I was very pleased that the Financial Services Committee held a hearing on the Federal Reserve Transparency Act, HR 1207. The bill has 295 cosponsors and there is also strong support for the companion bill in the Senate. This hearing was a major step forward in getting the bill passed.
I was pleased that the hearing was well-attended, especially considering that it was held on a Friday at nine o’clock in the morning! I have been talking about the immense, unchecked power of the Federal Reserve for many years, while the attention of Congress was always on other things. It was gratifying to see my colleagues asking probing questions and demonstrating genuine concern about this important issue as well.
The witness testifying in favor of HR 1207 made some very strong points, which was no surprise considering the bill is simply common sense. It was also no surprise that the witness testifying against the bill had no good arguments as to why a full audit should not be conducted promptly. He attempted to make the case that the fed is already sufficiently accountable to Congress and that the current auditing policy is adequate. The fact is that the Fed comes to Congress and talks about only what it wants to talk about, and the GAO audits only what the current laws allow to be audited. The really important things however, are off limits. There are no convincing arguments that it is in the best interests of the American people for anything the Fed does to be off limits.
It has been argued that full disclosure of details of funding facilities like TALF and PDCF that enabled massive bailouts of Wall Street would damage the financial position of those firms and destabilize the economy. In other words, if the American people knew how rotten the books were at those banks and how terribly they messed up, they would never willingly invest in them, and they would fail. Failure is not an option for friends of the Fed. Therefore, the funds must be stolen from the people in the dark of night. This is not how a free country works. This is not how free markets work. That is crony corporatism and instead of being a force for economic stabilization, it totally undermines it.
If the Fed gave its actual arguments against a full audit, they would not have mentioned anything about political independence or economic stability. Instead they would admit they don’t want to be audited because they enjoy their current situation too much. Under the guise of currency control, they are able to help out powerful allies on Wall Street, in exchange for lucrative jobs or who-knows-what favors later on. An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore.
Monday
HELP ME END THE FED
What unprecedented anti-Fed days these have been! We had our Audit the Fed Congressional hearing, in which the central bank – for the first time in 96 years – was put on the defensive. End the Fed was chosen as a Main Selection of the Conservative Book Club; this book, the first anti-central banking bestseller in American history, debuted at #2 on Amazon.com and #6 on the New York Times and Wall Street Journal bestseller lists.
End The Fed – which the Mises Institute's Lew Rockwell calls “readable and persuasive beyond belief” – can climb up the NYT and WSJ lists week by week, eventually reaching #1, if you help me. Please, buy a copy. Buy one for a friend or family member. Spread the word. One businessman bought copies for all his 23 employees. Others have given them to students, a favorite use of mine.
By the way, the royalties go to my educational FREE Foundation, to carry on the fight among young people and all Americans.
Since 1913, the Fed has had it all its own way: booms and busts, dollar depreciation, redistribution to the government and the big banks from the middle and working classes. But just as Andrew Jackson abolished the predecessor of the Fed, we too can knock over this dangerous institution. End The Fed teaches all the fascinating history, and tells us what we can do for the future. It gives the constitutional, economic, moral, and libertarian arguments against what Jackson called "the Monster."
Ever seen the Fed’s marble palace in Washington, DC, on Constitution Avenue (of all streets!)? That bunch sure knows how to live. I’ve long had a dream of being the auctioneer when the Fed is sold off for private offices, or maybe a Museum of Sound Money! Help me dull its scissors and then break them, so the Fed can’t cut down our dollar’s value. Indeed, I believe that people ought to be ashamed to work at such a place; an institution that has done so much damage to American prosperity and freedom, as well as to the freedom and prosperity of the whole world. For example, I want no more bowing and scraping to the Fed chairman when he goes to Capitol Hill to peddle his nonsense. He is just a bureaucrat, albeit a disastrous one.
Together, you and I can change things. Indeed, we must. Buy End The Fed. Get copies for those you love. Certainly get copies for those who disagree with us. For all our futures, nothing is as important as cutting the Fed down to size. Join me: let’s End the Fed.
End The Fed – which the Mises Institute's Lew Rockwell calls “readable and persuasive beyond belief” – can climb up the NYT and WSJ lists week by week, eventually reaching #1, if you help me. Please, buy a copy. Buy one for a friend or family member. Spread the word. One businessman bought copies for all his 23 employees. Others have given them to students, a favorite use of mine.
By the way, the royalties go to my educational FREE Foundation, to carry on the fight among young people and all Americans.
Since 1913, the Fed has had it all its own way: booms and busts, dollar depreciation, redistribution to the government and the big banks from the middle and working classes. But just as Andrew Jackson abolished the predecessor of the Fed, we too can knock over this dangerous institution. End The Fed teaches all the fascinating history, and tells us what we can do for the future. It gives the constitutional, economic, moral, and libertarian arguments against what Jackson called "the Monster."
Ever seen the Fed’s marble palace in Washington, DC, on Constitution Avenue (of all streets!)? That bunch sure knows how to live. I’ve long had a dream of being the auctioneer when the Fed is sold off for private offices, or maybe a Museum of Sound Money! Help me dull its scissors and then break them, so the Fed can’t cut down our dollar’s value. Indeed, I believe that people ought to be ashamed to work at such a place; an institution that has done so much damage to American prosperity and freedom, as well as to the freedom and prosperity of the whole world. For example, I want no more bowing and scraping to the Fed chairman when he goes to Capitol Hill to peddle his nonsense. He is just a bureaucrat, albeit a disastrous one.
Together, you and I can change things. Indeed, we must. Buy End The Fed. Get copies for those you love. Certainly get copies for those who disagree with us. For all our futures, nothing is as important as cutting the Fed down to size. Join me: let’s End the Fed.
Sunday
WHAT I THINK......JONATHON ALLEN
Long before he danced with the stars, then-House Majority Leader Tom DeLay two-stepped all over fellow Texas Rep. Ron Paul's hopes of overseeing the Federal Reserve, according to an account provided by House Financial Services Committee Chairman Barney Frank .
In a broader interview with my colleagues Phil Mattingly and Benton Ives, Frank offered this assessment of how DeLay and other GOP leaders tiptoed around giving Paul -- who wants to abolish the Fed -- the gavel of the subcommittee with jurisdiction over it:
"In 2003, Ron Paul was in line to be chairman of the Domestic Monetary Policy Subcommittee of this committee. Specifically and solely to frustrate Ron from being the chairman, they merged the Subcommittee on Domestic Monetary Policy with the Subcommittee on International Monetary Policy. Ron Paul then complained to Tom DeLay, and Tom DeLay told [then-Chairman Mike] Oxley [R-Ohio] 'Don't change it' ... [T]wo years later, even though they merged the two subcommittees in the progression, Ron was then again ready to be chairman, this time of the combined one. [Then-Rep. Deborah] Pryce [R-Ohio] was dragooned to come back and assert a subcommittee chairmanship ... Ron at that point said to me, 'I guess I have to wait for you to be chairman for me to have any authority around here.' The Republican Party was a staunch defender of the Fed against Ron Paul."
Paul and Frank share an interest in auditing the Fed, though neither Frank nor any other member of the House has signed onto Paul's bill to repeal the Federal Reserve Act.
The general outlines of Frank's account -- though not DeLay's hand -- were confirmed by Republican sources. Paul said he didn't recall DeLay's involvement, but he acknowledged Republican leaders didn't want him to have the subcommittee chairmanship.
"They just got rid of one" subcommittee, Paul said of the first time he was passed over. "They wouldn't have enjoyed me being chairman."
But Paul has a defender in the current top Republican on the Financial Services Committee, Rep. Spencer Bachus of Alabama, who appointed him to the leading spot on the subcommittee with Republicans in the minority.
"There are people who said 'Is this the best thing to do?' I felt like it was," Bachus said. "I'm glad I appointed him. I have no regret."
In a broader interview with my colleagues Phil Mattingly and Benton Ives, Frank offered this assessment of how DeLay and other GOP leaders tiptoed around giving Paul -- who wants to abolish the Fed -- the gavel of the subcommittee with jurisdiction over it:
"In 2003, Ron Paul was in line to be chairman of the Domestic Monetary Policy Subcommittee of this committee. Specifically and solely to frustrate Ron from being the chairman, they merged the Subcommittee on Domestic Monetary Policy with the Subcommittee on International Monetary Policy. Ron Paul then complained to Tom DeLay, and Tom DeLay told [then-Chairman Mike] Oxley [R-Ohio] 'Don't change it' ... [T]wo years later, even though they merged the two subcommittees in the progression, Ron was then again ready to be chairman, this time of the combined one. [Then-Rep. Deborah] Pryce [R-Ohio] was dragooned to come back and assert a subcommittee chairmanship ... Ron at that point said to me, 'I guess I have to wait for you to be chairman for me to have any authority around here.' The Republican Party was a staunch defender of the Fed against Ron Paul."
Paul and Frank share an interest in auditing the Fed, though neither Frank nor any other member of the House has signed onto Paul's bill to repeal the Federal Reserve Act.
The general outlines of Frank's account -- though not DeLay's hand -- were confirmed by Republican sources. Paul said he didn't recall DeLay's involvement, but he acknowledged Republican leaders didn't want him to have the subcommittee chairmanship.
"They just got rid of one" subcommittee, Paul said of the first time he was passed over. "They wouldn't have enjoyed me being chairman."
But Paul has a defender in the current top Republican on the Financial Services Committee, Rep. Spencer Bachus of Alabama, who appointed him to the leading spot on the subcommittee with Republicans in the minority.
"There are people who said 'Is this the best thing to do?' I felt like it was," Bachus said. "I'm glad I appointed him. I have no regret."
Wednesday
WHAT I THINK......DAN HANNAN
Ron Paul is an unusual phenomenon: a politician who always answers questions fully and honestly. This tendency often gets him into trouble: although people say they want straight-talking representatives, they often react with horror when they get one.
Dr Paul’s ruthless application of his convictions - minimal government, localism, personal freedom and adherence to the letter of the US Constitution - alienates many of the conservatives who might have been expected to back him.
For example, although he doesn’t agree with abortion - as a GP, he says, he delivered thousands of babies, and never came across a case where a termination was necessary for the mother’s physical or psychological well-being - he insists that abortion law ought not to be a federal prerogative and, during his 2008 presidential bid, resolutely refused to give the Pro-Lifers the assurances they wanted.
Similarly, when almost every conservative legislator, including a great many Democrats, supported a law to prevent gun-shops being sued for crimes committed with weapons they had sold legally, he voted against the measure on grounds that it represented a usurpation of jurisdiction from the 50 states
Many Republicans regarded his opposition to the Iraq war as almost treasonable. Although the issue is no longer the shibboleth it was - plenty of conservatives, knowing what they now know, wish that they had kept the trillion dollars to spend on something else - Ron Paul is still treated with suspicion.
Now I don’t always agree with the Texas Congressman. Indeed, I don’t agree with his absolutist non-interventionism. Although, like him, I opposed the invasion of Iraq, I’m glad the US intervened militarily against Nazism and Soviet expansionism, and I regard the alliance of free English-speaking nations as one of the happiest geo-political facts of our era.
None the less, no conservative should dismiss Ron Paul’s anti-war arguments without giving them proper consideration. Essentially, he believes that the US is wasting her strength through imperial overstretch. This observation would once have been a commonplace in the GOP. From the earliest days of their party through to Robert Taft in the 1950s, Republicans tended to view foreign policy adventurism as the enemy of personal freedom, dispersed power, small government and, indeed, the constitution itself. They understood that the founding fathers had counselled against imperialism precisely because they had feared the concentration of power. They grasped that there was an incompatibility, in Russell Kirk’s phrase, between an American Republic and an American Empire.
There is, of course, an alternative tradition in the GOP: the tradition of John McCain and his all-time hero, Teddy Roosevelt. Decent and honourable people disagree with Paul; but there is neither decency nor honour in implying that he is an al-Quaeda apologist, or a witless tool of the terrorists.
As you’d expect, Ron Paul has fanatical supporters, who make up in fervour and in high principle what they lack in numbers. They are called the Campaign for Liberty, and they comprise an extraordinary coalition, ranging from prim Republican matrons to dreadlocked peaceniks. The one thing they have in common is a dislike of state coercion.
I am in Philadelphia, addressing one of their regional conferences. While there are some odd types among them - including, alas, a couple of 9/11 conspiracy theorists - most of them are, like their hero, extraordinarily high-minded. They are less interested in winning office than in winning the battle of ideas. They see themselves, with some justice, as the true heirs of the Republic, keeping faith with the vision of the Founding Fathers and the promise of the Constitution.
In Ron Paul, they have found something the founders dreamed of: a citizen legislator, who takes his oath of office seriously, votes as his conscience directs, and cannot be bought. Sometimes, Dr Paul is eccentric. Occasionally he’s wrong. But, by Heaven, I’m glad he’s there.
Dr Paul’s ruthless application of his convictions - minimal government, localism, personal freedom and adherence to the letter of the US Constitution - alienates many of the conservatives who might have been expected to back him.
