Ron Paul: Global Fiat Currency will be Derailed by Free Markets and Nationalism

Ron Paul talks with Lew Rockwell about monetary policy, Austrian Business Cycle Theory, skepticism about the Fed, and how free markets and nationalism will thwart the Keynesian elite’s plans for a global fiat currency.

Date: 11/09/2010

Transcript

Lew Rockwell: Well, it’s wonderful to have as our guest this morning, Dr. Ron Paul, long-time Congressman from Texas, author of a wonderful book called “End the Fed.” Ron, we could talk about many of your achievements. In fact, I could take up the whole show just beginning to scratch your achievements. But, I want to mention this morning the extraordinary thing you’ve done, building on the work of great Austrian economists, whether it’s Mises and Rothbard and Hayek and Hazlitt, Sennholz. You have actually made the Fed unpopular in a lot of quarters. You’ve actually brought the Central Bank into question, which has, to my knowledge, never been true in this country. So all of a sudden, Bernanke’s worried. And now, it looks like you are going to be Chairman of the Monetary Policy subcommittee, be able to hold some interesting hearings. At this very time, people all over the world are questioning the Fed, questioning the new quantitative easing. There’s real dissent, isn’t there?

Ron Paul: I think so, and I guess I enjoy thought that maybe I helped a little bit, but it took a little more than just me, because it took two things. It took a lot of other people who have been talking about Monetary Policy and Austrian Economics for a long time as I have had been doing from the Mises Institute. That’s one thing, but the other thing is that a lot of us were talking about this for many years, and it was falling on deaf ears. I think what has really helped us get some attention on this is has been the total failure. I see this 2008 as a very special year in the declaration of the failure of the nonsense the Keynesians have been preaching and the whole idea of fiat money. That has made it easy; so it has come together, and hopefully, we have participated in doing something very positive, and that we can continue to do this in order to talk about what type of reforms we’re going to have to have, because I’m working on the assumption that reforms have to come; That you cannot maintain the system this way. I fear that the reforms will come from another angle and that will be internationalism. Not just an IMF fixed exchange rate but an IMF worldwide fiat currency. So that’s why our work is cut out for us, and sometimes they take advantage of the chaos. We see the chaos as an advantage. They’ve messed it up, so we can offer an alternative, and we’ve gotten some attention. But the other side, who want worldwide government and worldwide control of the monetary system, also see it as an advantage, and those are the people that we’ll have to compete with.

Lew Rockwell: Well you mentioned the Keynesians, John Maynard Keynes of course, famously called for a world currency, a world fiat currency. He called it, “The Bank Core.” He wanted a world Central Bank. Is this what we’re facing? I remember when the trilateral commission was first established. Its key job, as delegated to it by David Rockefeller, was a bringing together—first of all, the creation of European Central Bank and then combining it with the Bank of Japan and the Federal Reserve in to a World Central Bank. I guess they might have to do it slightly differently now, but this has been their goal for a very long time hasn’t it?

Ron Paul: Yeah, I think so, and I think they’re going to continue, so the chaos, to them, sometimes is an advantage. That’s sort of the way foreign policy works too. There were desires to pass the Patriotic Act and desire to invade Iraq, but when a chaotic event occurred, like 9-11, it wasn’t that they thought up these new things to do; they’re just looking for opportunities. In monetary policy, they’re always looking for opportunities, and they’re more or less here. I think they’re content to keep the status quo going as long as they’re benefiting, and they can satisfy enough people, but when it breaks down, then they use this as an advantage to promote their agenda. It’s going to be a significant fight, but I think there’s a reason to be encouraged because, just like you say, “More people are thinking about this now.” And when they spontaneously start talking about ending the Federal Reserve, you know that we’re making inroads. If the grassroots are now saying, “We don’t need the Central Bank, and they’re not our friend.” It might be pretty hard for them to be convinced that, “Oh, what we need now is super Federal Reserve, a worldwide Federal Reserve, under the United Nations and the IMF.” So we have to keep working on that to make sure the people resist it because if they resist, it’s going to be much more difficult for them to impose it on us.

