Issue: Economic: On the Federal Reserve

[giskard]

The Mises Institute has this 42 min docu:
http://www.youtube.com/watch?v=iYZM58dulPE

And then some people will say something like the following
If you took macroeconomics you'd know:

1) The Fed is purposefully separated from the government so that the government cannot directly control interest rates and affect money. There is a damn good reason for this.
2) Small inflation is a very good thing. It means that people can pay back loans with money that is worth a little less than the money you borrowed. Zero inflation isn't bad but any amount of deflation is almost disasterous.
3) Our national debt as as percentage of GDP is in line with the rest of the first world and slightly lower. Yes, it's large but the money we pay in interest goes to foreign allies that we borrow money from. It keeps them our allies since if they get pissed at us, we'll just negate the debt. It's useful in world stability.

And then there's this "Debunking Federal Reserve Myths"
http://www.geocities.com/CapitolHill/Embassy/1154/flaherty.html

Could someone support or debunk some of the above statements?

[wraft]

Ron's position on the Federal Reserve should be the same as Andrew Jackson's - they are a den of vipers to be rooted out. Anything more elaborate than that puts people to sleep.

[Gee]

1) I would say this is a question of who can best manage what the Fed does, Congress or private bankers? Private bankers aren't publicly accountable, and Congress is hardly fiscally responsible. To me, neither seem ideal.

2) I don't know the answer to this, as I'm not an economist. I am, however, extremely skeptical that creditors and debtors could not learn to react to any currency with resonably predictable inflationary (or deflationary) tendencies.

I was drawn to Dr. Paul's platform on the Fed not because he says he wants to abolish it, but that he wants to allow hard currencies to compete with it (by removing any tax on buying or selling specie). If we had a "free market" of currencies, I feel confident the best solution would arise, and the US economy would not be as crippled if our government resorted to hyperinflation to pay off its debts. In my opinion anything is better than a state-mandated currency which does not give the people the power to choose what they wish to barter with. Most people today don't think about it, but the reason we have legal tender laws is because people refused to accept fiat currency without the threat of government force. If people were naturally inclined to accept a fiat currency, legislation wouldn't have been necissary.

3) Its still pretty high if you look at it as a percentage of GDP:
http://upload.wikimedia.org/wikipedia/en/8/8d/National_debt_as_a_%25_of_gdp.jpg
As you can see, the trend is for a sharp spike after large wars (and the Great Depression), followed by a gradual decrease. But the overall trend is still increasing levels of debt when compared to GDP.
I think the main cause for concern is the drop in value of the dollar and expansion of our money supply. If the dollar looses too much value, people may stop lending us money. And if the debts get too high to pay back, more inflationary practices may be used. That, combined with promised entitlements to retiring "baby boomers", might push the government into bankruptcy. A good explaination of it is here:
http://news.bbc.co.uk/2/hi/programmes/hardtalk/4857646.stm

[Brandybuck]

The Federal Reserve has worked in the past couple of decades because the past few chairmen have had been very disciplined. But we shouldn't be in a situation where our monetary supply is run on the "honor system". There's just too much temptation to reach into that coffee can and snag a few inflation bucks when no one's looking.

Of course, I doubt that getting rid of the Fed is a realistic prospect. Maybe in Ron Paul's second term, but not in his first. :-)

[Bryan]

Could someone support or debunk some of the above statements?

Here is my take:


1) The Fed is purposefully separated from the government so that the government cannot directly control interest rates and affect money. There is a damn good reason for this. And what is that reason? And how does that reason outweigh the proposed alternative? Per the Constitution, the hundreds of members of Congress have the power to regulate money whereas with the Fed there are only seven who serve 14 year terms. With the Fed it only takes four people to get together behind closed doors to preplan years of interest rate fluctuations and then work deals with their business cronies on how to best profit from it. With Congress, it would take hundreds to do this same. So what is the "damn good reason"? Can it top allowing four people to basically run the country?



Small inflation is a very good thing. It means that people can pay back loans with money that is worth a little less than the money you borrowed. It also means that people who saved money have a little less later than they had before, unless then keep the asset liquid to "invest" it. So by this logic, the advantage goes to the debtor (one who spends too much). If you run big business you thrive on people that spend too much.


Our national debt as as percentage of GDP is in line with the rest of the first world and slightly lower. Who cares what the rest of the first world does? How about doing what is best? Our national debt is $120,000 for every family of four- how is this a good thing?


Yes, it's large but the money we pay in interest goes to foreign allies that we borrow money from.How many hundreds of billions of US debt does China hold? Since when are communist our allies?


It keeps them our allies since if they get pissed at us, we'll just negate the debt. It's useful in world stability.If you threaten to not pay a debt to a friend do you think it adds stability to your friendship? I'd say if a country didn't repay its debt then a citizenry might just want to start an invasion and take control over valuable natural resources to force the repayment. The borrower is servant to the lender. How is this stability?

Never mind the fact that in a free society (like we're suppose to be) no other person or group of people (or their government) can impose a forced tax or debt upon you. If someone else wants to go in debt then let them but don't let them force their debt upon you.


As for the Fed, can anyone provide a diagram that has the following attributes:

- Who are the players (Board of Governors, Open Market Committee, Federal Reserve Banks, Board of Directors, etc)
- What are the players legal roots (some are government, some private)
- Who has what authority?
- How the exact flow of money occurs between all these entities, for all types of transitions

From there it would then be possible to properly analyze and discuss the attributes of the system and who may or may not be getting a favorable deal. I have looked for this information in a plan English form before in books and on the net with no luck, it seems it should be pretty simple to produce- anyone know where it can be found?

[wraft]

To understand the current Federal Reserve, it is useful to contrast our current interest bearing currency with that of non-interest bearing money such as the Lincoln greenbacks.

see: http://www.thetruthseeker.co.uk/print.asp?ID=843

Every President who has tried to take control of the money from the bankers has been assassinated - Lincoln, Garfield, McKinley, Kennedy.

[beermotor]

The problem you must understand is that a hard currency system, i.e. not what we operate under now, is the single most powerful check on aggressive, destructive government action, period. Look at what Washington had to do to fight the Revolutionary War... print "Continentals." (I think that little bit is in the Mises.org video that features Ron, as well.)

This is the critical issue that many people do not understand.

This is a critical issue that the Democratic party does not understand (among quite a few others).

If $1 == 1/35th ounce of gold (or whatever you'd like to set it to be), a government cannot go on spending forever. It could not fight an open-ended war. Indeed, like you and I, it would have to save funds to conduct such operations.

But government does not have any business whatsoever conducting any open-ended war, period. This is Ron Paul's point every time he opens his mouth. Whether the wars are on personal freedom, on successful capitalists, or on freedom-minded Muslim peoples who simply want self-determination free of Western domination, wars are ALWAYS, ALWAYS THE SAME. SAME OUTCOME, EVERY SINGLE TIME.

And that outcome is: the world is made poorer.

I think he needs to get this message across. The Federal Reserve is a machine of war. Without it, the government could not do the multitude of things that it does so poorly, so ineptly, and nor could it do the multitude of things that are simply evil. Throw in some Bible verses for good measure. This is a moral issue, a Christian issue.

[MsDoodahs]

If $1 == 1/35th ounce of gold (or whatever you'd like to set it to be), a government cannot go on spending forever. It could not fight an open-ended war. Indeed, like you and I, it would have to save funds to conduct such operations.



YES YES YES!

This is the key point that I don't think most people understand.

[Gee]

YES YES YES!

This is the key point that I don't think most people understand.
Some people would say this is why fiat money is needed, to allow the government to spend a ton more money than it has when its needed (such as in an important war). I don't really agree, but its an argument people will probably make. I think if a nation is actually directly threatened by another, the extra taxes or labor required to defend it will be available without overprinting fiat money.

[NMCB3]

Some people would say this is why fiat money is needed, to allow the government to spend a ton more money than it has when its needed (such as in an important war). I don't really agree, but its an argument people will probably make. I think if a nation is actually directly threatened by another, the extra taxes or labor required to defend it will be available without overprinting fiat money. Nations just borrow money during wartime. For example Great Briton in the 17th and 18th century's borrowed money from the Dutch bankers to finance their wars against the French and everyone else.

[lifeasariver]

The Mises Institute has this 42 min docu:
http://www.youtube.com/watch?v=iYZM58dulPE

And then some people will say something like the following
If you took macroeconomics you'd know:

1) The Fed is purposefully separated from the government so that the government cannot directly control interest rates and affect money. There is a damn good reason for this.
2) Small inflation is a very good thing. It means that people can pay back loans with money that is worth a little less than the money you borrowed. Zero inflation isn't bad but any amount of deflation is almost disasterous.
3) Our national debt as as percentage of GDP is in line with the rest of the first world and slightly lower. Yes, it's large but the money we pay in interest goes to foreign allies that we borrow money from. It keeps them our allies since if they get pissed at us, we'll just negate the debt. It's useful in world stability.

And then there's this "Debunking Federal Reserve Myths"
http://www.geocities.com/CapitolHill/Embassy/1154/flaherty.html

Could someone support or debunk some of the above statements?

1. Separated from the government and in the hands of unelected people - financiers and speculators. Whoever has control over money controls the country - the citizens should be more comfortable by knowing the the control of their country is in the hands of the people they elected.
2. True but inflation devalues our money and weakens our stance on the world market - kind of safe for now since the oil is priced and purchased with US dollars which keeps our inflation-weakened currency still in demand.
2 & 3. GDP is inflated by the Wall Street revenues including money that are not monetized and then reduced by inflation. Then the inflation is calculated by the BLS using hedonic regression (look it up). The real inflation is much, much higher than what is made public. In addition, Fed Reserve doesn't publish M3 anymore which was the indicator of all the US dollars in the world (the more money, especially fiat money, the greater the inflation). So, the real GDP is much lower. Borrowing money from others doesn't make them our allies, it makes them our creditors. Just borrow money from a bank and don't pay back and see what happens.

[Bryan]

2 & 3. GDP is inflated by the Wall Street revenues including money that are not monetized and then reduced by inflation. Then the inflation is calculated by the BLS using hedonic regression (look it up). The real inflation is much, much higher than what is made public. In addition, Fed Reserve doesn't publish M3 anymore which was the indicator of all the US dollars in the world (the more money, especially fiat money, the greater the inflation). So, the real GDP is much lower.
Great information Stephan.

In the last debate Dr. Paul mentioned that our total debt obligation is $60 trillion, vastly more than the current debt near $9 trillion. The $51 trillion difference is money that we have agreed to pay out (via social security and the like) at a future date. This puts the debt obligation to around $800,000 for every family of four in America which is beyond insane.

Does anyone have a good link to show the $60 trillion figure?

[lifeasariver]

Great information Stephan.

In the last debate Dr. Paul mentioned that our total debt obligation is $60 trillion, vastly more than the current debt near $9 trillion. The $51 trillion difference is money that we have agreed to pay out (via social security and the like) at a future date. This puts the debt obligation to around $800,000 for every family of four in America which is beyond insane.

