Rising prices and a weak economy? It’s a very real possibility, says Ron Paul.




Show: The Kudlow Report
Channel: CNBC
Date: 7/21/2009

Transcript

Larry Kudlow: So is the Fed up to the task and is it time for a policy audit? My next guest says “yes sire”. Here now is former Republican presidential candidate and Texas Congressman Ron Paul. Congressman, thank you ever so much for coming back on.

Ron Paul: Thank you Larry, go to be with you.

Larry Kudlow: You know, I thought it was a kind of whitewash today with Bernanke and that’s why I was especially keen to get your somewhat critical views. First up: Ben Bernanke says that he and the Fed averted a global and US financial collapse. What do you say to that?

Ron Paul: Well, I would say that the mess we have today is nothing to brag about. We’ve gone through a lot of pain and suffering and we haven’t even paid for this. We’ve created all this new money; we’ve run up this deficit, our national debt is going up to $2 trillion.

So if he thinks he’s averted a crisis, I think he’s just made the crisis that much bigger. And it’s going to be that much worse. I mean, people now are starting to talk correctly about the problem in commercial properties. So when that shoe falls what’s he going to do? Quadruple the money supply? Then you should be concerned about the value of the dollar.

Larry Kudlow: Alright, before I get to your GAO audit bill, Mr. Bernanke says in the Wall Street Journal and again in the hearing that you attended today, that he has the tools and the wisdom to develop an exit strategy to prevent inflation. But he also says that it’s not going to happen soon. There is nothing imminent and he has no plans, and as far as the eye can see we’re going to stay with this easy-money policy. Your thought on all that? Does he have the tools? Does he have the wisdom, or is he going to overstay his easy-money welcome?

Ron Paul: Well, he has the tools because he has the ability to turn off the money machine and that would stop the inflation. Whether or not he has the wisdom… it isn’t he that lacks wisdom but every individual who might run the Federal Reserve does not have the wisdom because they are central economic planners through monetary policy, and it’s not achievable. You want the markets to set rates. In capitalism you don’t have a central planner telling you what the price of money is. And the cost of money is very, very important, just as important as supply and demand is in the rest of the market place. And they’re interfering with it.

He can’t be smart enough to know that, but even if you get somebody new they’re not going to be smart enough to do it either. So it’s a very deeply flawed system. And from my view it’s deeply flawed because it encourages the Congress to spend. You know, they talk about a little bit about deficits, but there’s no real concern expressed here in the Congress about spending. They talk glibly about another million dollar medical program which could cost 2 or 3 million dollars, and they don’t have the money; revenues are crashing right now. That’s why the deficit is exploding.

Larry Kudlow: Does that overspending and binging and borrowing… I mean President Obama is going to be the greatest bond salesman in the history of America. Does that force the fed to monetize the debt? A lot of criticism on that. Bernanke always denies it, although the liquidity surge says maybe there’s some to it.

Ron Paul: Well, did you see in his statement in the Wall Street Journal that he absolutely would not monetize the deficit? And yet he recognized and he admitted to me that they have this $300 billion program of buying treasury bills and bonds. Well, what is that if that is not monetizing the debt? And he claims he has the tools and the wisdom to turn the money machine off and to have an exit strategy. But what if we have rising prices? I know when I first got to know you in the 1970s, Larry, we had rising prices and a weak economy. What if that would come back? Would he have the wisdom to know when to raise interest rates and have an exit strategy when the economy is still weak, and that’s a possibility. We don’t know exactly how this will transpire, but I think that’s a very real possibility.

Larry Kudlow: Well, you’ve got 274 co-sponsors, I gather, for your idea to have a GAO audit, government accounting audit, of the Fed including the Fed’s policy. Can you just tell us briefly about that? Mr. Bernanke, of course, opposes it.

Ron Paul: He strongly opposes it. You know, he talks about transparency, he’s for transparency except for certain things that he doesn’t want to be transparent about. There are just a few things that are sacred and that is what he does with the discount window and the monetary policy, and what he does with international agreements.

