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Ron Paul: Something Big Is Going On

http://www.campaignforliberty.com/blog/?p=115

The following statement is written by Congressman Paul about the pending financial disaster. He will introduce this statement as a special order and insert it into the Congressional Record next week. Fortunately, we have the opportunity to debut it first on the Campaign for Liberty blog. It reads as follows:

I have, for the past 35 years, expressed my grave concern for the future of America. The course we have taken over the past century has threatened our liberties, security and prosperity. In spite of these long-held concerns, I have days�growing more frequent all the time�when I�m convinced the time is now upon us that some Big Events are about to occur. These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed.

Though the world has long suffered from the senselessness of wars that should have been avoided, my greatest fear is that the course on which we find ourselves will bring even greater conflict and economic suffering to the innocent people of the world�unless we quickly change our ways.

America, with her traditions of free markets and property rights, led the way toward great wealth and progress throughout the world as well as at home. Since we have lost our confidence in the principles of liberty, self reliance, hard work and frugality, and instead took on empire building, financed through inflation and debt, all this has changed. This is indeed frightening and an historic event.

The problem we face is not new in history. Authoritarianism has been around a long time. For centuries, inflation and debt have been used by tyrants to hold power, promote aggression, and provide �bread and circuses� for the people. The notion that a country can afford �guns and butter� with no significant penalty existed even before the 1960s when it became a popular slogan. It was then, though, we were told the Vietnam War and a massive expansion of the welfare state were not problems. The seventies proved that assumption wrong.

Today things are different from even ancient times or the 1970s. There is something to the argument that we are now a global economy. The world has more people and is more integrated due to modern technology, communications, and travel. If modern technology had been used to promote the ideas of liberty, free markets, sound money and trade, it would have ushered in a new golden age�a globalism we could accept.

Instead, the wealth and freedom we now enjoy are shrinking and rest upon a fragile philosophic infrastructure. It is not unlike the levies and bridges in our own country that our system of war and welfare has caused us to ignore.

I�m fearful that my concerns have been legitimate and may even be worse than I first thought. They are now at our doorstep. Time is short for making a course correction before this grand experiment in liberty goes into deep hibernation.

There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. Instead of using globalism in a positive fashion, it�s been used to globalize all of the mistakes of the politicians, bureaucrats and central bankers.

Being an unchallenged sole superpower was never accepted by us with a sense of humility and respect. Our arrogance and aggressiveness have been used to promote a world empire backed by the most powerful army of history. This type of globalist intervention creates problems for all citizens of the world and fails to contribute to the well-being of the world�s populations. Just think how our personal liberties have been trashed here at home in the last decade.

The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical-care costs; the collapse of the housing bubble; the bursting of the NASDAQ bubble; stockmarkets plunging; unemployment rising;, massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we�ll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?

There are various reasons that the world economy has been globalized and the problems we face are worldwide. We cannot understand what we�re facing without understanding fiat money and the long-developing dollar bubble.

There were several stages. From the inception of the Federal Reserve System in 1913 to 1933, the Central Bank established itself as the official dollar manager. By 1933, Americans could no longer own gold, thus removing restraint on the Federal Reserve to inflate for war and welfare.

By 1945, further restraints were removed by creating the Bretton-Woods Monetary System making the dollar the reserve currency of the world. This system lasted up until 1971. During the period between 1945 and 1971, some restraints on the Fed remained in place. Foreigners, but not Americans, could convert dollars to gold at $35 an ounce. Due to the excessive dollars being created, that system came to an end in 1971.

It�s the post Bretton-Woods system that was responsible for globalizing inflation and markets and for generating a gigantic worldwide dollar bubble. That bubble is now bursting, and we�re seeing what it�s like to suffer the consequences of the many previous economic errors.

Ironically in these past 35 years, we have benefited from this very flawed system. Because the world accepted dollars as if they were gold, we only had to counterfeit more dollars, spend them overseas (indirectly encouraging our jobs to go overseas as well) and enjoy unearned prosperity. Those who took our dollars and gave us goods and services were only too anxious to loan those dollars back to us. This allowed us to export our inflation and delay the consequences we now are starting to see.

But it was never destined to last, and now we have to pay the piper. Our huge foreign debt must be paid or liquidated. Our entitlements are coming due just as the world has become more reluctant to hold dollars. The consequence of that decision is price inflation in this country�and that�s what we are witnessing today. Already price inflation overseas is even higher than here at home as a consequence of foreign central bank�s willingness to monetize our debt.