Does anyone have a good link to show the $60 trillion figure?

I was looking for such a link too but couldn't find it but here is some interesting info about SS http://www.heritage.org/Research/SocialSecurity/bg1802.cfm. They consider the social security "off budget" something that sounds to me like they don't see it as an obligation to pay. And about the $8.5 trillion debt, the Congress had to increase the cap every year for the last 4 years or so because, by law, when the cap is reached, the government is considered bankrupt and ceases to function (it only keeps a minimum of critical agencies open, such as DoJ). We have been bankrupt for a long time but they always find ways to hide it. Thinking about the social security debt is even more depressing.The lesson is, never let the government take care of your own well-being, no matter what kind of government is.

[jon_perez]

Why is deflation "disastrous"? I believe Japan has undergone some mild deflation recently and it does not seem to have been "disastrous".

Does deflation always precede (and not accompanies, which would be the opposite causal relationship) depression/recession ?


Keynesian economics - which is considered to have worked remarkably well in pulling the US out of the Great Depression - prescribes deficit spending which then justifies the move fiat currency.

pbs.org has a video documentary called "Commanding Heights" which is an excellent and very fascinating layman's introduction to 20th century economic history.

[Brandybuck]

Keynesian economics - which is considered to have worked remarkably well in pulling the US out of the Great Depression - prescribes deficit spending which then justifies the move fiat currency
Keynesian economic theory was disproven when we had high unemployment AND high inflation at the same time. Stagflation during the Ford years.

As for getting us out of the Great Depression, big government meddling with the monetary supply had nothing to do with it. In fact, it was that meddling that got us into the depression and kept us there long after the market should have corrected it.

[jon_perez]

Keynesian economic theory was disproven when we had high unemployment AND high inflation at the same time. Stagflation during the Ford years.Disproven or I would say, shown to have its flaws.


As for getting us out of the Great Depression, big government meddling with the monetary supply had nothing to do with it.It is easy to say this in retrospect. However, perhaps it was the right prescription during those years.

It is entirely possible (and quite likely in fact) that economic theories, unlike hard science theories, are not universally applicable across all times and all different situations. Over history, it seems that the pendulum swings back and forth between statist/socialist and laissez-faire economic theories, generally evolving and becoming more sophisticated as time goes by.

[kelldor]

There are 2 "national debt" numbers floating around. The national debt that the government tells you is at about 9 trillion. This debt is calculated using fuzzy math. Federal government agencies have been using cash accounting instead of accrual accounting for the last 10 years. if a corporation did that the ceo's and cfo's would be thrown in jail. Cash accounting does not account for the outlays and unfunded liabilities that accrual accounting does. Using accrual accounting the real national debt is over 50 trillion, if not 60 trillion atm. examples of unfunded liabilities would be veterans benefits, social security, medicare, medicaid, etc.

The GAO has been complaining about this for 10 years now, (No, Clinton did "not" pay off the national debt, he just started using fuzzy math, which bush continues to this day). I urge you to check out this GAO report called "Fiscal Stewardship: A Critical Challenge Facing Our Nation (http://www.gao.gov/new.items/d07362sp.pdf)". Just the Preface of the report lays out in clear language how bad the situation is. They even call this a National Security threat. The GAO is probably the last government agency that is telling the truth. This report is well laid out, lots of graphs and charts, not hard to understand.

Grandfather Economic Reports (http://mwhodges.home.att.net/) is a great place to get information also.

National Debt, Inflation, and GDP (http://www.youtube.com/watch?v=rW5KgF7OyiA) is a good YouTube video with lots of information. It explains how our we are broke, insolvent, bankrupt, and our "real" National Debt is 400% greater than our GDP. This one explains very well the "Inflation=hidden tax" that Ron Paul has talked about recently during the debates.

After you check these out, you may want to puke in a bucket as you come to realize what exactly the corrupt Federal Reserve has done to us. Combine this with the sub-prime mortgage collapse in march, the bursting housing bubble that will result, which is being temporarily staved off by Ben Bernanke printing up as much money as possible, which depreciates the dollar in relation to other currencies like the Euro, which many central banks are switching to for their reserves and for use to buy oil from Iran with since they announced they wouldn't accept dollars anymore, which drops our petro-dollar even more, cause the the fact our dollar is the main currency countries use to buy oil is the only thing holding it afloat, along with the fact that other countries still loan us money, which they are rapidly figuring out that we will never be able to pay back, and it paints a pretty scary picture that our whole house of cards is crashing down around us, but we don't see it cause Neil Cavuto tells us "the economy is great, The DOW is at record levels, unemployment is low, etc."

Lastly, The real reason we attacked Iraq was because in 2000 before Bush was elected Saddam announce that Iraq would no longer accept dollars for oil. This is when Cheney, Wolfowitz and the Project for the New American Century began working on their now famous paper titled "Rebuilding Americas Defenses", which calls for taking out a bunch of mid-east countries we don't like, but sais it will be hard to do absent some "pearl harbor-like event". It had absolutely nothing to do with WMD's.

This is why we will either attack Iran, or switch to the Amero, or both. Iran announced a couple months ago they won't accept dollars for oil, so by these guys logic we must bomb them to save the dollar, but I also think they see that it can't be saved, unless we do away with it and institute the Amero before it crashes completely.

If I had stocks, IRA's, 401k's, I would sell all of them and buy hard gold and hard silver, buy a safe to keep it in, and buy a gun.

http://www.silverstockreport.com has great info on silver.

http://www.dollarcollapse.com/ - Ron Paul friendly site!

Dollar collapse would result in Amero (http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=53350)

U.S. Mortgage Crisis Can Trigger Collapse Of the Global Casino (http://www.larouchepub.com/eiw/public/2007/2007_10-19/2007-12/pdf/04-12_712_feat.pdf)

Inflation, Dow 13K and the Second Great Depression (http://bullnotbull.com/archive/dow13k-1.html)

Good luck all, I have to go puke now.

[megiddo]

Most of the inflationary macro-economic theory is based (as has been mentioned) on Keynesian economics. The logic is flawed for two reasons:

1. Keynes described a short-run technique for easing economic transaction during periods of contraction (but not growth).

2. Politicians are always looking for free taxes, of which inflation is the most hidden.

This combination of an economic theory of inflation, and politicians who desire such a theory, led to its general use even when it was inappropriate.

Keynesian theory and politicians were a match made in heaven for socialists and expansionist lobbyists.

The long and short of which is, the 3 primary arguments presented in the first post are fallacious in their basis, so arguing them point-by-point is moot.

It would be like claiming that 2+2 = 22, then asking to disprove that 3 x 4 = 34.

[giskard]

Can someone debunk the statements in here:
http://www.geocities.com/CapitolHill/Embassy/1154/flaherty.html


Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publically-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board. In addition, nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank's district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publically-appointed Board of Governors, not by the Federal Reserve banks.

Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office.

Facts: The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury. The government could print its own currency independent of the Fed, but there would be no effective safeguards against abuse of this power for political gain.

Facts: The Federal Reserve banks have only a small share of the total national debt (about 7%). Therefore, only a small share of the interest on the debt goes to the Fed. Regardless, the Fed rebates that interest to the Treasury every year, so the debt held by the Fed carries no net interest obligation for the government. In addition, it is Congress, not the Federal Reserve, who is responsible for the federal budget and the national debt.

Facts: Kennedy wrote E.O. 11,110 to phase out silver certificate currency, not to issue more of it. Records show Kennedy and the Federal Reserve were almost always in agreement on policy matters. He even signed legislation to give the Fed more authority to issue currency.

Facts: McFadden was incorrect regarding the Fed costing the government money. However, later economic analysis agrees with him that Federal Reserve policy blunders had a substantial role in causing the Depression. However, his implication that this was done deliberately has no basis in fact. Moreover, for a dozen years prior to his rant, McFadden had been the chairman of the House subcommittee that oversaw the Federal Reserve. Why didn't he do anything to reform or abolish the Fed while he had the chance?

Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank's ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank's operating costs and is de facto proof a bank cannot costlessly create money.

Fact: The term 'lawful money' does not refer to gold or silver coin, but to types of money which the government would permit banks to use when tabulating their reserves. These types of money included, but were not limited to, gold and silver coin.

[Bradley in DC]

To understand the current Federal Reserve, it is useful to contrast our current interest bearing currency with that of non-interest bearing money such as the Lincoln greenbacks.

see: http://www.thetruthseeker.co.uk/print.asp?ID=843

Every President who has tried to take control of the money from the bankers has been assassinated - Lincoln, Garfield, McKinley, Kennedy.

Not sure where to start dispelling falsehoods: for starters, FRNs are not interest bearing. The First National Bank and Second National Bank were sunsetted (abolished at the end of their charter) without any anyone getting assassinated. Jackson survived a very prominent fight with Nicholas Biddle. Lincoln was horrible on these issues, and you imply a causal relationship on assassinations that isn't there.

[Bradley in DC]

Can someone debunk the statements in here:
http://www.geocities.com/CapitolHill/Embassy/1154/flaherty.html

which statements do you think need debunking? they offer a more sophisticated explanation than most of the hybrid public (Board)-private (Reserve Banks) than most short analyses I've seen.

[Bradley in DC]

The Federal Reserve has worked in the past couple of decades because the past few chairmen have had been very disciplined. But we shouldn't be in a situation where our monetary supply is run on the "honor system". There's just too much temptation to reach into that coffee can and snag a few inflation bucks when no one's looking.

Of course, I doubt that getting rid of the Fed is a realistic prospect. Maybe in Ron Paul's second term, but not in his first. :-)

Definitely a goal of the first term! Greenspan was not disciplined: the Y2K excess liquidity (on top of the previous excesses) inflated the stock market bubble, etc. Greenspan wrote about in the WSJ and testified before the Gold Commission (Dr. Paul has a copy of the hearing transcripts handy in his office in Texas) on an easy way *how* to return to gold (gold-denominated bonds competing with FRN-denominated ones; I think it was the inspiration for our TIPS bonds). When he cuts spending and stops the deficit, the Fed won't have to monetize the debt anymore! Any function of the Fed could be handled better by the private sector, Congress or the Treasury.

[Brandybuck]

The cause of the Great Depression and the "business cycle" has been thoroughly explained by the Austrian economists. Here is a book (free pdf) by Rothbard on the subject: http://www.mises.org/rothbard/agd.pdf

To quote Ron Paul: "From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy."

[Bradley in DC]

In the last debate Dr. Paul mentioned that our total debt obligation is $60 trillion, vastly more than the current debt near $9 trillion. The $51 trillion difference is money that we have agreed to pay out (via social security and the like) at a future date. This puts the debt obligation to around $800,000 for every family of four in America which is beyond insane.

