The Unz Review: An Alternative Media Selection
A Collection of Interesting, Important, and Controversial Perspectives Largely Excluded from the American Mainstream Media
 BlogviewRon Paul Archive
Federal Reserve: Enemy of Liberty and Prosperity
🔊 Listen RSS
Email This Page to Someone

 Remember My Information



=>

Bookmark Toggle AllToCAdd to LibraryRemove from Library • BShow CommentNext New CommentNext New ReplyRead More
ReplyAgree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
AgreeDisagreeLOLTroll
These buttons register your public Agreement, Disagreement, Troll, or LOL with the selected comment. They are ONLY available to recent, frequent commenters who have saved their Name+Email using the 'Remember My Information' checkbox, and may also ONLY be used three times during any eight hour period.
Ignore Commenter Follow Commenter
Search Text Case Sensitive  Exact Words  Include Comments
List of Bookmarks

Lost in the media’s obsession with the impeachment circus last week was Federal Reserve Chairman Jerome Powell’s testimony on the state of the economy before the Joint Economic Committee. In his testimony, Chairman Powell warned that when the next recession inevitably occurs, the US Government’s over $23 trillion debt would prevent Congress from increasing spending to revive the economy.

Powell also said that the Fed’s current low interest rate policies would prevent the Fed from using its traditional methods of increasing the money supply and further lowering interest rates to jump-start economic growth in a recession. Hopefully, Powell is correct that when the next recession hits the Federal Reserve and Congress will be unable to “stimulate” the economy with cheap money and new spending.

Interest rates are the price of money and, as with all prices, government manipulation of interest rates distorts the signals regarding market conditions. Artificially low interest rates lead to malinvestment and the creation of bubbles. Recessions are a painful but necessary correction that allows the economy to cleanse itself of these distortions. When the Federal Reserve and Congress try to stimulate the economy, they introduce new distortions, making it impossible for the economy to heal itself. Fiscal and monetary stimulus may temporally create the illusions of prosperity, but in reality they merely create another bubble that will eventually burst starting the boom-and-bust cycle all over again. So, the best thing Congress and the Federal Reserve can do to help the economy recover from a recession is nothing.

Powell is the latest Federal Reserve Chair to warn of the dangers of government debt, which is ironic since the Federal Reserve is the great enabler of deficit spending. Government manipulation of the value of money allows politicians to hide the true costs of their warfare and welfare. This is why throughout history governments have sought the power to dictate what is and is not money and determine the value of the monetary unit. Today’s central bankers are the heirs of the medieval kings who shaved off the edges of gold coins, then ordered the people to pretend that shaved coins where just as valuable as unshaved coins.

Instead of shaving gold coins, today’s central bankers facilitate the growth of government by purchasing government securities in order to keep interest rates—and thus the government’s borrowing costs— low. The Federal Reserve’s interventions enable the expansion of government well beyond what would be politically palatable if politicians had to finance the entire welfare-warfare state through direct taxation or borrowing at market interest rates, which would increase interest rates for private sector borrowers, lower growth, and increase unemployment.

Since the creation of the Federal Reserve, the US dollar has lost over 96 percent of its value. The Federal Reserve-caused decline in purchasing power is a stealth tax. This inflation tax does not affect the financial elites—who receive new money created by the Federal Reserve before the Fed’s actions have diminished the dollar’s purchasing power—but has hurt middle-and-working class Americans whose purchasing power is continuously reduced by the Federal Reserve. The inflation tax is not just the most hidden, but the most regressive of taxes.

The Federal Reserve is responsible for the growth of government, the loss of liberty, the rise in income inequality, and the boom-and-bust economic cycle. All those who support liberty, peace, and prosperity should join the effort to audit and end the Fed.

(Republished from The Ron Paul Institute by permission of author or representative)
 
• Category: Economics • Tags: Federal Reserve 
Hide 41 CommentsLeave a Comment
Commenters to Ignore...to FollowEndorsed Only
Trim Comments?
    []
  1. While Ron Paul has identified the culprit, he is invested in the wrong solution.

