Ron Paul: What Has The Federal Reserve Done To Our Money?

In his latest column, Ron Paul exposes the Federal Reserve System as a cabal of elite, quasi-governmental banks who have destabilized the economy, destroyed 96% of the dollar’s value, silently stole from the poor to give to the rich, and are deeply entrenched with the political power elite, all the while claiming with a straight face that an independent and untouchable Fed is essential to ensure economic growth. But history has proven that central economic planning doesn’t work, no matter if it’s tried by bankers or politicians. Only the free market, built upon an asset-based, non-fiat currency, can determine the “correct” value of money and its rate of interest.

Download the column as an MP3 file here (4:06 minutes).

Audit the Fed, Then End It!

by Ron Paul

I have been very pleased with the progress of my legislation, HR 1207, which calls for a complete audit of the Federal Reserve and removes many significant barriers towards transparency of our monetary system. This bill now has nearly 170 cosponsors, with support from both Republicans and Democrats. Senator Bernie Sanders has introduced a companion bill in the Senate S 604, which will hopefully begin to gain momentum as well. I am very encouraged to see so many of my colleagues in Congress stand with me for greater transparency in government.

Some have begun to push back against this bill, and I am very happy to address their concerns.

The main argument seems to be that Congressional oversight over the Fed is government interference in the free market. This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters.

Instead, Congress has abdicated this responsibility to a cabal of elite, quasi-governmental banks who, instead of stabilizing the economy, have destabilized it. It took less than two decades for the Federal Reserve to bring on the Great Depression of the 1930s. It has also inflated away the value of our currency by over 96 percent since its inception. It has invisibly stolen from the poor and given to the rich through this controlled inflation, and now openly stolen through recent bank bailouts. It has predictably exacerbated the very problems it was meant to solve.

Detractors have also argued that the Fed must remain immune from the political process, and that that more congressional oversight would distort their very important decisions. On the contrary, the Federal Reserve is already heavily entrenched in the political process, as the Fed chairman is a political appointee. High level officials routinely make the rounds between positions at the Fed, member banks, Treasury and back again, taking care of friends and each other along the way.

As far as the foolishness of placing complex monetary policy decisions in the hands of politicians – I couldn’t agree more. No politician or central banker, no matter how brilliant, is smart enough to know more than the market itself. The failure of central economic planning has been witnessed over and over. It is frankly beyond me why we ever agreed to try it again.

To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have. They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability. Thus the loudest arguments against greater transparency are likely to come from those friends, and understandably so.

However, it is the responsibility of every member of Congress to represent the interests of the people that sent them to Washington and find out what has been happening with our money. As the branch of government with the power of the purse, we really have no other reasonable choice when the economy is in the shape it is in.

  • http://NA V Weber

    Greetings
    Pray you have time to study & support LibertyDollar.org
    Saint Paul convert US to an honest monetary system.
    Prayerfully v

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  • Pingback: Falling Dollar - Page 2 - INGunOwners()

  • Nate Y

    Krugman’s devastating critique of Ron Paul, Peter Schiff, and the Austrian School in general?

    “Look I don’t want to get into the Austrian stuff. It’s um (pause and gulp) not a major school”

    See? It doesn’t matter that the Austrians were, are, and will continue to be right. What matters is they aren’t one of the more popular schools.

    Oh well. Truth always wins out over time.

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    • Sean

      He says its not major school because it can’t apply to 20th century economics. This man who won the Nobel peace prize last year for mapping out the geography of trade in the world.

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      • Sean

        The reason why we got away from sound money was because of our trade deficits. When they took the dollar off the gold standard, other countries owned enough dollars to what we had in gold reserves. That means they could of taken all of our gold if we didn’t delink it to the dollar. Also a major cause was the overpriced dollar. It lost 50% of its value because other countries realized that gold was overpriced…
        Now we are in a similar but worse scenario. Other countries have acquired all of our mortgage debt thru fannie may, freddie mac, bear sterns, leeman brothers, etc. If we didn’t bail them out, they could seize their assets.. This was an unregulated free market problem that let become so largely in debt to china.. You don’t understand how much money and assets other countries own of ours. If we returned to sound money than they could take away everything we could possibly back it up with.

        http://patriotmissive.com/tag/fannie-may/

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        • Ross

          More intellectual flatulence Sean? “We got away from sound money because of trade deficits.” You are the master of double speak and spin.

          The reason why any currency collapses is because the ratio of debt money to real productivity is too high.The fractional reserve ratio is currently 9:1 or 9 counterfeit dollars are created to $1.00 that represents real productivity.That is the simple truth.

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          • Sean

            and ross, if you watched this short video i just posted, you would learn the simple truth.