Lew Rockwell: You know, Ron, I’m noticing for the first time ever, coming from the German Finance Minister, a subordinate government of the US openly criticizing the Federal Reserve. I don’t remember anything like that ever happening. And then, of course we have Brazil and China and other places, being worried about what the Fed is doing—worried about currency wars, worried about what use to be competitive devaluations in a new mode about increase protectionism. All the things, of course, reminding us of other aspects of the 1930s.

Ron Paul: Yeah, I think so. Although the internationalists, the one world government people, are very powerful, and they do have a lot of influence, and we need to fear them. I think two things will contain them. One is the market. Just remember how the Bretton Woods was supposed to be propped up. Finally, the market overwhelmed them, and it broke down. That’s when gold broke loose from 35 dollars an ounce. The other thing that I’ve always assumed to be the case, I’ve not proven correct yet, but I don’t think they can kill nationalism. You know we like to be called “American,” and I think the Frenchmen like to be “Frenchmen,” and the Germans, “Germans.” I don’t think the European Union is all that solid. I think that this fact that people like their independence—I wish they’d carry it all the way through to small units of government, all the way back to the individual—but I think there’s a healthy desire for all people in the world to be identified. That’s what is so wonderful about limited government that permits that as long as nobody wants to dominate each other. There’s nothing wrong with wanting to be with like-minded people and being friends with their neighbors. So I think, there’s reason to be optimistic that the market and the sense of nationalism will always be helpful to us.

Lew Rockwell: You know, Ron, I know one of the bills that you plan to introduce this coming January is a bill to audit the gold, and you mentioned what happened with the breakdown of Bretton Woods, and a lot of people would think that in the late 1960s and before Nixon closed the gold window, that a lot of gold left the United States during that chaotic monetary period under LBJ and then under Nixon, and I know, you’d like to see what exactly is there and, of course, who owns what’s there.

Ron Paul: Yeah, seeing the gold and counting bars won’t give you the answer that we need because they could give it to another country, but hold it for them. They could have swap arrangements. They could lend the gold out. So it’s a lot more than that. I mean, to fully audit it, I think you have to know what the Fed has done, all their agreements. You have to know what our Treasury has done, especially the Exchange Stabilization Fund, which has legal authority to deal in gold. That was set up in the 1930s, after Roosevelt stole the gold from the American people. They were told they could trade in gold and try to set prices and that kind of thing. Now, their reports don’t reveal it, but somewhere, I think buried in the records, you might find out that they participated in this, probably indirectly. It’s probably not right out in front, and that’s what is so difficult. Even what the Fed does, you could have the Fed turn over all the books and say, “Well, we loaned so and so some money,” because they can make loans to other countries and other Central Banks. It may be secretly quid pro quo—“We’re going to give you this ten billion dollars, but your obligation is to buy Treasury bills or buy Fannie Mae mortgages,” and this sort of thing. So it’s not an easy audit, but I still think it has to be pursued. It should be done now that Republicans are back in control because it’s supposed to be a little neater and a little cleaner. If you’re taking over a business, you want to make an assessment. What do we have? What do we own? And what are our plans? If gold has to be used again, and history is on our side, gold is always used again—it’s always constantly used, sometimes more so than others. An assessment of what we have and what kind of obligations we are, I think that is mandatory. I’ve been very pleased with my mere mentioning of that, I wasn’t out putting up press releases, but it was a large number of people in the financial community—not necessarily the hard-money people. A lot of people in the financial community have expressed a deep interest in this, think it’s very logical, and this should bring in progressives and libertarians and conservatives. Anybody who’s honest should say, “Why can’t we know?” It doesn’t mean we have to all agree on what monetary policy should be, but there’s no reason in the world why we can’t have transparency, whether it’s that of the gold or what kind of deals the Fed is making.

Lew Rockwell: Ron, I know that you said that when you become Chairman of—we certainly hope, keep our fingers crossed—you become Chairman of the Monetary Policy subcommittee, you are aware that they’ve blocked you three times in the past with various insider shenanigans, even though by seniority standards, of course you should be taking Barney Frank’s place as Chairman of the entire committee. But if they don’t block you again, and I think it would be very, very difficult for them to do so, you said you want to open up the books of the Fed, make it transparent, share with the American people exactly what this very, very powerful institution—maybe the most powerful institution in the world—has been doing.