    “Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.”
    ~ William Lyon Mackenzie King

    King made the statement before introducing legislation to nationalize the Bank of Canada. Another Liberal, globalist shill Pierre Trudeau, ceded that control to the Bank of international Settlements in 1974, and it’s been straight downhill ever since.
    What people like Ron Paul fail to understand, is that interest (usury) is the law of diminishing returns. Banks create debt, Governments create credit, and can do so at no interest owed. In two Canadian provinces during the Depression, two “socialist” type systems paid off debt and grew their economies. While different methods, both stopped dependence on banks. Here is one of those methods: https://www.socred.org/

    • Replies: @onebornfree
  2. onebornfree says: • Website
    @Curmudgeon

    “The kind of man who wants the government to adopt and enforce his ideas is always the kind of man whose ideas are idiotic” H.L.Mencken

    “Regards” onebornfree

    • Replies: @animalogic
  3. Thomm says:

    Since the creation of the Federal Reserve, the US dollar has lost over 96 percent of its value.

    This type of statement is very misleading and ignorant.

    All major advanced-economy currencies have traded in a narrow band relative to each other for many decades.

    Plus, mortgages, which I am sure Ron Paul thinks are a backbone of American prosperity, could not exist without at least some inflation, as a mortgage is just a leveraged bet on inflation.

  4. @onebornfree

    Hey, great quote — taken at its word it’s a call for utter anarchy …but, I’m sure you knew that?

    • Replies: @Curmudgeon
  5. Svevlad says:

    Wouldn’t last long, the actual solution requires a purge of basically every american politician and the entire financial elite, then nationalize the central bank, in order for the people to have full control of it.

    Invisible hand won’t fix it, being the sum of all decisions made by market participants, and market participants are people, and people are extremely fallible, it would result in just another scummy layer rising and repeating the same shit again, and the size and complexity of modern economies makes the entire thing even less reliable (though free market is much better for small markets and environments, as people know each other better in them, therefore the freedom of the market should be inversely proportional to it’s size)

  6. @Thomm

    Yeah, what did an iPhone cost in 1913’s dollars compared to today’s dollars? These claims about the loss of the dollar’s “value” ignore the fact that our dollars today can buy goods which didn’t even exist as ideas a century ago. For example, the richest man in 1913 couldn’t have bought with his entire fortune a month’s prescription for effective drugs to lower his blood pressure and extend his healthy life that we can buy today for literally pocket change.

    Our standard of living doesn’t depend on what one dollar can buy. It depends on what all of the dollars can buy.

    • Agree: Thomm
    • Replies: @Jim A.
    , @Achmed E. Newman
  7. @animalogic

    Thanks. Ironically, most people do not know that part the socialist political spectrum was termed the anarchists. Co-operatives but no government.
    In another vein, the US Congress is supposed to produce gold and silver coinage as currency. Does gold and silver currency qualify as the founders and Ron Paul being “The kind of man who wants the government to adopt and enforce his ideas is always the kind of man whose ideas are idiotic”?

    • Replies: @animalogic
  8. I’ve never quite understood the role of the Fed. Does it create money out of thin air, “lend” that money to our government, and then charge interest on that “loan”? That this interest is part of our national debt that we the people owe and must pay? This is what I’ve heard. Is it true? If it’s true, it’s beyond outrageous.

    • Replies: @Achmed E. Newman
  9. Jim A. says:
    @advancedatheist

    Yes there are a lot of gadgets in the landfill economy we have now that did not exist in 1913.

    Perhaps a better comparison would be pulling up a circa 1910 Sears & Roebuck catalog (the Amazon of it’s time) and checking on prices for everyday consumer goods relative to the price of an ounce of gold, then and now.

    I saw such a comparison back when gold was maybe $300. What hard money could buy back then versus what a Federal Reserve Note can buy in the modern era was an eye opener for me.

    • Agree: Achmed E. Newman
    • Replies: @advancedatheist
    , @MarkinLA
  10. @Jim A.

    Gold simply doesn’t work in the modern world. You can’t “wire gold” across the planet. And how would you bring “hard money” with you when you travel by air? You’d have to lug your sacks of gold coins with you as your carry-on luggage, because you wouldn’t trust the baggage handlers to respect your property rights.

