It’s Time To Abolish The Fed And The SEC

On January 5, Ron Paul addressed the House Financial Services Committee’s hearing on the Madoff Ponzi scandal. He pointed out that Bernard Madoff was operating under the supervision of the SEC, that more regulation will only make the job of cunning fraudsters easier because they can claim to be approved by the government, and that two of the biggest government-run Ponzi schemes are the Social Security system and even the monetary system itself. These scams create a climate of fraud that sucks in the people and teaches them to imitate the government. This outrage must be stopped and it can be done by abolishing the Federal Reserve and the SEC, and returning to an honest monetary system based on gold and/or free competition in currencies.

Ron Paul: “For a good many years now, since the 1930s, every time a problem like this comes up, like in the Depression, we think that it is a lack of regulation, so we introduce regulatory agencies like the SEC, and, like after Enron, that was a major problem so we appropriate more money, and hire more people… that doesn’t do any good.

But this circumstance I think really makes my point, that the approach is completely wrong. [The approach] that the regulatory agencies are preempting people from doing bad things, just doesn’t work. There are millions and millions and millions of transactions. You can’t do it. All they do is give a false sense of security.

This is a perfect example of it. The SEC was involved with Madoff over the last decade. And that sort of gives the stamp of approval and says, “oh, must be okay”. So everybody’s guard is let down. This creates the moral hazard that allows people to make these mistakes and not to assume responsibility for themselves.

Does that mean we should ignore the problem? No! The problem comes because people commit fraud. And fraud laws are on the books. All the people involved with Enron were prosecuted under state laws of fraud, and the market took care of the stocks. But just adding on new regulations and spending millions and millions if not billions of dollars on regulating enterprise doesn’t do any good. It contributes to it. It is the problem.

We should look more to how the atmosphere is created by the Congress. If you look at the principle of fractional reserve banking, that in a way is a Ponzi scheme. This gets people doing things and building a mountain of debt… debt on debt, in this manner.

Also, if you really want to look at a big Ponzi scheme, and it is said too often that people end up doing what governments to, if we set examples, and believe me, everybody knows the Social Security system is a Ponzi scheme.

So yes, 50 billion dollars is horrendous, but what about an 8 trillion dollar loss in the stock market? So what do we do? We rush and pump in 8 trillion dollars. Where do we get the money? We create it out of thin air, furthering this whole idea of moral hazard and believing that we can create an unmanageable system.

It’s not the fault of the individuals at the SEC. They have an impossible job and they have to pretend they’re doing something to feel relevant the same way we do here in the Congress. We have to feel relevant we need the market to work, we need to get rid of the bad policies, the monetary system, and these mountains of debt. We say, well we’re relevant because we’re gonna hire more bureaucrats and we’re gonna appropriate more money we don’t have. And we’re gonna solve all our problems.

We’ve been doing this for 78 years, and we’ll do it again, but believe me, this will not solve our problems. We need to think about eliminating this whole regulatory process. And actually, we don’t need the SEC at all, and we could thrive even better and we would dwell on self-reliance, self-policing and the idea that people can’t commit fraud, but the government should not commit fraud either. We should not set an example.”

  • Sean

    you know we kept worrying about the national debt rising 4 trillion dollars over the past 10 years before the bailouts, but we have had a trade deficit of 3.5 trillion dollars in that same length of time.. We need a large national defcit and more money because we have such an unfair balance of trade. With a 3% GDP, that .5 trillion dollar gain we’ve had in the past 10 years doesn’t nearly add up to the total amount of money we should be at.. If you look at the debt to gdp%, we are at the same amount of debt as we were in 1990 but we pretty much had a trade surplus so we had an abundance of money. With NAFTA and all these free trade agreements, we are giving all our money away. We have to print more and more money just to keep from being bankrupt. The problem is that other countries are getting richer by extracting our money supply.

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  • Ross Johnson

    If you cannot back your currency by gold then think of the next most precious commodity that is real.Land and infrastructure owned by your Govt.I’m Australian and our future in very intricately entwined with the US economy.We don’t have nuclear weapons and rely on the US for defence.We also have free trade agreement with you.
    Why not have a currency that is redeemable in shares of the Govt owned land mass and infrastructure of your nation.Then it is backed by something more subatantial than gold.ie it can actually produce something.

    Sack the Fed Res and let Congress print money backed by shares in your nation.

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    • longshotlouie

      interesting, have you crunched any numbers on this?

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    • Dave

      not a bad plan, but the gov would still be in charge of the distribution of who gets what land.

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  • http://www.connellybarnes.com/ Connelly Barnes

    Thanks Ron for these continuing blog posts on a variety of topics. I watched your YouTube videos for a while trying to understand your philosophy, and read some libertarian books with the same intent.