As you point out, our obligations and debt are measuring two different things. Just so we don't go off the deep end, the obligations include all government guaranteed loans (student loans, OPIC, Ex-Im Bank, etc.). While most of these loans are repaid, the subsidies do distort the price signaling mechanism of the market which causes dislocations that contribute to the boom and bust cycle.

[Bradley in DC]

1) The Fed is purposefully separated from the government so that the government cannot directly control interest rates and affect money. There is a damn good reason for this.
We need market-determined interest rates, not central planning through central banking.

2) Small inflation is a very good thing. It means that people can pay back loans with money that is worth a little less than the money you borrowed. Zero inflation isn't bad but any amount of deflation is almost disasterous.
Inflation is bad; deflation is the correction.

3) Our national debt as as percentage of GDP is in line with the rest of the first world and slightly lower. Yes, it's large but the money we pay in interest goes to foreign allies that we borrow money from. It keeps them our allies since if they get pissed at us, we'll just negate the debt. It's useful in world stability.[/i]
So Red China is our foreign ally on whom we should depend?

[Bradley in DC]

The problem you must understand is that a hard currency system, i.e. not what we operate under now, is the single most powerful check on aggressive, destructive government action, period.
If $1 == 1/35th ounce of gold (or whatever you'd like to set it to be), a government cannot go on spending forever. It could not fight an open-ended war. Indeed, like you and I, it would have to save funds to conduct such operations.

The history of the adoption of central banking is the history of war finance.

[G-khan]

I run a website that is dedicated to educating on the Federal Reserve and money..

Here is a link with a movie that includes comments by Ron Paul..

http://goldismoney.info/forums/showthread.php?p=343772

Here is one that explains the Fed and their role in our wars..

http://goldismoney.info/forums/showthread.php?t=100643

There is a lot more info on my site about the Fed and its creation and who owns it!

You will then understand why Dr. Paul is against the Fed!

[Bradley in DC]

I run a website that is dedicated to educating on the Federal Reserve and money..

I used to be Dr. Paul's legislative staffer for banking and monetary issues. I had an over-eager intern then key in all of the transcript exchanges of the banking cmte with Dr. Paul. They are available here:

http://www.house.gov/paul/committeework/bankingtrans/welcome.htm

There is no longer a link to it on their site and has not been kept updated. But it should be useful for you.

[fsk]

I made a pretty detailed article on this topic in the "Ron Paul Wiki".

http://www.ronpaulpresshub.com/wiki/index.php?title=Federal_Reserve

I edited it to address all the points people made here.

[joenaab]

Remember that gold is fiat money, too. It is a fiat money less susceptible to inflation and counterfeit than paper. With a fixed quantity of gold and a growing economy and growing population deflationary pricing would be the natural outcome.

In the presence of growth, if the desired outcome is stable prices, then the money supply would have to be increased to keep prices the same. With a gold-backed currency, the ratio of gold per unit would have to be decreased over time to keep prices the same.

Using extreme examples to illustrate the point: An economy of ten people uses 1000 grams of gold to represent the value of the golds and services they exchange. A meal might cost a few grams. The economy grows to a million people. The amount of gold remains fixed. The money supply would be inadequate to represent the value of goods and services being exchanged. Instead of ten grams per person you'd have 1000 people per gram. You couldn't keep the price of a meal to a few grams. Its price would fall to a small fraction of a gram. If paper money was used to represent grams of gold, and you wanted to keep the price of a meal the same, you'd have to grow the ration of paper units per gram of gold, which is a subjective process. If no action were taken, there'd be no way for a million people to conduct commerce with 1000 units of value to divide amongst them.

My point is that, whether a currency is backed by gold or not, maintaining an adequate supply of money with zero inflation requires human intervention. Lots of it. Who do we most trust to intervene, a private for-profit business with huge incentive to manipulate the money supply to better it's own profits, or our own not-for-profit public enterprise acting in the best interest of serving all people equally?

[Bradley in DC]

Remember that gold is fiat money, too.

Um, I don't think so. Gold = commodity money. Fiat money, well, it grows on trees!;)

"Price stability" is not the goal. In fact, keeping the nominal aggregate price level stable in a time of increased productivity effectively masks inflation. Hayek (and others) have written about this extensively. The stable (consumer) prices of the 1920s at a time of great productivity gains (radio, etc.) and in the 1990s (internet, just in time delivery, etc.) lead to asset price bubbles in the stock and real estate markets. In a market economy, prices should gently fall over time for each item (picture the Walmart falling prices sign).

I'm just suggesting a more nuanced analysis, not that there isn't some merit to the other comments you made about a growing economy. The important part is letting the price signalling mechanism work without governmental interference. The price level will adjust as necessary with a guide.

[chopdave]

The federal reserve is not a product of a free society. In a free society, peoples' individual actions determine interest rates, not a cabal of old grey-haired men.

[mordechai]

It sucks.

[Gimme Some Truth]

I think if a nation is actually directly threatened by another, the extra taxes or labor required to defend it will be available without overprinting fiat money.

Agreed.

Also, since Ron Paul would abolish the Income Tax , im sure people would back him up in reinstating it during wartime.

Anyhow, a sound monetary system lessons the amount of needless wars ,which lessons blowback. I fully agree with Paul and his "Trade with everyone , have alliances with no-one" stance

[RonPaul4President]

You do not need income tax, period. We already pay taxes on everything. If the money was used for domestic purposes instead of trying to rule the entire world their would be a suplus in a matter of months. Ron Paul knows what he is talking about.

[G-khan]

The problem as I see it is we have private people bankers creating our money and charging us interest on it. Plus it is not money it is debt - the bankers and the Fed create it out of thin air and charge us interest on it. If there is to be a profit on creating money it ought to go to the people and not bankers and maybe we would not need so many taxes.

Whoever controls the money supply controls the people. The creation of the Fed was the greatest rip off ever. Congress and the politicians are all in on it and let it continue because they can buy votes and promise programs without raising taxes - they just borrow it by asking the Fed for it. When it was backed by Gold/Silver they could not do this because you could take your paper dollar and cash it in for Silver or Gold - they had to back it..

What you need to ask yourself is this.
Why do we borrow money from the bankers/Fed and pay them interest on it?
How come we don't make our own money and issue US Notes and pay no interest on it?

Here is something many of you don't know but President Kennedy printed about 4 billion US notes and you can still get them and he paid no interest on them. He also wanted to get rid of the Fed.. He was killed before he got very far..

http://www.sweetliberty.org/issues/eo/eo2.htm


Here is a great film you can watch called the Money Masters

Part 1 Deals with money its creation the Federal Reserve etc.
http://goldismoney.info/forums/showthread.php?t=79890

Part 2 Is the solution and what could be done!
http://goldismoney.info/forums/showthread.php?t=27150

Getting rid of the Fed = freedom and Dr Paul knows this and that is why I fear for his life........... These guys start wars to make money and Dr. Paul means nothing to them.. they will take him out if he plans to end the Fed IMO

[RonPaul4President]

I watched all of part one and a little of part two. Tomorrow I will post some thoughts and ideas I have to challenge the tactics of global bankers. Hopefully I will live through the night. ;)

[RonPaul4President]

Here are some thoughts, ideas and questions I had while watching part one:


Any senator should be immediately escorted from Capitol Hill and impeached if they show any support for privitization of currency.
Government should have at their disposal a currency to place into circulation in the event of threat from private bankers.
Illegalize fractional reserve banking.
There is no war nor terror. The greatest enemy to all humans is the central bank which manifests both.
Did the U.S. attack IRAQ to instil private control of their currency, just as the British attacked us for the same reason?
Name the investors. It is their anonymity that is their greatest strength.
Imprison them and return the stolen wealth to the world.
Create a new currency that is out of the hands of the private bankers. Barter when possible.
Legislate a Constitutional amendment that makes it illegal for any private bank to control federal currency.
Have the Department of Justice investigate Bankers and Congress for bribery and conspiracy.
Was it the bankers that penned the patriot act?
Dissolve all unconstitutional law.
No bill shall pass without the vote of 2/3 or more of the Senate.


Unity of people is the banker's worst nightmare. Not only must we remain united as a country, we must strive to unify all humanity and educate them of this insane and murderous scheme to own the entire planet by a few men.

[joenaab]

Bradley in DC, I want to continue to argue that gold is a type of fiat money, fiat meaning we put "faith" in that it will be accepted as a unit of stored value in exchange for actual commodities that we consume while having little consumption value itself, other than as jewelry. It's scarcity and present impossibility to "counterfeit" makes it an excellent fiat currency. However:

1. The "Gold Supply" constantly grows through mining by the tens or hundreds of tons per year. New gold enters in private hands so its entry into the marketplace is already inherantly unfair to the general public. In effect, wealth was created without having to produce value to the community, in a similar way as printing paper money on a machine, though more labor intensive.

2. By its nature, using gold and silver as money has produced a long history of slavery, war, theft and other atrocities as there is tremendous incentive by those who are prone to violence to go straight for the gold & silver as opposed to producing goods and services that have tangible value to the community.

3. The fair distribution of gold, or money backed by gold, is rarely talked about by gold money advocates. It's an easy system for Americans to promote as they have (once had?) enormous gold stores, not all of it acquired ethically. What about countries that have no gold? Most of the above ground gold is in the hands of elite private citizens or heavily armed 1st world nations.

4. Gold does not fairly represent the goods and services exchanged for it, because gold lasts forever and food, consumer goods, etc. last for days, weeks and/or decades. I believe it was Silvio Gessell who points out that true neutral money must fall in value to best mimic the underlying goods and services.

5. Gold money does not address the problem caused by the growing gap between national production and national income due to automation. We don't earn enough to pay for the goods and services that we've produced. This falls into the realm of National Dividend, Basic Income Guarantees and, I believe, the work of Henry George.

Sorry to go on at length. I'm not trying to be a know-it-all, as I am just learning all this in the past year and think that all ideas should be on the table and that we should equally discuss the flaws of using gold as money as we do its strengths.

[Gee]

I agree with Joe. Any form of exchange has value as a currency because people agree to use it for exchange. The problem with fiat money is that whomever prints it can simply create as much of it as they want, of course. I wouldn't say the problem with fiat money is its valuelessness in itself, but rather cronic miss-management by government. After all, it DOES have some logistical advantages over commodity-backed money.

But other than constitutional limits on how its managed, I don't see a way to keep it from being abused.

[G-khan]

I agree with Joe. Any form of exchange has value as a currency because people agree to use it for exchange. The problem with fiat money is that whomever prints it can simply create as much of it as they want, of course. I wouldn't say the problem with fiat money is its valuelessness in itself, but rather cronic miss-management by government. After all, it DOES have some logistical advantages over commodity-backed money.

But other than constitutional limits on how its managed, I don't see a way to keep it from being abused.

Here is one solution that has been offered from the Money Masters and to me it seems it could work...