    Fiat money, by contrast, doesn’t suffer from these advantages because it exists as an idea in the mind. You’d think Objectivists and adjacent hard-money cranks would see fiat money as an achievement of the human mind that has greatly benefited the economy.

    • Replies: @Thomm
    , @Showmethereal
    , @d dan
  11. Thomm says:
    @advancedatheist

    You’d have to lug your sacks of gold coins with you as your carry-on luggage, because you wouldn’t trust the baggage handlers to respect your property rights.

    That is another thing the Ron Paul nuts don’t get.

    It is easy to look up old prices, and old wages. Suffice it to say that ball point pens, (incandescent) light bulbs, TVs, and even basic articles of clothing were MUCH more expensive 50 years ago, in relation to the average hourly wage.

  12. MarkinLA says:
    @Jim A.

    The only real valid calculation is how many man-hours of work by a typical middle class person does it take to buy it. Gold has swung up and down like any commodity, the price of refrigerators is more stable than gold. I doubt anybody is calling for the US to go on the refrigerator standard.

    There isn’t enough gold to have a true gold standard where every dollar out there is backed by gold. How would that even work in an era of mass production where everything you can think of is produced in quantities hundreds of time faster than the increase in gold production.

    • Agree: Ian Smith
    • Replies: @Achmed E. Newman
  13. @Curmudgeon

    Interesting idea:
    “the US Congress is supposed to produce gold and silver coinage as currency.”
    Given the volatility of gold, & it’s general desirability, I wonder whether gold could function as a currency in terms of “means of exchange”. (it’s primary use would be “store of value”, I guess) Perhaps silver might be better adapted as an every day currency.

  14. A Texan says:

    So how we do benefit from a central bank that continuously destroys the purchasing power of money? It’s true we can buy many more and better consumers goods than 1913.

    Regardless of whether a money system is backed by a commodity, why is it good that a purchasing power of that money depreciates over time? How does this help the working class?

    Also, if gold is so stupid, why do many central banks across the world buy and hold it and collateralize in some of their operations?

    • Agree: Achmed E. Newman
    • Replies: @MarkinLA
  15. “All those who support liberty, peace, and prosperity should join the effort to audit and end the Fed.”

    HOW????????????????????

  16. MarkinLA says:
    @A Texan

    They also hold reserves in US dollars and short term US debt instruments. In the old days when a trade imbalance happened one country sent it’s foreign currency overseas and the other country sent it’s gold back. More money is tranferred electronically in one hour than all the gold reserves in the world. There is no way gold is any kind of reserve today, it is just a relic of the past.

    You could have a gold standard before large scale industrialization because most tradable products were agriculturally based and quickly consumed.

    The Fed is not “destroying” the value of the dollar. If every dollar was backed by gold then without an increase in the gold reserves, no more money can be printed. How does the economy function when increased production of goods and services is not accompanied by an increase in money? Does that mean wages and prices have to go down?

    If you print more money anyway then you have the same issue as we had when Nixon took us off the gold standard. Americans went to Europe on vacation and spent dollars. Some also bought European luxury goods. The Europeans decided rather than buy US goods they wanted the gold. Under the gold standard Nixon was obligated to empty Fort Knox.

    • Replies: @d dan
  17. Federal Reserve and fiat money
    Fuel the fakest boom in history.
    Infantile kings and queens make babbling sounds,
    Blow bubbles, buy war like killer clowns.

  18. It is completely nonsensical from an overall economic sense to keep interest rates so low for so long. But politicians have to win elections. They are better off having comminity groups lend money at no interest for people to do things like buy houses and cars. That will makemthe markets more “honest”… But that is not the priority.

  19. @advancedatheist

    Huh??? Gold can be traded all the time electronically without the gold actually moving. I do it… But any way China and Russia have both been buying huge amoints of gold. Its not because their money is completely backed by it – but gold is a tangible asset. They and other countries are beginning to push into crypto currency to break the strangle hold of the US dollar. But they will still buy gold. Tangible assets are always good to have.

