and behold we would have vibrant economic growth. But it didn't work out that way.

Creating more money has simply created more debt. The world is being swamped by a flood of money and credit. Since 2007, global debt has increased by $57 trillion—three times faster than global GDP. This includes all categories of debt: household, corporate, government, and financial. All the major central banks are now engaging in quantitative easing. The Fed has been spending trillions of dollars buying government bonds to increase the money supply to stimulate the economy, but the U.S. statistics I've cited above show it hasn't worked.

Japan, which has tried stimulus programs for more than two decades, has gone even further. Its central bank now buys not only government bonds but corporate bonds, common stocks, real estate, and ETFs to increase the money supply. In fact, the central bank owns 52% of the entire Japanese market in exchange traded funds. None of this has worked. In spite of all this spending, Japan has had two “lost decades” of virtually no economic growth and is now more concerned about deflation than inflation.

Japan is the last of the major central banks to reach its “Havenstein moment.” Rudolph Havenstein was the head of the German Central Bank during the great hyperinflation in Germany. A “Havenstein moment” is when the person in charge of the money supply decides that massive printing of money is better than the alternative, that it is preferable to deflation. In November 2015 Japan entered its fifth recession since 2008, and the recoveries have been so weak it's hard to distinguish them from the recessions. The nation is mired in a third “lost decade.”

Shinzo Abe was elected prime minister of Japan largely on a campaign of monetary easing. The Abe government said in May 2013 it aimed to improve the economy with two percent inflation by doubling the money supply. It said it would engage in “unlimited” or “open ended” printing of money to achieve that goal. Almost three years later, in April 2016, the inflation rate was 0.10 percent. And the nation's debt-to-GDP ratio ballooned to 250 percent—the highest in the world—compared to 65 percent in 1990, when the stimulus programs began.

Why can't governments create wealth? Laws and regulations are all enforced by the police power of government to inflict losses on people by fines or jail sentences if they don't comply. But people make economic transactions because of the prospect of gain, not because of the threat of loss. There is no way the government's power to inflict losses can bring the same results as a free market that allows people to choose gains.

In a free market every transaction benefits both sides, according to their judgment, or they would not participate. It is a win-win situation. A government transaction is always win-lose, because government benefits one side by imposing a loss on the other (or the taxpayers) that would not be accepted but for the prospect of even greater loss through fines or jail sentences. Instead of the win-win transactions of free markets, we have the win-lose transactions of a government “managed” economy. The more these win-lose transactions proliferate, the more the economy falls behind what would have been achieved by the win-win transactions of free markets. Government's only power in managing the economy is to make things worse; whatever it does will be worse than if it did nothing. Some individuals or sectors of the economy may benefit from government policies, but those gains are always more than offset by losses elsewhere. The advance of society is achieved by the economic gains of people acting for their own self-interest in the context of their natural rights to life, liberty and the pursuit of happiness. In short, by the actions in a free market. 
 
The Obama administration has added 80,000 pages of regulations annually and is preparing to issue another 3,000 regulations before the end of the year. This is not a way to grow the economy. Regulations force uneconomic actions dictated by government's power to inflict losses. Businesses face the time-consuming, costly and often futile task of keeping up with regulations to avoid penalties for requirements they didn't know existed. James Madison wrote in Federalist 62:

It will be of little avail to the people that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man who knows what the law is today can guess what is will be tomorrow.”

The number of federal crimes has grown to 4,889, mostly from regulations, even though the Constitution lists only three: treason, piracy and counterfeiting. Government grows and freedom shrinks. And what can people do about it? Decades of effort to elect new people to office in Washington have failed to reverse the expansion of the federal government.

For more than 40 years I have been intrigued with amending our Constitution by a method that has never been used. It is the provision in Article V of the Constitution whereby the states themselves can amend the Constitution rather than going through Congress, as was done with previous amendments in our history. I have discussed this unused method—and made recommendations for new amendments—in three books I have written over the years, the most recent one being The Impending Monetary Revolution, the Dollar and Gold, Second Edition. I have come to the conclusion that constitutional amendments are the only way to right the wrongs that have developed in our political system. For decades we've been deviating from the Constitution and principles of economic freedom and individual rights that made this country, but Obama's “transformational change” has made things so much worse as to culminate in a monetary revolution now before us.

Since our economy has been performing poorly for years and government has been unable to stimulate it, we face an insurmountable obstacle in the form of entitlements growing at 9 percent annually—far beyond our economic growth rate. We are not going to be able to fund what we are already legally obligated to spend. Since 2000, entitlements have been growing almost twice as fast as wages and salaries (6.3 percent compared to 3.3 percent). That alone should tell you this cannot continue much longer. There must be an end to it—not years from now but very soon.

Capital investment is critical to productivity growth, and productivity growth in turn is the crucial issue in economic growth in a wider sense. As productivity and economic activity slow down, entitlements will loom as an even larger problem. Meanwhile, near-zero interest rates—even negative rates in major foreign countries—punish savers and leave less capital for investment. The economic slowdown is not limited to the United States.