You know, there is one example given recently where the Federal Reserve, not under Bernanke, but the Federal Reserve chairman went to the IMF and insisted the IMF pay off some loans to the bank and pay the interest. So it’s that kind of mischief that goes on. They can have agreements with other governments, other central banks, international banking, financial organizations, and dealing in trillions of dollars and the American people don’t know what’s going on. And Congress up until recently really didn’t care. But during this crisis now, fortunately, for what I’ve been trying to do, we’re getting a lot more attention because I think people are recognizing how important it is.

Larry Kudlow: Well, isn’t it really Congress though, with the old Humphrey-Hawkins Act which was passed back in 1978, created a dual mandate that said, “get inflation down and keep prices stable on the one hand, but keep the unemployment low on the other hand”. Are those conflicting and in terms of an audit, don’t you need to repeal Humphrey-Hawkins and give the Fed a clear mandate to stabilize the currency, the value of money and prevent inflation?

Ron Paul: You know, I don’t think that would be a bad idea. I think the audit could lead to something like that. But first we want to know what they’ve been doing. But those are impossible mandates. Full employment, they sure haven’t done very well there. They want stable prices, stable prices of money? Back in the 1970s we had interest rates of 21%, now they’re less than 1%. I mean it’s a total failure. They give us the inflations, they give us the recessions, they give us financial crisis, they’ve given us a depression and nobody says, “Hey, what’s going on here?” and this is the first time the American people have woken up.

I just spoke to a bunch of high school kids and they’re ecstatic about the issue of the Federal Reserve, I just can’t believe it. Young people, especially, and a lot of others, are waking up to the fact. Yet the establishment, when it comes to, you know, a few at the Wall Street Journal and a few other financial institutions, they come down real hard saying, “Hey no, we don’t want any transparency about this. This might raise interest rates if they knew what we’re doing.”

Larry Kudlow: So that’s the argument. Bernanke says you’re going to stop their independence. And you’re saying the public has a right to know. Is that how you’re framing this?

Ron Paul: That’s right. Independence to them is secrecy, and besides, my bill doesn’t do anything to take over monetary policy. I don’t want Congress to manage monetary policy, I’m looking for something different than that. But, you know, in the clip that you just played Bernanke said, “Oh yeah, the Fed does one thing one day, and the next day the Congress orders the GAO to get an audit.”

(Bernanke said: If we were to raise interest rates at a meeting and someone in the Congress didn’t like that and said, “I want the GAO to audit that decision”, wouldn’t that be viewed as an interference or at least in that expose…)

That’s not the way the GAO works. And you could easily put a provision in there and say, “We can’t review some of these decisions for a year,” or something like that. But we do deserve to know. If they give Goldman Sachs $10 billion for some reason down the road or through the discount window, we have a right and a moral obligation to figure out what he is doing and when and why.

Larry Kudlow: If you go down the road a year or two, isn’t the real problem going to be, like it was in the early 2000s, that Bernanke and the Fed, even the institutional Fed, they’re targeting the unemployment rate, and they’re not going to tighten interest rates to stop inflation. The Congress doesn’t want them to stop inflation. The Unions, the business establishment, even the banks. I mean isn’t that what he’s up against, isn’t he just going to target the unemployment and overstays easy money?

Ron Paul: Oh, I think you’re absolutely right. As a matter of fact, I’ve accused him of a policy deliberately wanting to inflate, because the real deficit goes down when you inflate. If you devalue your currency by 10% just think a $10 trillion national debt goes down to $9 trillion in real value. So they have to get rid of the debt. You have to get rid of debt when you get bogged down like this. And we’re not going to pay it off, so it has to be liquidated. Governments liquidate it by creating bad money and paying it off with bad money.

Larry Kudlow: Is your going to pass, sir?

Ron Paul: Not easily, because the establishment is very, very determined. Something will pass. We will get something, but I’m not predicting that we’ll get everything we need to monitor what the Fed is doing.

Larry Kudlow: Alright, Congressman Ron Paul, we appreciate your time. Thank you very much.

Ron Paul: Thank you.

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59 Comments:

  1. Government Suspends 'Clunkers' Program After Only One Week
    Seems they were overwhelmed, administratively.

    Wonder how they would handle administrating health care for 300,000,000+.

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  2. Tough Times

    Four of the most powerful business leaders in America arrived at the White House one day last month for lunch with President Barack Obama, sitting down in his private dining room just steps from the Oval Office.