    • Agree: Achmed E. Newman
    • Replies: @MarkinLA
  20. MarkinLA says:
    @Showmethereal

    Gold can be traded all the time electronically without the gold actually moving. I do it…

    If you are talking about the COMEX, gold isn’t really being traded. People are speculating on the rise and fall in the price of gold. People close out their positions and take the paper losses or gains. Very few people actually take delivery and then real gold has to be shipped to the end user or stored in a COMEX approved vault. Remember the Hunts and some Saudi buddies were able to use the fact that so many people who trade didn’t really have any silver to squeeze the market. Only intervention by the government limiting the number of contracts somebody could have screwed them.

  21. d dan says:
    @advancedatheist

    “You’d think Objectivists and adjacent hard-money cranks would see fiat money as an achievement of the human mind that has greatly benefited the economy.”

    It benefits the economy and humans being only if the guardian of the fiat money is honest and has integrity.

    The invention of nuclear energy greatly benefits the world too, but in the hand of wrong persons (e.g. terrorists), you know what happen. In my opinion, the current guardian and caretaker of US dollar is closer to being a terrorist than an angel.

  22. d dan says:
    @MarkinLA

    “More money is tranferred electronically in one hour than all the gold reserves in the world. There is no way gold is any kind of reserve today, it is just a relic of the past.”

    That does not necessarily mean either way – it could mean that the gold price is way too low.

    “The Fed is not “destroying” the value of the dollar. “

    Whenever the Fed creates more money than the net gain of the economic output of the country, it is destroying the value of the dollar. Yes, there are demands from foreigners for the extra dollars, but those debts are simply future claims to our assets and output. So, in the long terms, the value of the dollar is being destroyed.

    • Replies: @MarkinLA
    , @MarkinLA
  23. MarkinLA says:
    @d dan

    Whenever the Fed creates more money than the net gain of the economic output of the country, it is destroying the value of the dollar.

    Maybe, but who knows what the net gain of the economic output really is? It sure isn’t the amount of gold pulled out of the ground.

    • Replies: @d dan
  24. MarkinLA says:
    @d dan

    That does not necessarily mean either way – it could mean that the gold price is way too low.

    You know how many times I’ve heard that from goldbugs: Gold is being artificially held down and should be 100 trillion dollars an ounce.

    Gold is just a commodity and like all such things has a cost of production and a profit. The idea that there is some extra “intrinsic” value beyond its industrial use (which is actually very little) is just more nonsense from the goldbugs.

    • Replies: @Achmed E. Newman
  25. d dan says:
    @MarkinLA

    “Maybe, but who knows what the net gain of the economic output really is? “

    Of course, we do. Don’t we have mountain of economic data to measure economic output? Pick any reasonable approximation of GDP growth or whatever, you can almost certainly conclude that the Fed printed more money than the economic value we created. Hence the Fed is constantly destroying the value of dollar.

    “It sure isn’t the amount of gold pulled out of the ground.”

    Of course, it isn’t. If anything, the value of the gold pulled out is so small comparing to the economic output, an indication that the price of gold should rise when people start to lose confidence of the fiat money.

    “The idea that there is some extra “intrinsic” value beyond its industrial use (which is actually very little) is just more nonsense from the goldbugs.”

    I am not a goldbug (I don’t own physical gold), but I believe its value is as nonsensical as the intrinsic value of the dollar, Euro, Yen, bitcoin or whatever – which essentially means everything is subjective.

    One advantage that physical gold has, however, is that it is not subjected to arbitrary “printing” by small groups of arrogant economists and power elites.

    • Replies: @MarkinLA
  26. MarkinLA says:
    @d dan

    Of course, we do. Don’t we have mountain of economic data to measure economic output? Pick any reasonable approximation of GDP growth or whatever, you can almost certainly conclude that the Fed printed more money than the economic value we created. Hence the Fed is constantly destroying the value of dollar.

    When somebody buys a Chinese made TV is there an increase in GDP? I think there are other similar problems with GDP. Freidman (who said a lot of stupid things) said put the money supply on autopilot and increase it by X% each year. This is probably a better idea than tying it to an easily manipulated number.

