The Most Dangerous Monopolist

[imported_Tango]

Originally posted by: Capitalizt
Ron Paul is running in the Republican primary for President. This guy is spot-on on so many issues...It's a shame he is being sidelined by the media.


http://www.lewrockwell.com/paul/paul380.html

The Federal Reserve Monopoly Over Money

by Ron Paul

Recently I had the opportunity to question Federal Reserve Chairman Ben Bernanke when he appeared before the congressional Joint Economic committee. The topic that morning was the state of the American economy, and many of my colleagues raised questions about how the Fed might better "regulate" things to ease fears of an economic downturn. The tenor of my colleagues' questions suggested that Mr. Bernanke's job is nothing less than to run the U.S. economy, like some kind of Soviet central planner.

Certainly it?s true that Mr. Bernanke can drastically affect the economy at the drop of a hat, simply by making decisions about the money supply and interest rates. But why do members of Congress assume this is good? Why do we accept without objection that a small group of people on the Federal Reserve Board wields so much power over our economic well-being? Is centralized, monopoly control over our money even compatible with a supposedly free-market economy?

Few Americans give much thought to the Federal Reserve System or monetary policy in general. But even as they strive to earn a living, and hopefully save or invest for the future, Congress and the Federal Reserve Bank are working insidiously against them. Day by day, every dollar you have is being devalued.

The greatest threat facing America today is not terrorism, or foreign economic competition, or illegal immigration. The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch ? Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference ? that threatens to impoverish us by further destroying the value of our dollars.

The Fed?s inflationary policies hurt older people the most. Older people generally rely on fixed incomes from pensions and Social Security, along with their savings. Inflation destroys the buying power of their fixed incomes, while low interest rates reduce any income from savings. So while Fed policies encourage younger people to overborrow because interest rates are so low, they also punish thrifty older people who saved for retirement.

The financial press sometimes criticizes Federal Reserve policy, but the validity of the fiat system itself is never challenged. Both political parties want the Fed to print more money, either to support social spending or military adventurism. Politicians want the printing presses to run faster and create more credit, so that the economy will be healed like magic ? or so they believe.

Fiat dollars allow us to live beyond our means, but only for so long. History shows that when the destruction of monetary value becomes rampant, nearly everyone suffers and the economic and political structure becomes unstable. Spendthrift politicians may love a system that generates more and more money for their special interest projects, but the rest of us have good reason to be concerned about our monetary system and the future value of our dollars.
_____________________________________________________
Dr. Ron Paul is a Republican member of Congress from Texas.

Check out the Ron Paul archives for many more great articles:
http://www.lewrockwell.com/paul/paul-arch.html

Hum... from a technical perspective this guy has no clue of what he's talking about. Nothing he says makes any sense. He absolutely ignore what a central bank is and does, or act like he didn't know it for the political purpose of adopting a demagogic stance.

The dollar devaluation he is concerned about (which is similar but absolutely not equal to inflation) is not generated randomly by the central bank. It is the result of the US current account deficit.

If anything, he's right about blaming the government about its fiscal policy. That might be controlled and might avoid the central bank need to increase money supply. The Current Account deficit, on the other hand, it's a structural problem no governance body alone has control on, and would require extensive reforms to be addressed.

Besides, it's funny that these remarks come after the FED went through the longest series of hikes in interest rates of recent history. Talk about inflationary policies!

 

[imported_Tango]

Oh.. now I see: the guy is a gynecologist...

Nice qualification to talk about international monetary policy...

 

[morkinva]

There's a GOP debate on May 3, MSNBC 5pm at the Reagan Presidential Library.

Accepting former first lady Nancy Reagan's invitation are Sen. Sam Brownback (Kan.), former Virginia governor Jim Gilmore, former New York City mayor Rudy Giuliani, former Arkansas governor Mike Huckabee, Rep. Duncan Hunter (Calif.), Sen. John McCain (Ariz.), Rep. Ron Paul (Texas), former Massachusetts governor Mitt Romney and former Wisconsin governor Tommy G. Thompson.