Ron Paul: Yeah, there is a goal. We want transparency. We want people to have more information. I believe this is important that when the time comes when reform would be forced upon us, that we will know what we’re dealing with, and then we can offer reforms. In order to do that, we have to have a better understanding by a lot more people about the business cycle. Business cycle theory is not the top priority in Washington, matter of fact, they’ve ignored it totally, and don’t think much about it, and if they do, they’ll accept the notion, “Oh well, there’s not enough people spending money. If you don’t want a downturn you just print more money and get people to buy stuff.” That’s their idea of understanding the business cycle. So I think, what I would like to do is pursue that in the committee and have people come in and start talking about the business cycle and how that is related to Monetary Policy. I will welcome those who disagree with us and say, “Look, we don’t agree with this.” And, bring our people in and say that there is a connection. You have all kinds of variations, you could have the Keynesians talk, and you can have the Moderates come in too and make their claim. You could have Supply siders talk. But, I think our views can stand off against any of those views, and it’s very important that people come around to understanding how Monetary Policy is the key element in understanding the business cycle.

Lew Rockwell: Ron, I saw a prediction this morning that to “clean up” the Freddie and Fannie mess will cost six hundred and eighty six billion dollars. In other words they’re saying, almost seven tenths of a trillion dollars. And of course, who can believe them, right? Who knows what they mean by “clean up?” Is this is something that would be coming up this next year or two, that huge dark hole—Fannie and Freddie mess.

Ron Paul: Very definitely, and it won’t be only a few of us doing that. I think the members, the Republican members, of the House Financial Services Committee. I think there’s quite a few in there that are quite willing to look into that. They say it’s a partisan issue you know because the former Chairman of the committee was very much into subsidizing and helping Fannie Mae and Freddie Mac, and they have all supported the transparency of the Fed. So I think they will be looking into it, and I think they are going to have a hard time literally appropriating that money. I think, when push comes to shove, of course, the Fed is always there. They will not allow the liquidation and the correction, which is so necessary. But, I don’t think, on the surface, (the Fed, or) the Congress is going to come in and bail them out. Unfortunately they won’t push hard enough for what I think is important. If we have six hundred billion dollars of bad debt out there, the quicker you find out what it’s really worth, and let the people who are holding the bad debt suffer the consequences, but instead the people who have been making all this money over these years when the bubble was being formed, they’re getting the bail out. And who’s getting stuck with all these illiquid worthless assets?—the American tax payers. That’s why it’s so pessimistic for our dollar—our dollar not doing very well. I think it looks like the dollar and the Canadian dollar is about 1 for 1 right now, so that’s a dramatic change.

Lew Rockwell: Ron, you were, of course, talking about what was going to happen with Freddie and Fannie. This was no news to you, or anybody who was listening to you. You predicted all of this, and I think it’s absolutely true that there are other Republicans interested in this issue. But, you know the other important issue that you’ve devoted so much time to, the issue of war and peace. I must say, I suddenly worry about the Republicans as being even worse than the Democrats.

Ron Paul: Yeah, I’m not too optimistic about that. I want to always make the point, especially with those more conventional conservatives that it’s a fiscal affair as well. That wars ring up deficits, that doesn’t change our minds, but it also makes the point that wars can’t be fought perpetually nor can you maintain an empire. It easily comes to an end for economic reasons. I have read—I don’t have proof of this—but I believe it’s very likely to be true, there’s never essentially there’s been never a war fought without government’s debouching the currency. Even in the old days, they would clip coins or dilute the matter and steal the gold or do whatever but they never do it with an honest system of having the people pay for… You always have to deceive the people into paying for the war. Can you imagine if they knew that they couldn’t have deficit financing? You have ten billion dollars going over to Iraq to build bridges versus ten billion dollars to spend here at home. They’d give up on that war real quick! That’s why the deceitfulness of monetizing debt and printing money is so bad, and it encourages not only the mal-investments and the problems you get with the fiat currency, but it also encourages a war, which then compounds because the expenditure is one thing but then the long-term cost and the people coming back that have been injured and sick and also the perpetuation of the problems. You start a little war, “Yeah, we’re going to take over Iraq and have it over in a couple of weeks, and we’ll get all our money back because oil is going to pay for it.” But here we are, still in Iraq,and there’s still a lot of violence there. Christians are all being run out of the country. They’re heading to Afghanistan and Pakistan and Yemen and on and on. What do they do? They say it’s time to come home. No, they say, “When are we going to bomb Iran?” But that will have to end, and I think it’ll end not through our persuasion as much as economic reality will end that foolishness.