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          • Ed

            You are absolutely correct. I totally agree with you. Fractional reserve banking and the federal reserve are the real reason for the economic collapse

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      • Nate Y

        First, he won the Nobel Prize in Economics not the Nobel Peace Prize. Second, so what? The argument from authority is yet another fallacy. I don’t care if he’s won 100 Nobel Prizes. The man didn’t see the crisis coming, doesn’t understand the fundamentals of economics, and prescribes all the wrong solutions (for example, government must increase spending because private citizens are saving). It’s not really his fault though. I imagine he’s been spoonfed Keynes his whole life. And now he’s busy spitting Keynes’ bankrupt theories back at the public.

        Also, this debacle was caused by governments and central banks. It was not caused by the free market.

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        • Sean

          he did see the housing bubble comming. bubbles can be formed without the government. any over investment causes bubbles.. It was overinvestment in houses used by a system that was created by the free market.. All that credit swap, what goes where, who owes who what is all a HUGE mess caused by free market systems. The government didn’t tell the banks to start a securities system to sell our debt overseas.

          and ross, educate yourself..

          “By the time Nixon took office, U.S. gold reserves had declined from $25 billion to $10.5 billion. Gold was an underpriced commodity, as the dollar was overpriced as a currency. The United States was on the verge of running its first trade deficit in over 75 years.[80] The price of gold had been set at $35 an ounce since the days of Franklin Roosevelt’s presidency; foreign countries acquired more dollar reserves, outnumbering the entire amount of gold the United States possessed. Nixon completely eradicated the gold standard, preventing other countries from being able to claim gold in exchange for their dollar reserves.”

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          • Sean

            I don’t care if paul krguman won 1 or 1000 nobel prizes, He still knows all aspects of economics and knows what can be considered “main stream” or not.. Listening to him compared to listening to peter schiff is like the difference of listening to obama compared to bush speak. One seems a lot more highly educated and understands whats going on a whole lot better.

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          • Nate Y

            Yes, Krugman with his tortured Keyensian “logic” and his incessant pauses, gulps, ums, and ahs, is a much better speaker than Schiff. Give us a break!

            Peter Schiff is one of the most gifted on-the-fly speakers I’ve ever heard.

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        • Sean

          Austrians are correct when they say that trade deficits bring investments to a country, but they are wrong to think that it is okay. It is wrong to have to borrow money overseas to be able to build homes bc people don’t save money and spend it on gas and other goods from these same people.. Even paul krugman suggested to the government that we restricted some trade, but so called free market advocates throughout congress reject that notion because they want a “world economy” or “new world order.” The problem isn’t the federal reserve, its the government.

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          • Nate Y

            The Federal Reserve is a creature of government. Since they dictate monetary policy, they’re basically the fourth (and perhaps the most powerful) branch of government.

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  • Nate Y

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    • Sean

      I know the broken window theory, but its wrong because it rises gdp. As long as the assets are boughten from our own country, than it creates new needs for assets which is good the economy, its called capitalism.

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      • Sean

        One of ben bernanke’s good friend believes we should get rid of income taxes and raise corporate taxes.. But all of ben bernankes friends are evil so we shouldn’t listen to him.

        Your trying to fix a heroin problem with alcohol.

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        • Sean

          Example of the broken window theory..

          ac units always have a life cycle and break down. They need to be repaired and parts need to be replaced. So there are manufacturing plants to create parts, suppliers to sell them, and workers to do the repairs. It fits basic needs to capitalism. Same with cars, or anything that breaks.

          I don’t think Katrina was good for the economy, because it was a major disaster, but the theory in general is incorrect.

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      • Nate Y

        Total nonsense. It is impossible to become wealthier by the destruction of wealth. It doesn’t matter if it is a major disaster (hurricanes, wars, etc.) or a minor disaster (breaking windows, crashing cars, etc.) It is always a net loss.

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        • Sean

          no because its a net gain for whoever creates it to replace it.

          check this out

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          • Nate Y

            No. It is ONLY a gain for the person who has to do the replacing. But it is still a NET loss. You’re only focusing on the group who benefits to the neglect of all other groups.

            I guess you’ll go out sometime soon and contribute to the economy by breaking all your neighbors windows.

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          • Sean

            Repair services is a good portion of our gdp. It provides the most work for construction.. Those people can eat because they have a job.

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          • Nate Y

            Well then you better get to smashing all your neighbors windows. Or you can go start a giant fire and destroy a few hundred homes. That will spur some increased GDP.

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  • longshotlouie

    For my Christian friends:

    ‘BAPTIZED INFLATION
    A Critique of “Christian” Keynesianism
    http://www.entrewave.com/freebooks/docs/html/ihbi/ihbi.html

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  • longshotlouie

    More from ‘Keynesians Exposed':

    Free eBook
    http://www.capitalism.net/Capitalism/CAPITALISM_Internet.pdf

    For those that want an insight into why seemingly intelligent people would promote Keynesian economic theory, and to defend it even as it fails, check out Chapter 18 (p.863).