 

[Vic]

Originally posted by: Ferocious
Sad to see him a member of a party that shares almost none of his views...just for the extra support.

It must really kill him to have to do that.

Perot (with his money) and Nader (with his name and history) didn't have to whore themselves to get support to run.

Right... 'cause Perot wasn't affiliated with Republicans and there's no contradictions with Nader. 😛

Speaking of... I had a Naderite bang on my door the other day, looking for money for OSPIRG. When I told him (politely) I wasn't buying, he protested, saying "But we're developing renewable fuels!" I said, "Really? And just how many scientists does OSPIRG employ?" The answer is none, of course, it's a political activist organization for college students. I shut the door in his face.

Yep, no whoring going on there...

 

[3chordcharlie]

Originally posted by: Vic

Originally posted by: Ferocious
Sad to see him a member of a party that shares almost none of his views...just for the extra support.

It must really kill him to have to do that.

Perot (with his money) and Nader (with his name and history) didn't have to whore themselves to get support to run.

Right... 'cause Perot wasn't affiliated with Republicans and there's no contradictions with Nader. 😛

Speaking of... I had a Naderite bang on my door the other day, looking for money for OSPIRG. When I told him (politely) I wasn't buying, he protested, saying "But we're developing renewable fuels!" I said, "Really? And just how many scientists does OSPIRG employ?" The answer is none, of course, it's a political activist organization for college students. I shut the door in his face.

Yep, no whoring going on there...

I hate door-to-door whoring.

I mean the whole point to a whore is to have her not know where you live or want to come back.😛

 

[Capitalizt]

Originally posted by: Tango

Besides, it's funny that these remarks come after the FED went through the longest series of hikes in interest rates of recent history. Talk about inflationary policies!

Yep, hiking rates while expanding the money supply (so much so that they are afraid to publish the numbers any longer). Make cash more expensive over the short term while steadily dilluting the supply over the long term. That's called the old "one-two punch" to the American consumer.

 

[3chordcharlie]

Originally posted by: Capitalizt

Originally posted by: Tango

Besides, it's funny that these remarks come after the FED went through the longest series of hikes in interest rates of recent history. Talk about inflationary policies!

Yep, hiking rates while expanding the money supply (so much so that they are afraid to publish the numbers any longer). Make cash more expensive over the short term while steadily dilluting the supply over the long term. That's called the old "one-two punch" to the American consumer.

You do realize that the money supply is influenced by the bank rate, and exapnsion slows when the rate goes up?

Don't get me wrong, there's a legitimate beef here, but that ain't it.

 

[HombrePequeno]

Originally posted by: Vic

Originally posted by: zephyrprime
It's too bad that more people don't know what a scam of epic proportions the federal reserve and the entirely fractional reserve banking system are.

:thumbsup:

And I'm a banker! The sheep just don't want to get it that the whole FED system was purposefully designed to given the rich the power to print their own money. Nope, they just want to believe that the FED is the opposite, that it is somehow the government controlling the money supply for the people, when in fact it is nothing of the sort (the banks actually control the government, not the other way around). Further irony is that it's this false sense of confidence (and literally nothing else) that makes our economy more stable than it was pre-FED. It would all be hilariously funny if it wasn't so tragically sad.

Actually before the Fed came along, banks would print their own notes. Also, there were no reserve requirements so banks could actually print as much money (bank notes) as they wanted. There was also no lender of last resort. When a bank overextended itself by lending too much, there would be a run on that bank. That was fine when it was a small bank but runs on larger banks quite often caused banking crises.

 

[Rainsford]

I think perhaps one of the most infuriating things in a capitalist system is that somehow "free market magic" automatically produces the best results. An economy is like anything else, it does not just automatically work best when totally left alone. This is not an argument for central planning like in the Soviet Union, because that's way too far the other way. And that's my problem with guys like Ron Paul...they don't understand the middle ground. To them, it's either "free market" (as in, no controls at all) or "central planning" (ie, socialism). Yet any economist with a brain will look at history and suggest that, whatever the problems of a somewhat regulated economy are, they are NOT as big as those in a totally anarchist situation. The federal reserve performs a VERY useful function, trying to control the seesawing of the economy that you inevitably get without any controls. Ignoring that role is ignoring reality in favor of ideology, and I'm not a big fan of that no matter WHICH side you're on.