Part 2 Is the solution and what could be done!
http://goldismoney.info/forums/showthread.php?t=27150

[Bradley in DC]

Bradley in DC, I want to continue to argue that gold is a type of fiat money, fiat meaning we put "faith" in that it will be accepted as a unit of stored value in exchange for actual commodities that we consume while having little consumption value itself, other than as jewelry. It's scarcity and present impossibility to "counterfeit" makes it an excellent fiat currency. However:

1. The "Gold Supply" constantly grows through mining by the tens or hundreds of tons per year. New gold enters in private hands so its entry into the marketplace is already inherantly unfair to the general public. In effect, wealth was created without having to produce value to the community, in a similar way as printing paper money on a machine, though more labor intensive.

2. By its nature, using gold and silver as money has produced a long history of slavery, war, theft and other atrocities as there is tremendous incentive by those who are prone to violence to go straight for the gold & silver as opposed to producing goods and services that have tangible value to the community.

3. The fair distribution of gold, or money backed by gold, is rarely talked about by gold money advocates. It's an easy system for Americans to promote as they have (once had?) enormous gold stores, not all of it acquired ethically. What about countries that have no gold? Most of the above ground gold is in the hands of elite private citizens or heavily armed 1st world nations.

4. Gold does not fairly represent the goods and services exchanged for it, because gold lasts forever and food, consumer goods, etc. last for days, weeks and/or decades. I believe it was Silvio Gessell who points out that true neutral money must fall in value to best mimic the underlying goods and services.

5. Gold money does not address the problem caused by the growing gap between national production and national income due to automation. We don't earn enough to pay for the goods and services that we've produced. This falls into the realm of National Dividend, Basic Income Guarantees and, I believe, the work of Henry George.

Sorry to go on at length. I'm not trying to be a know-it-all, as I am just learning all this in the past year and think that all ideas should be on the table and that we should equally discuss the flaws of using gold as money as we do its strengths.

Joe, it's good to see discussions of important public policy issues! You define your own terms (fiat money) in a manner contradictory to the conventionally accepted one. Fiat money is paper money that is not backed (redeemable) in an underlying commody. Commodity money (such as gold or silver) cannot be fiat money. One could have paper instruments (such as gold certificates) that are redeemable in gold and would not be considered fiat money, but there are, by definition, no commodities that are fiat money.

Without wanting to come off as pedantic, I'd like to suggest some fundamental readings:

The last chapter of the Princples of Economics by Carl Menger on how money evolved in the first place (and what money is). He has a similar article here:
http://www.mises.org/web/2692

The Foundation for the Advancement of Monetary Education (FAME) has lots of good resources:
http://fame.org/ReadingList.asp

The Committee for Monetary Reform and Education
http://cmre.org/

The Mises Institute has a lot of good information including a pdf of a book of Dr. Paul's
http://www.mises.org/books/goldpeace.pdf

In response to some of your observations:
1. Yes, new gold is mined. This introduction into the community is inherently "fair" even by your subjective definition since they mined the gold and produced something of value.

2. "By its nature" no such thing.:confused: If you argue one does things for money, it is the nature of greed for money itself, not the nature gold and silver.

3. "Fair distribution" is an alien concept not applicable here.:confused: If you understand what money is and how gold evolved in the market (ie, how people choose gold over every other competing monetary instrument), it would be a better discussion. Check Menger. It was FDR (out of "fairness" I'm sure) who confiscated monetary gold held by the common citizens now held by a heavily armed elite that offends Dr. Paul and his followers.

4. If one didn't find the exchange "fair" or to their advantage, the exchange would not take place. How often do you give up your labor when you do not subjectively "get your money's worth" out of it? Don't some things, in fact, increase in value over time? I'm not familiar with that author, but that presentation of his ideas gives me little inclination to spend my time that way.

5. If prices are allowed to fluctuate in a free market, and automation reduces relative prices on those goods, the prices gently fall over time to the benefit of consumers (think of Walmarts falling prices ads).

I think you are trying to address concerns that go beyond the nature of money. A more focuses line of inquiry might help in a conversation on a forum like this one.

[RonPaul4President]

If gold is fiat money, what isn't fiat money? I thought gold "was" the commodity and paper the promissory note. BTW, I don't think I'm a know-it-all either. I'm learning as I go just as everyone alive is. If I offended anyone with my abundance of opinion, I apologize.

[G-khan]

If gold is fiat money, what isn't fiat money? I thought gold "was" the commodity and paper the promissory note. BTW, I don't think I'm a know-it-all either. I'm learning as I go just as everyone alive is. If I offended anyone with my abundance of opinion, I apologize.


Gold is not fiat money! It has substance and you can't just add some zeros to it and change 1 dollar into 100 by what you print on it..

Fiat money is paper money and gets its worth from what is printed on it. Now you can take paper money and have it backed by gold or silver and redeemable in the metal itself. This requires the trust that those who issue it actually can pay all the bills off if they come in for redemption.

The actual gold or silver is better than the backed money because it has its value in your hand and you own it. The banksers can't control gold and silver that you hold as you own it.

I have been reading and studying a lot of opinions on money and what it is and happen to think that printing US notes is what we should do as a country. The congress should be in charge of it. We should not pay interest to private bankers for creating money. Think about it - the banksters create money out of thin air and then charge us interest on it.

How would you like to have the privilege of creating money from nothing and then charging others interest on it. While you are in debt to them you also work for them which means they control you..

I don't pretend to know it all or the answers to it all - I do know I don't like giving this privilege to private bankers and the Fed.

We need to get rid of the Fed, they make the mafia look like child's play IMO

[RonPaul4President]

I agree 100%, right on!

[joenaab]

I am all for abolishing the Fed, so don't mistake my discussions regarding gold as me standing in oppostion of what I think is the single most important issue facing the world.

This idea that gold is a form of fiat money is not mine, I read it recently in my studies of monetary theory, but I don't remember where. I understand that it's not the common definition, but it makes sense to me. Is has value because we believe it has value (fiat=faith).

An example of a non-fiat currency would be a currency backed by something we all use, such as a kilowatt of energy. (Of course when zero-point free energy is worked out, there goes the money!) I will drop the subject and start referring to gold as non-fiat, for the sake of uniformity of dialog here.

Though I can't say for certain until I've studied some more, I expect that in an ideal situation, a well-managed fiat currency would be better than gold or gold-backed currency. The question would be could the ideal ever be achieved?

Bradley, thanks for the links to the reading material. I'll add them to my growing list and I'll get to them after this week's chaotic post-debate online madness.

Thanks guys, great thread.

[Gee]

The point is that the value of all commodities is subjective. If gold lost its industrial usage and people stopped using it for jewelry, it would be worth very little. Its a lot more likely for fiat money to loose its value than gold, of course, but ultimately the value of gold is still subjective. The primary benifits of the gold standard are not really adding "value" to money, IMO, its more that it prevents the government from abusing the money supply for its own purposes.

[G-khan]

From what I understand of money per say.. it is not faith but guns that back the currency each country chooses to choose. Your government tells you by law what is legal tender and what you must pay your taxes in.. If they tell you it must be sea shells then that is your currency...

[Gee]

From what I understand of money per say.. it is not faith but guns that back the currency each country chooses to choose. Your government tells you by law what is legal tender and what you must pay your taxes in.. If they tell you it must be sea shells then that is your currency...
Thats true, but the dollar is accepted overseas because people have faith in it. It has a subjective value to them. That value varries, and futures markets try to predict the changes to the dollar just like they do to gold, silver, etc.

Many odd currencies arose (such as sea shells, or whatever) not by law, but by convenience. That is the whole point of money after all, convenience. Fiat money is more convenient than commodity-backed money, at least to the people who run the currency.

I'd rather the market just decide what currencies to use.

[Bradley in DC]

This idea that gold is a form of fiat money is not mine, I read it recently in my studies of monetary theory, but I don't remember where. I understand that it's not the common definition, but it makes sense to me. Is has value because we believe it has value (fiat=faith).

Bradley, thanks for the links to the reading material. I'll add them to my growing list and I'll get to them after this week's chaotic post-debate online madness.

Hi Joe,

My pleasure. Of course I should have pointed out Greenspans article (but you can find that on FAME, etc.). Before repeating that gold is fiat money again anywhere else, I kindly suggest you go back and try to find what you read (it was either a misunderstanding or that person was just plain wrong). Gold--or any other commodity--does not have value based on "faith" but on it's INTRISIC value as a commodiy (look at the global commodity markets for gold, base metals, oil, etc.).

There are characteristics that make up a good money (divisibility, easily identifiable, durable, etc.--please, please read up on Menger first) that should also help shape your understanding of how we got money in history in the first place, how different types of commodities were traded for those with higher use value and eventually a global acceptance of gold (and silver) as the preferred medium of exchange and store of value.

It is government paper money that relies on faith (actually the full faith and credit!) of the issuer (government). Commodity money such as gold has intrisic value set by the market (ie, the equilibrium price at any given moment of the willingness of holders of gold to sell vs. the willingness of others to buy). Remember also, that the market is a *process* not a thing, or place, etc.

[joenaab]

As G-khan posted, I, too, was intrigued by the idea at the end of the Money Masters and the warning against returning to the gold standard. This is what set me off in the direction of alternative theorists like Gessell and George.

We already know that using gold itself is impractical due to its weight, and that even currencies backed by gold can be taken off the gold standard on a whim, so we'll never be 100% safe.

The issue of ethics and human mismanagement is what breaks the bank everytime, not necessarily the system employed.

[joenaab]

Bradley, I plan to read up, though it's hard to get books in Brazil. However, gold's value as a commodity is derived almost solely from its use as money (due to the faith we put in it as money). Oil and gas produce energy, fruits and vegetables can be eaten. Even silver has many industrial applications.

There is also the argument that gold's scarcity can inhibit the ability to transact. The ideal "money" would be readily available when an exchange of goods and services has been agreed upon. This is why sea-shells and nuts and fiat currencies emerge, because transactions must occur even in the absense of gold.

Most people on the planet still live far from the big cities and money centers and have neither access to nor priviledge to acquire gold held in big vaults by big business and big government.

[G-khan]

As G-khan posted, I, too, was intrigued by the idea at the end of the Money Masters and the warning against returning to the gold standard. This is what set me off in the direction of alternative theorists like Gessell and George.

We already know that using gold itself is impractical due to its weight, and that even currencies backed by gold can be taken off the gold standard on a whim, so we'll never be 100% safe.

The issue of ethics and human mismanagement is what breaks the bank everytime, not necessarily the system employed.

I think we must some how come up with a money like US notes and make strict rules that make sure that no one can profit from it would be best. Our monetary system is most basic to our freedom and having a just country for all. It must be written like the constitution only with more checks and balances so it can never be abused. Anyone even trying to tamper with it profit from it like the Rothchilds etc. would get life in prison..

Funny how we all go to school to get an education so we can earn money and they never teach what money is or how it comes into circulation.. Back in the 1800's the people knew more about money and its creation then they do now.