    Enjoy

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  • Sean

    Hey nate, this is where my math skills come in handy…I was looking at this chart about the value of the dollar and I realized something very important. As long as inflation stays balanced, than there is a limit to how low the value of the dollar can reach. It’s a simple algebraic formula called Infinite Sequence, or Infinite Summation using Geometric Sequencing. For instance.. If I have a hundred dollars and I take away 3% of the value, than it is worth 97 dollars. That is a 3 dollar difference. If I took 3% away from 97 than I would get 94.09. That’s a difference of 2.91 instead of 3. If I then take 3% of 94.09, than I would get 92.0163. That’s a difference of 2.07 instead of 2.91. If I did this over and over about thirty times or for thirty years, than the value lost each year will become so minute that the total value lost will bottom out and reach a stopping point.. Another example. If I had 1/2+1/4+1/8+1/16+1/32+1/64+1/128… and kept dividing it in half an infinite amount of times and added it all together, I would only end up with a total sum of less than 1.

    This is why the chart starts flattening out, because it has reached its limit to how much value it can lose.

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    • Sean

      Now what does this mean? This means that the normal rules of inflation don’t apply. The dollar holds a value but different parts in the market experiences pressure squeezes that leads to inflation, or rising prices. Like the cost of housing goes up when we invest alot in it, but once investments are down the value of the house drops. Oil affects the prices on everything that is shipped including food. Oil prices are controlled by supply and demand, not inflation. The price of oil raised 1000% in the past ten years. That has nothing to do with inflation. Hospital prices have gone up because less people are insured. and the list goes on and on.. This is why the supply of money has nothing to do with its value.

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      • Nate Y

        Hmm…I guess there’s nothing to worry about then. The math proves it. Just like math proved option ARM mortgages, credit default swaps, mortgage backed securities, CDOs, etc. weren’t problematic. Keep printing that money Mr. Bernanke. The supply of money has nothing to do with it’s value. Forget common sense, all of monetary history, and the law of supply and demand. Infinite sequence proves it.

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        • Sean

          That credit swap is a whole financial institute that wasn’t governed called “shadow” banks paid for by foreign investors. Major banks like bear sterns and lehman brothes were two of the huge mortgage holders that collapsed. That has nothing to do with the federal reserve. Your talking about a system designed from free market choices.

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          • Sean

            You can believe what you want. The fed doubled the supply of money so we’ll see if the dollar loses half of its value.

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        • Matt

          “The math proves it. Just like math proved option ARM mortgages, credit default swaps, mortgage backed securities, CDOs, etc. weren’t problematic. ”

          Yep, mad props to our ‘Free Market’ for figuring out things like that, huh? Yes, lets totally strip everything out and let those same free markets manipulate the value of a commodity to which our purchasing power is tied .

          That is, instead of the free markets NOW valuing our currency that is…

          Brilliant!

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      • Ross

        What a croc of BS Sean.As if a simple formula can represent the complexities of an economy.The US Dollar is only stable at the moment because people trade in petro dollars with it.When people start to move away form the US currency ,it will collapse.The amount of cash in the US economy has has doubled in 8 months.When this eventually finds it’s way to the real economy,then the US dollar will collapse.

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        • Matt

          If that is so painfully obvious and you are soooooo much smarter than how the rest of the assets in the whole world are valuing our currency, what you should do is liquidate everything of value that you own and invest with Peter Schiff!

          Oh wait… Maybe that might not be the best idea… Maybe the markets know a little more than you do after all?

          http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html

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          • longshotlouie

            It was amusing to see Mike title his piece (promotion), ‘Peter Schiff Was Wrong’. Especially since the subject matter is what is still to come.

            Has Peter Schiff ever been wrong? Can we point to anyone that has not been? Has Mike been wrong? Painfully so.

            Now Mike needs your business, hence, he must appear to be smarter than Peter Schiff. Sorry Mike, not even on your best day could you touch his knowledge.

            Mr. Schiff continues to be correct, as many other experts are acknowledging, and folks like Mike will continue to troll for the new generation of suckers.

            The oldest cons in the world never die.

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          • Sean

            Why don’t you listen to a real economist?

