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View Full Version : A Spooked Economy in October - Ron Paul




tangent4ronpaul
10-11-2010, 11:26 AM
http://paul.house.gov/index.php?option=com_content&view=article&id=1783:a-spooked-economy-in-october&catid=31:texas-straight-talk

Last week we received worse than expected unemployment numbers, challenging recent claims that the recession has come and gone. Also, as the economy continues to suffer the after effects of the Federal Reserve-created bubbles of the last decade, there is renewed interest in gold. Fears that the Federal Reserve will pump even more money into the system had caused the price of gold to reach new highs. Also contributing to enthusiasm for gold is continued instability in the banking industry, symbolized this week by fraud allegations that have caused many banks to halt foreclosure proceedings, thus further destabilizing the housing market. Yes, October has a reputation for being a scary month economically and this month is shaping up to be frightening, as well.



The Fed has been wreaking havoc and devaluing our monetary unit steadily since 1913, and greatly accelerating it since the collapse of the Bretton Woods agreement in the 1970s. This severing of the dollar’s last tenuous link with gold allowed the Fed to create as much new money as it pleased, and it has taken full advantage of this opportunity.



In 1971, Gross Domestic Product (GDP) was $1.29 trillion. Today it is $14.6 trillion, nominally. But adjusted for all the inflating the Fed has been doing, it is only $2.73 trillion, which constitutes only a 1% real increase per year! So with all this extra money going around, we may appear nominally wealthier, but the reality is, we have barely moved at all. This is unfortunate especially for the prudent, conscientious savers, whose nest eggs are constantly being devalued. Unless of course, they have saved in something out of the Fed’s reach, like gold. While the economy has basically been in a holding pattern against the leeching of wealth by the Fed for 39 years, gold has seen an inflation adjusted increase in value of over 5% per year, if measured in 1971 dollars. This is due to the Fed’s ability to make dollars plentiful. And yet, this is the only tactic the Fed can come up with to rescue an economy already devastated by “quantitative easing”, as they call it.



The turmoil in the housing market demonstrates how disastrous it is to flood the economy with fiat money. Latest events with foreclosures are good examples of mistakes made in the market, in this case, by the banks, in the rush to soak up manipulated currency. This is why the truly free market depends on sound, honest money, free from false signals of artificially low interest rates.



The government finds ways to spend money even faster than the Fed can create it, bringing our national debt well past the point of the taxpayers ever being able to pay it off. Other nations who, in the past, have eagerly bought up any amount of debt we produced are now starting to resist. We are reaching a crucial point at which the dollar will no longer function, and in the absence of a functioning dollar, restoring sound money will be the only alternative.



The truly scary notion is that those in power might allow our system to collapse so chaotically to the detriment of so many people rather than simply obey the Constitution.

DamianTV
10-11-2010, 11:29 AM
Wasnt the value of gold in 1970 like $30 bucks an ounce or something?

PaulineDisciple
10-11-2010, 11:38 AM
Yes, $35 an ounce.

furface
10-11-2010, 12:26 PM
Printing money is not the problem. Government spending is the problem. If the government printed money, handed it out to people on some equitable basis, and found some way of keeping the monetary supply down through excise fees or monetary depreciation, that would work fine.

The big culprit is government spending. It does more harm than just creating deficits and inflation. It robs productivity from society. It creates self serving bureaucracies and intermingled complexes of special interests. In the US it propagates continuous warfare. It criminalizes things that are natural freedoms for the sake of a massive "justice" system and its parasitic industry.

PeacePlan
10-11-2010, 12:33 PM
Yes, $35 an ounce.

Yes it was 35 but that was a controlled price fixed to the dollar. Nixon cut it loose from the dollar to trade freely...........

Travlyr
10-11-2010, 12:35 PM
Printing money is not the problem. Government spending is the problem. If the government printed money, handed it out to people on some equitable basis, and found some way of keeping the monetary supply down through excise fees or monetary depreciation, that would work fine.

The big culprit is government spending. It does more harm than just creating deficits and inflation. It robs productivity from society. It creates self serving bureaucracies and intermingled complexes of special interests. In the US it propagates continuous warfare. It criminalizes things that are natural freedoms for the sake of a massive "justice" system and its parasitic industry.

Spending is a big culprit, but excessive spending would be nearly impossible without fiat money.

Printing money out-of-nothing is counterfeiting. I see it as a big problem. The bankers are allowed to counterfeit, and you're not. If everyone was allowed to print money out of thin air, you would see in a hurry just how big of a problem it truly is.

furface
10-11-2010, 12:55 PM
The bankers are allowed to counterfeit, and you're not. If everyone was allowed to print money out of thin air, you would see in a hurry just how big of a problem it truly is.

