Knightskye
03-28-2009, 04:18 AM
Instead of returning to double digit levels of inflation and the failed economic policies of the 1970s, Republicans support maintaining the cost of living after witnessing the booms and busts triggered by loose monetary policy.
Democrats assume that the free-market system has failed and that a more robust federal government must now rescue the nation. The American people reject that notion and know, as Republicans do, that government has failed and that this financial crisis is the result of decades of misguided government policies that interfered with the free-market.
In addition to a loose monetary policy by the Federal Reserve that fueled a housing boom, government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and federal mandates that weakened lending standards contributed to a perfect storm of government-induced failure.
History tells us what governments do with such levels of debt and what happens to their citizens. In order to avoid the political pain of reducing spending or retiring debt,
they simply “monetize” the debt, meaning they print money to pay it off. But this “solution” triggers massive inflation in every instance.
In the U.S., the government printing presses are already in full gear. On March 18, 2008, the Federal Reserve announced a new plan to purchase $300 billion in Treasury bonds in an effort to prevent deflation and increase the supply of credit. Such efforts may be needed in a financial crisis such as this, but they will come at a steep cost. The Fed is printing trillions to make these and other purchases, and inflation is inevitable.
Inflation acts as a silent tax on the cost of living, particularly heavy on the poor and those living on fixed incomes. It devalues every dollar earned and unfairly penalizes savings and thrift. It will cause interest rates to spike dramatically, stalling any nascent economic recovery by increasing the cost of borrowing for a home or business.
And if inflation is high enough, it inevitably leads to calls for wage and price controls. This is the narrative of the 1970s, and it is upon us again.
One of the major risks for central bankers who print money to pay for the spending agenda of politicians is that the public begins to doubt the bank’s independence from the government in power. The current Fed risks this perception at a time when the nation’s confidence in it has already been shaken.
Economists have consistently identified the Fed’s accommodative monetary policy as one of the main causes of the current financial crisis. It began lowering interest rates in early 2001 to cushion the economic blow from the burst of the high-tech bubble in 2000, and maintained this policy to help grow the economy after the September 11th terrorist attacks. But maintained too long, this policy unleashed a wave of cheap credit that fueled a housing boom. Lenders and investors all came to assume that no matter the credit history or the borrower, money could be made, even in default, on the ever-rising price of housing. The last year has proved that they were wrong—but the Fed’s role in distorting such private decision-making cannot be overlooked.
Our plan phases out the GSEs’ government charter and privatizes them over a reasonable time [..]
Don't mind if I start drooling. :p
Anyone know if Ron Paul snuck in after hours and did some editing to this "Road to Recovery"? It almost seems unreal. I've never heard Republicans talking about the Federal Reserve before.
EDIT: I'm calling shenanigans. This cannot have been written by a bunch of congressional Republicans!
(PDF)
http://www.gop.gov/solutions/budget/road-to-recovery-final.pdf
Democrats assume that the free-market system has failed and that a more robust federal government must now rescue the nation. The American people reject that notion and know, as Republicans do, that government has failed and that this financial crisis is the result of decades of misguided government policies that interfered with the free-market.
In addition to a loose monetary policy by the Federal Reserve that fueled a housing boom, government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and federal mandates that weakened lending standards contributed to a perfect storm of government-induced failure.
History tells us what governments do with such levels of debt and what happens to their citizens. In order to avoid the political pain of reducing spending or retiring debt,
they simply “monetize” the debt, meaning they print money to pay it off. But this “solution” triggers massive inflation in every instance.
In the U.S., the government printing presses are already in full gear. On March 18, 2008, the Federal Reserve announced a new plan to purchase $300 billion in Treasury bonds in an effort to prevent deflation and increase the supply of credit. Such efforts may be needed in a financial crisis such as this, but they will come at a steep cost. The Fed is printing trillions to make these and other purchases, and inflation is inevitable.
Inflation acts as a silent tax on the cost of living, particularly heavy on the poor and those living on fixed incomes. It devalues every dollar earned and unfairly penalizes savings and thrift. It will cause interest rates to spike dramatically, stalling any nascent economic recovery by increasing the cost of borrowing for a home or business.
And if inflation is high enough, it inevitably leads to calls for wage and price controls. This is the narrative of the 1970s, and it is upon us again.
One of the major risks for central bankers who print money to pay for the spending agenda of politicians is that the public begins to doubt the bank’s independence from the government in power. The current Fed risks this perception at a time when the nation’s confidence in it has already been shaken.
Economists have consistently identified the Fed’s accommodative monetary policy as one of the main causes of the current financial crisis. It began lowering interest rates in early 2001 to cushion the economic blow from the burst of the high-tech bubble in 2000, and maintained this policy to help grow the economy after the September 11th terrorist attacks. But maintained too long, this policy unleashed a wave of cheap credit that fueled a housing boom. Lenders and investors all came to assume that no matter the credit history or the borrower, money could be made, even in default, on the ever-rising price of housing. The last year has proved that they were wrong—but the Fed’s role in distorting such private decision-making cannot be overlooked.
Our plan phases out the GSEs’ government charter and privatizes them over a reasonable time [..]
Don't mind if I start drooling. :p
Anyone know if Ron Paul snuck in after hours and did some editing to this "Road to Recovery"? It almost seems unreal. I've never heard Republicans talking about the Federal Reserve before.
EDIT: I'm calling shenanigans. This cannot have been written by a bunch of congressional Republicans!
(PDF)
http://www.gop.gov/solutions/budget/road-to-recovery-final.pdf