For example, although he doesn’t agree with abortion - as a GP, he says, he delivered thousands of babies, and never came across a case where a termination was necessary for the mother’s physical or psychological well-being - he insists that abortion law ought not to be a federal prerogative and, during his 2008 presidential bid, resolutely refused to give the Pro-Lifers the assurances they wanted.
Similarly, when almost every conservative legislator, including a great many Democrats, supported a law to prevent gun-shops being sued for crimes committed with weapons they had sold legally, he voted against the measure on grounds that it represented a usurpation of jurisdiction from the 50 states
Many Republicans regarded his opposition to the Iraq war as almost treasonable. Although the issue is no longer the shibboleth it was - plenty of conservatives, knowing what they now know, wish that they had kept the trillion dollars to spend on something else - Ron Paul is still treated with suspicion.
Now I don’t always agree with the Texas Congressman. Indeed, I don’t agree with his absolutist non-interventionism. Although, like him, I opposed the invasion of Iraq, I’m glad the US intervened militarily against Nazism and Soviet expansionism, and I regard the alliance of free English-speaking nations as one of the happiest geo-political facts of our era.
None the less, no conservative should dismiss Ron Paul’s anti-war arguments without giving them proper consideration. Essentially, he believes that the US is wasting her strength through imperial overstretch. This observation would once have been a commonplace in the GOP. From the earliest days of their party through to Robert Taft in the 1950s, Republicans tended to view foreign policy adventurism as the enemy of personal freedom, dispersed power, small government and, indeed, the constitution itself. They understood that the founding fathers had counselled against imperialism precisely because they had feared the concentration of power. They grasped that there was an incompatibility, in Russell Kirk’s phrase, between an American Republic and an American Empire.
There is, of course, an alternative tradition in the GOP: the tradition of John McCain and his all-time hero, Teddy Roosevelt. Decent and honourable people disagree with Paul; but there is neither decency nor honour in implying that he is an al-Quaeda apologist, or a witless tool of the terrorists.
As you’d expect, Ron Paul has fanatical supporters, who make up in fervour and in high principle what they lack in numbers. They are called the Campaign for Liberty, and they comprise an extraordinary coalition, ranging from prim Republican matrons to dreadlocked peaceniks. The one thing they have in common is a dislike of state coercion.
I am in Philadelphia, addressing one of their regional conferences. While there are some odd types among them - including, alas, a couple of 9/11 conspiracy theorists - most of them are, like their hero, extraordinarily high-minded. They are less interested in winning office than in winning the battle of ideas. They see themselves, with some justice, as the true heirs of the Republic, keeping faith with the vision of the Founding Fathers and the promise of the Constitution.
In Ron Paul, they have found something the founders dreamed of: a citizen legislator, who takes his oath of office seriously, votes as his conscience directs, and cannot be bought. Sometimes, Dr Paul is eccentric. Occasionally he’s wrong. But, by Heaven, I’m glad he’s there.
Tuesday
TRADE WARS AND PROTECTIONISM ARE NOT FREE TRADE
Two weeks ago, both the administration and the Fed announced with straight faces that the recession was over and the signs of economic recovery were clear. Then last week, the president made a stunning decision that signals the administration’s determination to repeat the mistakes of the Great Depression. Much like the Smoot-Hawley Tariffs that set off a global trade war and effectively doomed us to ten more years of economic misery, Obama’s decision to enact steep tariffs on Chinese imported tires could spark a trade war with the single most important trading partner we have. Not only does China manufacture a whole host of products that end up on American store shelves, they are also still buying our Treasury debt.
One has to wonder why this course of action is being undertaken if the administration really believes its own statements about economic recovery. Why are they still trying to fix something they have supposedly already fixed? The most troubling thing is the rhetoric about free trade given to justify this. The administration claims it is merely enforcing trade policies and that this is necessary for free trade. This sort of double speak demonstrates a gross misunderstanding of free trade, economics and world history. Yet these are the same people the country trusts to solve our problems. This sort of thing should remove all doubt about the credibility of the decision makers in Washington.
The truth is this will hurt American consumers by driving up prices of tires and cars. This will also complicate matters for our already crippled manufacturing and agricultural industries, if and when China retaliates against US made products. Whatever jobs might be saved in the tire and steel industries here as a result of this protectionist measure will likely be lost in other American industries. It is even doubtful that those jobs will be saved, as cheap tires can be obtained from other places like Mexico instead. It is difficult to see any real winners among all the losers where trade wars are concerned. If Unions think this is beneficial to them, they are being penny-wise and pound foolish.
Free trade with all and entangling alliances with none has always been the best policy in dealing with other countries on the world stage. This is the policy of friendship, freedom and non-interventionism and yet people wrongly attack this philosophy as isolationist. Nothing could be further from the truth. Isolationism is putting up protectionist trade barriers, starting trade wars imposing provocative sanctions and one day finding out we have no one left to buy our products. Isolationism is arming both sides of a conflict, only to discover that you’ve made two enemies instead of keeping two friends. Isolationism is trying to police the world but creating more resentment than gratitude. Isolationism is not understanding economics, or other cultures, but clumsily intervening anyway and creating major disasters out of minor problems.
The government should not be in the business of giving out favors to special interests or picking winners and losers in the market, yet this has been most of what has consumed politicians’ attention in Washington. It has reached a fevered pitch lately and it needs to end if we are ever to regain a functional and prosperous economy.
One has to wonder why this course of action is being undertaken if the administration really believes its own statements about economic recovery. Why are they still trying to fix something they have supposedly already fixed? The most troubling thing is the rhetoric about free trade given to justify this. The administration claims it is merely enforcing trade policies and that this is necessary for free trade. This sort of double speak demonstrates a gross misunderstanding of free trade, economics and world history. Yet these are the same people the country trusts to solve our problems. This sort of thing should remove all doubt about the credibility of the decision makers in Washington.
The truth is this will hurt American consumers by driving up prices of tires and cars. This will also complicate matters for our already crippled manufacturing and agricultural industries, if and when China retaliates against US made products. Whatever jobs might be saved in the tire and steel industries here as a result of this protectionist measure will likely be lost in other American industries. It is even doubtful that those jobs will be saved, as cheap tires can be obtained from other places like Mexico instead. It is difficult to see any real winners among all the losers where trade wars are concerned. If Unions think this is beneficial to them, they are being penny-wise and pound foolish.
Free trade with all and entangling alliances with none has always been the best policy in dealing with other countries on the world stage. This is the policy of friendship, freedom and non-interventionism and yet people wrongly attack this philosophy as isolationist. Nothing could be further from the truth. Isolationism is putting up protectionist trade barriers, starting trade wars imposing provocative sanctions and one day finding out we have no one left to buy our products. Isolationism is arming both sides of a conflict, only to discover that you’ve made two enemies instead of keeping two friends. Isolationism is trying to police the world but creating more resentment than gratitude. Isolationism is not understanding economics, or other cultures, but clumsily intervening anyway and creating major disasters out of minor problems.
The government should not be in the business of giving out favors to special interests or picking winners and losers in the market, yet this has been most of what has consumed politicians’ attention in Washington. It has reached a fevered pitch lately and it needs to end if we are ever to regain a functional and prosperous economy.
Thursday
INTERVIEW WITH THE WALL STREET JOURNAL
For three decades, Rep. Ron Paul has waged a lonely battle in Congress to abolish the Federal Reserve. But he has more foot soldiers across the nation today, particularly after the financial crisis, who are leading the drive for wider congressional audits of the central bank. (See today’s Journal story for more on their movement.
In his new book — “End the Fed” — released today, Rep. Paul walks through his critique of the central bank and lays out a strategy (briefly) for eliminating it. We sat down with the congressman to hear his views on a money system backed by gold, the Fed’s challenge of withdrawing its stimulus and his legislation to audit the central bank. Excerpts of the interview:
What would a world without the Fed look like?
You’d go back to the day that if you wanted to borrow money to build a house, somebody would’ve had to save some money. You wouldn’t have zero savings and all the credit in the world. That’s just a total distortion of capitalism. Capital comes from savings. The part you don’t use for everyday living which you have left over, you reinvest and you save or you loan it out. We were living with something absolutely bizarre that had nothing to do with capitalism. We had no savings whatsoever yet there was all the credit in the world.
So without the Fed, there wouldn’t be as much credit.
Yeah, it would be different. If you were selling me a car and the car was worth $10,000 and I didn’t want to pay cash, you could take credit from me. You’ve got to have something to measure it by. What is a dollar? We don’t even know what a dollar is. There’s no definition for a dollar. There’s never been a time in law that said a Federal Reserve note is a dollar. That’s the basic flaw. There’s no definition for money. We’ve built a worldwide economy on a measuring rod that varies every single day. That’s why it was fragile, and that’s why it collapsed. There was no soundness to it. So that’s why you have to have a stable unit of account.
If you live in a primitive society, you’d trade goods. And if you wanted to advance, then you would trade a universal good, which would be a coin. But we’ve become sophisticated and smart and say, ‘Oh, you don’t have to go through that. We’ll just print the money. And we’ll trust the government not to print too much, and distribute it fairly.’ That’s often just a total farce. People are realizing that it is.
Don’t you think the Fed has moderated the business cycle over the past century?
Yes, I think they did smooth things out. The market’s always demanding the correction of the malinvestment and the excessive debt. … Since Bretton Woods broke down, I think every recession has been moderated by the Fed. That’s why the trust kept being built. That’s all a negative. You have to get rid of the mistakes. Moderating it means that we have slowed up the correction. The fact that they have been successful is probably the worst part about it. They’re moderating the rapidity of the crash and the correction by holding the mistakes in place.
What if, years from now, we see that the Fed has returned its balance sheet to its old size and pulled that money back from the system? Would that not be a validation of its approach?
There has only been one time that I know of where they have done that significantly, to withdraw anything of significance. That was after the Civil War. They withdrew greenbacks to a degree, they quit printing greenbacks, and they balanced the budget. I don’t think you can find any other time in our history and probably the history of the world. Because it’s an addiction, and the withdrawal is always much more serious than the continuation. The immediate problem of continuing the inflation is always more acceptable than withdrawal symptoms. Politically there will be continued inflation until it self-destructs.
So you don’t think it’s possible to pull it off?
They might try a little bit. With a weak economy, they’ll say it’s better for the economy to have low interest rates. If we didn’t have a Federal Reserve today, interest rates might be market driven. A lot of people would go bankrupt, but it would benefit the people who save. Capitalism is supposed to benefit the people who save. Even though they’re cheating the people who save, they’re cheating those on fixed income and the elderly, they will not quit inflating. The pain will be too great. They’re smart enough to know? They weren’t smart enough to know when they printed. They created the bubble. All of a sudden they’re going to get smart enough to know when to withdraw this? There’s not one chance in a million that’s going to happen.
But if the Fed were to pull this off and return its balance sheet to a normal size, where would that leave you?
If they were able to shrink their assets by 50%, to a trillion dollars or so … I would say it would challenge a lot of people. But I think the economic laws are in place. It’s only going to be temporary. It’s not going to happen. The only way you could do that is what I’ve been advocating for these last several years. You’ve got to cut spending, you’ve got to balance the budget, you’ve got to stop fighting these wars, you’ve got to bring our troops home, you’ve got to quit expanding the welfare state here at home … But I just don’t think the conditions exist. In theory you could, but if you do that without shrinking the size of the government and shrinking the deficit, it will be disastrous. It won’t work.
How would an audit lead to ending the Fed?
It’s a stepping stone. I think what’s going to lead to the next step is the destruction of the dollar, just like economic events moved further ahead than my legislative process. I wasn’t getting anywhere. But the economic events demanded that we look into it. So even if this bill passes and we have more information and we’re talking about monetary policy reform, I don’t think that’s the way this system is going to be ended. I think it’ll be ended when it’s a total failure and then it’ll have to be replaced by something. It could be replaced with a more authoritarian government, a more socialistic government.
Do you think the Fed will be abolished during your career?
I always thought the day would come… This economy is going to get worse and this dollar is going to get a lot worse. It’ll take care of itself. My real goal is educating people to the nature of money so that when this system fails, that they’ll know what to do and not just say ‘Well, we need a better manager.’
In his new book — “End the Fed” — released today, Rep. Paul walks through his critique of the central bank and lays out a strategy (briefly) for eliminating it. We sat down with the congressman to hear his views on a money system backed by gold, the Fed’s challenge of withdrawing its stimulus and his legislation to audit the central bank. Excerpts of the interview:
What would a world without the Fed look like?
You’d go back to the day that if you wanted to borrow money to build a house, somebody would’ve had to save some money. You wouldn’t have zero savings and all the credit in the world. That’s just a total distortion of capitalism. Capital comes from savings. The part you don’t use for everyday living which you have left over, you reinvest and you save or you loan it out. We were living with something absolutely bizarre that had nothing to do with capitalism. We had no savings whatsoever yet there was all the credit in the world.
So without the Fed, there wouldn’t be as much credit.
Yeah, it would be different. If you were selling me a car and the car was worth $10,000 and I didn’t want to pay cash, you could take credit from me. You’ve got to have something to measure it by. What is a dollar? We don’t even know what a dollar is. There’s no definition for a dollar. There’s never been a time in law that said a Federal Reserve note is a dollar. That’s the basic flaw. There’s no definition for money. We’ve built a worldwide economy on a measuring rod that varies every single day. That’s why it was fragile, and that’s why it collapsed. There was no soundness to it. So that’s why you have to have a stable unit of account.