Well if Dr. Paul does get elected we will need to have a plan on what to do after he gets rid of the Fed. My guess is if it looks like he will get elected they will kill him..

[RonPaul4President]

Personally, I would like to use U.S. minted gold coin. Make the coins the weight needed to make them the value of todays coins. Why get wrapped up in the promissory notes. Let's just use the real thing. Of course that would mean buying our gold back from The Bank of England.

[joenaab]

Imagine how I feel, - I've got a degree in Economics and never learned a thing about money and central banking.

I like the idea of replacing Reserve Notes with Treasury Notes right away as suggested in the Money Master. We'll need some time to get the gold back if its not where we left it. Ending fractional lending will also be a high priority.

And, no, they won't give it up easy, which is why this campaign is as much about raising awareness as it is about getting RP elected. I can envision state by state secession if we stay on this course and the economy/dollar gets crushed. If countries with populations in the few millions can have their own currencies, so can our states.

[aravoth]

Yeah, I'd rather use gold and silver coin myself. None of this "Pay to the bearer on demand" shit.

[Bradley in DC]

Bradley, I plan to read up, though it's hard to get books in Brazil. However, gold's value as a commodity is derived almost solely from its use as money (due to the faith we put in it as money). Oil and gas produce energy, fruits and vegetables can be eaten. Even silver has many industrial applications.

There is also the argument that gold's scarcity can inhibit the ability to transact. The ideal "money" would be readily available when an exchange of goods and services has been agreed upon. This is why sea-shells and nuts and fiat currencies emerge, because transactions must occur even in the absense of gold.

Most people on the planet still live far from the big cities and money centers and have neither access to nor priviledge to acquire gold held in big vaults by big business and big government.

Joe, where are you in Brasil? Never been but hope to go "soon." I used to live in Colombia and Chile and have cousins in Argentina. It was in Peru during Garcia's previous stint as President in 1987 that I got interested in monetary policy (the gold dealers there were the last functioning banking system in the country at the time).

Most gold is bought for commercial (electronics) and jewelry (though some of the jewelry sales in India, China, etc. are a "clunky jewelry" gold standard as a store of wealth for many poorer, rural people and others who don't trust the local fiat currencies or don't have ready access to the formal banking sector--or one that isn't corrupt anyway).

Again, please read the Menger article (you know a lot already, he just helps fill in some of the gaps). If we can put it behind ones and zeros on the back of a piece of plastic, it's easy to transact!

Are you familiar with goldmoney.com and egold?

[Freedom]

Imagine how I feel, - I've got a degree in Economics and never learned a thing about money and central banking.


That's exactly the way the banksters want it to be! Imagine collecting the interest on the government debt - what would you do with all of that money? You might spend it to secure your position to get that spigot of money. Perhaps you purchase all of the media so you can control public opinion, next you might purchase entire educational systems to control what young persons are taught (or not taught!). You could even promote economic theories (Keynesian) that help obfuscate your evil deeds. (Look into Austrian Economic theory to see what's really going on - www.mises.org ( "http://www.mises.org") is a great place to start!) You might convince people's of a country to go to war and then loan money to both sides. You care not who wins, you just want the interest.

Mayer Amschel Rothschild once said, "Give me control of a nation's money and I care not who makes her laws."

A great book to read about the central bankers' evil doings is The Creature from Jekyll Island by G. Edward Griffin (http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212)

Central banking is the root cause of most of the evil in this world. It must be destroyed at all costs!

[joenaab]

I've definately spent some time on the Mises site and I've listened to a few hours of Rothbard spoken word. Great stuff. I've also read the excellent book, "How the World Really Works", which includes a chapter which summerized Griffin's Jekyl Island book. I also learned in that book how the Bankers paid Congress to create the tax-exempt foundation laws which they used to create all the text books we use from kindergarden through PhD, to make sure we learn exactly what's "in our best interests". Education was federalized to guarantee that we use their books.

Bradley, I live on an island called Florianopolis, in the state of Santa Catarina. Beautiful place. I left the U.S. in June of 2001 and arrived here after three years of continuous travel with no more than a suitcase full of clothes and an ATM card to my name. I lived a year in Colombia and loved it. I spent three months in Ecuador. You are welcome to visit.

I saw the writing on the walls in big letters and got out early, taking no chances. I never thought that a man like Ron Paul would turn up (while being there all along). Thought I'd join the fight, since the NWO is here in Brazil and ready to do horrible things.

[joenaab]

Oh, Bradley, and yes, I know of goldmoney and egold. I love the idea. I would trust this type of private enterprise, audited, etc. much more than any govt.

[CurtisLow]

The FED creates money from nothing, and loans it back to us through banks, and charges interest on our currency. The FED also buys Government debt with money printed on a printing press and charges U.S. taxpayers interest. Many Congressmen and Presidents say this is fraud. Who actually owns the Federal Reserve Central Banks? The ownership of the 12 Central banks, a very well kept secret, has been revealed: 1. Rothschild Bank of London 2. Warburg Bank of Hamburg 3. Rothschild Bank of Berlin 4. Lehman Brothers of New York 5. Lazard Brothers of Paris 6. Kuhn Loeb Bank of New York 7. Israel Moses Seif Banks of Italy 8. Goldman, Sachs of New York 9. Warburg Bank of Amsterdam 10. Chase Manhattan Bank of New York.


.

[Bradley in DC]

A new article from the Independent Institute that might be of interest:

http://www.independent.org/publications/tir/article.asp?issueID=48&articleID=612

Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy
By Richard H. Timberlake

Discounting the differences between the self-regulating classical gold standard that prevailed before World War I and the government-managed gold-exchange standard that replaced it, many writers have erroneously blamed “the gold standard” for the inability of Federal Reserve Board policymakers to implement countercyclical policies in 1929–33 and thus to prevent the Great Depression. Worse, they have failed to identify the true culprit in the monetary system of that era—the fallacious real bills doctrine, which guided Fed policy.

[fsk]

I read that the Great Depression was caused by insiders manipulating interest rates for their own benefit. At that time, the Federal Reserve didn't publish its interest rate target in advance. The banks who knew that credit was going to be tightened knew in advance to stop issuing loans. They converted all their holdings to cash. After the crash, they bought assets cheap.

Interest rates weren't loosened until after Roosevelt became president so he could take credit for the recovery.

http://the7thfire.com/Politics%20and%20History/Secrets_of_the_Federal_Reserve/secrets_of_the_federal_reserve_TC.htm#Introduction

[RonPaul4President]

Inevitably, there will be a market crash. Whenever the people rise up in revolt against the system the Fed deprives the economy of money and crashes the stock market. All wealth and property that is not in physical possession of it's owner, and/or fully paid for, will be claimed by the money lender(s). The wealth is not lost nor does it disappear into thin air. It is tranferred from those that are indebted to the banks(debtors) to those that OWN the banks(the money lenders). Don't expect the government to step into save you because the government is run by these scoundrels. It is for this very reason we have the 2nd Amendment. Use it!

[fsk]

There will soon be a market crash. Mark my words. Whenever the people rise up in revolt against the system the Fed deprives the economy of money and crashes the stock market. All wealth and property that is not in physical possession of it's owner, and/or fully paid for, will be claimed by the lender(s). The wealth is not lost nor does it disappear into thin air. It is tranferred from those that are indebted to the banks(debtors) to those that OWN the banks(the money lenders).

There is one possibility. If the Federal Reserve is abolished, the government would need to print enough new money to ensure an adequate money supply. It could print money and repurchase debt. It could directly spend the money or cut taxes.

All the government has to do is print "This note is legal tender" and it'll be as valid as the Federal Reserve Notes.

[RonPaul4President]

There is also another possbility. A non-currency currency. For example, my pay goes directly to my bank and I use a debit card for ALL my purchases. At no point does "currency" come into play. It is a system based solely on currency points. If we removed the middleman(the banks) credit could go directly from the employer to the employee via a debit card. The employee is given a debit card for his/her work instead of a check that needs to be cashed at a bank. Some would say that there is a risk of dishonesty on the employers side but that same risk exists today. This system is private and confidential between the employer and employee. The government nor the banks have any say or control over the flow of this forum of currency point system. As many now know, the IRS does not have any Constitutional right to deduct taxes on labor, as well as many other forms of earnings they now steal from Americans. Income tax is a trick used by the government to pay interest on the debt it has to the money lenders. Our income tax goes directly to funding WAR. Income tax is tool used by global bankers/federal reserve to remain in power, and WE pay for it. It's the perfect crime and they are getting away with it.

[fsk]

The problem with a private monetary system is that you still have to pay income taxes in regular dollars. In the eyes of the IRS, barter transactions are taxable income. Income taxes must be paid in dollars.

Even if you are legally correct, the IRS will still hassle you. They have more resources than you and can make you waste time and money defending yourself in court. There is no guarantee you would get a jury that understands the complicated issues.

If there was no income tax, then a private monetary system would be viable.

I agree with you in principle. The IRS and worthless fiat money are inherently wrong. However, the way the courts and the IRS act mean that no progress can be made without changing the laws or the way courts interpret the constitution.

[Carl]

There is also another possbility. A non-currency currency. For example, my pay goes directly to my bank and I use a debit card for ALL my purchases. At no point does "currency" come into play. It is a system based solely on currency points. If we removed the middleman(the banks) credit could go directly from the employer to the employee via a debit card. The employee is given a debit card for his/her work instead of a check that needs to be cashed at a bank. Some would say that there is a risk of dishonesty on the employers side but that same risk exists today. This system is private and confidential between the employer and employee. The government nor the banks have any say or control over the flow of this forum of currency point system. As many now know, the IRS does not have any Constitutional right to deduct taxes on labor, as well as many other forms of earnings they now steal from Americans. Income tax is a trick used by the government to pay interest on the debt it has to the money lenders. Our income tax goes directly to funding WAR. Income tax is tool used by global bankers/federal reserve to remain in power, and WE pay for it. It's the perfect crime and they are getting away with it. Who pays for the setup, maintenance and administration of this system?

.

[RonPaul4President]

Good question. I'm just throwing a suggestion around. All the employer needs is a card press and the cards. The stores that honor this form of credit would pay for their end to attract customers just as they do now. Whenever you use a debit or credit card, they(the seller) have to pay a "fee" to the banks. Now, the real dilemna is, what does the store do with that credit and how do they store and use it themselves. Originally, banks were used to store people's gold. Then the paper/fiat money came into existance as a receipt for said gold. The banks then became the backbone of this system. We need to remove the banks from the currency equation to ensure we are never tricked again. I'll leave the rest up to someone smarter than me.

[fsk]

Who pays for the setup, maintenance and administration of this system?


It would be very easy to set up a private monetary system. It would take a competent programmer a year or two to write the software and open-source it. The trick would be convincing people to adopt it.

It should be possible to set up such a system using strong cryptography and making it a distributed P2P system. It would have to be distributed rather than centralized because the IRS would crack down on any centralized organizer. The IRS probably has access to techniques that would crack any cryptography the average person would use.