    But even for powerful CEOs, there’s no such thing as a free lunch: White House staffers collected credit card numbers for each executive and carefully billed them for the cost of the meal with the president.

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  3. Non-Federal Non-Reserve, Formula is not wrong. Money IS demand is not non-credit money demand. Non-credit money is gift for pensions as demand.

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  4. Hyperinfaltion Nation
    http://www.nia.us - How to Prepare for Hyperinflation

    Part I, II, III
    http://www.youtube.com/watch?v=SzmYI_4XCbM&feature=related
    http://www.youtube.com/watch?v=vQCCDttLhA4&feature=related
    http://www.youtube.com/watch?v=rVcyM2Z4Ego&feature=related

    Peter Schiff - Empire Collapse & Emergence of Asia
    http://www.youtube.com/watch?v=4FvwxXfc7s0&feature=related
    http://www.youtube.com/watch?v=JKPXpZ6hQkY&feature=related
    http://www.youtube.com/watch?v=MshsoCP1zFw&feature=related

    Peter Schiff - We Live In A Fake Economy - Dollar To Fall Like A Stone - Gold To $2,000.00
    http://www.youtube.com/watch?v=MIEpFz2X7QM&feature=related

    "We're on the edge of a major, major recession."

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    • Against Our Will, Mr. President
      "Put down that stick, Mr. President."

      Viewer Discretion is Advised
      http://www.youtube.com/watch?v=77H2w1FA3dA&feature=pyv&ad=3902518749&kw=conservative%20economy&gclid=CJvNnpyV-psCFQk_agodwiag9Q

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  5. As momentum builds for Ron Paul’s efforts to audit the Fed, a new Gallup poll shows that Americans are turning against the Federal Reserve, with just 30 per cent saying the agency is doing a good job.

    35 per cent rate the job the Fed is doing as “only fair” and 22 per cent say it is doing a “poor” job.

    The contrast compared with when the question was last asked in 2003 is clear. Six years ago, just 5 per cent thought the Fed was doing a “poor” job, while 53% thought it was doing a “good/excellent” job.

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  6. thats a good catch phrase.. "as long as a shilling will be lent."

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  7. It's quite comical that, after throughly abusing The Constitution with your language games, you're now attepmting to debauch on The Articles of Confederation.

    Do you not even realize that The Articles of Confederation establish an even MORE limited government? Under the Articles of Confederation, the Congress didn't even have the ability to tax. Congress had to request money from the States.

    Here's a section of interest:

    "The United States in Congress assembled shall never engage in a war, nor grant letters of marque or reprisal in time of peace, nor enter into any treaties or alliances, nor coin money, nor regulate the value thereof, nor ascertain the sums and expenses necessary for the defense and welfare of the United States, or any of them, nor emit bills, nor borrow money on the credit of the United States, nor appropriate money..."
    -The Articles of Confederation

    It is true that the Continental Congress began issuing paper currency or bills of credit to help finance the Revolutionary war. They were known as "Continentals" and had no solid backing. As a result, they quickly depreciated in value and became essentially worthless, prompting the phrase "not worth a Continental". Seeing the horrors of unbacked paper currency prompted the delegates at the Constitutional Convention to include the gold and silver clause in The Constitution. Unfortunately, we have abandoned their good sense.

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    • hahahahahahahahahahahahahahahahaha!!!!!!!
      you didn't finish the quote!!!! CAN YOU READ? Damn you are stupid!

      The United States in Congress assembled shall never engage in a war, nor grant letters of marque or reprisal in time of peace, nor enter into any treaties or alliances, nor coin money, nor regulate the value thereof, nor ascertain the sums and expenses necessary for the defense and welfare of the United States, or any of them, nor emit bills, nor borrow money on the credit of the United States, nor appropriate money, nor agree upon the number of vessels of war, to be built or purchased, or the number of land or sea forces to be raised, nor appoint a commander in chief of the army or navy, UNLESS NINE STATES ASSENT TO THE SAME; NOR SHALL A QUESTION ON ANY OTHER POINT,EXCEPT FOR THE ADJOURNING FROM DAY TO DAY BE DETERMINED, UNLESS BY THE VOTE OF THE MAJORITY OF THE UNITED STATES IN CONGRESS ASSEMBLED.

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      • thank you for helping me prove my point. good job, a round of applause.