If you live in a primitive society, you’d trade goods. And if you wanted to advance, then you would trade a universal good, which would be a coin. But we’ve become sophisticated and smart and say, ‘Oh, you don’t have to go through that. We’ll just print the money. And we’ll trust the government not to print too much, and distribute it fairly.’ That’s often just a total farce. People are realizing that it is.
Don’t you think the Fed has moderated the business cycle over the past century?
Yes, I think they did smooth things out. The market’s always demanding the correction of the malinvestment and the excessive debt. … Since Bretton Woods broke down, I think every recession has been moderated by the Fed. That’s why the trust kept being built. That’s all a negative. You have to get rid of the mistakes. Moderating it means that we have slowed up the correction. The fact that they have been successful is probably the worst part about it. They’re moderating the rapidity of the crash and the correction by holding the mistakes in place.
What if, years from now, we see that the Fed has returned its balance sheet to its old size and pulled that money back from the system? Would that not be a validation of its approach?
There has only been one time that I know of where they have done that significantly, to withdraw anything of significance. That was after the Civil War. They withdrew greenbacks to a degree, they quit printing greenbacks, and they balanced the budget. I don’t think you can find any other time in our history and probably the history of the world. Because it’s an addiction, and the withdrawal is always much more serious than the continuation. The immediate problem of continuing the inflation is always more acceptable than withdrawal symptoms. Politically there will be continued inflation until it self-destructs.
So you don’t think it’s possible to pull it off?
They might try a little bit. With a weak economy, they’ll say it’s better for the economy to have low interest rates. If we didn’t have a Federal Reserve today, interest rates might be market driven. A lot of people would go bankrupt, but it would benefit the people who save. Capitalism is supposed to benefit the people who save. Even though they’re cheating the people who save, they’re cheating those on fixed income and the elderly, they will not quit inflating. The pain will be too great. They’re smart enough to know? They weren’t smart enough to know when they printed. They created the bubble. All of a sudden they’re going to get smart enough to know when to withdraw this? There’s not one chance in a million that’s going to happen.
But if the Fed were to pull this off and return its balance sheet to a normal size, where would that leave you?
If they were able to shrink their assets by 50%, to a trillion dollars or so … I would say it would challenge a lot of people. But I think the economic laws are in place. It’s only going to be temporary. It’s not going to happen. The only way you could do that is what I’ve been advocating for these last several years. You’ve got to cut spending, you’ve got to balance the budget, you’ve got to stop fighting these wars, you’ve got to bring our troops home, you’ve got to quit expanding the welfare state here at home … But I just don’t think the conditions exist. In theory you could, but if you do that without shrinking the size of the government and shrinking the deficit, it will be disastrous. It won’t work.
How would an audit lead to ending the Fed?
It’s a stepping stone. I think what’s going to lead to the next step is the destruction of the dollar, just like economic events moved further ahead than my legislative process. I wasn’t getting anywhere. But the economic events demanded that we look into it. So even if this bill passes and we have more information and we’re talking about monetary policy reform, I don’t think that’s the way this system is going to be ended. I think it’ll be ended when it’s a total failure and then it’ll have to be replaced by something. It could be replaced with a more authoritarian government, a more socialistic government.
Do you think the Fed will be abolished during your career?
I always thought the day would come… This economy is going to get worse and this dollar is going to get a lot worse. It’ll take care of itself. My real goal is educating people to the nature of money so that when this system fails, that they’ll know what to do and not just say ‘Well, we need a better manager.’
Wednesday
WHAT I THINK.....CHARLES SCALIGER
“The entire federal government,” laments Congressman Ron Paul in his newest book, End the Fed, “is one giant toxic asset at the moment. It certainly has no business telling the private sector how to run its affairs. It is in worse financial shape than all the companies in the private sector put together.”
Hard words, but Congressman Paul knows whereof he speaks. It was Ron Paul, unique among congressmen for his understanding of how a free-market economy is supposed to work, who warned repeatedly of the coming economic calamity. It was Ron Paul, too, who warned both the Bush and Obama administrations that attempts by the government to bail out failing corporations with taxpayer dollars and passing massive stimulus packages would only make things worse. And it has been Ron Paul who has warned of disastrous long-term consequences of the inflationary activities of the Ben Bernanke–led Federal Reserve.
Congressman Paul’s concerns about the Federal Reserve are nothing new. The gynecologist-turned-eleven-term congressman from Texas has spent a long political career promoting liberty and limited constitutional government as the American Founders understood them and exposing the mischief at the Federal Reserve. With the unexpected success of his presidential campaign and his recent best-selling manifesto on liberty, Dr. Paul’s uncompromising, consistent, and thoroughly principled stances on limited, constitutionally legitimate government are well known around the world. Now, thanks to End the Fed, his views on paper money, fractional-reserve banking, and the Federal Reserve and its manipulation of the money supply are summarized for a mass readership. Under a single cover and on just 212 readable pages are assembled philosophical, economic, and constitutional arguments for abolishing the Federal Reserve, a succinct history of banking, and a number of fascinating recollections and snippets of telling dialogue between Dr. Paul and various chairmen of the Fed as far back as Paul Volcker.
Finances and Freedoms
For Dr. Paul, an understanding of economics and finance is absolutely crucial to understanding liberty fully; one cannot embrace liberty while rejecting free-market economics in any degree. Yet it has become characteristic of many on the right – otherwise eloquent partisans of liberty and free-market economics, like the late Milton Friedman – to set aside certain free-market principles where money and banking are concerned. Laissez faire for factories, mines, retailers, and agriculture, indeed, say apologists for the Fed, but for banking, money, and finance, we must have regulation, currency manipulation, the fixing of interest rates, and other characteristics of a command economy.
Unfortunately, many people have allowed themselves to be persuaded that economics, banking, and finance are numinous, abstract disciplines best left to the experts. But we ignore these topics to our considerable detriment. Dr. Paul writes: “Everyone should have an intense interest in what money is and how it’s manipulated by the few at the expense of the many. Money is crucial for survival. It is necessary for maintaining a free society. A healthy economy depends on it. Limiting political power is impossible without it. Sound money is essential for preventing unnecessary wars. Prosperity and peace in the long run are impossible without it. To understand money, one absolutely must understand what a central bank is all about.”
America’s central bank, the Federal Reserve or “Fed,” was established in 1913, and according to Dr. Paul, has been complicit in – indeed, has been the driving engine for – the supersizing of the federal government that has transformed America since the First World War, and not for the better. This is because the Federal Reserve, with its ability to artificially increase the money supply (especially after the gold standard was abandoned), has largely emancipated Washington decision makers from the risky politics of raising revenue via direct taxation.
Heavy, direct taxation we certainly have, but the income tax and other federal taxes, obnoxious though they are, pale beside the Fed’s ability to raise money for the federal government simply by printing it (or, which amounts to the same thing, making a computer entry). Only thus has the federal government been able to finance hugely unpopular projects, like international wars, that Americans would never consent to if the monies were extracted up front via direct taxation. Thanks to the inflationary magic of so-called fiat money, the Federal Reserve (and other central banks like it around the world) can print money as needed, and the bill will come later, in the form of reduced purchasing power resulting from inflation. Inflation, by the way, is also a kind of tax, but one so subtly (and dishonestly) administered that few are able to diagnose its origin.
Hard words, but Congressman Paul knows whereof he speaks. It was Ron Paul, unique among congressmen for his understanding of how a free-market economy is supposed to work, who warned repeatedly of the coming economic calamity. It was Ron Paul, too, who warned both the Bush and Obama administrations that attempts by the government to bail out failing corporations with taxpayer dollars and passing massive stimulus packages would only make things worse. And it has been Ron Paul who has warned of disastrous long-term consequences of the inflationary activities of the Ben Bernanke–led Federal Reserve.
Congressman Paul’s concerns about the Federal Reserve are nothing new. The gynecologist-turned-eleven-term congressman from Texas has spent a long political career promoting liberty and limited constitutional government as the American Founders understood them and exposing the mischief at the Federal Reserve. With the unexpected success of his presidential campaign and his recent best-selling manifesto on liberty, Dr. Paul’s uncompromising, consistent, and thoroughly principled stances on limited, constitutionally legitimate government are well known around the world. Now, thanks to End the Fed, his views on paper money, fractional-reserve banking, and the Federal Reserve and its manipulation of the money supply are summarized for a mass readership. Under a single cover and on just 212 readable pages are assembled philosophical, economic, and constitutional arguments for abolishing the Federal Reserve, a succinct history of banking, and a number of fascinating recollections and snippets of telling dialogue between Dr. Paul and various chairmen of the Fed as far back as Paul Volcker.
Finances and Freedoms
For Dr. Paul, an understanding of economics and finance is absolutely crucial to understanding liberty fully; one cannot embrace liberty while rejecting free-market economics in any degree. Yet it has become characteristic of many on the right – otherwise eloquent partisans of liberty and free-market economics, like the late Milton Friedman – to set aside certain free-market principles where money and banking are concerned. Laissez faire for factories, mines, retailers, and agriculture, indeed, say apologists for the Fed, but for banking, money, and finance, we must have regulation, currency manipulation, the fixing of interest rates, and other characteristics of a command economy.
Unfortunately, many people have allowed themselves to be persuaded that economics, banking, and finance are numinous, abstract disciplines best left to the experts. But we ignore these topics to our considerable detriment. Dr. Paul writes: “Everyone should have an intense interest in what money is and how it’s manipulated by the few at the expense of the many. Money is crucial for survival. It is necessary for maintaining a free society. A healthy economy depends on it. Limiting political power is impossible without it. Sound money is essential for preventing unnecessary wars. Prosperity and peace in the long run are impossible without it. To understand money, one absolutely must understand what a central bank is all about.”
America’s central bank, the Federal Reserve or “Fed,” was established in 1913, and according to Dr. Paul, has been complicit in – indeed, has been the driving engine for – the supersizing of the federal government that has transformed America since the First World War, and not for the better. This is because the Federal Reserve, with its ability to artificially increase the money supply (especially after the gold standard was abandoned), has largely emancipated Washington decision makers from the risky politics of raising revenue via direct taxation.
Heavy, direct taxation we certainly have, but the income tax and other federal taxes, obnoxious though they are, pale beside the Fed’s ability to raise money for the federal government simply by printing it (or, which amounts to the same thing, making a computer entry). Only thus has the federal government been able to finance hugely unpopular projects, like international wars, that Americans would never consent to if the monies were extracted up front via direct taxation. Thanks to the inflationary magic of so-called fiat money, the Federal Reserve (and other central banks like it around the world) can print money as needed, and the bill will come later, in the form of reduced purchasing power resulting from inflation. Inflation, by the way, is also a kind of tax, but one so subtly (and dishonestly) administered that few are able to diagnose its origin.
WHAT I THINK......GARY NORTH
The Social Security system has long been described as the third rail of American politics. "Touch it, and you die." You get electrocuted. If you should somehow survive, the next subway train will cut you in pieces.
There is such a rail in academia: the Federal Reserve System.
A fascinating article appeared on the Huffington Post on September 10. Its title was good, and its content was better: "Priceless: How the Federal Reserve Bought the Economics Profession." The title is a veiled reference to a popular series of MasterCard TV ads. The author began with this, and never looked back.
* The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.
* This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.
It is a long article and well worth reading. It presents evidence that the Federal Reserve for three decades has had almost the entire profession of monetary economists on its payroll, one way or another.
He offers this example. In 1993, Greenspan informed the House Banking Committee that 189 economists worked for the Board of Governors (a government operation) and 171 worked for the 12 regional Federal Reserve banks (privately owned). Then there were 703 support staff and statisticians. These came from the ranks of economists.
This was only part of the story: the proverbial tip of the iceberg. From 1991–1994, the FED handed out $3 million to over 200 professors to conduct research.
This is still going on. There has been growth. The Board of Governors now employs 220 Ph.D.-level economists. But the real growth has been in contracts.
* Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.
That is a great deal of money. This amount of money, the author implies, is sufficient to buy silence. He adds that there are fewer than 500 Ph.D.-level members of the American Economic Association whose specialty is either money and interest rates or public finance. In the private sector, about 600 are part of the National Association of Business Economists' Financial Roundtable.
If you count existing economists on the payroll, past economists on the payroll, economists receiving grants, and those who want in on the deal, "you've accounted for a very significant majority of the field."
In addition, the FED has editors of the academic journals on its payroll or grants list.
* "It's very important, if you are tenure track and don't have tenure, to show that you are valued by the Federal Reserve," says Jane D'Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.
This suggestion is dismissed as "silly" by Robert King, editor-in-chief of The Journal of Monetary Economics, who is a visiting scholar at the Federal Reserve Bank of Richmond.
Just plain silly. Nothing to it.
If you do not get published in an academic journal, you do not gain tenure at the top three-dozen universities in the United States.
The author cites a 1993 letter from Milton Friedman, which was sent to a critic of the FED, Robert Auerbach.
* "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results."