Printing dollars over long periods of time may not immediately push prices up�yet in time it always does. Now we�re seeing catch-up for past inflating of the monetary supply. As bad as it is today with $4 a gallon gasoline, this is just the beginning. It�s a gross distraction to hound away at �drill, drill, drill� as a solution to the dollar crisis and high gasoline prices. Its okay to let the market increase supplies and drill, but that issue is a gross distraction from the sins of deficits and Federal Reserve monetary shenanigans.

This bubble is different and bigger for another reason. The central banks of the world secretly collude to centrally plan the world economy. I�m convinced that agreements among central banks to �monetize� U.S. debt these past 15 years have existed, although secretly and out of the reach of any oversight of anyone�especially the U.S. Congress that doesn�t care, or just flat doesn�t understand. As this �gift� to us comes to an end, our problems worsen. The central banks and the various governments are very powerful, but eventually the markets overwhelm when the people who get stuck holding the bag (of bad dollars) catch on and spend the dollars into the economy with emotional zeal, thus igniting inflationary fever.

This time�since there are so many dollars and so many countries involved�the Fed has been able to �paper� over every approaching crisis for the past 15 years, especially with Alan Greenspan as Chairman of the Federal Reserve Board, which has allowed the bubble to become history�s greatest.

The mistakes made with excessive credit at artificially low rates are huge, and the market is demanding a correction. This involves excessive debt, misdirected investments, over-investments, and all the other problems caused by the government when spending the money they should never have had. Foreign militarism, welfare handouts and $80 trillion entitlement promises are all coming to an end. We don�t have the money or the wealth-creating capacity to catch up and care for all the needs that now exist because we rejected the market economy, sound money, self reliance and the principles of liberty.

Since the correction of all this misallocation of resources is necessary and must come, one can look for some good that may come as this �Big Even� unfolds.

There are two choices that people can make. The one choice that is unavailable to us is to limp along with the status quo and prop up the system with more debt, inflation and lies. That won�t happen.

One of the two choices, and the one chosen so often by government in the past is that of rejecting the principles of liberty and resorting to even bigger and more authoritarian government. Some argue that giving dictatorial powers to the President, just as we have allowed him to run the American empire, is what we should do. That�s the great danger, and in this post-911 atmosphere, too many Americans are seeking safety over freedom. We have already lost too many of our personal liberties already. Real fear of economic collapse could prompt central planners to act to such a degree that the New Deal of the 30�s might look like Jefferson�s Declaration of Independence.

The more the government is allowed to do in taking over and running the economy, the deeper the depression gets and the longer it lasts. That was the story of the 30ss and the early 40s, and the same mistakes are likely to be made again if we do not wake up.

But the good news is that it need not be so bad if we do the right thing. I saw �Something Big� happening in the past 18 months on the campaign trail. I was encouraged that we are capable of waking up and doing the right thing. I have literally met thousands of high school and college kids who are quite willing to accept the challenge and responsibility of a free society and reject the cradle-to-grave welfare that is promised them by so many do-good politicians.

If more hear the message of liberty, more will join in this effort. The failure of our foreign policy, welfare system, and monetary policies and virtually all government solutions are so readily apparent, it doesn�t take that much convincing. But the positive message of how freedom works and why it�s possible is what is urgently needed.

One of the best parts of accepting self reliance in a free society is that true personal satisfaction with one�s own life can be achieved. This doesn�t happen when the government assumes the role of guardian, parent or provider, because it eliminates a sense of pride. But the real problem is the government can�t provide the safety and economic security that it claims. The so-called good that government claims it can deliver is always achieved at the expense of someone else�s freedom. It�s a failed system and the young people know it.

Restoring a free society doesn�t eliminate the need to get our house in order and to pay for the extravagant spending. But the pain would not be long-lasting if we did the right things, and best of all the empire would have to end for financial reasons. Our wars would stop, the attack on civil liberties would cease, and prosperity would return. The choices are clear: it shouldn�t be difficult, but the big event now unfolding gives us a great opportunity to reverse the tide and resume the truly great American Revolution started in 1776. Opportunity knocks in spite of the urgency and the dangers we face.

Let�s make �Something Big is Happening� be the discovery that freedom works and is popular and the big economic and political event we�re witnessing is a blessing in disguise.

zomg, I love this guy.