            “Nobel prize economist Paul Krugman takes on Ron paul and peter schiff”

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          • Sean

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  • longshotlouie

    More from ‘Keynesians Exposed’
    http://site.theaustrianswereright.com/

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  • PHILL CLAUSS

    EXTENT OF ROTHSCHILD POWER

    According to one source “it was estimated that they controlled half the wealth of the world.”(50) The Federal Reserve Bank of New York was controlled by five banks which owned 53% of its stock. These five banks were controlled by Nathan M. Rothschild & Sons of London. Control over the U.S. Fed is basically control over the world’s money. That fact alone shows how immense the Rothschild Power is. If one examines who has been appointed to head the Fed, and to run it, the connections of the “Federal” Reserve System to the Rothschilds can further be seen. Another private enterprise using the name Federal that the Rothschilds also direct is Federal Express. Any one else might be taken to court for making their businesses sound like their are government, not the Rothschilds. It is appropriate for them to appropriate the name of Federal, because by way of MI6 via the CIA they instruct the U.S. government. Senators are bought and paid off by their system, as investigators of the BCCI are discovering. The Rothschilds have been intimately involved in witchcraft and the Illuminati since its early known history. The Kaiser of Germany seems to refer to them when he said, “the magic powers of money as wielded by the Lord of Lucre are powers of Black Magic at its blackest.”51

    If only half of the wealth is controlled by the Rothschilds, it indicates that if they are to be part of the world’s rulership, they must have allies.

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  • PHILL CLAUSS
  • Thomas Paine

    this site shares Ron Paul’s views:

    http://thomaspainereturns.net/

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  • PHILL CLAUSS

    However, eliminating the Fed, along with the ridiculous amounts of entitlement programs and then actually having a government spend within its means seems like a good recipe to help rectify our current economic mess. Please leave charitable causes up to charitable organizations – not my tax dollars. Am I way off here?

    THE FEDERAL RESERVE IS A PRIVATE INSTITUITION{THERE IS NOTHING GOVERNMENTAL ABOUT IT EXCEPT FOR ITS POWERS TO RULE OVER OUR COUNTRYS FINANCIAL DEALINGS!!}…THAT SETS INTEREST RATES..PRINTS MONEY BACKED BY NOTHING{FRACTIONAL },HAS ZERO TO DO WITH ENTITLEMENTS..THAT IS OUR FEDERAL GOVERNMENT…”WHEN YOU CONTROL SOMEONES MONEY..YOU CONTROL THEM”…THATS WHAT THE FED DOES..AND ITS OPERATIVES HISTORY GOES WAY BACK IN TIME..LONG BEFORE WILSON,{WHO MADE THE GIANT SIZE ERROR OF SIGNING THE FED RES ACT OF 1913…WAS LIKE PUTTING THE FOX IN CHARGE OF THE HENHOUSE},,THE GREENBACK,,AND EVEN BEFORE MADISON/HAMILTON..{A COURSE IN EROPEAN HISTORY CAN HELP YOU OUT THERE}..ETC…THERE IS A TON OF INFO ABOUT THE FED ON THIS WEBSITE..DR PAUL HAS A TON OF INFO HERE..AND THERE ARE MANY WHO POST HERE WHO UNDERSTAND THE POWERS AND THE DANGERS OF THIS “GROUP OF MONEYCHANGERS”…HAVE A GREAT DAY!

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    • Matt

      How does the Fed control me? I work, get paid, and spend money… How, exactly, is the Federal Reserve Board controlling me? My everyday life is more controlled by the private enterprise arena, i work, play, invest, and buy…

      I recognize ‘impacts’ but how do you separate ‘impacted’ from ‘controlled’?

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      • http://WWW.AMERICANJUNTO.ORG DL

        The inflation that the Fed creates through the monetary policies makes that 3-5% annual raise or stock market increase null and void overall, when the grocery, hardware, and furniture store are all raising their prices as a result of inflation (from the beginning to the end of the product cycle). Dr. Paul speaks extensively about the impact of inflation on products that we all buy.

        One other item is about your comment about assets ties up in housing, while that may be true for most of us, they still rise requisite with inflation purely based on the availability of dollars (3-5% appreciation per year). Who would actually know if there were any true real estate gains outside of the bubbles that have been created over the last few years.

        So, your definition of “controlled” or “impacted” may be one in the same, based on that perspective. Cheers.

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  • Andy

    John and Phil – you guys are cracking me up. I’m relatively new to this Federal Reserve dilemma but I have been trying to educate myself. From what I understand, it seems highly unlikely that we could successfully go back to the gold standard. However, eliminating the Fed, along with the ridiculous amounts of entitlement programs and then actually having a government spend within its means seems like a good recipe to help rectify our current economic mess. Please leave charitable causes up to charitable organizations – not my tax dollars. Am I way off here?

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    • PHILL CLAUSS
    • john

      Andy you are correct that not only is it probably nearly impossible to go back to the gold standard it also is not desirable. It would lower the purchasing power of the US consumer, increase the cost of commodities including oil, etc., etc. There is a reason the WORLD economies went off the gold standard. I am old enough to remember when and why. Unfortunately do not have the space here to delineate the reasons, but it is obviously available. Elimination of a Central Bank would also make the US a third world country, not just politically but economically as well. ie-how would we purchase, commodities, raw materials, petroleum, etc., etc. Out of space, sorry

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      • http://artbystewart.com Stewart

        Elimination of a Central Bank would NOT make the U.S. a third world country. However, the Fed. very well could, by transferring our wealth god knows where. Do YOU know where?
        The federal government could print its own money ANYTIME, without having to pay VAST interest payments to a bank, and has done so in the past as you are probably aware with a PHD.
        Certainly, the federal government spends way to much, but we need accountability, not secrecy.