    • Replies: @d dan
  27. d dan says:
    @MarkinLA

    “When somebody buys a Chinese made TV is there an increase in GDP? I think there are other similar problems with GDP. “

    Then subtract import from GDP, or whatever way you want to dissect those data. I am not advocating any particular policy, but simply asserting that The Fed has been destroying the value of dollar.

  28. @Thomm

    There is so little understanding here of the concepts Ron Paul has tried to explain for years, that:

    a) I’m late to this thread and will run into The Other Ron’s comment limits.

    b) I now see how Dr. Paul had no chance of winning a major election, as even the fairly astute commenters here don’t get half of what he explains.

    Thomm:

    Plus, mortgages, which I am sure Ron Paul thinks are a backbone of American prosperity, could not exist without at least some inflation, as a mortgage is just a leveraged bet on inflation.

    WRONG! Just WRONG! Loan interest may be higher to account for inflation, but interest rates are not about inflation to begin with. If you’d thought hard about one of the 1st lines in the post, “interest rates are the price of money”, you might understand. Money has a time value. $200,000 obtained now, to buy a house or whatever, is worth a whole lot more than the $200,000 one might save over 5 years to get it 5 years from now, even with inflation at 0.

    Whoever that money came from could have used that $200,000 for some money-making project, whether a retail store, part of a manufacturing concern, whatever, OR lent it to someone else doing that for, again, some interest. Real interest is the price of having money to use that you can pay back later (say, after you’ve used it wisely to make plenty back for the pay-back).

    What Dr. Paul means by the malinvestment is that an artificial lowering of the price (that is, the interest rate) will have people using the money for stuff that would not pay off in a market with the price of money (interest) free to float to a natural level.

    Take an example with any other price: Let’s say government controls the price of curry powder – this is for you, Thomm ;-} – they’ve got it set at 1/2 the cost it takes to produce, via government production of it, using taxpayer’s money of course. .Indian restaurants will switch to more curry dishes, and the food made with competing spices will be priced higher. The non-government curry-makers will be priced out of that business and will need to do risky moves like make other spices that may or may not sell well depending on the economy.

    The curry is like loaned money, the price of it like interest, and the food dishes like investments that are made. The government production is like the FED creation of money. .Indian spice manufacturers will have to make risky moves to stay in business, just as savers will have to put money into the much-more-risky stock market instead of CDs to get value (time value) out of their savings.

    The .Indian-cuisine customer who gets the runs from eating too much curry will suffer, just as will the saver who is forced to put money in the stock market.

    Hey, it’s all I got on short notice (this example). Hey, until 15 years ago, I too thought that interest should match the inflation rate. That’s not at all what interest is about.

  29. @MarkinLA

    ERROR # 2. Gold does not swing around in price, if you get your mind right and understand that it is much more an example of real money than those green pieces of paper or bits in the $ field of a database. An ounce of gold is an ounce of gold, whether it will buy 1470 of those little green pieces with (poor, abused) George Washington on them today or only 900 of them tomorrow.

    Toilet paper goes up and down with respect to gold too, but it’s much more absorptive than those green rags. The thing is, those green rags can be made more cheaply than they are supposedly worth, while it takes just a little less (for some profit) money to extract gold out of the rock than it’s worth in goods. If that weren’t the case, were it more cheap to extract, more gold would get extracted, and were it not to pay off, mines would shut down, and the value in goods of gold would go up until it becomes worth it to extract again.

    In the meantime, the FED just keeps pumping – “pump, pump”, says Trump, “I don’t want to be the one standing in the game of musical chairs when the music stops!”

    I also don’t get your statement, Mark, that because other quantities are produced faster than gold, gold can’t be money (?) Do you mean these other goods can be produced more and more cheaply? That’s an increase in productivity (assuming it’s not ALL Cheap China-made Crap.) There’s nothing wrong with that.

    Lastly, the idea that because an ounce of gold buys what 1,400-odd $ buys, it can’t be transferred via wire, or used for purchases has been refuted by others here. BTW, you know there are 0.1 oz coins, right?

    • Replies: @MarkinLA
  30. @advancedatheist

    You’re confusing advances in technology with the subject at hand, AA. In the 19th century, there were plenty of big improvements in quality of life, just as there were in the 20th. The difference, economic-wise was that, well, a picture is worth a 1,000 words and 3-comment/hr. limit here, so I’ll paste it here in a minute.