How many economists who sit on the seven top journals as editors are connected to the FED? Almost half: 84 of 190.
Nothing to it. Silly. It's just one of those things, just one of those crazy things.
The author cites testimony from Alan Greenspan before the House Banking Committee in 2008. This quotation is all over the Web. I will use the version cited in the Wikipedia article on Greenspan.
* Referring to his free-market ideology, Mr. Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact."
* Mr. Waxman pressed the former Fed chair to clarify his words. "In other words, you found that your view of the world, your ideology, was not right, it was not working," Mr. Waxman said.
* "Absolutely, precisely," Mr. Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."
And yet, and yet. . . .
The author did not ask what I thought should have been an obvious question. "Why was the Federal Reserve System immune to criticism from 1914 to 1975?"
Ask that question, let alone answer it, and you will not get your article published in anything but a conspiracy journal or LewRockwell.com.
IMMUNITY FROM 1914 TO EARLY 2009
The Federal Reserve System has been untouchable from the day that the Senate passed the Federal Reserve Act late in the afternoon of the day before Christmas recess in 1913, when only a handful of Senators remained on the floor to vote, and Woodrow Wilson signed it that evening.
There have been a few critics in Congress. In the Wilson years, there was Congressman Charles A. Lindbergh (the father of the flyer). He laid it on the line. His statement appears in his Wiki entry.
* This Act establishes the most gigantic trust on Earth. When the President signs this bill, the invisible government by the Monetary Power will be legalized, the people may not know it immediately but the day of reckoning is only a few years removed. . . . The worst legislative crime of the ages is perpetrated by this banking bill.
In the 1930's, there was Congressmen Louis McFadden, a former banker. He was the author of the 1927 law that prohibited interstate banking. (It was repealed in 1994.) He was a hard-liner. He moved to impeach Herbert Hoover in 1932. For a Republican, this was unique for his era. Seven House members voted with him. He even introduced a resolution to bring conspiracy charges against the FED's Board of Governors. It also failed. He was hard-core. He was a fringe figure, as hard-core people usually are.
In the 1940's, there was Jerry Voohis, a fiat money greenbacker whose claim to fame was that he lost to Richard Nixon in 1946. In the 1950's and 1960's, there was Wright Patman, the eccentric populist from Texas, who chaired the House Banking Committee. For the last three decades, there has been Ron Paul.
That is pretty much it, 1914 to 2009. This is why Ron Paul's bill to audit the FED is such a breakthrough. For the first time since 1914, the FED is being called into question.
That is why the Huffington Post article misses the point. The economics profession, the American political system, and the media have been silent about the FED until the last year. This is what needs explaining.
ACADEMIA'S SILENCE
Back in my graduate school years, a generation ago, there was only one thoroughly critical book on the FED that was written by an academic free market economist: Fifty Years of Managed Money. The author was Elgin Groseclose, who was an advocate of the gold standard. The book did not go down the memory hole. It never got out of it. In 1980, it was republished under a new title, America's Money Machine. It stayed in the memory hole. The good news is that it is now available on-lime for free.
All this is to say that the FED received a free ride from academia and everyone else long before it began doling out hundreds of millions of dollars a year to academic economists.
How was this possible? I offer these suggestions, each of which would make a great rejected doctoral dissertation topic. The advisory cartels that shape public opinion and politics in every nation, without exception has always favored central banking. The methodologies of all schools of economic opinion except Austrianism and Marxism favor central banking. Politicians of all parties want a lender of last resort to buy government debt at below-market prices. Investors and their brokers want a floor for stock prices. A conspiracy of bankers has pursued a cartel protected by central banking ever since 1694: the Bank of England.
But, you may respond, some of these topics are suitable for a dissertation topic in a history department. Political science, too. Quite true, and the dissertation will be rejected on the day the ABD (all but dissertation) student proposes it. Yet the FED does not fund historians and political scientists.
The protected status of central banking is universal. This is not unique to the United States. Central banking is by far the most protected anti-democratic institution in the modern world. The supporters of no other institution publicly defend the institution on this basis: a necessary means of protecting the nation from its legislature.
"IT'S THE METHODOLOGY, STUPID!"
Modern economics, except for Austrians and Marxists, teach that economics is a true science. Its model is physics. The economists are unwilling to accept the fact that human beings, unlike rocks, make decisions. These decisions make economics a realm of human action rather than physical cause and effect.
The Austrians begin with acting individuals to explain economic causation. The Marxists (all eight of them) begin with the mode of production. The Marxists are collectivists in every sense, but they view economics as a science based on dialectical materialism, not physics.
There is a third group, behavioral economists, who also break with the mainstream. But they do not break with the mathematical formulation of their theories of human action.
The supply-siders have yet to develop their theories into a consistent system. There is no college-level textbook based on their views. Their main pitch is that the government can and should cut marginal tax rates so that the government can and should collect more revenue.
The methodology of Keynesians, neoclassical economists, monetarists, behavioral economists, public choicers, and even rational expectationists are united: it is possible for central bankers to create economic growth and avoid recessions by increasing the money supply. They argue about the correct rate of fiat money growth. None of them concludes: "Shut down every central bank and let the free market decide the correct supply of money, given the right of non-fraudulent contract."
This is a legal question: What constitutes the right of contract in monetary affairs? This has been answered comprehensively and in great detail by Prof. J. H. de Soto. No other legal theorist-economist has ever presented anything comparable to his 874-page book, Money, Bank Credit, and Economic Cycles. It is on-line for free.
The economics profession favors either central banking or else, in the case of strict monetarists, believe the central bank can keep the economy working smoothly by a constant increase of the money supply by 3% to 5% per annum.
CONCLUSION
Until Ron Paul's H. R. 1207, Congress had remained comatose with regard to the FED ever since 1914. Bernanke is the first Chairman to face skepticism regarding the independence of the FED. This has to do with politics. Politicians want to find out which big banks got how much. This has nothing to do with the fundamental question, namely, the theoretical case for a bankers' cartel enforced by a central bank.
That question has not been raised by 99.9% of academia, the media, and politicians since 1914.
The Powers That Be will keep the public bamboozled for as long as the economy does not collapse,
There is such a rail in academia: the Federal Reserve System.
A fascinating article appeared on the Huffington Post on September 10. Its title was good, and its content was better: "Priceless: How the Federal Reserve Bought the Economics Profession." The title is a veiled reference to a popular series of MasterCard TV ads. The author began with this, and never looked back.
* The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.
* This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.
It is a long article and well worth reading. It presents evidence that the Federal Reserve for three decades has had almost the entire profession of monetary economists on its payroll, one way or another.
He offers this example. In 1993, Greenspan informed the House Banking Committee that 189 economists worked for the Board of Governors (a government operation) and 171 worked for the 12 regional Federal Reserve banks (privately owned). Then there were 703 support staff and statisticians. These came from the ranks of economists.
This was only part of the story: the proverbial tip of the iceberg. From 1991–1994, the FED handed out $3 million to over 200 professors to conduct research.
This is still going on. There has been growth. The Board of Governors now employs 220 Ph.D.-level economists. But the real growth has been in contracts.
* Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.
That is a great deal of money. This amount of money, the author implies, is sufficient to buy silence. He adds that there are fewer than 500 Ph.D.-level members of the American Economic Association whose specialty is either money and interest rates or public finance. In the private sector, about 600 are part of the National Association of Business Economists' Financial Roundtable.
If you count existing economists on the payroll, past economists on the payroll, economists receiving grants, and those who want in on the deal, "you've accounted for a very significant majority of the field."
In addition, the FED has editors of the academic journals on its payroll or grants list.
* "It's very important, if you are tenure track and don't have tenure, to show that you are valued by the Federal Reserve," says Jane D'Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.
This suggestion is dismissed as "silly" by Robert King, editor-in-chief of The Journal of Monetary Economics, who is a visiting scholar at the Federal Reserve Bank of Richmond.
Just plain silly. Nothing to it.
If you do not get published in an academic journal, you do not gain tenure at the top three-dozen universities in the United States.
The author cites a 1993 letter from Milton Friedman, which was sent to a critic of the FED, Robert Auerbach.
* "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results."
How many economists who sit on the seven top journals as editors are connected to the FED? Almost half: 84 of 190.
Nothing to it. Silly. It's just one of those things, just one of those crazy things.
The author cites testimony from Alan Greenspan before the House Banking Committee in 2008. This quotation is all over the Web. I will use the version cited in the Wikipedia article on Greenspan.
* Referring to his free-market ideology, Mr. Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact."
* Mr. Waxman pressed the former Fed chair to clarify his words. "In other words, you found that your view of the world, your ideology, was not right, it was not working," Mr. Waxman said.
* "Absolutely, precisely," Mr. Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."
And yet, and yet. . . .
The author did not ask what I thought should have been an obvious question. "Why was the Federal Reserve System immune to criticism from 1914 to 1975?"
Ask that question, let alone answer it, and you will not get your article published in anything but a conspiracy journal or LewRockwell.com.
IMMUNITY FROM 1914 TO EARLY 2009
The Federal Reserve System has been untouchable from the day that the Senate passed the Federal Reserve Act late in the afternoon of the day before Christmas recess in 1913, when only a handful of Senators remained on the floor to vote, and Woodrow Wilson signed it that evening.
There have been a few critics in Congress. In the Wilson years, there was Congressman Charles A. Lindbergh (the father of the flyer). He laid it on the line. His statement appears in his Wiki entry.
* This Act establishes the most gigantic trust on Earth. When the President signs this bill, the invisible government by the Monetary Power will be legalized, the people may not know it immediately but the day of reckoning is only a few years removed. . . . The worst legislative crime of the ages is perpetrated by this banking bill.
In the 1930's, there was Congressmen Louis McFadden, a former banker. He was the author of the 1927 law that prohibited interstate banking. (It was repealed in 1994.) He was a hard-liner. He moved to impeach Herbert Hoover in 1932. For a Republican, this was unique for his era. Seven House members voted with him. He even introduced a resolution to bring conspiracy charges against the FED's Board of Governors. It also failed. He was hard-core. He was a fringe figure, as hard-core people usually are.
In the 1940's, there was Jerry Voohis, a fiat money greenbacker whose claim to fame was that he lost to Richard Nixon in 1946. In the 1950's and 1960's, there was Wright Patman, the eccentric populist from Texas, who chaired the House Banking Committee. For the last three decades, there has been Ron Paul.
That is pretty much it, 1914 to 2009. This is why Ron Paul's bill to audit the FED is such a breakthrough. For the first time since 1914, the FED is being called into question.
That is why the Huffington Post article misses the point. The economics profession, the American political system, and the media have been silent about the FED until the last year. This is what needs explaining.
ACADEMIA'S SILENCE
Back in my graduate school years, a generation ago, there was only one thoroughly critical book on the FED that was written by an academic free market economist: Fifty Years of Managed Money. The author was Elgin Groseclose, who was an advocate of the gold standard. The book did not go down the memory hole. It never got out of it. In 1980, it was republished under a new title, America's Money Machine. It stayed in the memory hole. The good news is that it is now available on-lime for free.
All this is to say that the FED received a free ride from academia and everyone else long before it began doling out hundreds of millions of dollars a year to academic economists.
How was this possible? I offer these suggestions, each of which would make a great rejected doctoral dissertation topic. The advisory cartels that shape public opinion and politics in every nation, without exception has always favored central banking. The methodologies of all schools of economic opinion except Austrianism and Marxism favor central banking. Politicians of all parties want a lender of last resort to buy government debt at below-market prices. Investors and their brokers want a floor for stock prices. A conspiracy of bankers has pursued a cartel protected by central banking ever since 1694: the Bank of England.
But, you may respond, some of these topics are suitable for a dissertation topic in a history department. Political science, too. Quite true, and the dissertation will be rejected on the day the ABD (all but dissertation) student proposes it. Yet the FED does not fund historians and political scientists.
The protected status of central banking is universal. This is not unique to the United States. Central banking is by far the most protected anti-democratic institution in the modern world. The supporters of no other institution publicly defend the institution on this basis: a necessary means of protecting the nation from its legislature.
"IT'S THE METHODOLOGY, STUPID!"
Modern economics, except for Austrians and Marxists, teach that economics is a true science. Its model is physics. The economists are unwilling to accept the fact that human beings, unlike rocks, make decisions. These decisions make economics a realm of human action rather than physical cause and effect.
The Austrians begin with acting individuals to explain economic causation. The Marxists (all eight of them) begin with the mode of production. The Marxists are collectivists in every sense, but they view economics as a science based on dialectical materialism, not physics.
There is a third group, behavioral economists, who also break with the mainstream. But they do not break with the mathematical formulation of their theories of human action.
The supply-siders have yet to develop their theories into a consistent system. There is no college-level textbook based on their views. Their main pitch is that the government can and should cut marginal tax rates so that the government can and should collect more revenue.
The methodology of Keynesians, neoclassical economists, monetarists, behavioral economists, public choicers, and even rational expectationists are united: it is possible for central bankers to create economic growth and avoid recessions by increasing the money supply. They argue about the correct rate of fiat money growth. None of them concludes: "Shut down every central bank and let the free market decide the correct supply of money, given the right of non-fraudulent contract."