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        • What on earth? The continuation of the passage does nothing to invalidate my point and support yours. You're delusional.

          How about you go respond to some other people's comments on this site? There are plenty of people who share my sentiments. They are calling for the audit/abolition of the Fed, the restoration of commodity money, renewed respect for The Constitution, free market healthcare, and so on. Respond to their posts. I've grown tired of your antics...again.

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          • James Madison - author of the constitution.

            "The present Congress can make requisitions to any amount they please, and the States are constitutionally bound to furnish them; they can emit bills of credit as long as they will pay for the paper; they can borrow, both abroad and at home, as long as a shilling will be lent."

            -The Federalist Papers.

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      • SLMFAO

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      • Non-Federal Non-Reserve

        That's right, they had to request all those things from the STATES. Nate's point not invalidated. Nate's point: "Do you not even realize that The Articles of Confederation establish an even MORE limited government? Under the Articles of Confederation, the Congress didn’t even have the ability to tax. Congress had to request money from the States."

        If Congress had to request all those things from the STATES, then that just proves the point. Go away.

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        • haha you go away.

          it says the states ARE CONSTITUTIONALY BOUND to pay them. We can borrow from at home or abroad.

          We borrow a lot of money from abroad.

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          • That wasn't the point nate was trying to make. Actually, that is the exact point I made in the comment before.

            "as long as a shilling will be lent."

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          • emitting bills of credit and requiring money from the states are two totally different things. the congress has the right to do both.

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          • Non-Federal Non-Reserve

            They're "bound"? Only if they BIND THEMSELVES. What do you think "UNLESS NINE STATES ASSENT TO THE SAME" means (there were only 13 states at the time).

            Reading Comprehension for Dummies like you: that means Congress COULDN'T DO SHIT under the Articles of Confederation unless NINE OUT OF THIRTEEN STATES approved of it.

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          • So what. If 9 states or the majority or however many accept a fiat currency, than it is constituional and the congress is allowed regulate it.

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  8. About 80% of the derivative assets and liabilities carried on the balance sheets of 100 companies reviewed by Fitch were held by five banks: JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley.

    Those five banks also account for more than 96% of the companies’ exposure to credit derivatives.

    http://www.cfo.com/article.cfm/14113089/?f=rsspage

    That Boat Won't Float

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  9. As I go from one Sean post to the next, I am reminded of an old Billy Preston song.
    http://www.rhapsody.com/ringo-starr/the-anthology-so-far/will-it-go-round-in-circles-billy-preston/lyrics.html

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    • I'm curious, am I making proper arguments against his nonsense? I know it's beyond hope to change the man's mind but for some reason, I can't let him pollute these boards uncontested.

      I know it's not a good idea to feed trolls. Should I just ignore his posts? Your input would be appreciated.

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      • I see his role as more carnival sideshow than troll.
        I guess how, or whether, one reacts to him would depend on their mood that day.

        Mostly, his arguments and his sources are his own greatest enemy. But it is a bit of devlish fun to kick him around.

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      • “— to borrow money, or emit bills on the credit of the United States, transmitting every half-year to the respective States an account of the sums of money so borrowed or emitted — to build and equip a navy — to agree upon the number of land forces, and to make requisitions from each State for its quota, in proportion to the number of white inhabitants in such State; which requisition shall be binding, and thereupon the legislature of each State shall appoint the regimental officers, raise the men and cloath, arm and equip them in a solid- like manner, at the expense of the United States.”

        from the Articles of confederation.. If you even know what that is. It was the first constitution written.. In the federalist papers, they say that the same laws were transfered to the new constitution. Your stupid word games wont change the meaning written in it's original sense, into the original constitution..

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      • When he starts replying to his own replies, it's over.

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        • haha, ya its over, I win. Nate wanted some information about bills of credit from the constitution and i gave it to him.

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        • hahaha yeah. It's a very strange habit.

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          • I did just quote the orignal constitution from 1776 about allowing bills of credit at the expense of the United States. The rewritten constitution gave the congress MORE power, not less. It gave them the power to regulate commerce.

            Your interpretation of the constitution is WRONG according to the author.

            You have a strange habbit of relying on your ignorance for the main source for all your arguments.