So many good points, and I admire him for fighting the good fight...but Paul is being naive if he really thinks we can turn things around at this point. It's just not going to happen. Government has become so massive and so relentless in it's growth that it simply can't stop down the path it's on. Sadly, a huge chunk of our economy is now dependent on government spending. Millions of people NEED this taxation/regulation/inflation to continue...They have become reliant on the federal parasite for their livelihood..

It's really a complete mess...and no matter how sound the arguments may be for reducing government power, it's not going to happen. The cycle needs to play itself out, and the monster needs to keep growing until it collapses under it's own weight like the USSR.

Do what you can to protect yourself and your family, then sit back and enjoy the show.

"gasoline prices over $4 a gallon"

i lol'd; we are currently paying $12 a gallon

An interesting read though.

^it's mostly because of taxes
according to wikipedia you guys are taxed at a rate of 110% for gasoline

High gas prices are terrific, I dunno why he sees them as a bad thing. The cost of pollution is in some way finally being borne on the consumer.

im not sure i can find the words to describe what a fucking moron he is.

yeah, let's return to the gold standard. what a fuckwit.

that's nothing but a bunch of empty, erroneous rhetoric that doesn't actually say anything.

quote:

Originally posted by pkcRAISTLIN im not sure i can find the words to describe what a fucking moron he is. yeah, let's return to the gold standard. what a fuckwit. that's nothing but a bunch of empty, erroneous rhetoric that doesn't actually say anything.

enlighten us and tell us how they are wrong, please

quote:

Originally posted by malek enlighten us and tell us how they are wrong, please

where would you like me to start? im most familiar with his useless diatribes regarding the gold standard if that helps.

or i could just generalise and point out the fact that nothing in his rant is particularly insightful, nor does he propose any actual solutions to the growing problems of....CAPITALISM!

for a libertarian, he shows a fundamental lack of faith in the economic system. the impending economic "crisis" will be just another example of the cyclic boom-bust tendency of free markets. but no, let's all fear-monger about it as if its the end of the world as we know it!

it wont be anywhere near as bad as the great depression, which was exacerbated by (you guessed it!) the adherence to the gold standard. what a genius he is. fiat money enables a government to act in the economy, and help shorten periods of economic downturn, rather than leaving everything to the market.

the problems he raises are related to all kinds of economic issues, and are certainly not the fault of fiat money (which is his underlying assumption). he's living in the dark ages and im not totally sure he truly understands all the shit he is spouting.

quote:

The central banks of the world secretly collude to centrally plan the world economy. I�m convinced that agreements among central banks to �monetize� U.S. debt these past 15 years have existed, although secretly and out of the reach of any oversight of anyone�especially the U.S. Congress that doesn�t care, or just flat doesn�t understand. As this �gift� to us comes to an end, our problems worsen. The central banks and the various governments are very powerful, but eventually the markets overwhelm when the people who get stuck holding the bag (of bad dollars) catch on and spend the dollars into the economy with emotional zeal, thus igniting inflationary fever.

i mean come on. what nonsense. yes, the evil central bank collude to...um...do what again? the irony of course is that it is (in part) INDIVIDUAL ECONOMIC FREEDOM that has been responsible for some of the economic problems we are seeing (and i thought ron liked freedom!?) such as how much people are willing to pay for a house. or for oil.

i have yet to see him raise a salient point against central banks. yes, they make mistakes (like any bank) but they're certainly not colluding to control the world economy.

what exactly is bad about a central bank that aims to deliver steady growth? that's pretty much their role.

half of the piece is nothing but opinionated bollocks without any substance or evidence. the other half is basically "wars are bad as is the patriot act et al". well duh. im really glad ron is around to tell us these things!

im not even an economist and i can tell he's talking shit.

i admire and respect Ron. i really do. but the fact that he constantly sees the United States in some sort of vacuum just irks me.

quote:

Originally posted by Q5echo i admire and respect Ron. i really do.

yeah, i particularly like his attitude to evolution, and how its just a "theory". i wish australia had more politicians with their brains in their ass.

quote:

Originally posted by pkcRAISTLIN yeah, i particularly like his attitude to evolution, and how its just a "theory". i wish australia had more politicians with their brains in their ass.

i really don't pay any mind to his religiousities<--sp/word? or anybody else's for that matter. it's not that important to me.

quote:

Originally posted by Q5echo i really don't pay any mind to his religiousities<--sp/word? or anybody else's for that matter. it's not that important to me.

but surely a statesman that can so readily (willingly?) misunderstand/ignore scientific fact isn't someone you'd trust with your country?

quote:

Originally posted by pkcRAISTLIN but surely a statesman that can so readily (willingly?) misunderstand/ignore scientific fact isn't someone you'd trust with your country?

i trust him as a Congressman. and if i were pregnant, maybe my mid-wife. other than that he seems like an honest guy.

quote:

Originally posted by Q5echo i trust him as a Congressman. and if i were pregnant, maybe my mid-wife. other than that he seems like an honest guy.

yeah, honestly retarded and willfully ignorant. yay.

quote:

Originally posted by pkcRAISTLIN the irony of course is that it is (in part) INDIVIDUAL ECONOMIC FREEDOM that has been responsible for some of the economic problems we are seeing

lol, quote of the CENTURY. More oppression is the answer. Go PK Go!

quote:

Originally posted by Capitalizt lol, quote of the CENTURY. More oppression is the answer. Go PK Go!

no, im pointing out that a component of the economic instability the US is experiencing right now is down to individual free (bad) choice, and not the machinations of the evil central banks.

the ultimate irony being that without central banks the "innocent victims" of economic downturns would be far greater in number, and they would be affected far more often.

honestly, i would expect students of economics (like yourself) to have a better grasp of his ridiculous bullshit.

quote:

Originally posted by pkcRAISTLIN im not sure i can find the words to describe what a fucking moron he is. yeah, let's return to the gold standard. what a fuckwit. that's nothing but a bunch of empty, erroneous rhetoric that doesn't actually say anything.

You don't like the gold standard. We get it. And we know you aren't a U.S. citizen, so you don't care much about the dollar..but the fact is Ron Paul's comments are DEAD ON BALLS ACCURATE in regards to entitlement spending, the welfare state, and dollar devaluation. We have been printing dollars like mad the past few decades and exporting our inflation to the rest of the world. We've been able to do that because we had the "reserve currency" of the world. Today however their are stronger alternatives and the US is not the only powerhouse. Other countries are becoming reluctant to hold our rapidly declining dollars, so they are dumping them on the open market which is exacerbating the problem of inflation. Our federal reserve which is supposed to be controlling inflation is instead sitting on it's ass doing absolutely NOTHING to protect the purchasing power of the dollar. They are doing quite the opposite in fact...leaving interest rates at record lows and pumping billions of newly created paper into the system every week.

You may call this being "flexible", but I call it a massive corporate bailout. The fed is protecting irresponsible corporations that made bad loans and bad decisions. Rather than letting the free market work so these failed companies can be bought out and reorganized, the feds interve. They inflate the money supply and provide cheap credit to prop up failed enterprises. Ron Paul is right about this; Low rates and easy money benefit VERY FEW (those who get to use it first), and ends up hurting the many...those of us who must live with the higher prices. Workers and retirees are punished severely by inflation. And Americans aren't the only ones...Remember that oil is priced in dollars, and because the dollar has crashed, prices have soared on the world market. You can blame capitalism all you want. The fact is that capitalism has NOT BEEN ALLOWED to work in these areas. There is no free market when it comes to interest rates, energy, healthcare, etc. The government has an iron hand over these sectors of the economy, and that is the root of most of our problems today.

quote:

Originally posted by Capitalizt You don't like the gold standard.

neither does any self-respecting economist of the last few decades.

quote:

Originally posted by Capitalizt And we know you aren't a U.S. citizen, so you don't care much about the dollar..

i love how the US is crying about their poor dollar weakening. welcome to the real world guys. youre just experiencing what every other country has had to deal with since they floated their currency. diddums.

quote:

Originally posted by Capitalizt but the fact is Ron Paul's comments are DEAD ON BALLS ACCURATE in regards to entitlement spending, the welfare state, and dollar devaluation. We have been printing dollars like mad the past few decades and exporting our inflation to the rest of the world. We've been able to do that because we had the "reserve currency" of the world. Today however their are stronger alternatives and the US is not the only powerhouse. Other countries are becoming reluctant to hold our rapidly declining dollars, so they are dumping them on the open market which is exacerbating the problem of inflation.

but this isn't a failure of either fiat money or evil banks. its bad government management. this has absolutely nothing to do with the system and everything to do with how it is being managed.

quote:

Originally posted by Capitalizt Our federal reserve which is supposed to be controlling inflation is instead sitting on it's ass doing absolutely NOTHING to protect the purchasing power of the dollar. They are doing quite the opposite in fact...leaving interest rates at record lows and pumping billions of newly created paper into the system every week.