This is a legal question: What constitutes the right of contract in monetary affairs? This has been answered comprehensively and in great detail by Prof. J. H. de Soto. No other legal theorist-economist has ever presented anything comparable to his 874-page book, Money, Bank Credit, and Economic Cycles. It is on-line for free.
The economics profession favors either central banking or else, in the case of strict monetarists, believe the central bank can keep the economy working smoothly by a constant increase of the money supply by 3% to 5% per annum.
CONCLUSION
Until Ron Paul's H. R. 1207, Congress had remained comatose with regard to the FED ever since 1914. Bernanke is the first Chairman to face skepticism regarding the independence of the FED. This has to do with politics. Politicians want to find out which big banks got how much. This has nothing to do with the fundamental question, namely, the theoretical case for a bankers' cartel enforced by a central bank.
That question has not been raised by 99.9% of academia, the media, and politicians since 1914.
The Powers That Be will keep the public bamboozled for as long as the economy does not collapse,
WHAT I THINK......DAVID GORDON
Ron Paul has since the inception of his tenure in Congress waged a heroic battle for financial sanity, and in End the Fed he gives us insights from that struggle available nowhere else. Dr. Paul had from an early age an affinity for the free market. "In the 1960s," he tells us, "I discovered the writings of economists such as Ludwig von Mises, F.A. Hayek, Murray N. Rothbard, and Hans F. Sennholz. I gradually found the answers I had been searching for. Even for the experts, it literally took centuries to fully understand the nature of money and the business cycle." (p.43)
Dr. Paul during his service in the Air Force was able to hear Mises speak, and when in Congress met with Hayek. "I had the pleasure of hearing Hayek lecture in Washington, around 1980. Following that meeting, we had a private dinner together and spent several hours visiting." (p.51)
But the principal economist who influenced him was Murray Rothbard. "Of all the Austrian economic greats of the twentieth century, I got to know Murray Rothbard the best.. . . I recall his surprise when he found out I had read his essay ‘Gold and Freely Fluctuating Exchange Rates.’. . . If there’s one book that the Washington establishment should read now, it’s Rothbard’s book America’s Great Depression. In this book, he demonstrates that it was the Fed that created the late-1920s boom that led to bust, and Hoover’s interventions that prolonged the Great Depression." (pp.57–8)
The last remark begins to suggest a key reason that the Fed should be abolished. Far from being a means to maintain monetary stability, as its supporters falsely insist, the Fed through expansion of bank credit bears primary responsibility for the business cycle. The expansion temporarily lowers the money rate of interest below the true market rate, largely determined by people’s time preference, i.e., their preference for present over future goods. Businesses, with money available, expand; but the new projects cannot be sustained. When the monetary expansion ceases (if it doesn’t, we will have hyperinflation, with disastrous consequences), these new investments must be liquidated. The process of doing so is the depression.
As Dr. Paul aptly remarks, "The Fed can indeed provide liquidity in these times [of credit contraction] by a simple operation of printing more paper money to cover deposits. But if you think of the cycle as beginning in the boom phase – when money and credit are loose and lending soars to fund unsustainable projects – matters change substantially.. . .when central banks push down [interest] rates on a whim, the impression is created that savings are there when they are in fact completely absent. The resulting bust becomes inevitable as goods that come to production can’t be purchased, and reality sets in by waves. Businesses fail, homes are foreclosed upon, and people bail out of stocks or whatever is the fashionable investment of the day." (pp.29–30)
Instead of the Fed and its false claim that we need an "elastic" currency, we should instead remove the government entirely from the creation of money. In a free society, money would be a commodity; most likely that commodity would be gold. "In fact, I’m only observing reality: the idea of sound money in most of human history has been bound up with gold money. Can there be sound money without a gold standard? In principle, yes. And I’d be very happy for a system that would permit markets to once again choose the most suitable money, whatever that turns out to be. I’m not for government imposing any particular standard: no central bank, no legal tender, no privilege for any commodity chosen as a backing for the currency." (p.71)
Dr. Paul has presented the Austrian view of money in a succinct, accurate, and effective way; but what justifies the claim that he offers insights available nowhere else? Are there not many excellent books and articles that explain the views of Mises and Rothbard on money, not least the works of those two economists themselves? The answer arises from Dr. Paul’s many years of service in Congress. In that capacity, he has had conversations with several Fed Chairmen, and one of these conversations enables us to solve a mystery.
Alan Greenspan epitomizes the control of the money supply by the government that Dr. Paul opposes. But is this not at first sight surprising? Greenspan was a follower of Ayn Rand and shared her devotion to laissez-faire capitalism. In an essay written for the Objectivist newsletter, reprinted in Capitalism: The Unknown Ideal, Greenspan offered a strong defense of the gold standard. The vital advantage of the gold standard, Greenspan explained, is to prevent the government from manipulating the money supply: "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation. . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold." (p.81)
Greenspan, amazingly, told Dr. Paul "that he had just recently reread it [the article] and wouldn’t change a word of it." (p.86). How could Greenspan say this, while presiding over a system that embodies the government control of money his article repudiated? Greenspan thought that he could conduct the financial system in the same way as the gold standard would operate. "I [Greenspan] think that you will find. . .that the most effective central banks in this fiat money period tend to be successful largely because we tend to replicate that which would have probably have occurred under a commodity standard in general." (p.88)
In other words, we need to remove government from the money supply, unless, of course, I and people like me are in control. Greenspan’s position brings to mind the Jewish tradition that King Solomon thought that the restrictions imposed in Deuteronomy (XVII: 16-17) on kings about wives and horses did not apply to him. Because, as the wisest of men, he knew the reasons for these restrictions, he could avoid the temptations these rules guarded against and take more wives and horses than allowed. His overweening arrogance led to disaster, and Greenspan has fallen victim to the same syndrome.
Dr. Paul does not regard Greenspan as the smartest of the Fed Chairmen he met. "I had the most interaction with [Paul] Volcker. He was more personable and smarter than the others, including the more recent board chairmen Alan Greenspan and Ben Bernanke" (p.48).
For Bernanke, it is clear that Dr. Paul has a deep distaste. He suspects that Bernanke has acted in secret to manipulate the price of gold, and he bristles at Bernanke’s refusal to disclose his operations to Congress. "So when Bernanke quickly refuses to give us information about the trillions of dollars of credit that he recently passed out in the bailout process because that would be ‘counterproductive,’ he is really saying, ‘It’s none of your business.’" (p.174)
The book recounts remarkable conversations with others besides Greenspan. When he served on the Gold Commission in Ronald Reagan’s administration, he on one occasion flew by helicopter with the president to Andrews Air Force Base. "‘Ron,’ the president told me, ‘no great nation that abandoned the gold standard has remained a great nation.’ He indeed was sympathetic, as he was to many libertarian constitutional ideas, but he was also swayed by staff pressure to be pragmatic on most issues." (p.74)
Reagan, it is apparent, could not break with the illusion that the government needs to be in control. That illusion is avidly propagated by those who profit from it. One such was the notorious George R. Brown, a longtime backer of Lyndon Johnson. Brown displayed interest in Dr. Paul’s campaign for Congress in 1976, and in one conversation told him, "‘Remember, for the economic system to work, business and government must be partners. I cringed and quickly scooted out the door. . . Once I was in office and after my votes and positions became known, the message was clear, and I never heard from him [Brown] again." (p.159)
Dr. Paul’s fight for freedom has not been confined to the issue of sound money. He has also led the struggle against an interventionist and imperialist foreign policy. But the fight for liberty is seamless, and he shows that an aggressive foreign policy depends on government control of the money supply: "it is no coincidence that the century of total war coincided with the century of central banking. When governments had to fund their own wars without a paper money machine to rely upon, they economized on resources. They found diplomatic solutions to prevent war, and after they started a war they ended it as soon as possible." (p.63)
The book contains an abundance of other arguments against our current monetary system, e.g., that it violates the Constitution. Dr. Paul brings to bear on his topic much learning, and readers will discover how monetary debasement helped bring the Byzantine Empire to ruin as well as Thomas Paine’s poor opinion of paper money. Those who have absorbed the book’s message will come to a clear conclusion: End the Fed.
Dr. Paul during his service in the Air Force was able to hear Mises speak, and when in Congress met with Hayek. "I had the pleasure of hearing Hayek lecture in Washington, around 1980. Following that meeting, we had a private dinner together and spent several hours visiting." (p.51)
But the principal economist who influenced him was Murray Rothbard. "Of all the Austrian economic greats of the twentieth century, I got to know Murray Rothbard the best.. . . I recall his surprise when he found out I had read his essay ‘Gold and Freely Fluctuating Exchange Rates.’. . . If there’s one book that the Washington establishment should read now, it’s Rothbard’s book America’s Great Depression. In this book, he demonstrates that it was the Fed that created the late-1920s boom that led to bust, and Hoover’s interventions that prolonged the Great Depression." (pp.57–8)
The last remark begins to suggest a key reason that the Fed should be abolished. Far from being a means to maintain monetary stability, as its supporters falsely insist, the Fed through expansion of bank credit bears primary responsibility for the business cycle. The expansion temporarily lowers the money rate of interest below the true market rate, largely determined by people’s time preference, i.e., their preference for present over future goods. Businesses, with money available, expand; but the new projects cannot be sustained. When the monetary expansion ceases (if it doesn’t, we will have hyperinflation, with disastrous consequences), these new investments must be liquidated. The process of doing so is the depression.
As Dr. Paul aptly remarks, "The Fed can indeed provide liquidity in these times [of credit contraction] by a simple operation of printing more paper money to cover deposits. But if you think of the cycle as beginning in the boom phase – when money and credit are loose and lending soars to fund unsustainable projects – matters change substantially.. . .when central banks push down [interest] rates on a whim, the impression is created that savings are there when they are in fact completely absent. The resulting bust becomes inevitable as goods that come to production can’t be purchased, and reality sets in by waves. Businesses fail, homes are foreclosed upon, and people bail out of stocks or whatever is the fashionable investment of the day." (pp.29–30)
Instead of the Fed and its false claim that we need an "elastic" currency, we should instead remove the government entirely from the creation of money. In a free society, money would be a commodity; most likely that commodity would be gold. "In fact, I’m only observing reality: the idea of sound money in most of human history has been bound up with gold money. Can there be sound money without a gold standard? In principle, yes. And I’d be very happy for a system that would permit markets to once again choose the most suitable money, whatever that turns out to be. I’m not for government imposing any particular standard: no central bank, no legal tender, no privilege for any commodity chosen as a backing for the currency." (p.71)
Dr. Paul has presented the Austrian view of money in a succinct, accurate, and effective way; but what justifies the claim that he offers insights available nowhere else? Are there not many excellent books and articles that explain the views of Mises and Rothbard on money, not least the works of those two economists themselves? The answer arises from Dr. Paul’s many years of service in Congress. In that capacity, he has had conversations with several Fed Chairmen, and one of these conversations enables us to solve a mystery.
Alan Greenspan epitomizes the control of the money supply by the government that Dr. Paul opposes. But is this not at first sight surprising? Greenspan was a follower of Ayn Rand and shared her devotion to laissez-faire capitalism. In an essay written for the Objectivist newsletter, reprinted in Capitalism: The Unknown Ideal, Greenspan offered a strong defense of the gold standard. The vital advantage of the gold standard, Greenspan explained, is to prevent the government from manipulating the money supply: "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation. . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold." (p.81)
Greenspan, amazingly, told Dr. Paul "that he had just recently reread it [the article] and wouldn’t change a word of it." (p.86). How could Greenspan say this, while presiding over a system that embodies the government control of money his article repudiated? Greenspan thought that he could conduct the financial system in the same way as the gold standard would operate. "I [Greenspan] think that you will find. . .that the most effective central banks in this fiat money period tend to be successful largely because we tend to replicate that which would have probably have occurred under a commodity standard in general." (p.88)
In other words, we need to remove government from the money supply, unless, of course, I and people like me are in control. Greenspan’s position brings to mind the Jewish tradition that King Solomon thought that the restrictions imposed in Deuteronomy (XVII: 16-17) on kings about wives and horses did not apply to him. Because, as the wisest of men, he knew the reasons for these restrictions, he could avoid the temptations these rules guarded against and take more wives and horses than allowed. His overweening arrogance led to disaster, and Greenspan has fallen victim to the same syndrome.
Dr. Paul does not regard Greenspan as the smartest of the Fed Chairmen he met. "I had the most interaction with [Paul] Volcker. He was more personable and smarter than the others, including the more recent board chairmen Alan Greenspan and Ben Bernanke" (p.48).