Money is an interesting issue that I have trouble completely grasping. I think the more honest economists, politicians, bloggers, etc will admit that the jury is still out as to what "money" truly is and what role it should play in society.

You're right. The problem is that certain people can print money for their own purposes while the rest of society can't. That's why government spending is the ultimate problem. If you printed and handed it out to everybody without regard to what they're going to do with it, that would be more fair. It would be at least an interesting experiment, one that the people who own our society aren't about to let happen.

Governments don't recognize assets (property) so much as they protect them. An important question for society to discuss is what type of assets it wants to effectively use violence to protect and which ones it doesn't. Is it important to use government violence to protect Warren Buffet's assets?

If there was a system that allowed Buffet's assets to go unprotected by government, but protected smaller sets of assets, would that be equitable? Right now the exact opposite is in place. The financial system is designed to protect the wealth of a small handful of people at the expense of the rest of society.

This is important to look at in a monetary context because the idea of printing money and handing it out to people instead of injecting it into society through government spending is something that will ultimately harm very wealthy people, not smaller sets of assets.

tangent4ronpaul
10-11-2010, 01:18 PM
Spending is a big culprit, but excessive spending would be nearly impossible without fiat money.

Printing money out-of-nothing is counterfeiting. I see it as a big problem. The bankers are allowed to counterfeit, and you're not. If everyone was allowed to print money out of thin air, you would see in a hurry just how big of a problem it truly is.

Seems like we have 2 problems here:

1) for every $1 a bank gets in deposits, it is free to loan $10 out - effectively creating money out of thin air.

This practice needs to end, but it will drive up interest rates to borrow money. I suspect many will scream because small businesses rely on regular loans to pay employees and buy stuff to sell but should such a business exist in the first place that can't keep itself afloat without the constant loans?

2) the second problem is the government printing money and driving inflation by doing so.

A radical solution is to end the FED and 90+ % of the federal government, but continue taxing at the current rate for 4-5 years. All funds collected go in the furnace.

That would bring our economy back in line in short order!

-t

anaconda
10-11-2010, 01:32 PM
A little inflation can help labor markets adjust the real wage downward more swiftly when this type of correction is necessary.

Travlyr
10-11-2010, 01:44 PM
A little inflation can help labor markets adjust the real wage downward more swiftly when this type of correction is necessary.
True. At the expense of the poor.

specsaregood
10-11-2010, 01:49 PM
1) for every $1 a bank gets in deposits, it is free to loan $10 out - effectively creating money out of thin air.

This practice needs to end, but it will drive up interest rates to borrow money. I suspect many will scream because small businesses rely on regular loans to pay employees and buy stuff to sell but should such a business exist in the first place that can't keep itself afloat without the constant loans?


I think one could scream just as loud that this exactly why we have huge corporations that have taken over the whole country at the expense of small businesses and strip malls in every single city/state are identical.

Travlyr
10-11-2010, 01:49 PM
Money is an interesting issue that I have trouble completely grasping. I think the more honest economists, politicians, bloggers, etc will admit that the jury is still out as to what "money" truly is and what role it should play in society.
Money is very clearly defined. Money is a "medium of exchange." If it has a commodity backing it, then it is valuable. If it does not have a commodity backing it, it is worth only the cotton/linen it's written on. If you have not yet read Murray Rothbard's "The Mystery of Banking", I encourage you to read it.


You're right. The problem is that certain people can print money for their own purposes while the rest of society can't. That's why government spending is the ultimate problem. If you printed and handed it out to everybody without regard to what they're going to do with it, that would be more fair. It would be at least an interesting experiment, one that the people who own our society aren't about to let happen.

Governments don't recognize assets (property) so much as they protect them. An important question for society to discuss is what type of assets it wants to effectively use violence to protect and which ones it doesn't. Is it important to use government violence to protect Warren Buffet's assets?

If there was a system that allowed Buffet's assets to go unprotected by government, but protected smaller sets of assets, would that be equitable? Right now the exact opposite is in place. The financial system is designed to protect the wealth of a small handful of people at the expense of the rest of society.

This is important to look at in a monetary context because the idea of printing money and handing it out to people instead of injecting it into society through government spending is something that will ultimately harm very wealthy people, not smaller sets of assets.
I wish no harm on the rich. I only want them to stop stealing wealth from others.