firstly, inflation isnt, in and of itself, a bad thing. a growing economy is going to have some inflation. i also dont think this situation is nearly as clear-cut as you seem to think. its not as if the fed are doing "nothing" because they're evil; they're doing some things whilst not doing others, in an attempt to balance the competing economic interests/concerns, such as stagflation. call me a noob, but wouldnt a sharp increase in the cash rate combine rather badly with an economy on the tip of recession?

quote:

Originally posted by Capitalizt You may call this being "flexible", but I call it a massive corporate bailout.

actually, isn't it the bush admin's measures that can be considered the 'bailout'? also, what happened to you giving a shit about those poor innocent people ron seems to care so much about? these problems dont end with business, there are millions of people that are also caught up in it.

quote:

Originally posted by Capitalizt The fed is protecting irresponsible corporations that made bad loans and bad decisions.

oh, but it wasn't the bad decision of individual borrowers? are they somehow free of guilt in this particular scenario?

quote:

Originally posted by Capitalizt Rather than letting the free market work so these failed companies can be bought out and reorganized, the feds interve.

like i have already said, sometimes the free market is fine, other times it needs intervention. to believe otherwise is contrary to the history of economics. i wont posit an idea here about whether they are doing the right thing or not because i simply dont know. but even if they can be shown to be doing the wrong thing, this is a problem with the management of the federal reserve, and not an indictment against the system of having a central bank.

quote:

Originally posted by Capitalizt They inflate the money supply and provide cheap credit to prop up failed enterprises. Ron Paul is right about this; Low rates and easy money benefit VERY FEW (those who get to use it first), and ends up hurting the many...those of us who must live with the higher prices.

that's completely over-simplified. the people down the bottom benefit from low interest rates. i happen to be one of those. im smart with my money so i dont get fucked over by an economic system i barely understand.

i really feel that youre looking at this problem in a very short-sighted fashion. as if the economic problems of today are somehow new and unusual. they're not. and i still havent seen a workable and sensible alternative presented by paul.

quote:

Originally posted by Capitalizt Workers and retirees are punished severely by inflation. And Americans aren't the only ones...Remember that oil is priced in dollars, and because the dollar has crashed, prices have soared on the world market. You can blame capitalism all you want.

right. so please explain to me the alternative you believe would fix the problem of inflation. i cant wait to hear this!

quote:

Originally posted by Capitalizt The fact is that capitalism has NOT BEEN ALLOWED to work in these areas. There is no free market when it comes to interest rates, energy, healthcare, etc. The government has an iron hand over these sectors of the economy, and that is the root of most of our problems today.

hahahahahaha. nonsense. if you think the american government is more powerful than all the economies of the world then you are kidding yourself. the rising price in oil for instance, isn't just due to the devaluing dollar. prices are rising because people in the free market are willing to pay more for it. any other analysis is just conspiracy bollocks.

this is capitalism at work mate.

incidentally, how do you think interest rates should work? im intrigued. how can you combat the very real evils of uncontrolled inflation if you dont have a central bank? or do you really favour a return to the gold standard?

id like to hear what you think the answers are to all the evils of central banking and fiat money.

also, the way he represents "globalisation" just sounds fucking childish. i mean seriously, how can you be a libertarian and then go around bashing globalisation? doesnt make sense.

PK, to all of your questions about how things should be "managed" and how interest rates SHOULD work, there is a simple answer:

Supply and Demand.


Radical idea...radically different from the system we have today. The "boom-bust" cycle you mentioned earlier is actually caused by fiat money creation and contraction. The artificially low rates under Greenspan let to the boom-bust of the Nasdaq bubble, then the housing bubble we are in now. Artificially low rates may be great for some (if you are one of those, more power to you)...but in the long run they do cause "bust" cycles. When there is no market-based rate of interest, nearly everyone has access to cheap money..even those who shouldn't. This leads to increased (and irresponsible) risk taking, malinvestment and wasteful spending that would not take place had there been a more natural cost for that money set by the marketplace.

Most people behave foolishly with access to cheap money. The government provides it to prevent recession, but they are fighting the inevitable...propping up a sick economy again and again in order to avoid political pain. They are only postponing the day of reckoning and guaranteeing it will be worse when we finally face it. We saw the results of inflationary policies in the 1920's, the 1970's, and apparently again right now.