    Inflation results in the stealing of portions of men’s lives, when it comes down to it. WHAT!? Yeah, that sounds ludicrous and hyperbolic, so let me explain. Unless you LUV LUV LUV your job so much that you’d do it for free or pay people to do it, you really would rather be doing other things, wouldn’t you? The time you spend working results in not just the keeping up with food and shelter, but some savings that is all you have left from your hours of labor. Think of that savings as a measurement of a portion of your life.

    Inflation steadily lowers the value of your labor already accomplished, as it reduces the purchasing power of your savings. As Ron Paul said, you’d have 4 measly cents left of purchasing power from a dollar saved 100 years back. OK, I know, you aren’t over 100 years old, but what if your granddaddy had wanted a good life for you? 30 years of work on the plow, fixing fences, banging a pick around in a nasty coal mine, whatever he did, has come to almost nothing for you. His life of labor has been mostly stolen. That’s what inflation does.

    Now, let’s look at the effect of the FED on the stealing of portions of men’s lives in graphical form. This is from Peak Stupidity’s 2nd of 2 posts on inflation/interest (Part 1 and Part 2).

  31. @Fool's Paradise

    I won’t try to explain the inner shenanigans, F.P., that I don’t understand, which is the back-and-forth between the FED and the US Treasury Dept. I imagine Dr. Paul could quite well, but if you* think his posts (and 2012 campaign speeches) were boring, just imagine if he did try …

    I think the way you put it is basically the case. The national debt is held by the lenders in the form of Treasury bonds. You may not think you have any (or actually don’t), but they could be held by market funds, pension funds, other bonds of various types, and then there are the holders around the world.

    Not to get into another China-good/China-bad argument here, but honestly, were a big portion of this debt held by China as one big “note”, so to speak, I’d be quite in favor of saying “Hey, listen, you fucked up – you trusted us. We did save your asses from the Japanese, if you recall, so let’s call it even. I know you won’t make this mistake again.” But no, these bonds are fungible, just like the US dollar itself. You can’t default on just certain ones, or they all become worthless. Additionally, the Chinese only own $1,500,000,000,000 of ’em, is what I’d read, so that’s less than 10%.

    Yes, it’s beyond outrageous. Let me put it this way. Take the ~ 100,000,000 million ACTUAL taxpaying families (I mean, that not just file, but actually pay in money, and YES, I’m taking that number out my ass – gonna be good +/- 25% I’d bet.) Divide that $23,000,000,000,000 by 100,000,000 and you get $200,000 owed per taxpaying household – I rounded to show that I don’t have that much precision in my numbers. Whoa! How can that possibly be paid back? What family or single individual can pay 10,000 bucks extra for the next 20 years. What would that do to the economy, since the money wouldn’t be spent elsewhere?

    .

    * Not “you” particularly, F.P., but the average American who does not understand the most simple concepts (price of money, theft via inflation, etc.)

    • Replies: @Fool's Paradise
  32. MarkinLA says:
    @Achmed E. Newman

    ERROR # 2. Gold does not swing around in price, if you get your mind right and understand that it is much more an example of real money than those green pieces of paper or bits in the $ field of a database. An ounce of gold is an ounce of gold, whether it will buy 1470 of those little green pieces with (poor, abused) George Washington on them today or only 900 of them tomorrow.

    It is a case of realtivity. If gold doesn’t fluctuate than neither does any other commodity.

    Lastly, the idea that because an ounce of gold buys what 1,400-odd $ buys, it can’t be transferred via wire, or used for purchases has been refuted by others here. BTW, you know there are 0.1 oz coins, right?

    You mean like all those other scams where you send them your money or gold and they store it for you and give you a piece of paper telling you how much gold you “own” – well at least until they finalize their escape plans. There isn’t an intelligent gold bug alive who recommends anything other than holding gold in its physical form. As for coins there are also gold and silver coins from a by-gone era that contain even less than 1/10 of an ounce, it is still a physical exchange.