Lew Rockwell: Ron Paul, you’ve been telling us about economic reality for a long time. Finally, at least many people out in the country are listening. I hope a few of those types in Washington pay attention to you. It’s going to be very exciting to see you as Chairman of this committee. The hearings on the business cycle theory and what the Fed has done to us, how they created this problem. Thank goodness for all you’ve done and all you continue to do.

Ron Paul: Well, thanks for having me on.

Lew Rockwell: Bye-bye.

You’ve been listening to the Lew Rockwell show, produced by Lew Rockwell.com—the best read libertarian website in the world. If you’d like to advertise on this podcast or on the website, email advertising at LewRockwell.com. Thanks for listening.

Thanks to Cynthia Sharp for proofreading and editing this transcript!

  • http://www.youtube.com/profile?user=lolodarius lolodarius

    plz if Ron Paul doesn’t be elected in 2012, send him to France to be our president. It’ will be a pleasure have him has president and in the same time kick the Ass of Sarkosy. We love you Dr. Paul. R3volution and gold Standar

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=lolodarius lolodarius

    plz if Ron Paul doesn’t be elected in 2012, send him to France to be our president. It’ will be a pleasure have him has president and in the same time kick the Ass of Sarkosy. We love you Dr. Paul. R3volution and gold Standar

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=lolodarius lolodarius

    plz if Ron Paul doesn’t be elected in 2012, send him to France to be our president. It’ will be a pleasure have him has president and in the same time kick the Ass of Sarkosy. We love you Dr. Paul. R3volution and gold Standar

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=lolodarius lolodarius

    plz if Ron Paul doesn’t be elected in 2012, send him to France to be our president. It’ will be a pleasure have him has president and in the same time kick the Ass of Sarkosy. We love you Dr. Paul. R3volution and gold Standar

    Like or Dislike: Thumb up 0 Thumb down 0

  • http://www.youtube.com/profile?user=lolodarius lolodarius

    plz if Ron Paul doesn’t be elected in 2012, send him to France to be our president. It’ will be a pleasure have him has president and in the same time kick the Ass of Sarkosy. We love you Dr. Paul. R3volution and gold Standar

    Like or Dislike: Thumb up 0 Thumb down 0

  • lolodarius

    plz if Ron Paul doesn’t be elected in 2012, send him to France to be our president. It’ will be a pleasure have him has president and in the same time kick the Ass of Sarkosy. We love you Dr. Paul.
    R3volution and gold Standar

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  • http://www.youtube.com/profile?user=JosephLa Joseph La

    right now Silver and Gold continue to rise ,one must remember that they are not making money but only keeping pace with inflation , real gain will occur when other countries devalue their currency so the price of silver and gold raises there too

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  • jhunted7667

    right now Silver and Gold continue to rise ,one must remember that they are not making money but only keeping pace with inflation , real gain will occur when other countries devalue their currency so the price of silver and gold raises there too

    Like or Dislike: Thumb up 0 Thumb down 0

  • CuriousBds

    DON’T TREAD ON ME!!! WE MUST STICK TOGETHER PEOPLE!!!

    Like or Dislike: Thumb up 3 Thumb down 0

  • kevreilly7

    you must be naive if you think prices of currencies move due to these politicians in which 90 percent of them are idiots

    Like or Dislike: Thumb up 1 Thumb down 0

  • Snowflake70

    The only Good Party – is a block party where people get to know their neighbors.