    I can’t say I agree entirely with libertarian philosophy, specifically because I think it’s important to subsidize education (though I concede that private schools are often better). Nonetheless, these philosophical points you’re making are very valid, so I think they should influence progressive policy in the future, as you’ve made clear the many significant dangers of using statism to enact progressive change. The problem being that statism is like cocaine, because power is addictive, so it can easily get out of control.

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  • Ken Freeman

    Everyone else that’s challenged the Fed ends up dead. I hope Ron is taking serious precautions…

    Unfortunately we’ve already crossed the even horizon of this disaster. The majority of the American sheeple are blind, soft, pink, and ignorant to the reality of this collapse.

    Stick together in your own communities as this unfolds. Learn basic skills that you’ll need to survive. Once this entire current system has burned to the ground the survivors will finally have a real chance to rebuild a truly productive America in the image the founders intended. Wait patiently for that chance and seize the opportunity. It won’t be free or easy, real freedom never is.

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    • Matthew Stone

      Cite your source Mr. Freeman (last name might be a fake :()? Otherwise that was just a terrible comment that you have to support

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      • Matthew Stone replyant

        John F. Kennedy attempted to bring back the power to issue and create currency back to the United States government (i.e. Only, and still is, three branches = executive ( now “all-powerful” due to Patriot Act), legislative, and judicial) and away from our government’s national bank, as we know by issuing those silver backed dollar certificates, and within those six months he brought back as much prosperity he could until he was ripped from this earth.

        In affiant to Mr. Freeman,
        In response to Matthew Stone,

        Anon, R.I.P. JFK, Abe Lincoln, Malcolm X, Mahatma Gandhi, Jesus, all of our fallen who fought for our universal freedom.

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    • Dave

      I couldn’t agree more.

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  • Darrin

    Sean writes: “Ok, the united states holds 241 billion worth of gold or 8,133.5 tonnes. How is that going to compare to the trillions of dollars thats in our economy today?? are we going to devalue gold around the world to fit our currency??”

    This is a common argument against following the gold standard but it is a trivial problem to solve. All you need to do is value gold properly. For example, let’s say the U.S. has 8133.5 tonnes of gold which is about 287 million ounces. Let’s say that the total money supply M3 of USD is $10 trillion (some estimates put it MUCH higher – see shadowstats.com ). In that case, you’d only need to value gold at about 35,000 $USD/oz to use it to back our money supply. But our government will never do that – they’d rather run $1 trillion+ deficits a year (as Obama just mentioned today in the news) and run their “digital” printing presses nonstop to inflate away their problems.

    So, go ahead and hold on to your paper Sean. I’ll hold on to my gold and continue to buy more at the ridiculously low price of $900/oz, thank you very much. The residents of Zimbabwe and Iceland who were holding wealth in their native currencies when they collapsed instead of gold already learned this lesson. Apparently you have not and won’t until it’s too late. No skin off my back.

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    • Sean

      you know we kept worrying about the national debt rising 4 trillion dollars over the past 10 years before the bailouts, but we have had a trade deficit of 3.5 trillion dollars in that same length of time.. We need a large national defcit and more money because we have such an unfair balance of trade. With a 3% GDP, that .5 trillion dollar gain we’ve had in the past 10 years doesn’t nearly add up to the total amount of money we should be at.. If you look at the debt to gdp%, we are at the same amount of debt as we were in 1990 but we pretty much had a trade surplus so we had an abundance of money. With NAFTA and all these free trade agreements, we are giving all our money away. We have to print more and more money just to keep from being bankrupt. The problem is that other countries are getting richer by extracting our money supply. So go ahead and buy your gold. I don’t care what you do. We aren’t going to be able to go back to the gold standard and we are going to have to print 1 trillion a year to match our 1 trillion a year trade deficit so stop worrying about it. No skin off my b ack

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      • Matthew Stone

        What do you do sean? We need you working for us! Whatcha doing and how can we all help you and ron paul? And if we help you do you have a private enterprise plan? You are making money how?

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  • Dave

    That is a very broadstroke observation to say that a country like China that is going through double digit grow is growing because it is producing it’s own raw materials, and therefore we should produce our own raw materials.

    You could take Japan for instance that has almost no raw materials to speak of and experienced double digit growth at one time. When you go from 3rd world to industrialized there is amazing growth in you economy. China has the world’s largest population and is currently experiencing growth based on increases in education, infrastructure, market, etc.

    The US is currently not growing at a large rate because we are not reinvesting in our own infrastructure at a massive rate because there are no initiatives to do so and because our old crap still works. Expect that you will see growth over the next few years with Obama’s plans for roadway and electral grid infrastructure investments.

    Economic growth is determined by new markets, and developments in old markets. Unfortunately growth is not infinite, and is fully dependant on major innovations. Until you see the next great thing explode, our markets will continue to slow in growth.

    That said, the US has been a leader in intellectual property markets for a long time. That could change with all of our education problems and other countries catching up, but in general software and inginuity have always been expanding markets that we continue to dominate.