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      • PHILL CLAUSS

        “There is a reason the WORLD economies went off the gold standard.”

        ..TRUE…IT PUT A TON OF POWER AND MONEY IN THE HANDS OF “THE CENTRAL BANK/SPECIAL FEW”…SO…YOU FIND THAT OK???…”BBBBBBAAAAAAAAAAAAAAAAAA”SAID THE LITTLE SHEEP….
        P.S.-AND WHERE DID THE GOLD GO TO??…THE IMF..AND THE CENTRAL BANKS!..DUH!…A FOOL WITH A HUGE DEGREE IN BLINDNESS…………TSK,TSK,,,

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      • PHILL CLAUSS

        “Elimination of a Central Bank would also make the US a third world country, ”

        THAT WAS FROM THE BOZO SKOOL OF BIZANESS”…
        WOW…THE CENTRAL BANK…IS.MAKING THE U.S. A 3RD WORLD COUNTRY!…JUST WAIT UNTIL THE YUAN IS THE WORDLDS CURRANCY!!.THEN WHATS YOUR WEAK MINDED EXCUSE GONNA BE??.BUCKWHEAT…YOUR A FOOL!

        KEEP IN MIND…THE CENTRAL BANK FINANCED BOTH SIDES DURING WORLD WAR 2…SO..THEIR LOYALTY IS TO “THEMSELVES!”..

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    • Matt

      I tend to agree as well on your notions Andy, I agree with RP’s thoughts on less govt but continue to entertain the notion of alternative approaches to a central bank.

      However, I just don’t know about linking our purchasing power to sumething that can be manipulated globally – how is that better than something that is manipulated currently?

      The free markets want to make money whatever the cost, not keep the price of a loaf of bread at $0.10.

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      • Nate Y

        A central bank armed with a fiat currency guarantees a massive expansion in government over time. If one wants less government, one must argue for sound money.

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        • PHILL CLAUSS

          HERE, HERE!!

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        • Matt

          Just because we tether to gold doesn’t mean our tax dollars would automatically decrease, tax rates could still remain high to support a bloated government.

          If ‘government’ were so powerful, couldn’t they just ramp up state investments in gold mining here and abroad to increase the possible money supply – and by extension inflate their budget?

          Further, why should a metal (or wheat, or whatever commodity) dictate how our leaders behave with our tax dollars?

          Don’t we have the right to be represented by politicians we vote for to be responsible and serve our interests?

          Or is the whole representative democracy concept broken in your opinion?

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          • Nate Y

            First, sound money isn’t simply government paper teathered to gold (or some other commodity). Although that that would certainly better than our current fiat dollar.

            You say: “If ‘government’ were so powerful, couldn’t they just ramp up state investments in gold mining here and abroad to increase the possible money supply – and by extension inflate their budget?”

            They could try. But how would they fund such programs? Since the printing press has been removed from their hands, they’d have to fund it via direct taxation. Doubtful the people would accept such a blatant smack in the face. That’s the great evil of paper money. It allows governments to silently rob the people. It is a stealth tax and a transfer of wealth from the people to the government. With sound money through competition in currency. The most honest and reliable currency would win out over time.

            No commodity will dictate what government does with their tax revenues. But that was never the argument. The point is that commodity money reigns in government borrowing/spending and prevents the government from robbing the people through inflation.

            “Don’t we have the right to be represented by politicians we vote for to be responsible and serve our interests?”

            To be responsible? Yes. To serve our interests? That’s impossible because there are so many groups with conflicting interest. Best thing government can do is let people make their own decisions and agreements. If a person/group/company does not honor a legally binding contract/agreement, the government can enforce the contract.

            “Or is the whole representative democracy concept broken in your opinion?”

            Not really. But the representatives have to abide by the Constitution. They have to play by the rules. This is a nation of laws, not of men.

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          • Matt

            One item I am wondering, how does the government rob us via inflation?

            Given that most people don’t have savings and instead have their assets tied up in inflation-friendly products such as houses, wages, and securities, how exactly am i being robbed – except for my ridiculous % assessed as taxes?

            I just don’t see why the Federal Reserve board is enemy number one when the Federal Government is the one REALLY taking my money.

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          • Matt

            There isn’t any money in our budget, if we were to streamline, to earmark in order to fund some mining projects? Are you kidding?