The problem is that the IRS will try to shut down any private monetary system. According to the IRS, any barter transactions are taxable as regular income.

There is no incentive for people to adopt a private monetary system, because the IRS would crack down on the participants. The only way it would work is if a substantial percentage of people started using it before the IRS noticed and started cracking down.

[RonPaul4President]

The problem is that the IRS will try to shut down any private monetary system. According to the IRS, any barter transactions are taxable as regular income.

Some excellent ponts. However, in a free country the IRS would not exist. I'm assuming that the IRS and Federal Reserve have been abolished at this point and we can start over, gradually replacing fiat money(worthless paper) with a tangible, yet intangible, currency point system. At this point honest government, as impossible as it sounds, would be a necessity to maintain fiscal order. I think the reason so many politicians aren't willing to fight against this is because they feel overwhelmed. I hope that, united as a people, we can return courage to their broken hearts and wisdom to their molested minds.

[fsk]

The problem is that the Federal Reserve and IRS have been around for so long that they couldn't just be instantly abolished.

If you abolish the Federal Reserve, there would be chaos in the financial markets. Interest rates would spike up 5% or more. Since the only money currently in circulation exists as debt, all the money would drain out of the economy as more loans were repaid than issued.

If you abolish the IRS, then the value of the dollar would fall to zero. Right now, there is a certain demand for dollars because the government demands them as payment for income taxes. You need income taxes to prop up the value of the dollar, due to the demand for dollars created by the government.

Think of a dollar as a receipt that says "bearer allowed to conduct $3 of economic activity" (assuming 33% federal tax income tax rates). This receipt is valid because the IRS will invade people's privacy and use force to collect the receipts.

In other words, "instantly abolish the IRS and Federal Reserve" would be a recipe for complete economic chaos. They would have to be phased out gradually.

For example, interest rates could be allowed to gradually be raised to a free market level, and income tax rates could be lowered gradually to zero. The problem is that this whole process would take longer than one President's term, if you want to do it properly.

[Carl]

The problem is that the Federal Reserve and IRS have been around for so long that they couldn't just be instantly abolished.

If you abolish the Federal Reserve, there would be chaos in the financial markets. Interest rates would spike up 5% or more. Since the only money currently in circulation exists as debt, all the money would drain out of the economy as more loans were repaid than issued.

If you abolish the IRS, then the value of the dollar would fall to zero. Right now, there is a certain natural demand for dollars because the government demands them as payment for income taxes. You need income taxes to prop up the value of the dollar, due to the natural demand for dollars created by the government.

Think of a dollar as a receipt that says "bearer allowed to conduct $3 of economic activity" (assuming 33% federal tax income tax rates). This receipt is valid because the IRS will invade people's privacy and use force to collect the receipts.

In other words, "instantly abolish the IRS and Federal Reserve" would be a recipe for complete economic chaos. They would have to be phased out gradually.

For example, interest rates could be allowed to gradually be raised to a free market level, and income tax rates could be lowered gradually to zero. The problem is that this whole process would take longer than one President's term, if you want to do it properly. If you abolished the Fed there would be no interest rates, as they would go with the Fed and their Fiat currency. Currency related activities that are not linked to the actual production of products and product related services will also bite the dust. Goodbye Hedge Funds, your 2.4 trillion dollar nonsense will not be missed. So on and so on.......

Will there be economic chaos, yes. It cannot be avoided but when the smoke clears and the dust settles we will be in a far better position to rebuild an economy that is real and legitimately prosperous.

[fsk]

I don't think that's part of Ron Paul's platform. "I'm the candidate for complete economic chaos."

Ron Paul hasn't exactly said what his plan would be after he abolished the Federal Reserve and IRS. I think they can be abolished or reformed without things getting totally out of hand.

[Carl]

I don't think that's part of Ron Paul's platform. "I'm the candidate for complete economic chaos."

Ron Paul hasn't exactly said what his plan would be after he abolished the Federal Reserve and IRS. I think they can be abolished or reformed without things getting totally out of hand. It's possible, if we can get the Federal Reserve, other Central Banks, World Bank and the Bank for International Settlements to cooperate in the transition, of course they'll be wondering what's in it for them that they would give up such a valuable resource as the U.S. Economy.

You just can't take half of the red pill, you have to swallow the whole thing.

But I suppose we could just have the Treasury Department start printing notes under their name to replace the Federal Reserve notes and continue on as if we've accomplished something grand and high minded.


.

[fsk]

But I suppose we could just have the Treasury Department start printing notes under their name to replace the Federal Reserve notes and continue on as if we've accomplished something grand and high minded.


Actually, it would be an accomplishment. Without the Federal Reserve, interest rates would be market-determined instead of fixed at an artificially low level. That would lead to more efficient allocations of capital.

[unconsious767]

Theres an -->interesting thread<-- (http://forums.anandtech.com/messageview.aspx?catid=52&threadid=2055708) in this techie forum, some calling Ron uneducated regarding economics and gold.

I've tried with these guys before, maybe someone more eloquent and knowledgable take a stab? :p

[Gee]

Ron Paul hasn't exactly said what his plan would be after he abolished the Federal Reserve and IRS. I think they can be abolished or reformed without things getting totally out of hand.
He's stated he doesn't think we can abolish it at this point, so he just wants to legalize the competition (i.e., other forms of currency).

[Carl]

Actually, it would be an accomplishment. Without the Federal Reserve, interest rates would be market-determined instead of fixed at an artificially low level. That would lead to more efficient allocations of capital.

I was thinking about this, again, this morning and I believe that simply replacing FRN's with Treasury Notes is the right track and I was also thinking that we take the FRN's and buy all the assets held by the cabal of banks that serve as the Federal Reserve System. They get their FRN's back and we get our assets back and everyone walks away happy. Of course FRN's will no longer be accepted or associated with the United States but hey, that's the issuer's problem not ours.

I just hope they have enough assets to cover all the FRN's they've floated out there.


.

[G-khan]

I don't think that's part of Ron Paul's platform. "I'm the candidate for complete economic chaos."

Ron Paul hasn't exactly said what his plan would be after he abolished the Federal Reserve and IRS. I think they can be abolished or reformed without things getting totally out of hand.

You could get rid of the IRS (income tax) right away and stop funding other countries and financing wars and we still would have more money than we had when we had the income tax!

[G-khan]

It's possible, if we can get the Federal Reserve, other Central Banks, World Bank and the Bank for International Settlements to cooperate in the transition, of course they'll be wondering what's in it for them that they would give up such a valuable resource as the U.S. Economy.

You just can't take half of the red pill, you have to swallow the whole thing.

But I suppose we could just have the Treasury Department start printing notes under their name to replace the Federal Reserve notes and continue on as if we've accomplished something grand and high minded.


.

All the banks IMF etc. all are one and the same.. The Fed makes money on what the US Gov. borrows and the discount rate it gives to its member bankers who are the shareholders.. It sets the requirements of the fractional bankers normally about 10% and the Fed discount rate to its members.

When it sets the requirements it is saying to its members you must have 10% in their books on hand. So say you come in and sold a boat for 20,000 bucks and deposit it! The bank can then create a loan for say 180,000 for someone to say buy a house. The banks themselves create this new money out of thin air.. and charge you interest on it.

The banksters run the world and finance all the wars.

We gave the Fed (banksters) the right to create money from nothing. The Fed has nothing to back anything they just have the right to create money and charge interest.

How would you like the right to be able to create money from nothing and then loan it out and collect interest on it.

We should create our own money and collect our own interest and we would not need taxes. Why do the banksters get it?

Thomas Jefferson (http://www.brainyquote.com/quotes/quotes/t/thomasjeff136339.html)
I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.

[Carl]

All the banks IMF etc. all are one and the same.. The Fed makes money on what the US Gov. borrows and the discount rate it gives to its member bankers who are the shareholders.. It sets the requirements of the fractional bankers normally about 10% and the Fed discount rate to its members.

When it sets the requirements it is saying to its members you must have 10% in their books on hand. So say you come in and sold a boat for 20,000 bucks and deposit it! The bank can then create a loan for say 180,000 for someone to say buy a house. The banks themselves create this new money out of thin air.. and charge you interest on it.

The banksters run the world and finance all the wars.

We gave the Fed (banksters) the right to create money from nothing. The Fed has nothing to back anything they just have the right to create money and charge interest.

How would you like the right to be able to create money from nothing and then loan it out and collect interest on it.

We should create our own money and collect our own interest and we would not need taxes. Why do the banksters get it?

Thomas Jefferson (http://www.brainyquote.com/quotes/quotes/t/thomasjeff136339.html)
I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs. Yes, I understand all that but they're not doing all of this from a home made hooch built in the woods someplace. Also, the banks hold real assets as part of debt collateral and acquisitions. They acquired these assets in exchange for the use of their FRN’s, give them back their FRN’s in exchange for the assets they hold.

I think it is a fair deal.


.

[G-khan]

Yes, I understand all that but they're not doing all of this from a home made hooch built in the woods someplace. Also, the banks hold real assets as part of debt collateral and acquisitions. They acquired these assets in exchange for the use of their FRN’s, give them back their FRN’s in exchange for the assets they hold.

I think it is a fair deal.


.

Their FRNs? You mean they gave us paper for land and houses and such..

I sure wish I could print numbers on paper and trade them for a lake home!

Please tell me what real assets banks hold - bullion banks and the IMF have gold?

[fsk]

Yes, I understand all that but they're not doing all of this from a home made hooch built in the woods someplace. Also, the banks hold real assets as part of debt collateral and acquisitions. They acquired these assets in exchange for the use of their FRN’s, give them back their FRN’s in exchange for the assets they hold.

I think it is a fair deal.


The banks hold real assets because they used their money-printing power to confiscate real assets.

For example, suppose banks collectively lend out $1 trillion at 5% interest for a year. A year later, $1.05 trillion needs to be repaid. However, there's only $1 trillion in circulation, because in the Federal Reserve System money is only created when a loan is taken out. There's a $50 billion shortfall, so either the banks foreclose on $50 billion worth of assets, or more loans are issued to keep up the money supply.

When money is only created by the issuing of loans, the only possible outcome can be that the aggregate indebtedness of society increases exponentially over time. The only time debt gets canceled is bankruptcy. In bankruptcy, banks convert their loans to real assets.

This process is facilitated by the expanding and contracting of the money supply. When interest rates are raised, fewer new loans are issued. The money supply contracts as more loans are repaid than new loans issued. By statistical necessity, some borrowers are forced into bankruptcy. The banks confiscate assets during bankruptcy. When interest rates are lowered, more loans are issued, and the money supply expands. Now, the banks sell back some of the assets they confiscated when the money supply was tight.

In the long run, the only possible outcome can be for banks to eventually own practically anything. The sum total of all debts is far greater than the sum total of the money supply. This means that the wealth confiscation rate can be carefully calibrated so that wealth is confiscated nearly as fast as workers produce it.