For Bernanke, it is clear that Dr. Paul has a deep distaste. He suspects that Bernanke has acted in secret to manipulate the price of gold, and he bristles at Bernanke’s refusal to disclose his operations to Congress. "So when Bernanke quickly refuses to give us information about the trillions of dollars of credit that he recently passed out in the bailout process because that would be ‘counterproductive,’ he is really saying, ‘It’s none of your business.’" (p.174)
The book recounts remarkable conversations with others besides Greenspan. When he served on the Gold Commission in Ronald Reagan’s administration, he on one occasion flew by helicopter with the president to Andrews Air Force Base. "‘Ron,’ the president told me, ‘no great nation that abandoned the gold standard has remained a great nation.’ He indeed was sympathetic, as he was to many libertarian constitutional ideas, but he was also swayed by staff pressure to be pragmatic on most issues." (p.74)
Reagan, it is apparent, could not break with the illusion that the government needs to be in control. That illusion is avidly propagated by those who profit from it. One such was the notorious George R. Brown, a longtime backer of Lyndon Johnson. Brown displayed interest in Dr. Paul’s campaign for Congress in 1976, and in one conversation told him, "‘Remember, for the economic system to work, business and government must be partners. I cringed and quickly scooted out the door. . . Once I was in office and after my votes and positions became known, the message was clear, and I never heard from him [Brown] again." (p.159)
Dr. Paul’s fight for freedom has not been confined to the issue of sound money. He has also led the struggle against an interventionist and imperialist foreign policy. But the fight for liberty is seamless, and he shows that an aggressive foreign policy depends on government control of the money supply: "it is no coincidence that the century of total war coincided with the century of central banking. When governments had to fund their own wars without a paper money machine to rely upon, they economized on resources. They found diplomatic solutions to prevent war, and after they started a war they ended it as soon as possible." (p.63)
The book contains an abundance of other arguments against our current monetary system, e.g., that it violates the Constitution. Dr. Paul brings to bear on his topic much learning, and readers will discover how monetary debasement helped bring the Byzantine Empire to ruin as well as Thomas Paine’s poor opinion of paper money. Those who have absorbed the book’s message will come to a clear conclusion: End the Fed.
HEALTHCARE REFORM IS MORE CORPORATE WELFARE
Healthcare Reform is More Corporate Welfare
Last Wednesday the nation was riveted to the President’s speech on healthcare reform before Congress. While the President’s concern for the uninsured is no doubt sincere, his plan amounts to a magnanimous gift to the health insurance industry, despite any implications to the contrary.
For decades the insurance industry has been lobbying for mandated coverage for everyone. Imagine if the cell phone industry or the cable TV industry received such a gift from government? If government were to fine individuals simply for not buying a corporation’s product, it would be an incredible and completely unfair boon to that industry, at the expense of freedom and the free market. Yet this is what the current healthcare reform plans intend to do for the very powerful health insurance industry.
The stipulation that pre-existing conditions would have to be covered seems a small price to pay for increasing their client pool to 100�f the American people. A big red flag, however, is that they would also have immunity from lawsuits, should they fail to actually cover what they are supposedly required to cover, so these requirements on them are probably meaningless. Mandates on all citizens to be customers of theirs, however, are enforceable with fines and taxes.
Insurance providers seem to have successfully equated health insurance with health care but this is a relatively new concept. There were doctors and medicine long before there was health insurance. Health insurance is not a bad thing, but it is not the only conceivable way to get health care. Instead, we seem to still rely on the creativity and competence of politicians to solve problems, which always somehow seem to be tied in with which lobby is the strongest in Washington.
It is sad to think of the many creative, free market solutions that government prohibits with all its interference. What if instead of joining a health insurance plan, you could buy a membership directly from a hospital or doctor? What if a doctor wanted to have a cash-only practice, or make house calls, or determine his or her own patient load, or otherwise practice medicine outside the constraints of the current bureaucratic system? Alternative healthcare delivery models will be at an even stronger competitive disadvantage if families are forced to buy into the insurance model. And yet, the reforms are sold to us as increasing competition.
What if just once Washington got out of the way and allowed the ingenuity of the American people to come up with a whole spectrum of alternatives to our broken system? Then the free market, not lobbyists and politicians, would decide which models work and which did not.
Unfortunately, the most broken aspect of our system is that Washington sees the need to act on every problem in society, rather than staying out of the way, or getting out of the way. The only tools the government has are force and favors. These are tools that many unscrupulous and lazy corporations would like to wield to their own advantage, rather than simply providing a better product that people will willingly buy. It seems the health insurance industry will get more of those advantages very soon.
Last Wednesday the nation was riveted to the President’s speech on healthcare reform before Congress. While the President’s concern for the uninsured is no doubt sincere, his plan amounts to a magnanimous gift to the health insurance industry, despite any implications to the contrary.
For decades the insurance industry has been lobbying for mandated coverage for everyone. Imagine if the cell phone industry or the cable TV industry received such a gift from government? If government were to fine individuals simply for not buying a corporation’s product, it would be an incredible and completely unfair boon to that industry, at the expense of freedom and the free market. Yet this is what the current healthcare reform plans intend to do for the very powerful health insurance industry.
The stipulation that pre-existing conditions would have to be covered seems a small price to pay for increasing their client pool to 100�f the American people. A big red flag, however, is that they would also have immunity from lawsuits, should they fail to actually cover what they are supposedly required to cover, so these requirements on them are probably meaningless. Mandates on all citizens to be customers of theirs, however, are enforceable with fines and taxes.
Insurance providers seem to have successfully equated health insurance with health care but this is a relatively new concept. There were doctors and medicine long before there was health insurance. Health insurance is not a bad thing, but it is not the only conceivable way to get health care. Instead, we seem to still rely on the creativity and competence of politicians to solve problems, which always somehow seem to be tied in with which lobby is the strongest in Washington.
It is sad to think of the many creative, free market solutions that government prohibits with all its interference. What if instead of joining a health insurance plan, you could buy a membership directly from a hospital or doctor? What if a doctor wanted to have a cash-only practice, or make house calls, or determine his or her own patient load, or otherwise practice medicine outside the constraints of the current bureaucratic system? Alternative healthcare delivery models will be at an even stronger competitive disadvantage if families are forced to buy into the insurance model. And yet, the reforms are sold to us as increasing competition.
What if just once Washington got out of the way and allowed the ingenuity of the American people to come up with a whole spectrum of alternatives to our broken system? Then the free market, not lobbyists and politicians, would decide which models work and which did not.
Unfortunately, the most broken aspect of our system is that Washington sees the need to act on every problem in society, rather than staying out of the way, or getting out of the way. The only tools the government has are force and favors. These are tools that many unscrupulous and lazy corporations would like to wield to their own advantage, rather than simply providing a better product that people will willingly buy. It seems the health insurance industry will get more of those advantages very soon.
Tuesday
WHAT I THINK......JEFF CROUERE
If a presidential election were held last night on the campus of Loyola University New Orleans, the winner would not have been the 48 year old occupant of the White House, but a spry 74 year old physician from Texas.
U..S. Congressman Ron Paul (R-TX) enthralled a huge crowd of supporters and students with a one hour address on topics ranging from the war in Afghanistan to the Federal Reserve. The crowd was so large that the university set up five overflow rooms to accommodate the intense interest in Dr. Paul’s message.
It was amazing to see such an enthusiastic reception for Paul’s message of limited government, freedom and adherence to the U.S. Constitution. The event was mostly promoted on the Internet and, as usual, the mainstream media was nowhere to be seen. Nevertheless, more and more people are learning about Ron Paul and they agree with his message.
Last night, Paul warned that the U.S. foreign policy was creating enemies for this country around the world. He noted that as innocent civilians are killed in war, Muslim families with “long memories” will spend the rest of their lives seeking vengeance against Americans. Paul said that the “easiest place to cut” the federal budget is the defense department and that the U.S. should bring home our troops from not only the wars in Iraq and Afghanistan, but also countries such as South Korea, Japan and Germany.
In keeping with his staunch libertarian principles, Paul advocated an end to selective service and the draft and the war on drugs. He called for an end to all foreign aid and said that if people wanted to help the poor in other countries, they should give handsome donations. Such generosity will be made easier if Paul is successful in eliminating the federal income tax.
The Congressman is delighted with the tea parties and the town hall meetings and the “anger being directed at Washington D.C.” He said that the Congress should “get government off of our backs and out of our lives” and allow individuals to “keep the fruits of their labor.” He said that the government has expanded beyond the “restraints of the Constitution” and there is no constitutional right to medical care, education or free meals.
In Paul’s view, the real problem is the continual devaluing of the U..S. dollar and the resulting inflation which hits the poor and the middle class the worst. Paul noted that it is ironic that our former communist enemies are now our bankers. If the dollar continues to lose its value, the Congressman believes that the result will be higher interest rates and rampant inflation. He said that the only way to improve the value of the dollar is “to restrain the printing press.”
While the Obama administration may be “brainwashing themselves” that their policies are working, Paul believes that a correction is inevitable. There will be “tough days ahead” to correct for the “extravagance of the past.” As more people become upset and disillusioned with their government, Paul sees the possibility for a “de facto nullification” in which people ignore our government and just “walk away.”
Even though he sounded the alarm about our problems, Paul is optimistic because the new generation has “a different attitude about government.” He also noted that the rise of the Internet allows for people to learn about these issues, study the documents of the Founding Fathers and become aware of what is going on in our government.
Overall, Paul believes that the country is headed for perilous times unless more Americans “wake up.” Yet, due to Ron Paul and other critics of the Obama administration, the American public is finally waking up and attempting to take back control of their government. While the stakes are very high and the problems quite immense, it is at least encouraging that a greater number of Americans are aware of what is happening with their government.
Progress is also gradually occurring in Washington D.C. Dr. Paul noted that there is increased support for his bill to audit the Federal Reserve. Paul has over 280 co-sponsors for the legislation, all Republicans and over 100 Democrats in the House.
If the crowd in Loyola University is any indication, the Ron Paul revolution is alive and well. Paul’s message strongly resonated with the audience, both students and adults. It followed months of unprecedented citizen activism at tea parties and town hall meetings throughout the country.
Dr. Ron Paul deserves a good deal of credit for this movement for he raised many of these issues during his 2008 presidential campaign. In fact, he predicted the financial crisis which has engulfed this country over the past year. While he was not able to wrest the GOP nomination from the favorite of party leaders, Paul attracted millions of supporters to his cause.
Now Paul is even more credible and Americans are even more receptive to his pro-liberty message. The time might be right for Ron Paul to achieve mass appeal in this country. Certainly, he has as much appeal on the Loyola campus as any rock star.
Let’s hope America starts learning the words to the song this rock star is singing
U..S. Congressman Ron Paul (R-TX) enthralled a huge crowd of supporters and students with a one hour address on topics ranging from the war in Afghanistan to the Federal Reserve. The crowd was so large that the university set up five overflow rooms to accommodate the intense interest in Dr. Paul’s message.
It was amazing to see such an enthusiastic reception for Paul’s message of limited government, freedom and adherence to the U.S. Constitution. The event was mostly promoted on the Internet and, as usual, the mainstream media was nowhere to be seen. Nevertheless, more and more people are learning about Ron Paul and they agree with his message.
Last night, Paul warned that the U.S. foreign policy was creating enemies for this country around the world. He noted that as innocent civilians are killed in war, Muslim families with “long memories” will spend the rest of their lives seeking vengeance against Americans. Paul said that the “easiest place to cut” the federal budget is the defense department and that the U.S. should bring home our troops from not only the wars in Iraq and Afghanistan, but also countries such as South Korea, Japan and Germany.
In keeping with his staunch libertarian principles, Paul advocated an end to selective service and the draft and the war on drugs. He called for an end to all foreign aid and said that if people wanted to help the poor in other countries, they should give handsome donations. Such generosity will be made easier if Paul is successful in eliminating the federal income tax.
The Congressman is delighted with the tea parties and the town hall meetings and the “anger being directed at Washington D.C.” He said that the Congress should “get government off of our backs and out of our lives” and allow individuals to “keep the fruits of their labor.” He said that the government has expanded beyond the “restraints of the Constitution” and there is no constitutional right to medical care, education or free meals.
In Paul’s view, the real problem is the continual devaluing of the U..S. dollar and the resulting inflation which hits the poor and the middle class the worst. Paul noted that it is ironic that our former communist enemies are now our bankers. If the dollar continues to lose its value, the Congressman believes that the result will be higher interest rates and rampant inflation. He said that the only way to improve the value of the dollar is “to restrain the printing press.”
While the Obama administration may be “brainwashing themselves” that their policies are working, Paul believes that a correction is inevitable. There will be “tough days ahead” to correct for the “extravagance of the past.” As more people become upset and disillusioned with their government, Paul sees the possibility for a “de facto nullification” in which people ignore our government and just “walk away.”
Even though he sounded the alarm about our problems, Paul is optimistic because the new generation has “a different attitude about government.” He also noted that the rise of the Internet allows for people to learn about these issues, study the documents of the Founding Fathers and become aware of what is going on in our government.
Overall, Paul believes that the country is headed for perilous times unless more Americans “wake up.” Yet, due to Ron Paul and other critics of the Obama administration, the American public is finally waking up and attempting to take back control of their government. While the stakes are very high and the problems quite immense, it is at least encouraging that a greater number of Americans are aware of what is happening with their government.
Progress is also gradually occurring in Washington D.C. Dr. Paul noted that there is increased support for his bill to audit the Federal Reserve. Paul has over 280 co-sponsors for the legislation, all Republicans and over 100 Democrats in the House.
If the crowd in Loyola University is any indication, the Ron Paul revolution is alive and well. Paul’s message strongly resonated with the audience, both students and adults. It followed months of unprecedented citizen activism at tea parties and town hall meetings throughout the country.