I won't pretend to have a perfect alternative to the fed, but I do know the current system is doing more harm than good. A good start for change would be much greater oversight and openness to the public. If people realized just how much intervention was taking place, how many companies were being bailed out, and how much their paycheck is being devalued every month, they would likely be shocked and put serious pressure on congress to keep the fed in check. I think it's time the fed stopped f*cking around with everything and let bad businesses fail...let irresponsible borrowers go bankrupt. It sounds harsh and I'm sure you will scream "heartless capitalist!", but this is the medicine our economy desperately needs.

quote:

Originally posted by Capitalizt The "boom-bust" cycle you mentioned earlier is actually caused by fiat money creation and contraction.

oh come now, let's be serious shall we? cyclical economic conditions is part and parcel of capitalism. could you tell me how fiat money contributed to the 'bust', the Great Depression?

quote:

Originally posted by Capitalizt The artificially low rates

technically speaking, there's no such thing as "artificially low" rates. rates are rates are rates.

quote:

Originally posted by Capitalizt under Greenspan let to the boom-bust of the Nasdaq bubble, then the housing bubble we are in now.

i dont know enough about this to comment, but i do know that the australian federal reserve is managed quite well, and i dont see why the US would be any different.

quote:

Originally posted by Capitalizt Artificially low rates may be great for some (if you are one of those, more power to you)...but in the long run they do cause "bust" cycles.

again, define for me "artificially low".

banks are free to set their interest rates at whatever they wish, regardless of anything the central bank does. sure, you wont find corporate banks offering lower rates than the fed, but they are more than free to have them higher if they wish. indeed, virtually all of australia's banks have a higher interest rate than the one set by the reserve bank.

even if we accepted that greenspan et al could have predicted the ensuing chaos of this "artificially low" interest rate, that isn't a problem with the system, and is part of the issues with management.

tell me how one controls inflation without a central bank (indeed, who is measuring the inflation if not the central bank?)

quote:

Originally posted by Capitalizt When there is no market-based rate of interest,

could you explain to me a bit more on how this would work? or how it is even different to what we have now? i have already pointed out that banks can set 'market-based' rates of interest independently of the central authority.

again i want to ask how inflation is kept under control without a central bank?

quote:

Originally posted by Capitalizt nearly everyone has access to cheap money..even those who shouldn't.

i think your underlying assumption here- that central banks foster climates where too many people have access to credit, and that a 'market-based' approach would help eliminate this problem- to be incredibly naive.

fact: corporate banks are predators and they will be shafting people for money with or without the fed. there will always be those that do not understand the consequences of their actions, especially when complicated economics are concerned.

how can you prove to me that the (early) interest rates that the fed had were artificial? and why do you think the fed made it impossible for the banks to act and raise their own rates in the face of economic danger, which seems to be the system you're advocating? why is it the fed that's getting the blame from you rather than the rest of the banks that did the lending (considering it is these very banks you now trust to provide 'market-based' interest rates)?

quote:

Originally posted by Capitalizt This leads to increased (and irresponsible) risk taking, malinvestment and wasteful spending that would not take place had there been a more natural cost for that money set by the marketplace.

haha, that's simply not true. you seem to possess a rather idyllic impression of capitalism, capitalists and the invisible hand. capitalism is a system of stratification that rewards and encourages self interest. there will always be problems like this occuring in a free market, or supposedly in your case- a 'freer' market. its called market failure.

quote:

Originally posted by Capitalizt Most people behave foolishly with access to cheap money.

but you seem to assume that the fed provides access to cheap money, when that isn't quite true. the banks do. it is THEIR decision how much they lend their (our) money for, and ultimatelyits their responsibility.

in your example, exactly how would things be different when the so-called 'market value' of interest was comparably low? its exactly the same situation. greenspan didnt keep the rates low all by himself.

quote:

Originally posted by Capitalizt The government provides it to prevent recession, but they are fighting the inevitable...propping up a sick economy again and again in order to avoid political pain.

that's not true. that's like saying an economy is perpetually sick, when in reality economies are in states of flux; needing more or less intervention depending on various circumstances.

quote:

Originally posted by Capitalizt We saw the results of inflationary policies in the 1920's, the 1970's, and apparently again right now.

jesus...and youre an economist? the countries that suffered most during the 20s were those nations that were tied to their gold standard:

quote:

The current judgment of economic historians (see, for example, Barry J. Eichengreen, Golden Fetters) is that attachment to the gold standard played a major part in keeping governments from fighting the Great Depression, and was a major factor turning the recession of 1929-1931 into the Great Depression of 1931-1941.

quote:

# Countries that were not on the gold standard in 1929--or that quickly abandoned the gold standard--by and large escaped the Great Depression # Countries that abandoned the gold standard in 1930 and 1931 suffered from the Great Depression, but escaped its worst ravages. # Countries that held to the gold standard through 1933 (like the United States) or 1936 (like France) suffered the worst from the Great Depression

http://www.j-bradford-delong.net/Po...ldstandard.html

the problems not really caused by "inflationary spending" as you seem to describe it. indeed, it was increased spending that saved the economies of those countries.

quote:

Originally posted by Capitalizt I won't pretend to have a perfect alternative to the fed, but I do know the current system is doing more harm than good.

i havent seen you prove that in the slightest. certainly not when you include examples from all the other nations (and there are many) that have a central bank. someone must be doing something right

quote:

Originally posted by Capitalizt A good start for change would be much greater oversight and openness to the public.

they are hardly secret meetings. they get together, discuss the economic health of the country/world, sometimes decide to alter interest rates. what else do i, john citizen, need to know? they are subject to oversight by congress, if you dont trust congress to keep an eye on things then that's a whole other problem.

quote:

Originally posted by Capitalizt If people realized just how much intervention was taking place, how many companies were being bailed out, and how much their paycheck is being devalued every month, they would likely be shocked and put serious pressure on congress to keep the fed in check.

could you explain to me how the fed is 'bailing out' companies? i am unaware that they're giving away free money ugh, the point being that the person's paycheck every month/year etc is also increasing. indeed, part of inflation is generated by higher wages.

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Originally posted by Capitalizt I think it's time the fed stopped f*cking around with everything and let bad businesses fail...let irresponsible borrowers go bankrupt. It sounds harsh and I'm sure you will scream "heartless capitalist!", but this is the medicine our economy desperately needs.

sorry, fact is absolutely nothing would change. nothing. well, except perhaps that a huge economic (global) meltdown could ensue. seriously, i find the complaint that "how much their paycheck is being devalued every month" to be rather disingenuous when simultaneously you dont give two shits if they lose their job or their life savings. not particularly consistent!

without sensible monetary policy, and sensible government spending, capitalism can be an awfully dangerous un-tamed beast. i think you love the market a little too much and flippantly ignore problems inherent with it.

if youre around and can be bothered occrider we'd love to hear your take on the matter

This is one of the reasons why you wanna stay on the gold standard.


Here are lots of lectures in mp3 about gold in anyone is interested.
http://mises.org/media.aspx?action=search&q=gold

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Originally posted by robstar This is one of the reasons why you wanna stay on the gold standard.

irrelevant.

Not in Zimbabwe,

I was skimming tru your response I saw this

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indeed, part of inflation is generated by higher wages.

Maybe there's two different schools on this or you made a mistake?
I always thought higher wages was the result of inflation, not the other way around.

holy ****, damn you pk...I don't have time to answer 15 questions. I'm going to try to do it just once, and I'm sure you're not gonna like my answers and probably pwn me on a few points. Don't take offense when I don't respond cuz it takes too long for me to write these responses and I'm just getting too old for this sh!t. gg

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Originally posted by pkcRAISTLIN oh come now, let's be serious shall we? cyclical economic conditions is part and parcel of capitalism. could you tell me how fiat money contributed to the 'bust', the Great Depression?

Fiat money led to the false boom..a HUGELY false boom. Not only were there low interest rates, but margin requirements by banks were insanely low. Back then, you could actually put up $1 in real assets and buy $50.00 worth of stock. This was only possible under a fractional reserve system, where banks were permitted to create credit (money) out of thin air with no backing whatsoever. Naturally with such easy money available, prices were bid into the stratosphere..much higher than the fundamentals justified, and when prices dropped and margin calls were made, there was no "real" money behind all of the stock purchases so the prices crashed...It was fiat money...money created and lent by banks on a whim, just as the fed creates it today.

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Technically speaking, there is no such thing as "artificially low" rates. rates are rates are rates.

There actually can be artificially low rates. You were correct earlier in pointing out that inflation is going to exist regardless of a central bank or not...but in a free market, the rate of interest will always find a natural equilibrium with the rate of inflation...providing a positive (if small) return for savers. When the fed is involved in setting rates, we've had periods (today included) where the real interest rate charged by banks is NEGATIVE...which means below the rate of inflation. So if you have money earning 3% with inflation running at 4%, you are losing purchasing power in that account. Through a policy of low rates, the fed is discouraging saving and encouraging risk taking, spending, and speculation...the things that lead to those false "boom" periods.