    You could spread this idea around. This would be an excellent time to be “TRENDY!”

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  • Khemistry101

    Good broadcast.

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  • kevreilly7

    4:37 “Ron”—Are they friends???—-How about a little respect –Senator Paul

    Like or Dislike: Thumb up 0 Thumb down 1

  • Andrew Shaker

    This makes sense! It’s only a matter of time until the masses demand a medium of exchange with ACTUAL intrinsic value.

    My favorite line of propaganda from my grad school ECON books was “a single fiat currency drastically decreases transaction costs”…. The author of that particular chapter was a Federal Reserve governor. Go figure.

    I think technology would allow us to have bank accounts in gold, silver, euros (not much better) or whatever. Ben Bernanke disagrees.

    Like or Dislike: Thumb up 3 Thumb down 0

    • http://endtheecb.ning.com Jack

      DEBT IS NOT THE PROBLEM. It´s the interest that causes inflation because debts are irreversable mulitplied by INTEREST to a point where the vital circulation no longer can service the debt, and new money needs to be borrowed. So an interest based money system can only sustain itself by a growing money supply and therefore rising prices. Constant inflation is a fact CAUSED BY INTEREST. Check out Mathematically Perfected Economy, Mike Montagne.

      The goal for most sheeple seems to be to try and take away the top of the pyramid (the fed), and leave the remainder of the pyramid intact. Will that destroy the pyramid?? NO Mathematically Perfected Economy (our mandate) will take away the complete pyramid from top to base and leave them with nothing.

      What is money? What should money be?

      http://endtheecb.ning.com/forum/topics/is-money-a-product-what-should

      Like or Dislike: Thumb up 2 Thumb down 3

      • Tim

        Jack – this is utter nonsense.

        Interest is a fundamental expression of human wants based upon the fact that people prefer to have goods now rather than later. Should I choose not to consume everything that I produce, then I will only lend it to someone else in return for more goods at a later date.

        So then, how do all these repayments of interest possibly take place? This is because over time those that borrow the goods are able to invest them into projects that yield more goods over time, thus the total amount of goods increases, allowing repayment of both capital and interest + entrepreneurial profit.

        But what if the money supply does not expand? What then? Surely there will not be enough money to repay all the interest plus capital owed as it falls due? Again, there is no problem here. This is because in the event that no new money is created, it gradually gets more valuable over time as the number of new goods are produced through capitalistic methods. Hence, the average cash balance held by the average person can fall over time, even while that falling balance maintains its purchasing power (due to the fact that total consumer goods increases while money supply remains constant). This frees up enough money to pay off any interest. The result of this theory implies that the rate of interest over time is equivalent to the “rate of profit”.

        All this implies that it is NOT necessary to print more money in order to pay off both capital and interest. It also shows interest up to be a necessary part of the human condition. Attempts to deny this amount to the attempted abolision of capitalism, and would only be possible through coersion and restriction of freedom, agains everything that your great country has stood for.

        These theories are and always have been correct and have been around for the best part of 100 years. Instead of looking at some deluded website’s economics-gabble, I suggest that you take a leaf of Congressman Paul’s _book and read the theories yourself. Rothbard, Von Mises and Hayek have been here, understood the issues and written about them eloquently. There is no need to go inventing it all over again. Just read it!

        Like or Dislike: Thumb up 2 Thumb down 4

        • Citizen

          Hello Tim,

          Beware of these MPE people. They are selling MARXIST SNAKE OIL guaranteed to collapse an economy in 6 months or less.

          MPE is none of the three they claim,
          -The MATH makes no sense in the real world, it ignores the price mechanism completely
          -The PERFECTED part means WE have to sell our soul to a software engineer self professed genius who has some formulas to sell us.
          -The ECONOMICS is a contrived CENTRAL GOVERNMENT CONTROLLED system of currency manipulations

          These Marxists are,
          Jack, David, TruthSeeker and the Snakes Head… Michael Montagne

          Keep up the Good Fight
          Ron Paul 2012

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        • http://endtheecb.ning.com Jack

          How Tim? How does an increase in the purchasing power of our medium of exchange (deflation) enable us to pay back the debt + interest if no new money is issued? Just explain us how!? Show us your math….