Under these economic conditions, are the assets owned by banks and the banks' owners really valid? Is their claim to this property legitimate?

I'd be satisfied if the Federal Reserve was abolished or reformed and their ability to confiscate wealth eliminated. Let them keep what they already stole and let people start working under a fair monetary system.

The end of the scam may be near anyway, even if Ron Paul is not elected President. The money supply is expanding at a rate of more than 6% per year, according to the Federal Reserve's M2. Interest rates are now 5.25%. That means the effective real interest rate is less than -0.75%. Real interest rates have to be negative just to insure enough borrowing occurs to keep the money supply up.

[G-khan]

@fsk Looks like we agree.... Thanks for explaining more, it seems you have a good grasp of it..

[AaronAbel]

Theres an -->interesting thread<-- (http://forums.anandtech.com/messageview.aspx?catid=52&threadid=2055708) in this techie forum, some calling Ron uneducated regarding economics and gold.

I've tried with these guys before, maybe someone more eloquent and knowledgable take a stab? :p



Rainsford basically hangs himself with his own words:


the value of oil and gold can't be controlled or linked to a constantly changing economy


That is exactly the point of hard money, central bankers can't manipulate it to make themselves richer and us poor. He believes central planning is superior to a market economy. Really no point in arguing with him until he realizes the central bankers only see him as a serf.

I haven't found a way to help people who believe a bunch of secretive bankers planning the economy from a marble palace is a good idea.

[beermotor]

We need to be consistently pushing the point that a hard currency system effectively BARS the government from committing all the atrocities that it does. It is the Federal Reserve which allows the government to do all of the socialist horsehockey that has caused us so many problems, internally and externally. The Founding Fathers were right, Lincoln (and FDR, et al.) were wrong, etc. I mean, this is common sense. But people haven't heard it before - you gotta educate them!

Just because we'd be on a gold standard doesn't mean you would never have banks or be able to borrow money! It means the GOVERNMENT would be constrained from taking such aggressive actions...

[Carl]

Their FRNs? You mean they gave us paper for land and houses and such..

I sure wish I could print numbers on paper and trade them for a lake home!Yes, I wish I could do that as well, but I went to a bank and they printed numbers on a piece of paper for me to borrow and use instead.

Please tell me what real assets banks hold - bullion banks and the IMF have gold? Yes, there is that too but....

The actual holders of the lake home is the bank and by extension the Federal Reserve who issues the FRN's which also gave the bank the power to create.

I think that it is only fitting that the original creators of the Federal Reserve System should be made responsible for the redemption of the FRN's. J. P. Morgan Company, First National Bank of New York, Kuhn, Loeb & Company now Lehman Brothers etc, etc, etc, to include anything associated with the Rockefellers.

They created the system, it’s their FRN’s, they can have them back in exchange for the assets they hold which they acquired using FRN's.

[Carl]

What fsk said!

[RonPaul4President]

I'd be satisfied if the Federal Reserve was abolished or reformed and their ability to confiscate wealth eliminated. Let them keep what they already stole and let people start working under a fair monetary system.

I wish that "could" happen but it can't. There lust for wealth and power is insatiable. If they had even an ounce of reason they would not impoverish the entire planet. They're sickos. Logic and reason is moot.

[Gee]

I wish that "could" happen but it can't. There lust for wealth and power is insatiable. If they had even an ounce of reason they would not impoverish the entire planet. They're sickos. Logic and reason is moot.
Ehh, a number of Fed chairmens have stated they weren't able to keep inflation under control with congress demanding more money for their programs. I seriously doubt your average Fed employee is any more "evil" than your average government employee. The problem is systemic, otherwise it could simply be fixed by putting the right people in charge.

Central banks employ a large number of the world's economists, and its hard to speak out against your employer. Even still, I'd bet a lot of them think central banks are necissary. Never attribute to malice that which can be adequately explained by stupidity.

[RonPaul4President]

Ehh, a number of Fed chairmens have stated they weren't able to keep inflation under control with congress demanding more money for their programs. I seriously doubt your average Fed employee is any more "evil" than your average government employee. The problem is systemic, otherwise it could simply be fixed by putting the right people in charge.

Central banks employ a large number of the world's economists, and its hard to speak out against your employer. Even still, I'd bet a lot of them think central banks are necissary. Never attribute to malice that which can be adequately explained by stupidity.

Have you seen the youtube movie Freedom to Fascism? The whole thing? I agree the problem is systemic but Congress is helpless. They have lost their power to legislate us out of this mess.

[fsk]

The Federal Reserve Chairman is going to be asking "Should we raise interest rates?" or "Should we lower interest rates?".

The Federal Reserve Chairman isn't going to be asking "Should we let the free market determine interest rates?". He isn't going to question the fundamental nature of the price-fixing cartel he's running.

[Bob Cochran]

Of course, I doubt that getting rid of the Fed is a realistic prospect. Maybe in Ron Paul's second term, but not in his first. :-)
Right. We have issues like unintended consequences and throwing the baby out with the bathwater.

I would rather see overhauls in government spending....like pork spending. John McCain said in the last debate that he'd make famous the politicians who tack pork onto bills...but I don't believe him.

I also believe that we need to maintain a superstrong military, but be extremely careful how we deploy them. We DON'T want to try to maintain an omnipotent military at ANY cost, which seems like our current policy.

One benefit to our current adventure in Iraq is that our next half-generation of military people will be trained by those who have seen real combat. This is very important in maintaining a strong military.

I was in the Army in the early to mid 80s. The Korean war era guys were mostly gone, and the Vietnam guys were getting close to retirement. But we got GOOD training from guys like my senior drill sergeant, who had served in Vietnam, and several of my senior NCOs and officers in Germany who had also done Nam tours. Those guys knew what it was all about, were very professional, and worked hard to make sure we were ready to fight, but prayed that we would not have to.

And let me say that, even though I didn't know it at the time, Ronald Reagan was a GREAT Commander in Chief. He knew we had to be ready to fight, but wanted to keep us out of fights if possible. That's the kind of guy you want. NOT a dry drunk like Dubya who has to swagger around the world and kick everyone's butt so he'll be feared.....or whatever his deal actually is. It's painful to watch.

Sorry for that....this thread is about the Fed.....:D I get carried away.

[fsk]

I thought that Ron Paul was quoted in one debate as saying he would eliminate the Federal Reserve and IRS during his first two weeks in office.

[Gee]

Have you seen the youtube movie Freedom to Fascism? The whole thing? I agree the problem is systemic but Congress is helpless. They have lost their power to legislate us out of this mess.
Yeah, I've seen the whole thing. I don't know if I'd call that movie terribly factual, though.

fsk, Ron Paul has said he wants to allow competition with it, by legalizing other forms of currency, not actually abolish it outright. Just like he talked about with the USPS on the Daily Show, the best way to transition these things is to allow competition, and let the market decide.

[Mr. Green]

The Fed is pretty much pure evil and I think it's time to put it out to pasture. And as far as inflation goes, there is only one way that inflation is caused: PRINTING MONEY.

This happens a lot with the Federal Reserve because they give the government loans out of thin air. They say, "You need 2 billion dollars?" they print 2 billion dollars and they make sure more money is printed so they can be paid the interest as well as the original loan.

They pretty much control the media, the government, and thus they control the knowledge and actions of most Americans. It's a disgusting situation and the only way it can be stopped is to shut them down.

Ron Paul is the ONLY politician who even brings this up much less the only politician who would shut them down.

[Mr. Green]

Yeah, I've seen the whole thing. I don't know if I'd call that movie terribly factual, though.
It was VERY factual.

And it is truly disturbing that all that information is out there about the Fed and this unconstitutional regulation being passed-- and NO MAINSTREAM MEDIA reports on it!

So that says quite a bit about mainstream media...

[fsk]

Suppose Ron Paul doesn't get elected President. Then what happens? Is this group of supporters going to just dissolve?

I don't like the idea that the Federal Reserve and IRS collectively steal 50% or more of what I produce, through inflation and taxation. Is there anything I can do about it?

Are there any viable options for someone who wants to do productive work, but not report all their activities to the government? The huge government spying apparatus would make it very risky to do this sort of thing. It may not be worth the risk of being hassled by the IRS if you get caught. However, when you take into account the effect of taxes and inflation, I'd only have to get paid half as much for grey market work for it to be worthwhile.

One interesting solution I read about was the idea of a grey-market economy. People can do productive work and get paid in barter, without having to report their activities to the government for taxation. Currently, the only hidden economy is illegal activities such as drug dealing. I'd like to do work that is otherwise legal, but not report it for taxation.

Another idea I had was setting up a corporation or trust. People would have their assets be owned by the trust instead of individually. The bylaws would respect everyone's individual property rights. Since the assets are in the trust, instead of individually held, transactions between trust members might not be taxable. I'm not a lawyer, so I don't know if that would work. Normally, really wealthy people set up trusts to avoid taxes. I was wondering if it was viable to set up a trust for the collective benefit of many people.

[Mr. Green]

One interesting solution I read about was the idea of a grey-market economy. People can do productive work and get paid in barter, without having to report their activities to the government for taxation. Currently, the only hidden economy is illegal activities such as drug dealing. I'd like to do work that is otherwise legal, but not report it for taxation.

Many people get paid under the table but I think that, like you said, is very risky and maybe not worth the hastle. It just depends. I suppose if everybody did it and refused to be bullied by the IRS, there would be nothing anybody could do about it. This is our government afterall. It only makes sense that we would be able to bypass the IRS completely.

I do believe that is a major reason that the Federal Reserve is working so hard through the government to put the US on a credit system. It appears as if the Real ID act is merely a stepping stone in which everyone must eventually have an RFID chip put into their body (they already have the technology) and nobody could spend or recieve money, or in this case credit, without it.

ALL money could be taxed and all debt could be collected without your permission. For a example, waiters and waitresses can keep cash tips without reporting them or paying tax on them. They cannot do this with credit cards however. Under a credit system ALL transactions will automatically be reported and taxed.

[Revolution9]

[QUOTE]Bradley in DC, I want to continue to argue that gold is a type of fiat money, fiat meaning we put "faith" in that it will be accepted as a unit of stored value in exchange for actual commodities that we consume while having little consumption value itself, other than as jewelry. It's scarcity and present impossibility to "counterfeit" makes it an excellent fiat currency. However:

Aurum Metallium, as it is called on AU contracts, has many uses. It is non-corruptable-does not oxidize nor salt out. In its monoatomic form..the one that alchemists strived to replicate.. it has many anomolous properties including loss of 5/9th's of it weight at one temperature and at another higher temperature actually causing the vessel it is in to have a negative mass. At another temoperature it disappears from the 3rd dimension though an instrument dragged through where the pile was will show a trail when the sample cools. It has a phi fractalled, self embedding and self sustaining wave imprint with a superdeformed yin-yang apiring of electrons and repairs the telemeres at the ends of DNA discarrding errors in replication sequences while upping the electron volt potential in the DNA strand by 10,000 times. As well monoatomic gold is a superconductor at room temperature. Molecular or metallic gold is the best conductor of electricty.