And I quite frankly don't see how Ron Paul is any less of a politician than anyone else. He's doing what they all do, which is ignoring reality and telling you what you want to hear. He's smart enough to realize that there is a lot of support to be gained with the "government is always evil" line that Reagan used to such effect, and he's perfectly willing to ignore reality when it doesn't fit his ideology. Don't get me wrong, I think he firmly believes what he's saying, but he's a free market fanatic. And while some of you may like those first two words, I'm a little more worried about the third.

 

[4X4er]

Originally posted by: 3chordcharlie

Originally posted by: Vic

Yep, no whoring going on there...

I hate door-to-door whoring.

I mean the whole point to a whore is to have her not know where you live or want to come back.😛

😀

 

[imported_Tango]

Originally posted by: 3chordcharlie

Originally posted by: Capitalizt

Originally posted by: Tango

Besides, it's funny that these remarks come after the FED went through the longest series of hikes in interest rates of recent history. Talk about inflationary policies!

Yep, hiking rates while expanding the money supply (so much so that they are afraid to publish the numbers any longer). Make cash more expensive over the short term while steadily dilluting the supply over the long term. That's called the old "one-two punch" to the American consumer.

You do realize that the money supply is influenced by the bank rate, and exapnsion slows when the rate goes up?

Don't get me wrong, there's a legitimate beef here, but that ain't it.

Correct. The FED (like any other developed country central bank) targets interest rates, so hiking interest rates while artificially expanding money supply is not even possible.

In fact, to hike interest rates the FED has done exactly the opposite, contracting proportionally the money supply.

The US dollar devaluation is the result of trade and budget deficit, and other monetary phenomena outside the US over which the federal reserve have no control.

Actually what was under control of the FED, inflation, has been remarkably controlled in a period of terrible shocks (dot.com bubble, 9/11) thanks to very good monetary policy.

 

[Rainsford]

Originally posted by: Tango

Originally posted by: 3chordcharlie

Originally posted by: Capitalizt

Originally posted by: Tango

Besides, it's funny that these remarks come after the FED went through the longest series of hikes in interest rates of recent history. Talk about inflationary policies!

Yep, hiking rates while expanding the money supply (so much so that they are afraid to publish the numbers any longer). Make cash more expensive over the short term while steadily dilluting the supply over the long term. That's called the old "one-two punch" to the American consumer.

You do realize that the money supply is influenced by the bank rate, and exapnsion slows when the rate goes up?

Don't get me wrong, there's a legitimate beef here, but that ain't it.

Correct. The FED (like any other developed country central bank) targets interest rates, so hiking interest rates while artificially expanding money supply is not even possible.

In fact, to hike interest rates the FED has done exactly the opposite, contracting proportionally the money supply.

The US dollar devaluation is the result of trade and budget deficit, and other monetary phenomena outside the US over which the federal reserve have no control.

Actually what was under control of the FED, inflation, has been remarkably controlled in a period of terrible shocks (dot.com bubble, 9/11) thanks to very good monetary policy.

I think it was a pretty good indication that Ron Paul has a big mouth but doesn't really understand the issue. He and his crowd frequently suggest that the Fed is "increasing the money supply" by actually printing more money. That isn't even close, as anyone who took economics in high school could tell you.

 

[Dissipate]

Originally posted by: Rainsford

I think it was a pretty good indication that Ron Paul has a big mouth but doesn't really understand the issue. He and his crowd frequently suggest that the Fed is "increasing the money supply" by actually printing more money. That isn't even close, as anyone who took economics in high school could tell you.

The Fed's operations from day to day are extremely complicated, but they indeed are creating more money.