    As for pretending the commodity exchanges are really about transferring gold, how many contracts are opened where the writer does not own any gold and how many are purchased by people who never intend to take delivery compared to real producers and consumers, probably 100 to 1.

  33. @MarkinLA

    The idea that there is some extra “intrinsic” value beyond its industrial use (which is actually very little) is just more nonsense from the goldbugs.

    You are sort of right, there, Mark. The fact that gold does not have that much intrinsic value as a material, other than some esoteric uses as a good heat-transfer material or good reflector of radiation (in spacecraft, etc.) is helpful for gold being good money.

    If it had more industrial uses, it would have more of a real price, which could go up and down a lot depending on how those industrial uses are fairing in the economy. It doesn’t, and it doesn’t corrode, and it is easily divisible, and you can’t make more of it*, and it is able to be faked, but there are plenty of good tests for this. This all makes it intrinsically valuable after all, but just for one thing – MONEY. You may naysay anyone quoting from the Bible, but you know that any money talked about in it is made of gold or silver. Do you think these people were all stupid? They may have been onto something that we’ve forgotten. Either way, gold and silver go way way back.

    BTW, no I don’t think gold and silver can really be held down, either – maybe those paper certificates from the Comex can, but who cares? It’s more just more paper.

    .

    * Maybe in micrograms is some nuclear reaction, but believe me, it wouldn’t pay. If this situation changed, well, gold would then not be as good as money anymore.

  34. @Achmed E. Newman

    Thank you, A.E. Newman, for this explanation, of which I understood maybe half. I understand regular English pretty well, but economic-English is hard for me. But I’ve done a little research on my own. Apparently our Federal Reserve (not Federal, no reserves) was voted into being in 1913 by a corrupt and bribed Congress (some things never change!), and, instead of Congress creating debt-free money and establishing its value, as the Constitution orders it to do, the Fed does the opposite, creates money with debt. The Fed is called a “central bank”. The bank ours is modeled on is the Bank of England, started in 1500 something (I forget the date) by William Paterson, who bragged, “this bank hath benefit of interest on all moneys which it creates out of nothing”. Benefit of interest! Out of nothing! Historians (some) say that our American Revolution was fought for the right to have our own debt-free money, instead of the Bank of England’s. Hamilton wanted a Central Bank, Thomas Jefferson opposed it, but the Central Bankers never gave up, kept bribing Congress, finally got it going again, only to have it killed by Andrew Jackson, only to have it installed for good in 1913.

    Anyway, my question remains the same, and if you answered it and I didn’t get it, I apologize. Is it true that the Fed creates (prints) money out of nothing, then “lends” that “money” to our government, charging interest on it which we must pay?

    Thanks again.

    • Replies: @Achmed E. Newman
    , @d dan
  35. @MarkinLA

    I wrote my last post about the time you were publishing this one, Mark. Exactly, if it’s not in physical form, as your store of wealth, I’d agree, it’s not any better than any other paper “money”. As far as an exchange goes, it all depends on whether there are banks one can trust. (I don’t have one, I’ll tell you that.)

    There’s no reason a trusted bank cannot hold gold in vaults and issue paper or secure electronic bits to represent it. The problem comes in when these banks create this paper and electronic bits with no gold to back it. In a free market, any bank doing this would have a rush on the real money in the vaults and go quickly out of business. That’s in the past now. Fractional reserve banking, in which un-backed currency is loaned, the FED being the biggest example, destroys the system.

    The biggest example of this destruction is at the US Feral Gov’t level. It was the case years ago that the US dollar was redeemable in gold, earlier ~ 20 bucks for an oz, and $35 after FDR tried to confiscate all the gold in the 1930s. The point was, if the government (or FED) created more money, one could turn in these FED NOTES for gold. This would keep them honest. Your example of what Richard Nixon did in 1971(?) was a good example. The French were fed up with having the dollars they held devalued by money creation and wanted to cash out. Nixon put the kibosh on that, and anything went, as far as money-printing, after that.

    Inflation got pretty bad from the early ’70s through early ’80s. It only got reasonable (but never stopped the stealing) again after Carter-appointed FED chairman Volcker sent interest rates to the moon. Nobody can do that now – the Federal budget would be completely busted. (I don’t mean the debt, but the cash flow – interest would be over 1/2 the budget expenditures if the rates went to 10%.)

