Playing God With The Economy
The unholy alliance between self-important bureaucrats and failed bailout bankers continues to wreaks havoc upon the economy. Only a gold standard can prevent these charlatans from poisoning the entire world with their increasingly worthless dollars. In his latest column Ron Paul speaks truth to power and calls for the abolishment of the Federal Reserve. But can reasoned arguments alone win this epic battle for sound money? — tmartin
The Neo-Alchemy of the Federal Reserve
by Ron Paul
As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.
The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.
One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.
Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.
Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money”, as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.
The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do.
Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money.
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Read more about how the Federal Reserve ruins our country and destroys our future.
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Keep fighting the good fight Dr. Paul! Many people, me included, admire you for your courage.
I wanted to add for the audience (I’m sure you know) that while no one knows for sure what caused Rome to fall, debasement of their currency is one of the theories for what caused their economic decline, and thus loss of military power. This happened under Nero and later emperors, who since they couldn’t print paper money, had to resort to adding impurities to the coins, until eventually the coins became near worthless. Von Mises and others discussed this:
http://en.wikipedia.org/wiki/Decline_of_the_Roman_Empire
The consequence of debasing the currency was rising prices, so then the emperors tried to create various price controls, which failed. Hopefully we’ll notice the problem before this happens in our country!
Each year we look at our crystal ball to see if we can penetrate the fine mists of the future. Last year at this time we suggested that home sales would fall, prices would drop and that interest rates would rise. Why? Huge numbers of toxic loans were scheduled to re-set. Higher monthly payments would force many owners to sell and many more to be foreclosed. The result was largely as predicted: Sales slowed significantly, prices across the country were down but interest rates remained curiously stable and steady.
It would be wonderful to suggest that the year ahead will be filled with cheer and good news on the home front, but the sobering events of 2007,2008 are likely to be repeated in the coming 12 months.
As folks have begun to figure out, we are now faced with a full-blown financial crisis. The government’s efforts to organize a $100 billion “SIV” bailout for big banks failed just before Christmas. Fannie Mae and Freddie Mac have each sought additional capital while hundreds of lenders have contracted or gone out of business.
The failure to regulate mortgage lending at the federal level is increasingly seen as the root cause of the financial crisis. Even so, at New Year’s the best the President could propose was a voluntary loan modification program that lenders were free to ignore. In December HUD claimed that the much-hyped FHASecure program had helped 33,000 borrowers nationwide while the actual number of delinquent homeowners saved from foreclosure turned out to be just a few hundred.
Look for more the same in 2009. Another two million or so foreclosures, no meaningful federal relief for distressed toxic loan borrowers, huge efforts to scuttle meaningful lender reform bills that have passed in the House and the Senate, declining home values, and reduced state and local revenues because of falling real estate prices. And if interest rates do rise, watch out. The economic impact will be worse than anything seen since Herbert Hoover sleep serenely at the White House.
Dr Paul,
Long time admirer, below find my efforts to get the Agora boys into the discussion:
Hi Bill,
I have been a big fan of Agora for sometime. You folks have a huge readership and with that “power of the pen”. I have been disappointed that except for Porter Stansberry none of your editors have proposed solutions for this global mess. I have been after Allison and Porter to get with it. Now I decided it is time to involve the Boss.
Most of your readers are intelligent and would appreciate a good discussion on global solutions not just critiques or your standard solution “Buy Gold”.
I have thought about these Solutions for awhile and believe they will restore the power back to the individual worker and restore global prosperity.
Time is running out for society, you boys should use your power of the pen to get a meaningful discussion started.
Hi Porter,
Your public needs common sense solutions for this melt down, sooner rather than later. Here are the solutions in summary:
1) Meaningful work and pay for the individual worker commiserate with their talents; will restore pride and sense of self-worth. This is the most important.
2) Establish a Global Gold Standard for All currencies tagged to Gold at $2000 per oz.