The money supply (or total stock of money) today, for instance, is much greater than it was in say, the '80s or especially the '70s. This is a fact. Hence, the vast majority of mainstream economists (including economists on the Fed) attribute long term inflation to the increase of the total money supply. The debate is whether or not this is a good thing or a bad thing. For instance, Milton Friedman said the money supply should be tied to the GDP for 0 inflation.

Others (such as myself) see the central bank as what it is: a cartel instituted by the government to institutionalize and perpetuate fraud. The bank failures that occurred prior to the Fed were simply the result of the market being kept in check. But the people were told that what the bankers were doing wasn't fraud and that the market was what was failing. They were of course lied to and continue to be lied to.

 

[imported_Tango]

Originally posted by: Dissipate

Originally posted by: Rainsford

I think it was a pretty good indication that Ron Paul has a big mouth but doesn't really understand the issue. He and his crowd frequently suggest that the Fed is "increasing the money supply" by actually printing more money. That isn't even close, as anyone who took economics in high school could tell you.

The Fed's operations from day to day are extremely complicated, but they indeed are creating more money.

The money supply (or total stock of money) today, for instance, is much greater than it was in say, the '80s or especially the '70s. This is a fact. Hence, the vast majority of mainstream economists (including economists on the Fed) attribute long term inflation to the increase of the total money supply. The debate is whether or not this is a good thing or a bad thing. For instance, Milton Friedman said the money supply should be tied to the GDP for 0 inflation.

Others (such as myself) see the central bank as what it is: a cartel instituted by the government to institutionalize and perpetuate fraud. The bank failures that occurred prior to the Fed were simply the result of the market being kept in check. But the people were told that what the bankers were doing wasn't fraud and that the market was what was failing. They were of course lied to and continue to be lied to.

Of course there's more money circulating than in the 70s. There's also a much larger GDP. You must look for a comparatively higher money supply to blame inflationary policies, not just more banknotes circulating. Because the FED targets interest rates, and not money supply, as the economy becomes larger and money demand increases, the FED must match it to keep constant interest rates.

The FED is not targeting 0 inflation. Zero inflation is a very bad policy because it is very prone to be reversed in a deflationary trend. While not officially stated, the American central bank targets an inflation rate between 1 percent and 2 percent, as do most developed countries central bank.

The only way one can see a fraud (sigh!) in the way central banks around the world operate is believing in a world-wide conspiracy.

If you plot data about inflation in the US since the 50s you'll see how it actually decreased dramatically since the central bank switched policies from targeting money supply to targeting interest rates starting in late '70s to middle '80s. Targeting money supply might be a better policy in developing countries where shocks can come from the money markets (for example shifts in foreign investments due to increased country risk) but in the US (like in any other developed economy) it has been acknowledged that shocks usually come from the asset market (shocks in real money demand for example) so targeting interest rates is a much better policy in terms of both limiting fluctuations in output and controlling inflationary trends.

What you write about banking crisis in the past is true, but it wasn't result of fraud, just of excessive aggressiveness by the banks. That's why now the deposit ratio is more conservative. Banks as private companies try to maximize profits, but at the same time the banking system has a very particular importance in the balance of an economy and because of this must be regulated by a central organism. Failure in the banking system are the single most dramatic factor for economic failures and tend to exacerbate shocks instead of mitigate them.

 

[Vic]

Originally posted by: HombrePequeno
Actually before the Fed came along, banks would print their own notes. Also, there were no reserve requirements so banks could actually print as much money (bank notes) as they wanted. There was also no lender of last resort. When a bank overextended itself by lending too much, there would be a run on that bank. That was fine when it was a small bank but runs on larger banks quite often caused banking crises.

The situation you describe only existed from 1833, when Jackson defunded the Second Bank of the US, to 1863, when Lincoln signed the National Banking Act. A provision of that bill that went into effect in 1866 essentially took all the currency from private state banks out of circulation. From 1866 to 1913, the federal government actually issued its own currency, as required in the Constitution, Article 1, Section 8.