Ron Paul: If the Fed didn't exist there would be no deficits

[bobbyw24]

YouTube - Ron Paul: If the Fed didn't exist there would be no deficits

[catdd]

That guy just couldn't get off the topic of Watergate could he? It was almost like he wanted to make RP apologize for the allegations - which he would not do.
He conveniently ignored the fact that Ron Paul also asked Bernankee if he intended on bailing out Greece in that very same sentence.

[Zippyjuan]

I have to disagree with Ron on that point that there would be no deficit without the Fed. The Fed is not the instrument of government debt. The debt is casused by Congress voting to spend more money than they take in (and the President signing off on it). Getting rid of the Fed does not change that. Money to fund the debt is raised throught the Treasury selling securities. Getting rid of the Fed would not change that. There could still be debt without the Fed existing.

[emazur]

I have to disagree with Ron on that point that there would be no deficit without the Fed. The Fed is not the instrument of government debt. The debt is casused by Congress voting to spend more money than they take in (and the President signing off on it). Getting rid of the Fed does not change that. Money to fund the debt is raised throught the Treasury selling securities. Getting rid of the Fed would not change that. There could still be debt without the Fed existing.

When did the federal government begin selling securities? When was the last period that it didn't sell them? Is selling treasuries authorized by the Constitution?

[freshjiva]

Selling treasuries is indeed Constitutional. It the simplest definition, they are one method of raising capital to fund government operations. Also, because it is purely your personal choice whether to buy these Treasury bills, it never violates personal freedom; in fact, it gives you an additional choice on how you want to invest your savings.

As I've said before, the federal government raises money in three broad ways:

1) Taxation (including import tariffs, income taxes, regulatory fees, etc).
2) Debt (done by selling Treasury bills)
3) Printing money

All three of these methods of raising capital are Constitutional. There is nothing wrong with running deficits. Any financial analyst will tell you debt financing can actually enhance shareholder value when its done intelligently. However, the greatest question is what the government is raising the capital for. That's where we go off track in terms of constitutionality.

[Fox McCloud]

Freshjiva, the biggest problem with your analysis is that governmental debt crowds out private investment---in our case, we're on the luck, receiving end of things where other nations are crowding out their private investments to finance our debt, but when this ends (not a question of when, so much as if), then you're really screwed, as you only have internal finance, inflation, and taxation. Either way, your analysis is flawed in terms of governmental "debt" being something that's positive to freedom--all governmental spending is a net loss to society; a perfect example of the seen vs the unseen--it's easy to see how many "jobs" or programs are created through governmental spending, but difficult to see how much the private market would create if that money that was taxed/stolen was still remaining in private hands.

[fisharmor]

As I've said before, the federal government raises money in three broad ways:

1) Taxation (including import tariffs, income taxes, regulatory fees, etc).
2) Debt (done by selling Treasury bills)
3) Printing money

I really think you ought to re-read the constitution before making these types of assertions.
Taxation is constitutional, but the other two aren't mentioned.
Therefore they are unconstitutional under the 10th amendment.

[freshjiva]

The Constitution does grant the authority to coin money (printing, in modern terms).
You're right, debt financing isn't explicitly condoned or banned by the Constitution, but just because it isn't explicitly written does not mean it is illegal. The Constitution is the law of the land when it comes to defining the role of government. Financing is a different issue.

If the government simply stayed within the bounds of the Constitution, we would never have to worry about the national debt running wild. But the point still stands -- debt can work in our favor if and only if it is managed and constrained commensurate to income.

Balanced budgets are great during times of peace, but in emergency situations, the ability to raise debt financing is critical.

[Bossobass]

I have to disagree with Ron on that point that there would be no deficit without the Fed. The Fed is not the instrument of government debt. The debt is casused by Congress voting to spend more money than they take in (and the President signing off on it). Getting rid of the Fed does not change that. Money to fund the debt is raised throught the Treasury selling securities. Getting rid of the Fed would not change that. There could still be debt without the Fed existing.

So, you're saying that the Fed doesn't monetize any of the deficits, directly or indirectly, created by Congress' overspending?

Bosso

[ARealConservative]

So, you're saying that the Fed doesn't monetize any of the deficits, directly or indirectly, created by Congress' overspending?

Bosso

that is not what he said.

debt sans fiat would still have a use. Namely when major events happen that require spending more then you can tax in a given period.

Paul is simplifying things because that is the only way to talk to the great unwashed. The debt we have is not because we need to spread a single year increase in spending over a period of time, it is to monetize the debt, which can only occur under fiat. So without the fed, we wouldn't have debt. He didn't say we couldn't. He said we wouldn't. big difference ZP - Ron Paul is right.

[catdd]

Would the liquidation of debt only occur in a fiat system as well?

[SamuraisWisdom]

I have to disagree with RP on this one. The government could still borrow from foreign nations with or without a federal reserve.