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    • Sean

      japan grew so much because they had a giant trade surplus which caused them so many problems. the point is, the steel and gas industry is the reason the federal reserve raised interest rates in the first place, to prevent hyper inflation.. we all know that and we all know that interest rates robbed money from the economy and caused this recession.. We already know that the steel industry is collapsing and is asking for a trillion dollar bailout. All i’m saying is that the federal reserve did what they did to prevent inflation which would have occured even if our money was backed by gold, our economy would have been set up to fail in the same manner. “Inefficiency + drying up money + new regulation = dead company.”

      Also, like I mentioned earlier. We have such a high trade deficit because our society has changed away from production to trade. If we change to the gold standard, than we would be giving all our money away, 800 billion a year that the fed could not replace.

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  • Sean

    I believe everyone should know, but not everyone will understand. Not even his fellow congressmen seem to care or understand. I think we need fix the system instead of attacking it if we want to change anything.

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  • repulsed

    Sean, Whether it is a show or not is not the point. The problem is not enough people know who ron paul is and what he stands for and they do not understand the problems facing this country hence they have no idea how to solve the problems. It is called exposure…the more you get the more people understand! Ron Paul is not seen enough to even know who he is outside his district in texas…That is a fact. I live on the east coast and i talk to people everyday who say. Ron Paul..Who is that?

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    • Matthew Stone

      Sorry man. I live on the east coast and ask to talk to ron paul supporters? nada.

      ronpaul supporters email me at forestnomad@hotmail.com

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  • Dan Beaulieu

    Funny how they gave him 2 minutes and then let him talk for 4.

    Perhaps something was sinking in? Probably not.

    Go Ron.

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    • Aaron K Davis

      Yeah I noticed that too, for once they didn’t cut him off!

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  • Sean

    As a result to Bush destroying the steel industry with high tarrifs, the price of oil skyrocketed. Many people blamed Katrina which actually had virtually little effect on the price of gas. It was the cost for oil pipelines and the rapid growth of the car industry that raised the price for crude oil.. Alan Greenspand raised interest rates 5 times or more in 2004 and continued raising rates through 2005 before Katrina ever hit due to rising costs of fuel. So the problem with the oil industry happened before Katrina.. Ben Benarke took over after Alan Greenspand and was going to reverse the interest rates but did not because the housing industry seemed to be improving, unfortunetly it was due to subprime mortgaging and not a strengthening economy. Actuality, the economy was losing money at a rapid pace because of interests. This is the major problem that led to unemploymet. We still have this probelem because of the steel industry. They tried telling us this when asking for a trillion dollar bailout in the summer of last year and again just a couple days ago. Bush destroyed about six major steel companies. Now only two remain and cannot produce as much as we demand. That is even what they have mentioned in their plea for help. I believe we should look into this problem and not overlook its importance. We really need to fix this problem if we want limited government. There are two ways of taking over control, by force and by stealth. We can’t achieve limited government by attacking the system, instead we must fix and build the system where it does not need government intervention. With more steel production we can increase supply and lower the cost for investments. We can build an economy that works on its own without the malpractice of the Federal Reserve whom raises interest rates because of our uncontrolable growth.. We need to control growth to eliminate it’s needs and the needs for other government intervention.

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    • Dave

      You do know the steel industry actually died because of Cold War contracts right? The company’s were publicly traded but primarily received revenue from the government. The contracts were profit margin over cost. In such a contract, the only way you make more profit is by increasing cost (instead of innovating to lower cost). As a result the end of the Cold War and reduction of the military industrial complex lowered the demand for steel. Additionally, these companies had large amounts of their profits based on public markets instead of government funds. Unable to compete the industry died by not being able to compete with newer, cost efficient worldwide competitors.

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      • Sean

        What?? I’m in the construction business. I build schools for a living. I know that Bush and the EPA set policies back in 2001 to make steel companies pay a tax on how much carbon they produce.. About six companies failed because they couldn’t afford to upgrade their production methods.. Steel is the base for all buildings. A school uses roughly around 10 million+ dollars worth to be built.

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        • Dave

          I think you saw the tail end of what was a long road of set up to fail, which is what I described. Inefficiency + drying up money + new regulation = dead company.

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  • repulsed

    The system that we have is so badly broken it is repulsive. Frustrating would be a huge understatement. I could type for hours here but what really needs to happen is a primetime show with ron and peter schiff explaining how our freedoms our being destroyed by this repulsive system which has dwarfed into moral hazard gone wild…now if we could sell as many videos as girls gone wild in this sick society…we might be on to something! Thank you so much for being our voice of reason!