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  10. If one wants to make Bible analogies (which I don't think is a good idea in general), it is much more accurate to say that the Constitution is the Bible and the Bill of Rights is the 10 Commandments. The Federalist Papers are analogous to the musings of important figures like Augustine or Aquinas but hold no ultimate authority.

    Your Hamilton quote from the Federalist Papers doesn't even argue that Congress should have the power to create paper money. It merely says that Congress can allow the States to do so. However, being that it appears in the Federalist Papers, it bears no legal authority. Legal authority is reserved for the Constitution.

    The rights of the people and the powers granted to government are outlined in the Constitution, not in the Federalist Papers. The Constitution is the law of the land. The Federalist Papers are not.

    Still waiting for you to post the article or clause in the CONSTITUTION where it states that Congress can create paper money.

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    • No, you are wrong. It shows that congress has the authority to create money and that the individual states cannot create money unless it is of gold or silver due to incompatible trade within the states.

      You obviously don't know anything if you don't know that the federalist papers were written by the authors of the constitution explaining the philosophy put into it. The bible is a book of philosophy, not the constitution itself. You are so dumb founded.

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      • The congress can use any measure to create money. I have already quoted this from the CONSTITUTION and proved u wrong.

        Where does it say in the constitution that the congress has to print money of gold and silver? It doesn't. It does say that the states cannot print money but of gold and silver as I have already explained. If you don't read the federalist papers and understand the philosophy of government, than you are as ignorant as a foreigner.

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        • "The imposition of duties on imported articles, and the emission of paper money, are specimens of each kind. No man of sense will believe, that such prohibitions would be scrupulously regarded, without some effectual power in the government to restrain or correct the infractions of them."
          James Madison- "Father of the Constitution"

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          • "James Madison[1] (March 16, 1751 – June 28, 1836) was an American politician and political philosopher who served as the fourth President of the United States (1809–1817), and one of the Founding Fathers of the United States. Considered to be the "Father of the Constitution", he was the principal author of the document. In 1788, he wrote over a third of the Federalist Papers, still the most influential commentary on the Constitution." - Wikipedia

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        • Appreciate how absurd your argument is. You're saying that the document meant (among other things) to limit the powers of government (particularly the Federal Government) actually grants limitless power to the Federal Governemnt in the realm of money creation. The argument destroys itself.

          No matter how hard you attempt to twist the words, Congress is not granted the power to create paper money under the Constitution. Under the Constitution, money is to be gold/silver.

          One can print paper. One cannot print gold/silver. One cannot coin paper. However, one can coin gold and silver. Learn to use the proper verbs.

          Let's consult the Constitution dirctly again shall we?
          Specifically part of Article 1 Section 8 which you posted earlier...

          "Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

          This means exactly what it says. Congress can COIN money. Coin meaning "make coins out of gold/silver". Regulate the value thereof, and of foreign coin means "X amount of gold/silver = a dollar; X amount of gold/silver = a pound", etc. Dollars, Francs, Pounds, etc. are supposed to be (as they originally were) specific measurements of weight of gold/silver. Just like inches and centimeters are specific measurments of length.

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          • HAHAHA!! You are trying to throw out a bone. Coining money is another term used for creating money. I have a bucket full of coins at home.

            You know nothing about the philosophy of our government if you have not read the Federalist Papers. They wanted a large government to protect corruption from within, a strong government to protect property and civil rights, and central powers to regulate commerce and money.

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          • Articles of Confederation: Which the constitution was modeled after..

            "— to borrow money, or emit bills on the credit of the United States, transmitting every half-year to the respective States an account of the sums of money so borrowed or emitted — to build and equip a navy — to agree upon the number of land forces, and to make requisitions from each State for its quota, in proportion to the number of white inhabitants in such State; which requisition shall be binding, and thereupon the legislature of each State shall appoint the regimental officers, raise the men and cloath, arm and equip them in a solid- like manner, at the expense of the United States."

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        • Definition of Coining

          n. conversion of metal into coin; act of stamping coins; invention of a new word or phrase

          v. make coins out of metal, mint; invent a new word or phrase

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          • I have copper pennies and nickel coins which are a type of metal.

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          • Which does nothing to strengthen your argument on what was meant by coining.

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          • coining money- piece of metal, usually a disk of gold, silver, nickel, bronze, copper, aluminum, or a combination of such metals, stamped by authority of a government as a guarantee of its real or exchange value and used as money.