3) Now, since all currencies are worth the same get rid of the Forex exchange. This massive “Casino Game” has no inherent worth for the individual worker.
4) Also get rid of all “Casino Games” that are not directly related to commerce, such as betting on the “interest rate” , naked shorts, and other derivatives that divert money away from the individual worker. Imagine if these Trillions of dollars were now spent supporting real work?
5) We need a fair Flat income tax now and get rid of the IRS and the dissention it causes society.
6) Forbid manipulation of the markets by Governments, Corporations and Individuals for this only stalls the individual workers real worth.
7) Forbid “Nationalization” of private industries do you think these shareholders will ever see any of the money? Now that the taxpayers own banks and car companies do you really believe they will ever see any of the money?
These Solutions will restore our government premise that we are a”Nation of the People for the People”. It will drag the rest of the world with it including the under privileged workers in India and China that will even the field for manufacturing jobs.
Only when the world stops exploiting its workers, shareholders and pensioners will we return to true prosperity based on talent, ingenuity and efficiency.
OK Porter, this would be a start and I am sure none of your readers will “Kill the Messenger” but a lot of financial people and IRS agents will need retraining. The boys at Agora need to stop critiques and get on with solutions, time is running out.
Tompet
San Diego
Apology accepted
How are banks going to be able to lend trillions of dollars when they have none? The “fiat money” that central banks produce is only a fraction of a percent of our total money supply. Banks create money (debt) through loans. The Fed takes money away from banks to control a balance between inflation and unemployment. What we really need is to focus on reducing cost-push inflation (rising costs of monopoly owned commodities). Because these commodities are monopoly controlled, the industries cannot grow as fast as the growth of our economy and resulting to greater demand with less supply (inflation). Changing our currency is not going to fix the cause of the problem. Even if we change our money to something backed by gold, we will still have to create money just as fast to keep up with a growing economy. This will lead to higher demands for commodity with the exact same high inflation risks only without an organization to manage and prevent heavier reprocutions.. Our population doubles every 50 years and the economy grows at around 3% a year, so our money supply is going to have to grow 3% a year wheather if it’s backed by gold, god, or nothing. We need to control rising prices of commodity if we want to control inflation.. Then we wouldn’t need a Federal Reserve.
Ummm, do you have documentation to support this statement:
“How are banks going to be able to lend trillions of dollars when they have none?”
Banks have no money? None? Zero? Really? No banks? Anywhere?
Regards,
Matt
Banks issue debt. They do have money, but not the money they lend out, they have money from interest on the money they lend out. Maybe thats why six or seven banks have gone bankrupt. really? am i serious? anywhere?.. everywhere?
Vote to abolish the Fed on Obama’s change.org site:
http://www.change.org/ideas/view/convert_to_debt-free_money
Spread the word. It should be at the top of the list.
Frighteningly accurate trends forecaster Gerald Celente says that America will see riots similar to those currently ongoing in Greece and that the cause will be a hyper-inflationary depression, leading to the inevitable use of troops and mercenaries to deal with the crisis as Americans are incarcerated in internment camps.
“Frighteningly”? OMG!
Really. I looked. It’s far more inflammatory than Schiff or Faber, and way less biased:
Please cite your ’source’ as I assume you heard this from Mr. Celente (I sent him a quick email with your notions):)
So you think:
“hyper-inflationary depression, leading to the inevitable use of troops and mercenaries to deal with the crisis as Americans are incarcerated in internment camps.”
I apologize for me, man, me
And to provide a bit of DECADES-OLD history for why I don’t think we are going to see “hyper-inflationary depression, leading to the inevitable use of troops and mercenaries”:
Please see Ron Paul’s paper from NINETEEN FREAKING EIGHTY ONE – yes parroting for nearly thirty years!? (google ‘Gold, Peace, And Prosperity, Ron Paul)
“Today, thanks to 67 years of bank control over the money supply, we face an economic and political crisis greater than ANY we have faced before.