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    • Sean

      We don’t need a show to explain to people what are country should be. Do you think thats going to feed the poor and cure the sick??? as long as there is a majority of people in need, there is going to be a large government to help. Thats the will of the people.. We need to help the people in need in order to restore faith in limited government. We should produce more domestic steel and oil if we want to cure our inflation problem. Then we wouldn’t need a federal reserve to enforce unemployment to reduce demand.. If we had the supply, we wouldn’t have to worry about the demand (inflation). Capitalism would take hold and the economy would start functioning without government intervention.

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      • Dave

        While you are correct that production of resources located in the US would reduce imports and increase exports (of course implying that our costs are competitive in the market, which is not the case of crude, and needs a vast infrastruction improvement for Steel), again it doesn’t address the underlying issue being brought up by RP. The current issue is that the fiat system allows the government to devalue the currency and yet does not accurately reflect those numbers in its reporting. The correction for inflation to wages, taxes, etc. that are “supposedly” working off of those numbers are vastly undercorrected and the everyday citizen suffers.

        Key example is the legislation RP got put in that allowed for minting of gold and silver coins to ease the ability for the everyday citizen to invest. If you take a $20 dollar denomination at the time of minting and compared its value in current US dollars it would be of $800 dollars in value. In the past 20 years the US has rarely posted inflation over 5%. How then do we come to that value?

        I doubt gold has vaporized, or demand has increased dramatically. Our currency has erroded. At the sametime if wages have adjusted to match inflation, assume 5%, but true inflation is in the 15-20% range, then how does the every day person keep up?

        That is the falicy of having a fiat monetary system as something that is truely capitalistic and should exist in a free market.

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        • Sean

          The federal reserve didn’t lower interest rates bc the housing market was stabilzing due to subprime mortgaging. It got an 11-0 vote to keep interest rates high after Alan Greenspan got replaced. This is the fault of poor lending methods that hid true growth. The federal reserve board was just as in the dark as we were about the future to come.. We don’t need to produce gas and steel to export. We need it here badly, and yes it would make both so much cheaper because we are competing on a world market with countries that are growing 3 times the pace as us. This is what inflation comes from, this is why the interest rates started going up in 2004. That is the whole problem. Not some system that is scientificly proven to work.

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          • Dave

            Producing here locally does nothing if it can be purchased overseas cheaper. That’s what killed Pennsylvania steel which was one of the largest producers in the US. They died after they lost the contract for the reconstruction of the World Trade Towers to smaller foreign competitors.

            The same is true of oil. Oil in Texas is only profitable to drill if crude is over $60-$72 a barrel. That’s why previous to the gas hike, you rarely saw many of the fields pumping oil. The sale price would have been too high.

            Your point of contributing 8T to rework the steel industry does not look at the government as a business. You inject that money into the system, and how do we get it out? What the return on investment? Whats the ROI period?

            All of those have to account for the global market competition. Other than the claim of jobs, or buying US vs foreign, I haven’t seen those type of numbers on injecting money into that market, let alone a proposed plan of reducing the money in circulation to preinjection levels.

            What you seem to not factor in on the “cheaper calculation” is the net effect of inflation to just make $8T to inject in the industry, as well as the time till the desired effect takes place (ie build, hire, train time). The instant effect is a devaluing of our currency while we wait for a long term effect of getting locally produced steel and because of a diminshed will make us cheap to buy by foriegners (maybe if our wages and cost are still not higher than the market will bear). Of course thats all speculation at this point because there is no study. Just the “independence” and “buy America” rhetoric.

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          • Sean

            The countries that are growing the fastest are producing their own steel. ex. china, south korea, etc… When we grew the most, we were producing 40% of the worlds steel. Now that we dont produce as much steel, we don’t build as much..

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          • Matthew Stone

            Sorry, not to drop in, but as soon as whatever commodity you pick you do that, and if i we a proponent of secondary effects and capitalism, i would plow my strong dollars (OIL)to cheap companies. Find gold, smuggle it in, then convert and take dollars out.

            Is that what you want? How can you keep a gold standard when everyone wants to take you down?

            China might have a crapload of gold. I would state that a gold standard would mean we abandon the free market (aka fiat currency) adhere to a communist security (we totally know better than the world) and watch china support countries like south africa just for the gold to take us down.

            – Matt

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        • Matthew Stone

          Wow. I would like to comment, but numbers are so normally specific, not widespread like your chatter. You have a defensible point? One.

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          • Matthew Stone

            I ask for one cause the next point had like 10 years of scheming and anger. Make one point, make it defensible, and make it good.

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  • longshotlouie

    These arguments about there not being enough gold to back a currency get repeated on here on all the time. Well, the statement always gets made, there’s just never any logical argument made to back it up.

    It’s simply a matter of tying x units of currency to 1 ounce of gold. And under a true gold standard, someone could walk into a bank with x units of said currency and walk out with 1 ounce of gold. Just because today’s dollar (or other fiat currency) is worthless doesn’t mean it always was. All a gold standard would do would be to tie the value of the currency to a fixed amount of gold. And prevent the government from its relentless campaign of theft through inflation.