            Or, maybe countries already can mine to boost their cash reserves, and we don’t want to replace our fiat currency but instead want to reduce our expenditures else we leave our money supply in China’s managed-economy hands?

            http://www.marketwatch.com/story/china-now-worlds-largest-gold-producer-foreign-miners-at-door

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        • Matt

          Finally, Gold is trading at $900 an ounce – at what dollar amount do you peg the dollar to Gold?

          It currently costs Barrick Gold $400 an ounce to mine, where obviously the $500 an ounce difference is an inflation hedge that the WORLD is using.

          Do you really want to tie the global purchasing power of your currency to the WORLD’s inflation hedge AT A PRICE MORE THAN TWO TIMES THE COST TO MINE?

          Or do you go below market? Wait, you can’t because you can’t purchase at that cost to build reserves… Or do you set the price above market? Wait, that would be price manipulation…

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          • Nate Y

            “One item I am wondering, how does the government rob us via inflation?”

            This is the only sensible question you asked so it is the only one I will respond to.

            Inflation robs you because it erodes the purchasing power of the currency. You pay the inflation tax through higher prices. Of course, inflation doesn’t affect every group equally. It is actually a method of wealth redistribution. It’s pretty easy to understand why higher prices makes it more difficult for people to save.

            You point out that people do not have savings in this country. This is exactly correct and it is a predictable consequence of inflation. People begin to realize that they are not receiving a proper return on their savings. As a result, people stop saving. Why save when your money will be worth less X years down the line? A lack of savings has dire economic consequences over time because savings (not credit) is the life blood of the economy. It’s impossible to have a strong economy with no savings.

            Where would you have credit come from if not from savings? There is no other way.

            Also, a house is not an “inflation friendly product”. It is a long term consumer good. One more thing, wages are usually the last price to adjust upward as a result of inflation. How in the hell can wages be considered “inflation friendly”.

            Want to know what’s really going to be “inflation friendly” over the medium term/long term? Gold, silver, oil, and other commodities. Inflation is going to be very unfriendly to the value of paper dollars.

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          • Matt

            Thanks for making my point. By the way, people do have savings, but in the form of dollars under their mattress, fortunately as free-market participants they are allowed to allocate their resources in any manner they choose – again not just sit on cash under their mattress. The free market is one of the many things that makes this country great. For example, I don’t have much in savings, but I do have a house and a diversified portfolio. This is not uncommon.

            Markets have already figured out 100% of what you said, which is why all commodities have spiked, then crashed, and gold still is hovering at ~$900 (and not the $2000+ level Mr. Schiff espoused years ago), and the dollar is stable. Or is this still a globally-led conspiracy?

            Wages are inflation friendly – if I work hard and make my company money – because my company spends money to make money (they don’t save money to make money), i get raises.

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          • Matt

            No comment on the mechanism by which we would go about pegging our currency to a commodity?

            E.G. avoiding the subsequent price manipulation of gold (or whatever commodity you select) that would immediately ensue once we announced we were going to do so – threatening long term stability of our currency?

            I mean, a 20% jump in price of a specific commodity upon announcement means we just artificially devalued our currency by 20%… Or was that not manipulation of the markets, oh wait, that would be free market activity right?

            I appreciate the guidance.

            Regards,

            Matt

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          • Nate Y

            It appears you’re not going to admit that inflation robs people and discourages savings and you’re just going to not respond, resume your usual method of changing the subject, and asking a bunch of nonsensical questions.

            The dollar is stable? You must be joking!

            What is this talk of a “globally-led conspiracy”? First of all, how would the globe lead a conspiracy? But really, as I’ve already pointed out elsewhere, I don’t believe in some world wide monetary/banking conspiracy.

            Anyway, it’s been fun exchanging comments with you but we should probably just move on. I don’t think I’ll ever convince you of the virtues of sound money and the evils of inflation.

            One last thing though. You’ll never get the limited government you want as long as the government can fund it’s own expansion with a fiat currency issued at will by a central bank.

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          • Matt

            Actually, the 81-year compound return of the S&P 500 Total return index is 10.5%, whereas inflation over the same 81 years is 3.0%, so not sure how that particular asset becomes “null and void” with inflation, no stealing there. Even if you decry foul with inflation numbers – go ahead and TRIPLE them – you would still come out far ahead over the same timeframe as opposed to stuffing dollars in your mattress.

            If houses “rise requisite with inflation” and i pay my mortgage, i build equity that increases with inflation. Again, I don’t feel inflation is ’stealing’ from me.

            Additionally, even from anecdotal evidence, I am a lot better off than my grandparents were at this same age something they remind me of constantly, noone in their right mind could say that our society as a whole has watched ‘their purchasing power decrease 94% since the advent of the federal reserve’. That simply is not true.

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          • Nate Y

            Remember, inflation is simply an increase in the supply of money/credit. The inevitable consequence of inflation is a general rise in prices over time.