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i dont know enough about this to comment, but i do know that the australian federal reserve is managed quite well, and i dont see why the US would be any different.

Well I don't know much about you Aussies, but I'm sure your system is better than ours. I admire the British system actually. Their fed has a single mandate...to control inflation. In the US however our fed has a dual mandate. It is supposed to control inflation AND promote economic growth. The second part is where we get into a real mess... It is under constant pressure from politicians to keep the economy booming...to keep pumping new money into the system so the economy can grow grow grow. This sort of thing IS NOT HEALTHY! Every market needs to correct and weed out the excesses once in a while...but our federal reserve is required BY LAW to keep the economy growing...to do whatever it takes..bail out struggling companies, devalue the currency as much as possible to keep people spending rather than saving, etc.

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you wont find corporate banks offering lower rates than the fed, but they are more than free to have them higher if they wish. indeed, virtually all of australia's banks have a higher interest rate than the one set by the reserve bank.

Yes all banks charge more than they pay to make a profit of course..but the amount they charged is based on the amount the fed charges them. They are competing for customers, and since they only have one source of credit (the fed), they all tend to charge close to what the fed charges them.

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again i want to ask how inflation is kept under control without a central bank?

I told you I don't have an ideal solution, but here is one idea (you're not gonna like it): http://www.fee.org/publications/the...le.asp?aid=1605

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fact: corporate banks are predators and they will be shafting people for money with or without the fed. there will always be those that do not understand the consequences of their actions, especially when complicated economics are concerned.

Yes some corporate banks can have shady practices..but these banks are going to be competing in a marketplace with dozens of other banks. Those who earn a reputation for dishonest business practices won't be around very long. It is in the interest of every business to satisfy as many people as possible...to make consumers HAPPY. This is the true beauty of the free market. Making people happy is the only way to succeed in the long run. No company will survive long if it continually aims to "shaft" people.

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and why do you think the fed made it impossible for the banks to act and raise their own rates in the face of economic danger?

The fed didn't make it impossible, and the banks DID raise rates eventually, but it was too late. The damage from easy money policies had already been done. I mentioned earlier these banks created millions of dollars out of thin air (only possible under the fractional reserve system). People used margin to buy huge amounts of stock with this newly created money and drove prices up. Once banks realized there was a problem and started raising rates on the loans, the market had already taken a downturn and people couldn't pay up..which led to a cascade of margin calls and the crash of 29'. The banks were partly responsible (for making foolish loans), but those loans were only made possible because the money they created was backed by nothing.

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haha, that's simply not true. you seem to possess a rather idyllic impression of capitalism, capitalists and the invisible hand. capitalism is a system of stratification that rewards and encourages self interest. there will always be problems like this occuring in a free market, or supposedly in your case- a 'freer' market. its called market failure.

Yes, some people will fail in the free market. We are human and everyone makes mistakes, so it is inevitable. The problem comes when an organization like the fed tries to PREVENT market failures...They try to prevent poorly managed companies from failing, or to prevent individuals from suffering the consequences of poor decisions. This may be "compassionate" but it is not healthy at all. In a market correction, the damage is very painful but it is also short and sweet. It doesn't get smoothed over, prolonged or delayed...the way our crisis is being handled by the fed.

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they are hardly secret meetings. they get together, discuss the economic health of the country/world, sometimes decide to alter interest rates. what else do i, john citizen, need to know? they are subject to oversight by congress, if you dont trust congress to keep an eye on things then that's a whole other problem.

Come on buddy, you know John Q Public doesn't have a clue what the federal reserve does. They still think those little paper rectangles in their pocket are backed by gold. They remain woefully ignorant of the inflation tax they are paying every year. As much as I hate to call for a new government program, I think learning about the federal reserve and how their money is created and valued should be mandatory for every high school student. Once people realize paper currency has no intrinsic value and is subject to the whims of politicians, they will start seeking alternatives.

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could you explain to me how the fed is 'bailing out' companies? i am unaware that they're giving away free money ugh, the point being that the person's paycheck every month/year etc is also increasing. indeed, part of inflation is generated by higher wages.

Google "Bear Stearns" for a start. And yes, paychecks are also increasing but for the past 10 years they have been growing at less than the official rate of inflation. Last I heard, median family incomes in America were up around 2.5% annually for the past 10 years while inflation has been running 3-4%. So even if you believe the official government inflation stats, people are losing ground. Inflation is a big invisible tax on everyone, which makes it the worst kind of tax in my book.

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