    When there was 1.5 billion people at the start of the 20th Century there was a true gold standard. And how much gold had ever been mined up to that point? Central bank and treasury holdings at the time were 3,200 metric tons. Today, with a world population of 6 billion, central banks and global institutions are holding over 30,000 metric tons. So CBs are actually holding more gold per capita today yet supposedly a gold standard couldn’t exist?

    http://www.mises.org/books/caseforgold.pdf

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    • Sean

      Who knows where your getting your numbers…

      “In 2005 the World Gold Council estimated total global gold supply to be 3,859 tonnes and demand to be 3,754 tonnes, giving a surplus of 105 tonnes.”

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      • longshotlouie

        link please

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        • Sean

          http://en.wikipedia.org/wiki/Gold#Production

          In fact, it says that the United States only has

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        • longshotlouie

          United States – 8,133.5 tonnes

          World – 29,783.9 tonnes

          World official gold holding (September 2008)

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          • Sean

            Ok, the united states holds 241 billion worth of gold or 8,133.5 tonnes. How is that going to compare to the trillions of dollars thats in our economy today?? are we going to devalue gold around the world to fit our currency??

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          • longshotlouie

            It’s simply a matter of tying x units of currency to 1 ounce of gold …. as a commodity, it will find its correct price in a free market, sound money economy

            you seem to want a seamless, painless, perfect plan
            do you have one now?

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          • Sean

            ok ok, so we could just own a portion in gold.. That doesn’t solve any problem though as I explain through this whole mess of arguments.

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          • longshotlouie

            The problems that would be solved have been pointed out over and over on this site.

            Are you just here to dance?

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          • Sean

            Where does it talk about the helping the steel industry on this page? I’m sorry im new here, but I am a diehard fan for limited government. I’ve been watching ron paul for over a year back when the elections first started and i traveled across the country to attend the rally for the republic.. I’m sorry i didn’t look into your gold arguments, but I see problems past that which really should be addressed and will eliminate the need for government intervention. Unlike everyone here, i believe we can achieve this by stealth instead of force.

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  • longshotlouie

    If every dollar must be backed by a certain amount of gold, then you cannot create money out of thin air. The gold standard says you must have the gold first. Governments find it harder to wage war, dole out entitlements and build public works with a gold standard tying them down. Banks can’t lend as much money; hence they can’t make as much money. This is why the banking interests of this country backed the creation of the Federal Reserve. They appreciated the value of a good cartel.

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    • Sean

      Actually WW1 started bc the unfair advantage of trade with the gold standard.. If banks can’t lend, than how are people going to start businesses??

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      • Matthew Stone

        Because they love credit and just want to take advantage of low interest rates!

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      • Dave

        How about saving their money??? I did it.

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  • Sean

    If the gold standard was desired so much, why would there not be one country in the world that has a hard currency. It is not there because the population of the world has exceeded the amount of gold for the use of money.. The population doubles every 50 years, do you think they are going to start producing double the amount of gold every half century. That is a complete insurmountable reality.

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    • Dave

      Very simply there are 3 good reasons why no country goes to the gold standard.

      1) The ability to include and exclude figures to produce inaccurate inflation and exchange rates is not able to be done in a gold standard. However many number of dollars you have ties to a number of gold. Your exchange rate is always known. While you can create inflation to compensate for population growth (there is nothing saying you can’t), you can’t hide that your inflation is increasing and by how much.

      This means you have an informed general population which is not the case within a fiat monetary system.

      2) The general population is in control of the monetary system instead of private organizations and the rich elite which control them. In a fiat system the control is in a central bank, that central bank decides the money supply and the way the value is determined, who gets the money, and where it is distributed.

      The gold standard limits inflation by allowing citizens to opt out of the currency and hold gold instead. A person could get all of their money in gold, wait for inflation to create 20% increase in the number of dollars it takes to buy his gold, and just increased 20% of his wealth.

      This is unlike the current system where people are forced to stay within the current monetary system, and then they have no way controlling its inflation or trading price. Additionally they do not have enough wealth to trade their depreciating asset in a way which allows them to increase their wealth. The game is angled to those who control it, and it is not the everyday citizen.

      3) The gold standard is not subject to speculation, and therefore is less subceptible to market swings. The hard currency does not change based on confidence in the market, it trades at whatever any other currency buys gold at and then the ratio of dollars to gold.

      This therefore does not fair well for those whom have the ability to a) always monitor market forces and therefore can benefit most from a currency which trades like stock, b) can control market forces based on their ability to control supply, and/or c) have enough money to invest and ride through the waves of market forces to benefit from fluctuation in currency trades.

      Again the currency is of the people, by the people, for the people, yet the current system benefits 8% of the population (or less) and robs the rest.

      That’s why no government goes to a commodity backed standard. The control of the monetary system returns to the people and not to the elite which control the markets and banking industries.