            The government measures inflation as an increase in prices and reports it as bogus CPI numbers. But even then, there’s no way the price of goods/services has increased only 3% in 81 years. That would mean something that was priced at $1.00 in 1928 would cost only $1.03 today. Reality does not bear that out. It’s much closer to say that there has been an ANNUALIZED increase in prices of 3% for the past 81 years.

            While true, your anecdotal evidence is exactly that and is easily tossed aside. Your living standards may indeed be better than that of your grandparents at the same age but that happy outcome has happened in spite of government fiscal/monetary policy, not because of it. You know the ever growing divide between rich and poor that is constantly talked about on college campuses? We can thank the government for that horrible reality.

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  • Matt

    I still don’t understand the complete absence of any mention as to where additional breakdowns occurred. I know this board does not believe that we have ‘Free Markets’ – but also curiously cannot point to one single free market in the whole world we should emulate.

    There are other countries, with differing fiscal and monetary policies, that experienced the same bubble at the same time.

    Sometimes it seems like a gross oversimplification to simply blame a central bank where personal excess and free market breakdowns also occurred.

    For example, will moving to a gold standard prevent people from herding in one direction, riding momentum, or trying to make money in a manner they cannot? No.

    Bubbles occurred BEFORE Central Banks and to think things will always remain steady in what has become a global economy (where other countries DO NOT adopt a gold standard) would be tantamount to disarmament.

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  • PHILL CLAUSS

    “THE ELECTED OFFICIALS WHO GOT US INTO THIS MESS.”

    ….WOODROW WILSON IS NO LONGER WITH US..SO…YOU WOULD RATHER HAVE OUR PEOPLE/GOV RUN BY A PRIVATE BUSINESS {WHO HIND IN SECRECY}THAT HAS CONTROL OF OUR ECONOMY,MONEY, AND TAX DOLLARS??…YOUR “WELL VERSED” ALL RIGHT…LOL..THE FEDERAL RESERVE IS NOT A U.S. GOVERNMENT INSTITUTION!..WHAT “VERSE” ARE YOU SINGING NOW??…
    “THE DEVIL WENT DOWN TO ROTHSCHILD?”.LOL..

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    • John

      PHD in Economics, Masters in Political Science and an MBA. Don’t for a minute believe I came from a priviledged background, just the opposite! How about you?

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      • PHILL CLAUSS

        GOOD.THEN YOU HAVE THE ABILITY TO SEE THE TRUTH…AND UNDERSTAND THE HISTORY…DO YOU THINK RON PAUL IS DOING/SAYING THIS BECAUSE HE’S BORED??..YOUR SHEEPSKIN IS COVERING YOUR EYES DUDE….WAKE UP..PUT YOUR ARROGANCE ON HOLD LONG ENOUGH TO ALLOW HISTOIC FACTS INTO YOUR GRAY MATTER…MAYBE YOU WERE ABSENT THE DAYS THEY DISCUSSED THESE MATTERS IN YOUR COLLEGE………..MY ABILITYS COME FROM READING MONUTAINS OF ARTICLES/BOOKS.AND TONS OF HISTORIC MATERIAL…NO MATTER WHAT YOU SAY…THE FACTS ARE.THE FACTS…AND YOU WOULD RATHER LET A BUNCH OF PRIVITEERS RUN THIS COUNTRY AS OPPOSED TO ITS PEOPLE…WHAT A WASTE OF ALL TAT MONEY ON AN EDUCATION YOU DONT EVEN KNOW HOW TO USE!…NO WONDER HAVE SO MUCH GOVERNMENT IN OUR LIVES..PEOPLE LIKE YOU MAKE IT A MUST TO CONTROL TOTAL STUPIDITY!!

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      • PHILL CLAUSS

        PHD in Economics, Masters in Political Science and an MBA. Don’t for a minute believe I came from a priviledged background, just the opposite! How about you?

        [Reply]
        “THE UNIVERSITY OF COMMON SENSE”…WITH A MAJOR IN REALITY…..

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  • John

    I am not a member of ANY political party!!! BUT am very versed in the functioning of 1) Govt fiscal policy (Congress and the Executive branch) 2) Govt monetary policy (Federal Reserve Bank. To blame the Federal Reserve bank is COMPLETELY ASSININE!!! The fault IS NOT Monetary policy, IT IS Fiscal policy!!! Monetary policy is used to conteract the ERRORS made in FISCAL POLICY. By subjecting the Federal Reserve Bank to this YOU ARE CEDEING MORE CONTROL OF THE ECOMOMY TO THE GOVT (FISCAL POLICY)THE ELECTED OFFICIALS WHO GOT US INTO THIS MESS. Stop the insanity.

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    • Nate Y

      Nonsense.

      Tell us, where does the money come from which allows such irresponsible fiscal policy to be funded?