          YOUR QUOTE
          The result of this theory implies that the rate of interest over time is equivalent to the “rate of profit”.

          This is just utterly stupid. The people have had enough of banker theories. We want facts and maths.

          Why don you just say what ALL Austrians ASSUME. Let me write it down for you and ALL the rest of us here:
          —————————————————————————-
          Can’t we simply assume 5% default rate in 5% int rate in the economy. Some do collect interest some don’t even collect principal and recover partially through property repossession. Mathematically defaults should be source of interest for those who manages to collect interest. Another source is equity investment where dividend rate even unknown in advance. Overall the system will survive, won’t it? Suppose the system is 100% equity financed. Some will loose equity some will increase stakes. Economically debt is not very different, there is only legal difference i.e. the way property goes to most effective hands.
          —————————————————————————–

          You are the very core of the OUR problem´s. Like i said before. AE is just more of the same without the leverage.

          But Mr. Hayek, God of the Austrians tells us why they advocate interest and the current banking model — which are our very problem. See Hayek’s article at Mises org: “A Free Market Monetary System,” I think it’s called. Anyway, he thus justifies interest, that it makes banking “an extremely profitable business.”

          That’s right. There IS no justification, just an outright confession of the motive.

          Like or Dislike: Thumb up 2 Thumb down 1

        • Tim

          YOUR QUOTE
          How Tim? How does an increase in the purchasing power of our medium of exchange (deflation) enable us to pay back the debt + interest if no new money is issued? Just explain us how!? Show us your math….

          MY ANSWER
          I explained this already, Jack. Money at all times is held by individuals. All of this money is held with the expectation that at some point in the future it will be spent. An improvement in productivity results in these people at the margin, requiring less physical cash, as each bit of cash will buy more.

          Productivity only increases (and the purchasing power of the monetary unit increases) if the investments made in productive assets end up actually producing more/better goods at lower prices. It is in this way, that the entrepreneur can entice a holder of cash to reduce his holding, so the extra bit of money required goes to pay off the debt which he incurred to finance his project.

          Those with unsuccessful projects default. From a systemic point of view, if none of the loans taken out over a given period resulted in an improvement in productivity, you would be right in saying that an interest rate of 5% results in a default rate of 5%. However, if productivity grows at 5%, then a sustainable interest rate without default is possible at the same 5% (though of course in reality there would be a normal distribution of successful and unsuccessful projects). FThe extra interest is paid for by the reductions in cash balances that individuals freely give up in exchange for these cheaper goods that become possible as a result of the success of the the project financed by the loan.

          Hence, the way that the maths works is that that productivity can keep on increasing at a given rate, and the purchasing power of the monetary unit keeps increasing at the same given rate. Due to the fact that money can be infinitely divided, there is no reason why this situation should cause any problem at all.

          The problems we have had are around the issue that the Fed SETS interest rates not in-line with the natural equilibrium as described above. If you were to abolish the Fed, and let interest rates be set natually, this would remove the problems of debt bubbles that we have seen hitherto.

          Please take this criticism of your view seriously. I can see that you’ve thought about these issues and want to make a difference. However, I really think that you’ve made an error in your calculations in neglecting the understanding of how productivity improvements are effected.

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        • http://endtheecb.ning.com Jack

          All assumptions Tim. You haven´t proven a single thing. Must be coming from a Mises lecture??

          In a system of “debt-based $$$$$ at interest,” further rounds of inflation are mathematically necessary to avoid default on previous loans, productivity improvements or not. As a matter of fact productivity improvements will be negatively affected in any money system where interest is applied.

          There is really only one solution:

          Mathematically perfected economy is a currency not subject to interest, comprising a debt financing all permissible enterprise, paid by each and every debtor exactly as they consume of the associated production.

          There is no inflation or deflation, as the currency in circulation is always equal to the current value of existent production across however much of the economy is supported by a circulation.