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      • Sean

        What are you talking about? Your gonna be making minumum wage if your paid in paper or gold shavings so 8% will still benifit bc they will still be making big bucks.. First of all, changing to the gold standard doesn’t mean people have to come out with their figures.. 2nd, the central bank just takes money out of the bank to control the demand for goods. Thats the whole reason the gold standard would be as effective. 3rd, inflation doesnt just jump 20%, that is a horrible insignificant argument. And anybody can buy gold right now and then sell it after inflation, so that doesn’t make any sense. 4th, gold is subceptible to market swings. More production cost more money makes that money less valuable.. That was alot of typing for not one single good point.

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        • Dave

          Ok I’m game.

          1) The government every year posts its inflationary rates, GDP, etc. Could the US government decide to be different than everyone else in the world and not post it? Sure, but it wouldn’t happen. That inflation rate would then reflect the change in ratio of dollars to gold.

          2) Let’s say that is 100% correct, how is it beneficial to devalue a currency as a means to change demand for goods and services? Demand should be fully in control within the market not via a central bank. That is the central ideal within capitalism. Control of the demand or supply by anything other than private industry is a direct violation of that principle. It’s even worse when you consider that central bank is a government entity but run by private individuals. Seems fairly clear that this is not something designed for the greater good instead of private intrest and is not within the ideals of a free market.

          3) My inflation number was an example. I didn’t do a year to year calculation to find out what an increase over 20 years from $20 to $800+ would be. I guarentee it doesn’t = 5% year over year.

          While you are correct that anyone can buy gold today, you cannot trade gold for common goods since that would be a competing currency. As such, you have to have the means to survive using current money, be liquid enough to tap your savings in case you need it, and invest in gold. There was a case you can look up on MSNBC about a lawyer office that paid his employees in gold denominations to avoid taxes. While they paid no penalties to the IRS, they adamantly stated you cannot pay people in competing US currencies.

          This is the central theme behind allowing for a gold standard currency. You open up gold as a currency to be traded easily and as liquid as cash. Instead of leaving it as a market commodity which must go through several processes before becoming accessible cash or transfered back into gold investment.

          4) You are correct, and I never denied gold is subject to market swings. However, fiat money introduces more swings due to there being no standard of what it is based on and therefore a market standard of what it should be traded as. Gold’s value (by itself) is based on cost to extract, availabilty, and demand. Under the fiat system you add the speculative cost the currency to determine the cost of gold. This again makes fiat money much more subceptible to market swings instead of gold.

          Gold has inherent value based on 3 factors. Fiat money is speculative and based on what other view its value relative to other currencies and commodities’ value. Additionally it has the same factors as any other commodity. The ability to truely relate its value is so subjective that it is obvious why it is hard to see some issues emerging.

          If you don’t see that adding the subjective value that Fiat money has is inherently flawed when compared to every asset it attempts to purchase than the concept of a sound monetary system is lost…where was your point?

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          • Sean

            The market can’t keep up with the demand, thats where inflation comes from. Demand is a natural part of a growing economy. Inflation is going to happen wheather the gold limits the supply of money of the federal reserve does. My point is that we need to solve inflation if we want a sound economy. We have to amp up domestic production to reduce demand in a global market.

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          • Matthew Stone

            “3) The gold standard is not subject to speculation,” Really?

            What if I took my easy fed dollars today and invested them into south african gold mine, brought the gold back then invested in illegal swiss currency accounts, sold the gold, then bought the united states.

            The gold standard has to be dead, it’s the equivalent of the oil standard is now.

            – Matt

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      • Matthew Stone

        Really? ‘The gold standard is not subject to speculation,’

        I don’t care what you said before or after, that is a terrible, terrible, statement.

        Totally incorrect.

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      • Matthew Stone

        Dave. As soon as you do that, and if i we a proponent of secondary effects and capitalism, i would plow my strong dollars to cheap compaines. Find gold, smuggle it in, then convert and take dollars out.

        Strangle man, strangle.

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  • Sean

    “The total amount of gold that has ever been mined has been estimated at around 142,000 tonnes.[12] Assuming a gold price of US$1,000 per ounce, or $32,500 per kilogram, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of circulating money in the U.S. alone, where more than $7.6 trillion is in circulation or in deposit (although international banking currently practices fractional reserves).[13] Therefore, a return to the gold standard would result in a significant increase in the current value of gold, which may limit its use in current applications.[14] For example, instead of using the ratio of $1,000 per ounce, the ratio can be defined as $2,000 per ounce (or $1,000 per 1/2 ounce) effectively raising the value of gold to $8 trillion. However, this is specifically a perceived disadvantage of return to the Gold standard and not the efficacy of the Gold Standard itself.” – wiki

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  • longshotlouie

    Though your argument that there is not enough gold is invalid, it really does not matter because what is really desired is specie money not controlled by the government.