Travlyr
10-11-2010, 01:55 PM
Seems like we have 2 problems here:

1) for every $1 a bank gets in deposits, it is free to loan $10 out - effectively creating money out of thin air.

This practice needs to end, but it will drive up interest rates to borrow money. I suspect many will scream because small businesses rely on regular loans to pay employees and buy stuff to sell but should such a business exist in the first place that can't keep itself afloat without the constant loans?

2) the second problem is the government printing money and driving inflation by doing so.

A radical solution is to end the FED and 90+ % of the federal government, but continue taxing at the current rate for 4-5 years. All funds collected go in the furnace.

That would bring our economy back in line in short order!

-t
I agree. Printing money out of thin air has to stop.
As far as recovery after ending the fed... recovery could be virtually immediate once the power elite were out of the picture and the country returns to the principals of the Constitution and free markets. The federal government owns enough real property to distribute to the people and recreate prosperity.

anaconda
10-11-2010, 02:43 PM
True. At the expense of the poor.

Some of those poor would otherwise be unemployed.

ItsTime
10-11-2010, 02:47 PM
Some of those poor would otherwise be unemployed.

Yeah now they are employed and homeless.

Travlyr
10-11-2010, 02:50 PM
Inflation is always good for the inflater, and not so good for everyone else.
If I counterfeit money without getting caught, it's good for me. But it is bad for you, and everyone else, because I increase the money supply and you all pay for it with higher prices.

furface
10-11-2010, 03:26 PM
Money is very clearly defined. Money is a "medium of exchange." If it has a commodity backing it, then it is valuable. If it does not have a commodity backing it, it is worth only the cotton/linen it's written on. If you have not yet read Murray Rothbard's "The Mystery of Banking", I encourage you to read it.


I encourage you to think about money in a fundamental sense. You don't need a book to tell you what it does. Think about how it's used and what problems it solves. Money is definitely not clearly defined. It is a very perplexing issue and there are many different theories of money, none of them being definitive.

anaconda
10-13-2010, 03:22 AM
Yeah now they are employed and homeless.

Not because of inflation.

AcousticFoodie
10-13-2010, 04:14 AM
A third factor is the issue of interest. If we go back to a precious metal backed system, unless loaners spend all the principle and interest they get back from their debtors, what's to stop all the bankers from owning all the money in the world?

hugolp
10-13-2010, 04:46 AM
Money is an interesting issue that I have trouble completely grasping. I think the more honest economists, politicians, bloggers, etc will admit that the jury is still out as to what "money" truly is and what role it should play in society.

There is no problem defining money and what function it acomplishes, there is only wackos out there trying to confuse people about the subject.


You're right. The problem is that certain people can print money for their own purposes while the rest of society can't. That's why government spending is the ultimate problem. If you printed and handed it out to everybody without regard to what they're going to do with it, that would be more fair. It would be at least an interesting experiment, one that the people who own our society aren't about to let happen.

If you dont print money this already happens because prices go down. Dont get lure into the idea that with more money we would be richer. Its untrue because prices would raise. If the money supply remains stable in respect for the demand of cash, prices go down because of increase of productivity and everybody is richer. Its a distribution system already in place. You dont need money printing.

But they are not equivalent. Money printing would be a disaster because it distorts the natural interest rates that coordinate the economy, and that leads to bubbles and a waste of resources and rampant speculation that makes the majority poorer.

There is nothing positive in money printing.


Governments don't recognize assets (property) so much as they protect them. An important question for society to discuss is what type of assets it wants to effectively use violence to protect and which ones it doesn't. Is it important to use government violence to protect Warren Buffet's assets?

Only legitimate adquired property should be protected. Property adquired through fraud and robbery should not be protected obviously.

There is a big problem with this and its that as time passes it gets harder to track this things.


If there was a system that allowed Buffet's assets to go unprotected by government, but protected smaller sets of assets, would that be equitable? Right now the exact opposite is in place. The financial system is designed to protect the wealth of a small handful of people at the expense of the rest of society.

This is important to look at in a monetary context because the idea of printing money and handing it out to people instead of injecting it into society through government spending is something that will ultimately harm very wealthy people, not smaller sets of assets.

The problems created by government regulation can not be solved with more government regulation (like money printing f.e.). It will only make things worse.

hugolp
10-13-2010, 04:48 AM
A third factor is the issue of interest. If we go back to a precious metal backed system, unless loaners spend all the principle and interest they get back from their debtors, what's to stop all the bankers from owning all the money in the world?

Can you point to one example of this not happening because of government regulations in favor of bankers?