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  11. Supply is greater than demand. Congress must creates new money as gift for consumers which augment demand.

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    • It appears I didn't ask the question plainly enough or you are unwilling to provide an answer. Either way, time to move on.

      Cheers

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      • The constitution gives the congress the authority to coin money.

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        • If you would actually read the federalist papers and the constitution, you would know that the congress has the power to create paper money, but not the states. The states can only make money of gold and silver.

          James Madison "Father of the constitution" in his letters say that paper money is holds lots of guilt and will eventually wear itself out. He prohibits the states to use paper money because..

          "Had every State a right to regulate the value of its coin, there might be as many different currencies as states, and thus the intercourse among them would be impeded; retrospective alterations in its value might be made, and thus the citizen of other states be injured, and animosities be kindled among the states themselves."
          -James Madison

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          • Section 8 - Powers of Congress

            To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

            Section 10 - Powers prohibited of States

            No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;

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        • Indeed. To COIN money. Not to produce formula based debt free paper money. And according to the Constitution, as you already point out (contradicting yourself), those coins are to be gold and silver (which nicely explains the "fix a Standard of Weights and Measures" clause).

          Go ahead and cite the article or clause in the Constitution which gives Congress the power to emit bills of credit. How about this...until you find it, you won't post on this site anymore. Deal?

          Remember, the way the Constitution is written, if a power isn't explicitly granted to the Federal Government by the Constitution, then it is forbidden from the Federal Government and belongs to the States/people.

          Seriously dude, ask yourself this question: If James Madison would write at length about the dangers of paper money in the hands of the States, why in the hell would he want such a power granted to the Federal Government? Especially when he was a proponent of DEcentralized power.

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          • "No state can emit paper money — lay any duties, or imposts, on imports, or exports, but by consent of the Congress; and then the net produce shall be for the benefit of the United States: the only mean therefore left, for any state to support its government and discharge its debts, is by direct taxation; and the United States have also power to lay and collect taxes, in any way they please." Article 1: Federalist Papers, Alexander Hamilton

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          • The constitution is like the ten commandments and the federalist papers are like the bible. I suggest you read.

            How about Federalist No.45 where James Madison explains the powers that the government have over the states where he says he could not imagine prohibiting paper money and the government would win over the states.

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          • Yet again, Sean, you seem to have some trouble comprehending what you read.

            Blame it in the Look/See method of learning to read.

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          • "The powers relating to war and peace, armies and fleets, treaties and finance, with the other more considerable powers, are all vested in the existing Congress by the articles of Confederation. The proposed change does not enlarge these powers; it only substitutes a more effectual mode of administering them. The change relating to taxation may be regarded as the most important; and yet the present Congress have as complete authority to REQUIRE of the States indefinite supplies of money for the common defense and general welfare, as the future Congress will have to require them of individual citizens;"
            -James Madison "Father of the Constitution"

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  12. This formula creates the only sound real money.

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    • I'm not asking about the formula. I am asking about the people charged with using it under your scenario.

      Please answer my question, what's to keep Congress from abusing this formula? It's already easy enough for government to manipulate unemployment, GDP, CPI, etc. what would keep them from misrepresenting "all supply and all demand" to fit desired wants? Nothing I can see.

      Have you read Web of Debt by Ellen Brown? Your solution is quite similar to the "Greenback Solution" she endorses.

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  13. Non-credit money as gift is better than gold. Non-credit money can solve this crisis. Non-credit money is the necessary additional quantity of money in circulation (dM) as percentage (k) of existing quantity of money in circulation (M). dM = kM ; k = (supply - demand)/demand ; If non-credit money is emitted according to the cited formula, inflation cannot exist. Also, taxes are annulled for the amount of non-credit money. The consumers pay less and producers get more than today, in the order of credit money. All get the gift from non-credit money. Without inflaton. Without Federal Reserve. Congress must create new money as non-credit money, according to the cited formula.

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    • Yeah this won't work. What's to keep Congress from abusing this formula based fiat currency?

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    • Non-Federal Non-Reserve

      A change in the supply of "non-credit money" affects supply and demand too, because that money IS demand. So as soon as you create the "non-credit money", your formula is wrong. Not that it would work anyway.

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