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  • Sean

    Money is just a means of exchange. Wheather if it’s blue, black, yellow, wooden, iron, copper or gold.. What gives value to the means of exchange is the effert and work gone into recieving that specific amount. If I worked so hard for a set amount in gold, I would still have the same amount of buying power as would I working for any other means of exchange.. The federal reserve intervines whenever production can’t keep up with demand. So the whole purpose is to limit the supply of money, adjusting it’s value or spending power. Creating money backed by gold would be used in the same manner as the federal reserve. The whole point of the gold standard is to limit the supply of money to keep the demand down which adjusts it’s value or spending power. We are going to have to create gold standard money just as fast as fiat money if we want to grow with the population, or else the dollar to individual ratio will become smaller and we would have to worry about serious deflation. There just isn’t enough gold around, so we will constantly be raising the value of gold and devaluing the dollar until it becomes unstable. We already know that we don’t have near enough gold to match the population we have now. There is not enough gold ever mined in the world that can match half of our deficit.. Gold standard makes unfair trade. It is what caused discrimination that led to world war 1.. Without deficit spending our economy would collapse because we gave away all our manufactoring jobs over seas and we have such a large trade deficit, that we would give all our money away! We developed a lifestyle of trade, not production, so half of our businesses would collapse because trade would become less and less when our total supply of money becomes gets shipped over seas. The fiat system is a way to control and balance the supply of money to the 21st century economy. It is flexible and has value. Inflation would come from money backed by gold or fiat. That is our main problem. We need to get ahead of production instead of trying to become low on demand if we want a healthy economy. Thats true for whatever form of money of means of exchange..

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    • Dave

      The part you are missing however is that tying money to a fixed commodity that is scarce forces you to actually show true inflation. Example: for every boullon of gold you have 1 dollar. The Fed decides we need more dollars and then the ratio changes to 1:2. Now you have inflation of 50%.

      Why did we move away from a system like this, because then you can’t do math magic and make inflation, GDP and whatever else look the way you want to. You have a fixed number of money which ties to a fixed commodity. That fixed commodity has exact value world wide, which then fixes your exact trade value to other currencies. In this fiat system its all speculative, which means money trades like stocks. In general this is why the excessively rich enjoy fiat money systems and inflation (especially inflation which can be doctored up in a fiat money system), because the more wealth you have the easier it is to trade currencies like stock and win out overall.

      Fixed commodity currencies means it is easier to understand for the everyday person on what is happening to the value of their money. It is easier for them to request more money from their employer, to argue against policy of printing more money and decreasing the money in their accounts, etc. This inheriently gives the power back to the people instead of the elite who can influence the game and have enough assets to win.

      I believe that people should be able to become rich and am very much opposed to the redistribution of wealth. I am also against a system which does not allow individuals to move up under their own sweat and hard work. The field has been drastically narrowed due to the ability of a few to control the game, the field, the teams, the rules.

      You are correct that inflation can occur in either system, however the visibility of that inflation and the impact it has on its middle and lower class citizens is vastly different than in a fiat system. This cannot endure.

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      • Sean

        That is a huge misunderstanding in the value of money.. When there is more money, there is more demand.. The amount of money printed doesn’t affect anyone until it reaches consumers hands.. You can’t have a “fixed number of money to a fixed price of commodity”…. It cost money to produce commodities, thats why the steel industry is asking for a trillion dollars to update production methods to keep up with our needs. It is the basics of economics, supply and demand.. When the price of gas goes up, it is because other countries need gas too. Other countries are growing 10% a year and buying 50% more cars every year, so it cost money for new steel pipelines for crude oil production. That is why the price of gas goes up. Just today the price of gas went up 20 cents because Russia cut off Europe from it’s reserves. Now europe is getting its oil from the middle east. Gas prices are going to get higher and higher to pay for the production of these different countries abroad and new drivers here in America.. Our economy has to grow so much every year wheather the money is fiat or gold, so the growing demand “inflation” will be the exact same.. fuel prices do effect food production costs, and does contribute to minor inflation, but steel is an ivestment commoditie, so the effect on its prices will effect all economic growth… Anybody can become wealthy if they tried. It’s not impossible to live a happy life with plenty of money if it is that you desire. People become wealthy somehow; It is the ones that try the hardest that succeed the quickest.. Also, all taxes are a redistribution of wealth. Fox news will warp your mind.

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        • Matthew Stone

          We are so much more global now? Isn’t it possible that people could actually make a run on a country if you were tied to a commodity? Or inflate it by ‘free market’ purposes?

          We are tenuous enough with oil, do you really want to tie your future to something other countries could swamp us with?

          E.G. if we went to a gold standard, why couldn’t middle east nations take their money from oil, as it inflates now, buy huge tracts of south africa, mine the crap out of it, and then say ‘ok peeps we got what you want, now sell us your currency at this non-freemarket rate’.