Dr. Ron Paul deserves a good deal of credit for this movement for he raised many of these issues during his 2008 presidential campaign. In fact, he predicted the financial crisis which has engulfed this country over the past year. While he was not able to wrest the GOP nomination from the favorite of party leaders, Paul attracted millions of supporters to his cause.
Now Paul is even more credible and Americans are even more receptive to his pro-liberty message. The time might be right for Ron Paul to achieve mass appeal in this country. Certainly, he has as much appeal on the Loyola campus as any rock star.
Let’s hope America starts learning the words to the song this rock star is singing
GOVERNMENT SOLUTIONS LACK UNDERSTANDING
Things seem to be unraveling quickly for the new administration. The latest unemployment numbers are worse than the last reports. For all the billions of dollars spent and committed to fixing our economic problems, the situation is only getting worse. This was to be expected by those who understand the root causes of the problems. Throwing money around and creating more government programs is both simplistic and damaging to the economy. Of course, the administration claims that we would have been much worse off without these efforts. You can’t improve this situation by adding to our mountain of public debt for the benefit of big banks and other special interests. The American people know this. When will Washington learn?
In addition, the president’s plans for healthcare reform – or health insurance reform - are becoming more and more unpopular as details are examined. But because of all the alarmist rhetoric, politicians in Washington feel obligated to pass something, even if it doesn’t help. Rarely are liberty and prosperity at greater risk than when politicians feel they must “do something”. It is frightening to watch Washington toy with our healthcare purely for political reasons.
However, the saddest shortcoming of this administration is its utter failure to pursue a more peaceful foreign policy. Just last week up to 90 people, apparently mostly civilians, were killed in Afghanistan in an airstrike, and the violence is only getting worse. The administration is mulling over how many more troops they will send as part of their “Afghan Surge” with advisors getting it exactly backwards. They qualify sending fewer troops as “high-risk” and sending more troops as “low-risk”. This is not the perception at all if you were to ask the families of those being sent over. The best answer would be to stop risking any of our troops for the sake of what is, for all intents and purposes, a violent occupation, helping no one.
But all of these problems and their wrong-headed solutions come from one greater problem - which is not understanding the reasons that we are here. The economy is in bad shape because of too much government intervention producing a myriad of unintended consequences and perverse incentives. Healthcare is broken because the doctor-patient relationship has been broken down by hyper regulation and too much government interference. Afghanistan is a mess because they ignored the mission approved by Congress - to seek out those who attacked us on 9/11. They have instead gotten sidetracked with nebulous interventionist tasks such as promoting democracy and nation building. Eight years later, there is no real progress. The Soviets bankrupted themselves fighting in the mountains and caves of Afghanistan and we’re about to do the same. If we would just look to history it would be self-evident that there is nothing left to win in Afghanistan, and everything to lose.
Most of all, we need to understand that we don’t understand Afghan culture and politics, and for that reason alone, intervening in their affairs is unlikely to produce positive results. The best thing we could possibly do now is to bring our troops home, from Afghanistan, from Iraq, from Japan, from Germany, from all occupied countries, and concentrate on mending badly damaged relationships around the world. Free and honest trade has always been the best way to do that, without fail. Not understanding the benefits of peace, freedom, and nonintervention will always bring about catastrophe.
In addition, the president’s plans for healthcare reform – or health insurance reform - are becoming more and more unpopular as details are examined. But because of all the alarmist rhetoric, politicians in Washington feel obligated to pass something, even if it doesn’t help. Rarely are liberty and prosperity at greater risk than when politicians feel they must “do something”. It is frightening to watch Washington toy with our healthcare purely for political reasons.
However, the saddest shortcoming of this administration is its utter failure to pursue a more peaceful foreign policy. Just last week up to 90 people, apparently mostly civilians, were killed in Afghanistan in an airstrike, and the violence is only getting worse. The administration is mulling over how many more troops they will send as part of their “Afghan Surge” with advisors getting it exactly backwards. They qualify sending fewer troops as “high-risk” and sending more troops as “low-risk”. This is not the perception at all if you were to ask the families of those being sent over. The best answer would be to stop risking any of our troops for the sake of what is, for all intents and purposes, a violent occupation, helping no one.
But all of these problems and their wrong-headed solutions come from one greater problem - which is not understanding the reasons that we are here. The economy is in bad shape because of too much government intervention producing a myriad of unintended consequences and perverse incentives. Healthcare is broken because the doctor-patient relationship has been broken down by hyper regulation and too much government interference. Afghanistan is a mess because they ignored the mission approved by Congress - to seek out those who attacked us on 9/11. They have instead gotten sidetracked with nebulous interventionist tasks such as promoting democracy and nation building. Eight years later, there is no real progress. The Soviets bankrupted themselves fighting in the mountains and caves of Afghanistan and we’re about to do the same. If we would just look to history it would be self-evident that there is nothing left to win in Afghanistan, and everything to lose.
Most of all, we need to understand that we don’t understand Afghan culture and politics, and for that reason alone, intervening in their affairs is unlikely to produce positive results. The best thing we could possibly do now is to bring our troops home, from Afghanistan, from Iraq, from Japan, from Germany, from all occupied countries, and concentrate on mending badly damaged relationships around the world. Free and honest trade has always been the best way to do that, without fail. Not understanding the benefits of peace, freedom, and nonintervention will always bring about catastrophe.
Saturday
WHAT I THINK......JAMES QUINN
In addition to his day job as a strategic planner with an Ivy League university, James Quinn has, in the past year, become one of the Web’s handful of must-read bloggers. Nearly everything he publishes ends up in the DollarCollapse “Best of the Web” column, and his Burning Platform website now hosts high-level discussions on topics ranging from Peak Water to Washington’s fraudulent employment numbers to Swiss bank dumping of U.S. bonds. We spoke earlier in the week:
DollarCollapse: The first article on your Burning Platform website is less than a year old. Since then you’ve been churning out big, thought-provoking, well-researched articles at the rate of about one a week. What happened to suddenly make you such a prolific blogger?
James Quinn: I’d never written an article in my entire life until April 2008. The reason I started was, I was watching the Republican presidential primaries and I saw how the mainstream press and the other candidates were treating Ron Paul. I’d never heard of Ron Paul until Richard Russell brought him up in his newsletter. I started investigating, and everything the guy wrote was dead-on, completely consistent with my point of view. And during the campaign they were treating him like a nut, when he was the most honest straightforward guy in the campaign. So I wrote an article titled “Why We Need Ron Paul.” I tried to get it published in some newspapers but nobody wanted any part of it. Then I came across Lew Rockwell’s site and he loved it and posted it. His site gives out its writers’ email addresses so I started getting 50 emails a day, most of them agreeing with me. So I kept going. The first five or six articles were all Ron Paul based, and Lew put them on his site. Then Seeking Alpha and Minyanville and your site picked them up.
Then I came across this guy named Jason Rines, who had created a site called Raging Debate, which had used a couple of my articles. I mentioned that I’d like to do a site that would include discussion threads and he said, “I’ll create it for you.” He put together the Burning Platform. I came up with the name and supply the content, and he built the discussion capabilities. Jason’s idea is to roll out these sites for anybody who has something to say. He’ll provide the technology and they’ll provide the content.
DC: Your articles cover a lot of ground, but the central theme is always the mess we’ve made of things. How in your opinion did we screw up so royally?
JQ: It comes back to 1971 when Nixon closed the gold window. Before that we were a manufacturing-based economy. We produced things, and we ran a trade surplus, not a deficit. But [disconnecting the dollar from gold] unleashed the Federal Reserve to print at will, and they have. Since then we’ve had nothing but inflation. The dollar has lost 93% of its value against gold.
We did fine from 1789 to 1913. We had strong growth without inflation. But when we created the Federal Reserve it was for the benefit of the bankers and politicians. It has allowed them to spend freely and create a welfare system that has skyrocketed. But you can’t let the rest of us off the hook. We’ve continued to vote for politicians who promised all the goodies without the pain. That’s how you get reelected today.
DC: You’re especially hard on us baby boomers. What did we do to make you so mad?
JQ: In 1980 the oldest boomer turned 35, and since then they’ve led us into a debt bubble. Every conceivable category of debt has skyrocketed. Now there’s a tipping point coming. As John Mauldin says, “an unsustainable trend will not be sustained.” At some point it’s going to come crashing down.
I have three teenage boys and for the first time in a long time I don’t think our kids are going to have a better future than we had. We’re saddling our children and grandchildren with $66 trillion of unfunded liabilities and still piling it on.
Everything this government is doing is the opposite of what it should be doing. With cash for clunkers and tax credits for houses we’re encouraging people to borrow more. They’re coming out with another for appliances later in the year. The debt is going to go up by $2 trillion this year. Ultimately it leads to a dollar collapse. I can’t see any other out at this point.
DC: If a crisis is unavoidable, what’s your most likely scenario?
JQ: Our standard of living drops dramatically. I keep reading about the government hitting the reset button and devaluing the dollar. Could they do what Roosevelt did in 1932 and confiscate gold and reset the dollar 50% lower to wipe out all the debt that we owe? That would be a choice on the part of the government, which is possible, but I don’t think they’re that smart. So I think it’s more likely to be a collapse where someone heads for the exits and everyone else follows. The Chinese and the Russians are already headed for the exits, but they’re doing it slowly and cautiously so they don’t cause a panic.
DC: What are you doing with your own money?
JQ: We’re putting three kids through school and have almost no debt. I’m mostly in inflation protected bonds. Our biggest stock positions are GLD and SLD, the ETFs for gold and silver. I think commodities are going to skyrocket, so I’ve got the commodity ETF DBA and a few gold mining stocks. But at this point I’m a lot in cash. I think the overall market heads back to its March lows and beyond.
DC: One last question: Your perspective is Austrian, or libertarian, or Constitutional or whatever other right-wing nutcase label you prefer. That’s generally not the dominant culture of an Ivy League school. Do your bosses read your stuff, and if so, what’s their reaction?
JQ: I keep a very low profile.
DollarCollapse: The first article on your Burning Platform website is less than a year old. Since then you’ve been churning out big, thought-provoking, well-researched articles at the rate of about one a week. What happened to suddenly make you such a prolific blogger?
James Quinn: I’d never written an article in my entire life until April 2008. The reason I started was, I was watching the Republican presidential primaries and I saw how the mainstream press and the other candidates were treating Ron Paul. I’d never heard of Ron Paul until Richard Russell brought him up in his newsletter. I started investigating, and everything the guy wrote was dead-on, completely consistent with my point of view. And during the campaign they were treating him like a nut, when he was the most honest straightforward guy in the campaign. So I wrote an article titled “Why We Need Ron Paul.” I tried to get it published in some newspapers but nobody wanted any part of it. Then I came across Lew Rockwell’s site and he loved it and posted it. His site gives out its writers’ email addresses so I started getting 50 emails a day, most of them agreeing with me. So I kept going. The first five or six articles were all Ron Paul based, and Lew put them on his site. Then Seeking Alpha and Minyanville and your site picked them up.
Then I came across this guy named Jason Rines, who had created a site called Raging Debate, which had used a couple of my articles. I mentioned that I’d like to do a site that would include discussion threads and he said, “I’ll create it for you.” He put together the Burning Platform. I came up with the name and supply the content, and he built the discussion capabilities. Jason’s idea is to roll out these sites for anybody who has something to say. He’ll provide the technology and they’ll provide the content.
DC: Your articles cover a lot of ground, but the central theme is always the mess we’ve made of things. How in your opinion did we screw up so royally?
JQ: It comes back to 1971 when Nixon closed the gold window. Before that we were a manufacturing-based economy. We produced things, and we ran a trade surplus, not a deficit. But [disconnecting the dollar from gold] unleashed the Federal Reserve to print at will, and they have. Since then we’ve had nothing but inflation. The dollar has lost 93% of its value against gold.
We did fine from 1789 to 1913. We had strong growth without inflation. But when we created the Federal Reserve it was for the benefit of the bankers and politicians. It has allowed them to spend freely and create a welfare system that has skyrocketed. But you can’t let the rest of us off the hook. We’ve continued to vote for politicians who promised all the goodies without the pain. That’s how you get reelected today.
DC: You’re especially hard on us baby boomers. What did we do to make you so mad?
JQ: In 1980 the oldest boomer turned 35, and since then they’ve led us into a debt bubble. Every conceivable category of debt has skyrocketed. Now there’s a tipping point coming. As John Mauldin says, “an unsustainable trend will not be sustained.” At some point it’s going to come crashing down.
I have three teenage boys and for the first time in a long time I don’t think our kids are going to have a better future than we had. We’re saddling our children and grandchildren with $66 trillion of unfunded liabilities and still piling it on.
Everything this government is doing is the opposite of what it should be doing. With cash for clunkers and tax credits for houses we’re encouraging people to borrow more. They’re coming out with another for appliances later in the year. The debt is going to go up by $2 trillion this year. Ultimately it leads to a dollar collapse. I can’t see any other out at this point.
DC: If a crisis is unavoidable, what’s your most likely scenario?