      As of now, the money/credit is bascially conjured from nothing by the Federal Reserve. The Fed’s reckless monetary policy enables the government’s wasteful fiscal policy to take shape. If the power to issue currency was in the hands of the people (free banking, commodity money, etc.) government simply wouldn’t be able to run such enormous and damaging deficits.

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    • PHILL CLAUSS
  • PHILL CLAUSS

    NOW MORE THAN EVER DO I UNDERSTAND THE IMPACT OF WHAT MY WISE OLE’ UNCLE SPOKE ABOUT{IN THE EARLY 60’S} WHEN HE TALKED ABOUT GOING BACK ON THE GOLD/SILVER STANDARD…AND GETTING RID OF THE FEDERAL RESERVE…HOW HE HAD HOPED,{DESPITE HIM BEING A DIE HARD REPUBLICAN AND FDR HATER},THAT KENNEDY WOULD “REVERSE THE ABUSE AND CONTROL OF OUR FINANCIAL SYSTEM…..SEEMS HE WAS VERY ACCURRATE WHEN ,AFTER KENNEDY WAS ASSASINATED,MY UNCLE SUSPECTED MORE THEN JUST YOUR AVERAGE CRAZY BEHIND HIS DEATH…AND FOR REASONS FEW THEN COULD OR WOULD UNDERSTAND…LEON..WHERE EVER YOU ARE NOW…DR. PAUL IS ON YOUR TRAIL…HANG IN THERE…AND WE WILL ONCE AGAIN BE FREE IN OUR OWN COUNTRY!..YOU WERE RIGHT ALL ALONG!

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    • John

      Do you know the results of going back to the gold/silver standard??? The countries that have the largest supply wiil have the most wealth!!! Check on who they are!!!

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      • PHILL CLAUSS

        Do you know the results of going back to the gold/silver standard??? The countries that have the largest supply wiil have the most wealth!!! Check on who they are!!!”

        .YES..WE ARE FIFTH OVERALL!..ALSO…ONE DOLLAR WOULD EQUAL 1 DOLLAR.OUR BUYING POWER WOULD SKYROCKET!..RIGHT NOW..THE FED HAS OUR MONEY NEAR WORTHLESS!.BUT THERE GETTING RICHER AND RICHER!….AND WHERE DID ALL THE GOLD THAT WAS CONFISCATED DURING THE F.D.R ADMINISTRATION??..YOU ONLY GET ONE GUESS…HINT: RYMS WITH “BURLED SHANKS”…LOL…

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      • PHILL CLAUSS

        http://www.socyberty.com/Economics/Worlds-Largest-Gold-Reserves.716893

        .YOU WILL NOTE THAT THE EURO CENTRAL BANK AND THE IMF ARE “NOT” COUNTRYS!…

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  • Thomas Jefferson

    A Common Scent
    (A Historical Novel about Thomas Jefferson
    showing who fought for liberty and who fought
    for selfish reasons in the American Revolution)
    by
    Steffan Stanford

    http://www.xeeatwelve.net/articles/cscent.pdf

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  • Ross

    Not until a 12 months ago did I realise what an abomination our banking system is.It is nothing but legalised theft.If I create money it is called counterfeiting because every non productive dollar I create,takes from the real producers in our society.

    The Fed creates $ billions in inflationary money and not even the economists question their motives or authority.The IMF has just announced $1.4 trillion in cyber money but only has one fourteenth of this is gold reserves.This represents the dilution of wealth amounting to $200.00 for every person on the planet.For poor people,this can mean a month’s survival.

    Banks over the decades have stolen trillions of dollars and still we the slaves have remained resilient.This battle can be won if we have the courage and resolve to see it through.

    To enslave your own species because you have not the fortitude or vision to compete,reveals a pathetically weak parasitic philosphy,that needs to be routed.

    We are hardened by decades of survival,the Fed has been pampered by decades of indulgence.

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    • John

      Please read my post, it is fiscal not monetary policy that is the problem

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      • Ross

        John.The problem is that we expect Govt to be stupid and inefficient and they act accordingly.If we put in rules that stop nepotism,inefficiency and corruption then Govt will improve.

        At least we can vote Govts out,but we cannot vote the Fed out since they control both the Republicans and the Democrats at the moment.

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  • HARRY OLIVETO

    Dear Dr. Paul:

    I admire you for the clarity of your thinking and your fluent eloquency.

    Nothing could make more sense to an average educated citizen that
    to opose the debasing of our currency.

    Ensuing inflation will be impossible to control.

    Bernanke et al know this.

    Do they care…..

    Respectfully,

    Harry

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    • John

      Please read my post about fiscal/monetary policy!!! By eliminating the Fed you are giving MORE power to the Govy/fiscal policy which IS WHAT HAS GOTTEN US INTO THIS MESS.

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