U.S. monetary problems are world problems. Our problems from abandonment of the gold standard, excessive federal spending and debasement of the dollar become problems for other nations' economies because of the dollar's reserve currency status. The dollar is the basis of the international monetary system—meaning that system is based on the debt of the U.S. government. Well, not quite, or at least not entirely, because the international monetary system contains another asset, gold.

Under the monetary system established at the Bretton Woods conference in 1944, only the U.S. agreed to link its currency to gold at a fixed rate ($35 per ounce), and other nations agreed to maintain fixed exchange rates of their currencies to the dollar. The International Monetary Fund was established to operate this gold-exchange standard with the dollar as a reserve currency along with gold. Although U.S. citizens in the 1930s lost the right to redeem their dollars in gold, foreign central banks could still do so until 1971 when the U.S. defrauded those banks just as it had its own citizens in 1933. On August 15, 1971, President Nixon ended redemption by foreign central banks of dollars for gold. He did so because U.S. inflation had made the $35 gold price unrealistic. Too many dollars were being accumulated by foreign central banks, and too many were being converted into gold at the bargain price. Gold was being drained from the U.S. Treasury at a rate that could not be sustained.
When the dollar's last link to gold was severed in 1971, there was nothing to limit the increasing number of depreciating dollars the U.S. sent abroad to pay for the increasing importation of goods. The U.S. consumed more than it has produced (measured by international trade balance) every year since 1976. In 1982 the U.S. was still the world's largest creditor. In 1985 it became a net debtor for the first time in 71 years, with an investment deficit of $110.7 billion. It became the worlds' largest debtor only three years later, and ever since, it has continued to pile more debt upon debt just like Greece.

Abolishing the last link of the dollar to gold led to the collapse in 1973 of the system of fixed exchange rates, but the dollar was still considered the reserve currency although it had lost the basis for its becoming so in the first place. This meant not only that this restraint on inflating the U.S. money supply was eliminated but that the U.S. could export inflation to other countries, which would convert increasing dollar reserves into their own currencies. The entire world's monetary system no longer had any anchor. The world's currencies all became fiat paper.

From 1976 to 1980 the International Monetary fund eliminated the use of gold as a common denominator, abolished the official price of gold, and ended the obligatory use of gold between the IMF and its member countries. Also, it sold approximately one-third (50 million ounces) of its gold holdings “following an agreement by its member countries to reduce the role of gold in the international monetary system,” says an IMF fact sheet.

For years then the IMF and others tried to phase out gold in the monetary system. The IMF even carried out several auctions of its gold to further this effort and demonstrate that gold wasn't really important and a paper reserve currency could take its place. That was to be the trend of the future. But the U.S. policies of excessive spending and running large deficits worked against that trend, because foreign countries resented those policies having adverse effects on their own economic interests. Indeed, the founding of the European Union—with its own currency—was partly the result of trying to escape the domination of the dollar in European commerce because of U.S. abuse of its privileged role of the dollar in the monetary system.

Finally, in 2009 the French President Nicolas Sarkozy joined Russia, China and other emerging countries in calling for an end to the dollar's reign as the primary international currency. And the United Nations Conference on Trade and Development endorsed moving away from the central role of the dollar in the world monetary system. The IMF held its last auction of gold (403 metric tons) in September 2009, and China began removing its restrictions on gold ownership by its citizens. The metal that was supposed to be phased out by fiat paper currency was now phasing out that fiat paper. This was to be the trend for the future, regardless of the Keynesian theories held by monetary policy "experts" in or out of government.

Deng Xiaoping was a reformer who abandoned many communist doctrines and introduced elements of the free-enterprise system into the Chinese economy. He reformed many aspects of China's political, social and economic life, but insisted it remain a socialist nation. He quickly opened China to trade and investment, and by the mid 1980s he had instituted reforms in agriculture and industry that made China an economic powerhouse.

China's efficiency in manufacturing led to huge trade surpluses—and the accumulation of trillions of dollars. Those dollars were recycled back to the U.S. by buying U.S. Treasury securities: that is, the U.S. was borrowing back the dollars, which were then used for more spending and increasing the federal debt. The U.S. acted like this cycle could go on forever, but two factors indicate that “forever” is coming sooner than expected. Both are related to the dollar's preeminent status as the world's reserve currency.

First, it was often stated that both the U.S. and foreign nations—particularly China, the largest buyer of U.S. treasuries—were “trapped” by the trading pattern: both sides were benefiting and would be hurt by changing the relationship. Importing cheap manufactured goods was advantageous to the U.S., while China obtained export markets and an influx of dollars for jobs and economic growth. It seemed like China could do nothing with its dollars except buy more U.S. treasury debt. But China, increasingly worried about the long-term value of U.S. fiat money, began using its dollars to buy gold and other hard assets.