We probably will see widespread civil disorder in the 1980s as a direct result of our faltering economic system. The dollar has been damaged by decades of interventionism, and Congress has legitimized depreciation of the dollar and forced redistribution of wealth through corporate and welfare schemes.”
Wow, yeah, the eighties were horrific! Or… Not. Maybe instead of getting scared, time might be spent improving oneself?
- Matt
I ask you all!! Should not the Federal Reserve be considered a Terrorist Organization?
Serious? You.. Cannot.. Be.. Serious…
You ever tried to read their transcripts?
Looking at historical prices Gold is quite expensive now, while Silver is extremely undervalued and Platinum is quite cheap. The problem with Silver is that you need a lot of -safe- storage, a compound would make it. Platinum is practically Russia monopoly and we just do not know how much there is available to determine a fair price.
Coming back to Gold can anyone argue that this is not a manouver of the Western Bankers to sell their Gold at high prices before it plunges again for another 10 years?
Professor Emeritus of Mathematics Antal E. Fekete says that December 2nd marked the beginning of the end for paper currencies and wealth based on such currencies:
“It is no exaggeration to say that this event will trigger a tsunami wiping out the prosperity of the world.”
What’s he babbling on about?
Well, since at least 1972, the price of gold futures has been higher than the spot price of gold – a condition called “contango” by futures traders.
But on December 2nd, for pretty much the first time ever, the futures price went below the spot price – what futures traders call “backwardation” – and has stayed there for several days.
Fekete argues that this means that gold owners are hoarding their gold and simply won’t sell, because (1) they’re not confident that they’ll be able to buy it back in the future, and (2) they have lost all faith in paper currency. He writes:
“Once entrenched, backwardation in gold means that the cancer of the dollar has reached its terminal stages. The progressively evaporating trust in the value of the irredeemable dollar can no longer be stopped.”
OMG! Wow! Contango and backwardation! Oil is also going to crash!!
The same can be said for oil, right? Like currency that is largely a free market thing. Assuming free markets are right, as you state. Everything you said is applicable to oil and not just the dollar. Wheee.
As thus, and of course free markets are free markets:
“Once entrenched, backwardation in (oil) means that the cancer of (oil) has reached its terminal stages. The progressively evaporating trust in the value of the irredeemable (oil) can no longer be stopped.”
Awesome!
http://www.youtube.com/watch?v=_dmPchuXIXQ
everything i ever need to know
http://www.cnn.com/2008/POLITICS/12/03/bill.gates/index.html
I would be intereested to see what Ron would have to say to B Gates…
Hi there. There are a lot of evidence that Obama cannot be the president of the United States of America because of his birth.
Ill give you couple of sites for evidence.
Just go here http://digg.com/2008_us_elections/Obama_1961_birth_announcement_from_Honolulu_Advertiser_2
or
http://wikileaks.org/wiki/Obama_1961_birth_announcement_from_Honolulu_Advertiser
A few years from now, when we’re in tanks rolling down what’s left of Washington DC after the riots and fires, I hope Dr. Paul will be around to help put the pieces back together. God knows we’ll need all the help we can get.
I’ve fought for this country and love it dearly but it’s become a disgusting mess of cowardly blind sheeple working in the fields and brazen criminals at the helm. These criminal thugs in suits now steal openly from us and our future great-grandchildren without a second thought or fear of retribution. The election process is now a total farce with the herd glued to corporate owned media outlets and believing everything they hear.
The last American Revolution was sparked by far less offense.
We need your leadership Dr. Paul, to put “boots on the ground”, but peacefully in Washington first. First with picket signs and loud voices. Second with whatever means are necessary to return this country to one of productivity, self-reliance, and prosperity. Organize it and we will come.
Keep it up Dr. Paul, we’re spreading the word! I’m in Beijing and all the foreigners I know here agree with your message. The MSM can’t keep Americans hypnotized forever.