          Neither the value of money or assets are altered by changing proportions of circulation to indebted assets or services. The value of the money is always consistent in quantity — both in earnability and spendability — with the remaining value of the indebted assets which exist, for which it was issued, and which constitute its immutable value.

          The remaining circulation is always sufficient to pay off debt. Further production therefore is not impeded by a deficient circulation, deplenished by paying more than what circulation was introduced to finance the production.

          Debt is not multiplied beyond the circulation or remaining value of indebted assets. To pay debt obligations exceeding the remaining value of indebted assets sets off a perpetual cycle of re-borrowing and multiplication of debt. Merely to maintain a circulation, we must borrow again so much as we have paid beyond the original circulation which was equal only to the unmultiplied debt.

          Neither production or consumption are impeded by imposition of extrinsic cost. In every transaction, production is traded for equal production.

          So long as we make such a circulation available to production, no impediment, limitation, or inequity whatever are imposed upon production or commerce. Production and commerce are fully expedited only by a completely liquid and effectual currency.

          Mathematically perfected economy is no more than a singular prescription, dissolving unjust intervention.

          This is the very set of principles — and the only set of principles which ensure the immutable value of money across its lifespan — a perpetual 1:1:1 relationship between remaining value, remaining *obligation*, and currency in circulation — .

          Like or Dislike: Thumb up 1 Thumb down 0

        • Tim

          Okay – thank you for your reply.

          We have reached an impasse. What you fail to address is “who provides the loans”.

          Under a normal market (no increase in the money supply, no credit expansion/contraction), savers provide loans, which should be transferred via financial intermediaries to borrowers. Savers will only do this in return for a financial return on this, otherwise they would consume today (they prefer goods now rather than goods later).

          Hence, the response that a saver would have to your proposal of ENFORCEMENT of zero interest rates, will be to increase consumption rather than savings. This would result in no investment, and a gradual deterioration of living standards for all.

          The only method that an authority would therefore have to make savings available under zero interest rates would be coercion, i.e. to forcably TAKE the savings from the people and allocate them accordingly. Hence, what your proposal amounts to is a massive increase in the size of the government, which would centrally make decisions on credit. This is anti-freedom. Historically, centralising decisions of this nature has always been disastrous as it leads to politicization of money/loans allocation such that certain groups are favoured for political aims, no matter what the original intentions are. The government is also unlikely ever to be a good allocator of capital, meaning that your solution even if it is not politicized is likely to result in a lot of waste and appalling investment decisions., and therefore lower living standards for all.

          You said

          “Debt is not multiplied beyond the circulation or remaining value of indebted assets. To pay debt obligations exceeding the remaining value of indebted assets sets off a perpetual cycle of re-borrowing and multiplication of debt. Merely to maintain a circulation, we must borrow again so much as we have paid beyond the original circulation which was equal only to the unmultiplied debt”.

          I agree that this is the current situation. However, I disagree that you need to abolish interest in order to prevent this. Please examine my previous posts which show that in the case of a fixed money supply, the payment of interest in aggregate would need to not be “paid for” by a given level of defaults, but rather by a willing reduction in cash balances within society as the purchasing power of the monetary unit increases, which occurs as a result of the success of the loans.

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      • Tim

        Dear Jack,

        Thank you for your reply. You’re right in that I agree with the Austrian view of economics.

        You are also right in that I do make assumptions, but this is normal in any economic theory. To make it plain, my assumption is as follows:

        People prefer goods now to goods later. From this it follows that a person will never part with goods unless he gets more than that with which he starts at a later date. This is the origin of interest.

        If, therefore, you attempt the abolition of interest, then the people’s response would be to consume more of what they have now, so saving would drop enormously. Saving is what allows us to build capital goods to make newer and more productive machines, which allow the production of more goods for later consumption.

        Hence, the policy that you advise would result in impoverishing humanity.

        The explanation that I gave you above with regards productivity growth is logically consistent with the views above.

        Once you accept the starting assumption that people prefer goods now rather than goods later, then this leaves your theories redundant.

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        • http://endtheecb.ning.com J

          Hi Tim, your welcome and thank you for your reply.

          Under MPE there would be no need to borrow our medium of exchange at interest.