          Or just smuggle gold in and buy currency at the gold rate?

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        • Dave

          When you said this… I just ignored it…

          “The whole point of the gold standard is to limit the supply of money to keep the demand down which adjusts it’s value or spending power”

          but then you restated it….
          “When there is more money, there is more demand”

          This is illogical. Just because there is more of something doesn’t mean there is more demand. ONLY when the VALUE of that item increases(inversely proportional to the price), will the demand go up.

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    • Matthew Stone

      Look two steps ahead dummy. If your dollars are backed. Why couldn’t someone (foreign country awash with oil or our treasuries) mine gold at slave wages then smuggle it in, convert, then run? BRILLIANT. Is that the dollar run you want?

      We (and me) totally failed at foreseeing the oil spike as a country we shit our pants before it crashed. But I saw how the RP peeps latch on ;(

      Where ron paul fails for me is that he doesn’t learn from failing back in the 80’s (Peace, Gold, and Prosperity) not sure he has a clue about reaganites.

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      • Some Dude

        ‘Matt Stone,’ you are either an idiot, a troll or both. Don’t opine on economic or monetary subjects until you do a lot more study. Yes, theoretically some foreign country could “mine gold at slave wages” and then generate significant inflation in a gold-standard monetary system, but there’s no way they could ever generate the sort of inflation that is possible — indeed, inevitable — with paper currencies. Having a currency backed by anything (gold, silver, grain, cotton, buckskins, beaver pelts, wood, etc.) of real value (i.e. – something that takes real work to obtain), limits the amount of inflation that is possible. Look at what is going on in Zimbabwe to get an idea of what is going to happen to the U.S. dollar. The dollar is dead — smart money is selling dollar holdings and buying assets overseas. You should do the same, while there are still people fool enough to take paper dollars.
        -Some Dude
        P.S. — Even if one accepts your premise that paper currency is best, how do you decide who gets to control the printing of the currency? Who gets to spend and/or lend it first? (And, thus, obtain the greatest benefit from it.) What of the fact that, if it is lent out at interest (>0%), then, mathematically, there is always more money owed to the lenders than actually exists? Or do you fail to even grasp that fundamental aspect of debt-based paper currency?

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        • Matthew Stone

          Why the quotes? matt stone is my real name :)

          I think you need to learn how natural
          resources are managed AND harvested. Complete ignorance. 😀 The peeps you abandon watched redwoods get sunk years ago, deep in the sea, old growth redwood!

          And yeah, I am a california republican. So im basically a democrat in georgia, so i fight that too.

          – Matt

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        • Matthew Stone

          And, really “Having a currency backed by anything (gold, silver, grain, cotton, buckskins, beaver pelts, wood, etc.) of real value (i.e. – something that takes real work to obtain), limits the amount of inflation that is possible.”

          Really? You are limiting inflation? And saying there are limits to inflation? Rad.

          – Matt

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  • Patrick Gann

    Ron Paul continues to shine like a beacon of light in the darkness and stupidity of the current American financial system. Go tell ’em, Ron!!!

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  • Sean

    You need to set short terms for regulatory officials… That would eliminate most crooks in Washington.

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    • EDWARD NUTTALL

      SAME CIRCUS, DIFFERENT CLOWNS. POLITICIANS COME AND GO, WE NEED TO REFORM THE SYSTEM IN ORDER TO MAKE LASTING IMPROVEMENTS!!!!!!!!!!!!!!!!!!!!!!!!

      -TYPICAL CAREER POLITICIANS VOTE IN FAVOR OF THEIR OWN CAREER AT THE EXPENSE OF THE PEOPLE THEREFORE WE MUST REQUIRE TERM LIMITS FOR ALL ELECTED OFFICES. THE U.S. CONGRESS BY ITS VERY NATURE IS A CLASS OF PEOPLE WITH PRIVILEGE AND POWER. THAT, I AM CONVINCED, IS AT THE HEART OF OUR PROBLEM. IF ALLOWED, CONGRESSMEN AND SENATORS WILL ALWAYS VOTE TO PERPETUATE THEIR OWN CAREER OF PRIVILEGE. THEY DO IT BY BRIBING THEIR COUNTRYMAN USING OUR TAX DOLLARS TO DO IT( i.e., EAR MARKS, SPECIAL INTEREST PORK BARREL SPENDING, CHARITY ENTITLEMENTS). MANDATORY CONGRESSIONAL TERM LIMITS WILL ALSO HELP TO STYMIE THE LOBBYISTS.

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  • http://carboncopied2050.blogspot.com cc’d

    Ron Paul has an inspiring appetite for harmony and freedom. I would have never thought a politician could be so eloquent and thoughtful in exposing the wrong truths of the financial system.

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    • Matthew Stone

      Anyone know what, if there were a speculative attack, how much money china would make?

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