  36. @Fool's Paradise

    Haha! You’re pretty much right that I went off on a couple of tangents, but didn’t really answer – other than I think you’ve got the idea of what happens. There are smaller details I’ve read that make my eyes glaze over.

    On the interest, it’s a low amount, which is what keeps interest rates down. Why borrow for more, if you (the bank) can borrow some of this cheap money off the FED. Same if you are the Feral Gov’t – you can borrow at those LOW, LOW rates too! No, we must not pay it back, because “we” CAN’T. That was one of my tangents – the $23,000,000,000,000 can’t be paid back other than with a bout of hyperinflation. That’ll make that $23,000,000,000,000 the same as a price of a Happy Meal. I’ll forgo one Happy Meal to help out the US. of A!

  37. d dan says:
    @Fool's Paradise

    ” Is it true that the Fed creates (prints) money out of nothing…”

    Yes.

    “…then “lends” that “money” to our government,…”

    During QE time, the Fed buys government debt, so the answer is “yes”.
    During non-QE time, the Fed lends the money to the banks, which may or may not use the money to buy government debt. So the answer is “no”, or at least “not directly”.

    “…charging interest on it which we must pay?”

    If the government debt is held by private (domestic or foreign) parties, we as taxpayers obviously have to pay the interest to them. If it is held by the Fed (as they bought during the QE), the interest will be returned by the Fed to the Treasury (i.e. the government).

    • Replies: @Fool's Paradise
  38. @d dan

    Thank you A. E. Newman and d dan. So Ron Paul wants to audit this bank that controls our money, but the bank won’t allow it! An Act of Congress created it, another Act could end it, but Congress is as full of bribed whores today as it was in 1913.

    • Replies: @Achmed E. Newman
  39. @Fool's Paradise

    Congress is much fuller of bribed whores today than in 1913. That’s why back then, they had to pass this evil during Christmas time, after scheming about it on Jekyll Island. Nowadays, all the stupidity is right out in the open for us to see. I’m glad I could help, if only a little bit.

    • Agree: Showmethereal
  40. Thank you, you did help shed light on this subject which affects every American, but I doubt that more than 1 in 100 Americans know what the fed is or does. Doing a little more research, I discovered that the great American poet Ezra Pound, (read his Canto XLV, on Usury) when he was committed to an insane asylum for making speeches in Italy trying to stop Roosevelt’s war, was visited by a young admirer named Eustace Mullins. Pound held up a dollar bill that said FEDERAL RESERVE NOTE and asked Mullins what he knew about the Fed. Well, Mullins knew nothing. Pound encouraged him to do some research into the subject. Mullins did, and after a few years produced a book, Secrets of the Federal Reserve, which tells how and by whom it was organized, and why. I will see if my local bookstore has a copy, and if not order it from Amazon.

  41. @MarkinLA

    Not really sure what you continue arguing about. Not all commodities are the same. Gold is not the same as a soybean or even lithium or oil. Gold has been recognized for thousands of years for a reason. Some God given things will indeed outlast nations and civilizations. Currency has been around for many many centuries too. The Chinese invented it and then it went on throughout the world. Gold wasnt always its backer… BUT gold has ALWAYS been an acceptable form of tangible asset and has always been a safe haven. Again I repeat – even as the BRIC nations are moving more and more to push aside the US dollar in their trade with each other and are beginning to push hard into cryptocurrency they STILL are stockpiling gold. Money aupply is indeed more complex now than 100 years ago — but your money system cannot be backed up just by thin air – nor micro circuits.
    When the west began trying to strangle Maduro and takeover Venezuela – onw of the first things it did was stop him from having access to the gold in Europe.

Current Commenter
says:

Leave a Reply - Comments on articles more than two weeks old will be judged much more strictly on quality and tone


 Remember My InformationWhy?
 Email Replies to my Comment
Submitted comments become the property of The Unz Review and may be republished elsewhere at the sole discretion of the latter
Subscribe to This Comment Thread via RSS Subscribe to All Ron Paul Comments via RSS