Other countries, particularly in Asia, began buying increasing quantities of gold, too. Every year India buys four times as much gold as all of North America. China has been encouraging its people to buy gold under its policy of “storing wealth with the people.” It even runs television ads urging them to buy. The Shanghai Gold Exchange leads the world in delivery of physical gold.
Figure 3

When there have been occasional large price declines that scared American and European investors into selling gold, much of that gold, particularly from ETFs, went to Switzerland—which has four of the largest gold refineries in the world—where bars and coins were recast into smaller sizes for export to Hong Kong, which services demand from China, Thailand, Taiwan and other Asian countries. There has been a massive transfer of gold from the West to the Far East. Central banks, which not many years ago were selling their gold, have been buying it in increasing quantities. In 2010 they bought 77 metric tons; in 2015 they bought 477.2 metric tons. Overall, global demand in the first quarter 2016 reached 1,290 metric tons, a 21 percent increase year-on-year, making it the second largest quarter on record.

Second, in 1973 the U.S. offered to sell Saudi Arabia, then the world's leading oil exporter, weapons and provide military protection to the ruling family and the government. All the U.S. asked in return was that Saudi Arabia's oil be sold only for dollars and that surplus revenue available for investment by the Saudis from oil sales, after deducting for the needs of government, would be invested in U.S. Treasury securities. Such a deal! By 1975 all of OPEC (Organization of Petroleum Exporting Countries) members agreed to the same deal.

Since every country in the world was either buying or selling oil, they were all dealing in dollars because oil was priced in dollars. These “petrodollars” gave support to the American currency, but that is all but gone. As a result of fracking, horizontal drilling, deep-water drilling, and the discovery of new oil fields all over the world, neither Saudi Arabia, nor the United States nor any other nation can set the price of oil irrespective of what is happening in the industry all over the globe. Japan is buying oil from Iran priced in Japanese yen. India buys oil from Iran in rupees. Russia agreed to the sale of $400 billion of natural gas to China over the next 30 years with the gas priced in Chinese yuan, not dollars. China also has agreements with at least 22 other countries for bilateral trade agreements in currencies other than the dollar. The BRICs (the large developing nations of Brazil, Russia, India and China) have agreed to trade in each others currencies rather than using the dollar as an intermediary. Australia, South Korea, Turkey and Kazakhstan have agreed to conduct trade in currency swaps of their own respective currencies. Our longtime ally Germany has agreed to trade with China in yuan and euros.

Meanwhile, what has happened to those oil revenues the oil-producing countries were recycling back to the U.S. by purchasing U.S treasury securities? Since dollars are no longer needed to buy oil, and since the treasuries pay extremely low interest, central banks have been dumping them at the fastest pace of a U.S. debt sell-off since at least 1978. Sales hit a record $57 billion in January 2016. In March all central banks sold net $17 billion in U.S. Treasury bonds with China, Russia and Brazil each selling at least $1 billion. The following chart shows how central banks have been dumping U.S. treasuries. Please note that the chart does NOT indicate less severe selling in 2016 than the previous year because the 2016 bar is incomplete; it represents only the first four months of the year. If the trend continues for the rest of 2016, the sell-off will be much larger than in 2015.

Figure 4

If central banks continue dumping U.S. treasuries, the U.S. will need to monetize some of the debt to fill the gap between the treasuries it offers and what other countries are willing to buy. In this monetizing process, government finances its spending by its central bank buying and holding debt, which increases the money supply. This essentially “turns the debt into money This does not happen when gold—not debt—is money.

When the Fed buys bonds for its portfolio, it purchases them from a bank with an account at the Fed and pays for them by simply creating a credit on that bank's Fed account. Kevin Hassett, a former senior economist at the Fed, notes “with money and gold connected, [this process] was simply not an option.” The U.S. was on the gold standard when the Fed was created.

The Constitution never had a balanced-budget amendment,” wrote Lewis Lehrman and John D. Mueller, “because the constitutional metallic standard was a perfectly written balanced budget amendment.” Now we have an unconstitutional agency, the Fed, creating unconstitutional money, fiat paper dollars. Our Constitution grants no authority for either a central bank or paper money, and we need not only a balanced budget amendment but amendments that abolish the Fed and restore gold convertibility to our currency.

Those amendments, and others, might be pursued by states that have passed or favor a multiple-amendment proposal for a convention. For states and organizations pursuing single-subject amendments, I would hope they might see my suggestions worthy of their support and not in conflict with their chosen objective but perhaps helpful to it. Hopefully, then, they might pass a resolution adding their approval, though perhaps this would not occur before 34 states approve their chosen amendment. It may be, too, that as an Article V convention gains popularity, the number of participating states will substantially exceed the required 34, meaning additional states might compensate for some states remaining confined to single-subject amendments and thus enable 34 states for new amendments.

The need for various amendments has never been more dire as the course of our government has brought us to the edge of a monetary disaster with worse consequence for Americans than the recent Great Recession. Some of my proposed amendments are similar to those proposed by others, but in my book I offer some I don't think anyone else has proposed. Some may seem unlikely at this point, but as economic conditions in this country unravel, they may be viewed in a more favorable light. In any case, they are steps America should take, whether now or later.

I shall discuss other of my proposed amendments in future postings of this series on this blog.