          Loans would be available free of interest if you are creditworthy, and the loan would be backed by the collateral/production/labour for where the loan is issued for.

          The loan (thus only the principal) will be paid back in a time based manner as per depreciation/consumption of the collateral, and the loan is slowly retired and destroyed from circulation.
          No inflation, no deflation, and no terminal outcome due to irreversable muliplication of debt by interest.

          To begin, everyone´s creditworthiness will be reset under MPE. If people destroy their own creditworthiness they can no longer apply for a MPE loan. Those people are free to turn to the secondary market to lend money at interest, which we leave for the Austrian moneychangers!

          Let me know if you have any questions.

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        • Jacktr

          @Tim

          The loans are provided (issuance of our money free of interest) by the Common Monetairy Foundry (CMF). The CMF is implemented and managed by a democratic chosen government under the conditions and terms as whatever we agree in a democratic manner.
          MPE Pre release/Amendment can be found on our website or search the net.

          You are (again) theorizing that with a fixed volume of money the deflation of prices will increase the purchasing power with no further need for the supply of new money. Where is the math?

          Again i can see no proof for your assumption. If there is only a very small difference in the number as there will be you are still promoting a terminal outcome. And not only that, you are still promoting a model that will exploit the fact that few people have capital, and most don´t because you are turning money into a product/commodity. A money (medium of exchange) cannot be a product. The moment you attach interest to our medium of exchange coming into circulation the outcome can only be terminal. Advocating theoretical outcomes like you do is a very dangerous game. We have had enough of these theories and the exploitation that naturally comes with it. We prefer a mathematically perfected economy.

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    • Citizen

      Yes we could have bank accounts denominated in WEIGHTS of gold and silver

      The TROY OUNCE is the world standard of weight for precious metals

      Governments can’t COUNTERFEIT PRINT bullion currencies.

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      • http://endtheecb.ning.com Jack

        Citizen, i suggest you do not longer participate in any forum discussions. The reasons for that are clear to everyone.

        You are just noise.

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        • Citizen

          HiJack-Jack

          I’m sorry but I can’t resist exposing a crafty Marxist Snake Oil salesmen

          Who comes to this site to DISPARAGE Dr Ron Paul
          as you say here…
          “ugly truth about Mr. Paul and his Austrian self inflicting terminal theories”

          Your MPE system is simply the FED with a Marxist slant with even more unprecedented powers to manipulate the currency to create a Utopian Socialist new world order..

          And yes HiJack speaks great words of Power to the People, and glory to the new MPE revolution, Sieg Heil Comrade

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        • http://endtheecb.ning.com Jack

          I´m not here to disparage Mr. Paul but i want US to get it right this time as otherwise there won´t be another opportunity in the foreseeable future. Mr. Paul is going into the right direction but needs to understands a few very important issues as outlined in this post to you here:

          http://www.ronpaul.com/2010-11-10/global-fiat-currency-will-be-derailed-by-markets-and-nationalism/comment-page-3/#comment-141648

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  • IndividualAutonomy

    The rise of nationalism in Europe is needed but in the West in general as well.

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  • mike1988123

    why isn’t this guy president yet?

    Like or Dislike: Thumb up 4 Thumb down 1

  • Rabbithorne

    Definitely, this guy has it figured out. I think he will run. Fears of voter fraud and mass media censorship of Dr. Ron Paul was affiliated with his 08 run. I hate the idea of partys or groups. I’m not Republican, Democrat, Moderate, Socialist, Neo-Con, Liberal, or any of those dynamic and discriminatory terms in my opinion. I find that if there was any party to be a part of, I would be in the American People party.

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  • lantsurfer

    I LOVE Ron Paul, and I’m a “yep” for him to be the next President too. But did I hear Lew Rockwell correctly when he said to “his” knowledge, the “central bank” had never been brought into question? WOW! Where the heck has he been???

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  • gcat4u

    Thanks to Ron Paul, I learned at the age of 54 years that the Fed is not my friend. If it becomes truly transparent then maybe many others will join in to end the Fed. and get this Country into financial stability.

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  • Mcleod0000

    first ! RP for prez

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