1. The "Gold Supply" constantly grows through mining by the tens or hundreds of tons per year. New gold enters in private hands so its entry into the marketplace is already inherantly unfair to the general public. In effect, wealth was created without having to produce value to the community, in a similar way as printing paper money on a machine, though more labor intensive.

Beside its practical uses the value of it comes from its scarcity. It cannot be countefeited. In regards to your analogy of the people and the 1000 grams of gold. I find it interesting that you can still purchase the same amount of nails of iron for the same amount of gold that you could a few hundred years back. As the gold is circulated amongst the community of commerce it is split into other commodities such as hard goods and consumables. These in turn are distributed to the purchasers who gained their purchasing power through the sale of their services or product. In a robust economy the goods and services cycle through at a rate where it is not necessary to have gold on hand for each purchase per se. In effect the entire set of goods, services, commodities and products are benchmarked to the gold unit price and considered a fraction thereof depending on the amount of sweat labor that was incurred to produce said product, perform said service, or grow, mine or refine said commodity. Fiat currency has no intrinsic value ither than bumfodder or firestarter. Even simple coins are more valuable. I can stack coins of alternating metals, pour acid over them and i have a battery. Silver as well is a valuable commodity due to it antiviral and antibiotic properties. As well the use of silverware was for more than show for many poisons and biological contaminations caused blackening of the silver and alerted the diner they were about to get a bad tummyache if they continued their reposte. Copper again has many uses for tools, weapons and as a cupric salt to be used medicinally for arthritis and other inflammation.



2. By its nature, using gold and silver as money has produced a long history of slavery, war, theft and other atrocities as there is tremendous incentive by those who are prone to violence to go straight for the gold & silver as opposed to producing goods and services that have tangible value to the community.

Hence the need for a good defensive force and fortress lockboxes. The gold and silver are what benchmark those goods and services that have tangible value to the community besides having tangible value in and of themselves both in utiltarian toolmaking and technological spheres



3. The fair distribution of gold, or money backed by gold, is rarely talked about by gold money advocates. It's an easy system for Americans to promote as they have (once had?) enormous gold stores, not all of it acquired ethically. What about countries that have no gold? Most of the above ground gold is in the hands of elite private citizens or heavily armed 1st world nations.

Somewhat true. If balance of payments ar no longer made with engraved paper then alot of that AU metal will come back into the system. I personally saw in one years contracts come through my hands that totalled over 125,000 MT of Aurum Metallium in private hands. The Thai Royal Court has gold that is not GLD'hallmarked and registered in the system sitting in teachests and attics and basements lockrooms amounting to over 120K MT as well as in the main bank vaults in Bangkok Thailand that is hallmarked at about 60,000 MT. many of the other far eastern royals and tribal royals keep their gold there as well. Thailand/Siam has not been invaded successfully for a long, long time..The Sultanate Of North Borneo has at least 5000MT sitting in an Australian vault.. The UAE has 45,000 MT sitting around for sale..If all these piles of gold had to be used to purchase these peoples lifestyles or exchange payments between goverments alot of this hoarded gold would circulate back into the markets. Both Russia and China full well understand this and are buying up any and all private contracts floating through the non metal exchanges market. If you had 10,000MT of AU metal I could sell it within four days and pull a cool 1% off the top.




4. Gold does not fairly represent the goods and services exchanged for it, because gold lasts forever and food, consumer goods, etc. last for days, weeks and/or decades. I believe it was Silvio Gessell who points out that true neutral money must fall in value to best mimic the underlying goods and services.

See my gold and silver as benchmarks spiel aove. Should we prefer a benchmark that corrodes in value, loses it weight after time or perishes?


5. Gold money does not address the problem caused by the growing gap between national production and national income due to automation. We don't earn enough to pay for the goods and services that we've produced. This falls into the realm of National Dividend, Basic Income Guarantees and, I believe, the work of Henry George.


The work of Buckminster Fuller spoke of ephemeralisation. The idea that more and more can be accomplished with less and less. Take the CPU for instance. It is made of silicon..probably the most abundant element on the face of the earth. Mix a few impurities in and cook it just right and etch and inlay very minute amounts of copper and gold and you have a very powerful calculating device. What would take years of intensive intellectual labor, gallons of ink, reams of paper and the requisite food and shelter needs to sustain the human calculator/s can be done in milliseconds by the recrystalized grains of sand and threads of metal. Mind you this could not have been accomplished without the original sweat and work of the previous labours in that field. In the labor fields ephemeralisation technologies are the keys to Americas future. We have the advantage in things like writing computer code as the syntax is in our native tongue. America will have to develop and then sell on the world market its new ideas and technologies based around ephemeralisation. Ephemeralisation makes things cheaper after inital tooling costs are repaid. The market determines that as the chip wars between Intel and AMD have shown. The various far eastern chip makers as well assist in lowering the costs through their fierce competition for a share of the marketplace. I could probaly write way too much on this so I will ephemeralize using my example above. We are not in the big machine Industrial Revolution age anymore and must adapt accordingly. Instead of watchng TV and whining they lost their manufacturing job they should be getting a professional software application and learn to use it or take their technical knowledge and invent or improve something and have a far eastern manufaturer knock a cheap prototype out for you to shop around. If you can write C++ for instance you can have any one of 100's of jobs paying real good money in any major or medium sized Sunday newspaper.



Sorry to go on at length. I'm not trying to be a know-it-all, as I am just learning all this in the past year and think that all ideas should be on the table and that we should equally discuss the flaws of using gold as money as we do its strengths.

Gold is a benchmarker. The sweat equity implied in its intrinsic value is distributable apportionately across all commodities and services in ratio to their sweat equity.

I am not a scholar but this is what I have derived from my brief tenure in the world of megaton gold trading and high finance derivative MTN's and currency swaps. It was giving me grey hairs so i went back to my music, arts and coding where i am much happier:)

Best Regards
Randy

[Mr. Green]

...Or as I like to say: Money backed by gold > Money backed by nothing.

:D

[beerista]

Preface: I'm not an economist.

Q1. The Fed is purposefully separated from the government so that the government cannot directly control interest rates and affect money. There is a damn good reason for this.
A1. I think that folks who make this argument are healthily skeptical of what the government would do if it did have direct control. But I'm surprised that this skepticism doesn't extend to the private banks, to whom the government's debt is a means of wealth creation through loans and interest collection and are further protected from poor decisions by their taxpayer bailout safety net. I don't know that it is any less a conflict of interest just because two parties with something to gain (the government and the banks) are involved than if only one were.

2. Small inflation is a very good thing. It means that people can pay back loans with money that is worth a little less than the money you borrowed. Zero inflation isn't bad but any amount of deflation is almost disasterous.
A2. Joseph Salerno, with Mises, has an audio lecture here http://www.mises.org/mp3/BBFuture/BBF03.mp3 that I thought was pretty good on the topic of deflation. He acknowledges that deflation in a society that is heavily in debt, both nationally and personally, is not without problems. But I think his take that it only would be bad for the profligate borrowers and lenders but okay for the thrifty would be a tough sell in a country that tends more toward profligacy and less toward thrift. Not wrong, just a hard sell. He has much more to say on the subject and says it better than I.

Q3. Our national debt as as percentage of GDP is in line with the rest of the first world and slightly lower. Yes, it's large but the money we pay in interest goes to foreign allies that we borrow money from. It keeps them our allies since if they get pissed at us, we'll just negate the debt. It's useful in world stability.
A3. I wouldn't pretend to have an economic answer to this, but isn't the “useful in world stability” argument the same that we hear for many other forms of otherwise indefensible foreign adventurism? Is debt hostage adventurism among friends any more morally defensible?
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While I'm encouraged to see links to an Austrian economics site on a Ron Paul board, it makes me a little wary of his chances that the same is probably not true of the boards for most other candidates.

[fsk]

Preface: I'm not an economist.

Q1. The Fed is purposefully separated from the government so that the government cannot directly control interest rates and affect money. There is a damn good reason for this.

Q2. Small inflation is a very good thing. It means that people can pay back loans with money that is worth a little less than the money you borrowed. Zero inflation isn't bad but any amount of deflation is almost disasterous.

Q3. Our national debt as as percentage of GDP is in line with the rest of the first world and slightly lower. Yes, it's large but the money we pay in interest goes to foreign allies that we borrow money from. It keeps them our allies since if they get pissed at us, we'll just negate the debt. It's useful in world stability.


A1. Interest rates should be determined by the free market, just like the price of everything else. The difference between the free market interest rate and the Federal Reserve interest rate is a government subsidy, paid by everyone else in the form of inflation.

Why don't we let the executives of oil companies get together and fix oil prices? The difference between the free market price of oil and the cartel price would be paid as a government subsidy.

Why don't we let the food manufacturers get together and fix prices?

Why don't we let the car manufacturers get together and fix prices?

Why should we ever allow the free market to set prices?

A2. Inflation is theft. Any expansion in the supply of money is stealing from whoever is currently holding dollars.

Even worse, the benefits of inflation accrue primarily to banks, not to the government. If there has to be inflation, all the inflation should be recognized by the government as revenue.

People currently holding loans took them out with an expectation of a certain amount of future inflation. In some sense, it would be discriminatory against them to suddenly halt inflation. It is possible to slowly phase out inflation in a way that's fair to current debtors.

A3. The rest of the world has a financial system with the same defect as the US. All first world countries have a corrupt central bank. All first world countries have an income tax or equivalent tax.

Because other countries are corrupt, it is acceptable for the USA to be corrupt. As long as our level of corruption is less than theirs, people will prefer to do business with us.

It is statistically impossible for the national debt to be larger than a certain percentage of GDP. With a large national debt, the currency will devalue, and there will be a partial default on the debt via inflation. Interest rates are currently negative. M2 grew by over 6% last year and interest rates are 5.25%. The national debt is being defaulted on at a rate of over 0.75% per year.

[bappley]

"gold is a type of fiat money, fiat meaning we put "faith"..."

I'm no expert on monetary policy, but, having taken a fair amount of latin in college, this sentence really annoys me. Fiat has nothing whatsoever to do with faith (on a side note, the latin word for faith is fides). The dollar is "fiat money" because it is purely based on an authoritative command (simply look up fiat in a dictionary to see this, you don't have to know latin). To help clarify the issue, here is Webster's understanding of the term "fiat money":
Fiat money, paper currency, not resting on a
specie basis, but deriving its purchasing power from the
declaratory fiat of the government issuing it.
[1913 Webster](my emphasis)

This clarification makes the argument about us putting faith that it will be accepted as currency completely spurious.

p.s. Sorry if my tone is a little angry or frustrated, it's just this vocab error really got on my nerves.