JQ: Our standard of living drops dramatically. I keep reading about the government hitting the reset button and devaluing the dollar. Could they do what Roosevelt did in 1932 and confiscate gold and reset the dollar 50% lower to wipe out all the debt that we owe? That would be a choice on the part of the government, which is possible, but I don’t think they’re that smart. So I think it’s more likely to be a collapse where someone heads for the exits and everyone else follows. The Chinese and the Russians are already headed for the exits, but they’re doing it slowly and cautiously so they don’t cause a panic.
DC: What are you doing with your own money?
JQ: We’re putting three kids through school and have almost no debt. I’m mostly in inflation protected bonds. Our biggest stock positions are GLD and SLD, the ETFs for gold and silver. I think commodities are going to skyrocket, so I’ve got the commodity ETF DBA and a few gold mining stocks. But at this point I’m a lot in cash. I think the overall market heads back to its March lows and beyond.
DC: One last question: Your perspective is Austrian, or libertarian, or Constitutional or whatever other right-wing nutcase label you prefer. That’s generally not the dominant culture of an Ivy League school. Do your bosses read your stuff, and if so, what’s their reaction?
JQ: I keep a very low profile.
WHAT I THINK......GEORGE SMITH
In 1919 a book was written that contained a brief passage about how to bring any modern society to its knees without firing a shot.
There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
At no time in college did I come close to even hearing about that passage, let alone actually reading it. The book in which it appeared was not assigned, nor was the idea of "currency debauchery" discussed in any political science or economics class. From what I’ve read of the author it is by far the most profound thought he ever penned, and one of the most important ever written. If every high school student were required to imbibe this passage as a condition of graduation, the world would likely be facing a sunnier future.
Unfortunately for the world, the author became famous for raising currency debauchery to a political and economic ideal. The teachers of today’s students, in high school and elsewhere, were trained to accept that ideal, in some cases as a condition of graduation. Debauchery – inflation – is and has been standard operating procedure of every country that boasts a currency, with the inflating done slowly, at least in the West, so people won’t notice. The only exceptions occur when those mysterious recessions arrive that require heavier doses of inflation to prevent the price level from falling. God help us if our cost of living ever declined.
Ninety years after publication of that passage, another book has arrived calling for the abolition of the world’s most respected currency debaucher, the U.S. Federal Reserve. It’s author, Ron Paul, has spent the better part of his career trying to wipe the Fed and its toxic effects off the face of the earth. His new book, End the Fed, is, as the title indicates, a death threat to the central bank. Given Paul’s popularity among libertarian activists and his congressional support for blowing the lid off Fed secrecy, the book cannot be dismissed as fanciful.
Paul’s libertarian view of the Fed brought to mind the 1950 Damon Knight short story, "To Serve Man." In that tale, aliens pay a visit to earth and claim to be man’s benefactors, telling a special session of the U.N. that they want "to bring [them] the peace and plenty which we ourselves enjoy." Two U.N. translators steal one of the aliens’ books and manage to translate the first chapter, only to discover to their horror that it’s a cookbook.
As he has done countless times, Ron Paul has translated the Fed-speak of the central bankers and its many defenders and subjected it to the rigors of free market and moral analysis. And the results are no less frightening than the aliens’ culinary recipes for mankind.
Can the Fed be reformed?
The first chapter of Paul’s 210-page book brings the curious on board by explaining why we should care about killing "the beast," as he refers to the Fed on at least one occasion. Wouldn’t it be more reasonable to push for reform? Abolishing any government creature is virtually impossible, especially one nearly a century old that serves as a pillar of the leviathan state. Isn’t a leader who calls for its abolition setting himself up for defeat?
The answer is no, for at least two reasons. One, any reform of the Fed would be pointless. Reform would imply it could exist in some condition that would be beneficial to all Americans. As a banking cartel with the license to counterfeit, there is no version of the Fed consistent with the ideas on which our welfare depends: voluntary exchange and private property. Second, abolishing the Fed is absolutely necessary if we care about freedom and civilization, because the central bank and its printing press are destroying both.
Ending the Fed, Paul writes,
[W]ould bring an end to dollar depreciation. It would take away from the government the means to fund its endless wars. It would curb the government’s attacks on the civil liberties of Americans, stop its vast debt accumulation that will be paid by future generations, and arrest its massive expansions of the welfare state that has turned us into a nation of dependents. [pp. 6–7]
One of his core beliefs is that,
Bad economic policy can destroy a civilization – no policy is more dangerous than bad monetary policy. [p. 9]
He moves on to the Fed’s fictitious history of how it was conceived as a means of curbing those injurious panics and recessions of the 19th century, and particularly the Panic of 1907. The solution to the problem of panics, said the bankers, was a more elastic currency, which is banker talk for money they could create when they wanted it. The banks also needed some institution to bail them out when they got in financial trouble. To accomplish their aims, the banking elite, together with key politicians, devised a plan for a central bank with a façade of decentralization. They called it the Federal Reserve, and it was passed into law by a depleted Congress two days before Christmas in 1913.
One Fed champion, the Comptroller of the Currency, issued a statement in 1914 that the Fed "supplies a circulating medium absolutely safe," and that all the previous panics would "seem to be mathematically impossible." He went on to say that "national-bank failures can hereafter be virtually eliminated." [p. 24] Drawing on data from the National Bureau of Economic Research, Paul shows that at least 18 "mathematically impossible" recessions have occurred since the Fed’s creation.
Later, he discusses the connection between central banking and government’s appetite for war, and how the Fed provided the bulk of the funding needed to send Americans overseas to fight in the European bloodbath of 1914–1918.
For the United States, [the "Great War"] meant the entrenchment of the imperial presidency and a globalized foreign policy mission. For Germany, it created the conditions of the great inflation, which led to Hitler . . . For Russia, it meant the beginning of Communism. [p. 66]
In a very real sense, we’re still fighting the "war to end all wars" that central banking made possible.
In a chapter called "The Current Mess," Paul discusses why the housing bubble burst and why the government’s response to it will only intensify the crisis. The suffering of housing and other sectors were "symptoms of a deeper problem: the Fed and its role in sustaining an unsustainable paper money system." [p. 124] Even Treasury secretary Timothy Geithner admitted to Charlie Rose that "easy credit" was one of "three types of broad errors of policy" that created the crisis, though as Paul’s partial transcript of their conversation reveals, Geithner didn’t name the Fed as the culprit.
The Fed created moral hazard by inducing "investors, savers, borrowers, and consumers to misjudge what was going on." Fed low interest rates created opportunities for quick profits, and competitive pressures made them virtually impossible to resist. But as Paul makes clear,
The problem isn’t with the choices made by central bankers, [such as low interest rates]. The problem is that they possess the power to make any choice at all. [p. 127]
The bursting of the housing bubble, he asserts, marks the end of a monetary era – the end of the fiat dollar reserve currency system. [p. 125]
Education is key
In his final chapters he makes the case for ending the Fed from four perspectives: philosophical, constitutional, economic, and libertarian. Simply stated, the Fed "is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty. Its destructive nature makes it a tool of tyrannical government."
Nothing good can come from the Federal Reserve. It is the biggest taxer of them all. Diluting the value of the dollar by increasing its supply is a vicious, sinister tax on the poor and middle class. [p. 141]
In the last chapter he shows us the way out: "unplug the machinery of the Fed." [p. 202]
In an ideal world, the Fed would be abolished forthwith and the money stock frozen in place. . . credit would be rooted in money saved, not money created. Congress would remove the Fed’s charter, and the president would stop appointing Fed governors." [p. 203]
Along with this, the government’s gold stock would be used to guarantee the convertibility of the dollar "at home and abroad," resurrecting the dollar’s role as the world’s preeminent hard-money currency.
But Paul doesn’t stop here. We should reconsider and ultimately reject "the entire idea of a government monopoly on money." We should repeal legal tender laws and let everyone who wants to get into the business of money production. "This would create a competitive market in which the best monies would emerge over time to compete directly with the federal government’s dollar." [p. 205]
This is the ideal world, but unfortunately not the real one. Paul does not expect a "graceful transition to sound money" for various reasons, including the powerful corporate welfare-warfare constituency that demands "financing well beyond what could be paid for through taxes or even borrowing." [p. 207]
Thus, as we work for reform, we should prepare for hyperinflation, poverty, depression, and quite possibly war, "as protectionist sentiments around the world grow." [p. 208] If there’s good news, it’s that most big government supporters are people of good faith who are misinformed. We must learn how liberty works ourselves then help educate those who do not understand. We should draw encouragement in knowing truth is on the side of liberty.
Even if you’re well-read in Ron Paul, End the Fed will provide an invigorating presentation of the problems of the central bank. Personally, I couldn’t put it down. It is an invaluable resource for any advocate of sound money and liberty.
There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
At no time in college did I come close to even hearing about that passage, let alone actually reading it. The book in which it appeared was not assigned, nor was the idea of "currency debauchery" discussed in any political science or economics class. From what I’ve read of the author it is by far the most profound thought he ever penned, and one of the most important ever written. If every high school student were required to imbibe this passage as a condition of graduation, the world would likely be facing a sunnier future.
Unfortunately for the world, the author became famous for raising currency debauchery to a political and economic ideal. The teachers of today’s students, in high school and elsewhere, were trained to accept that ideal, in some cases as a condition of graduation. Debauchery – inflation – is and has been standard operating procedure of every country that boasts a currency, with the inflating done slowly, at least in the West, so people won’t notice. The only exceptions occur when those mysterious recessions arrive that require heavier doses of inflation to prevent the price level from falling. God help us if our cost of living ever declined.
Ninety years after publication of that passage, another book has arrived calling for the abolition of the world’s most respected currency debaucher, the U.S. Federal Reserve. It’s author, Ron Paul, has spent the better part of his career trying to wipe the Fed and its toxic effects off the face of the earth. His new book, End the Fed, is, as the title indicates, a death threat to the central bank. Given Paul’s popularity among libertarian activists and his congressional support for blowing the lid off Fed secrecy, the book cannot be dismissed as fanciful.
Paul’s libertarian view of the Fed brought to mind the 1950 Damon Knight short story, "To Serve Man." In that tale, aliens pay a visit to earth and claim to be man’s benefactors, telling a special session of the U.N. that they want "to bring [them] the peace and plenty which we ourselves enjoy." Two U.N. translators steal one of the aliens’ books and manage to translate the first chapter, only to discover to their horror that it’s a cookbook.
As he has done countless times, Ron Paul has translated the Fed-speak of the central bankers and its many defenders and subjected it to the rigors of free market and moral analysis. And the results are no less frightening than the aliens’ culinary recipes for mankind.
Can the Fed be reformed?
The first chapter of Paul’s 210-page book brings the curious on board by explaining why we should care about killing "the beast," as he refers to the Fed on at least one occasion. Wouldn’t it be more reasonable to push for reform? Abolishing any government creature is virtually impossible, especially one nearly a century old that serves as a pillar of the leviathan state. Isn’t a leader who calls for its abolition setting himself up for defeat?
The answer is no, for at least two reasons. One, any reform of the Fed would be pointless. Reform would imply it could exist in some condition that would be beneficial to all Americans. As a banking cartel with the license to counterfeit, there is no version of the Fed consistent with the ideas on which our welfare depends: voluntary exchange and private property. Second, abolishing the Fed is absolutely necessary if we care about freedom and civilization, because the central bank and its printing press are destroying both.
Ending the Fed, Paul writes,
[W]ould bring an end to dollar depreciation. It would take away from the government the means to fund its endless wars. It would curb the government’s attacks on the civil liberties of Americans, stop its vast debt accumulation that will be paid by future generations, and arrest its massive expansions of the welfare state that has turned us into a nation of dependents. [pp. 6–7]
One of his core beliefs is that,
Bad economic policy can destroy a civilization – no policy is more dangerous than bad monetary policy. [p. 9]
He moves on to the Fed’s fictitious history of how it was conceived as a means of curbing those injurious panics and recessions of the 19th century, and particularly the Panic of 1907. The solution to the problem of panics, said the bankers, was a more elastic currency, which is banker talk for money they could create when they wanted it. The banks also needed some institution to bail them out when they got in financial trouble. To accomplish their aims, the banking elite, together with key politicians, devised a plan for a central bank with a façade of decentralization. They called it the Federal Reserve, and it was passed into law by a depleted Congress two days before Christmas in 1913.
One Fed champion, the Comptroller of the Currency, issued a statement in 1914 that the Fed "supplies a circulating medium absolutely safe," and that all the previous panics would "seem to be mathematically impossible." He went on to say that "national-bank failures can hereafter be virtually eliminated." [p. 24] Drawing on data from the National Bureau of Economic Research, Paul shows that at least 18 "mathematically impossible" recessions have occurred since the Fed’s creation.
Later, he discusses the connection between central banking and government’s appetite for war, and how the Fed provided the bulk of the funding needed to send Americans overseas to fight in the European bloodbath of 1914–1918.
For the United States, [the "Great War"] meant the entrenchment of the imperial presidency and a globalized foreign policy mission. For Germany, it created the conditions of the great inflation, which led to Hitler . . . For Russia, it meant the beginning of Communism. [p. 66]
In a very real sense, we’re still fighting the "war to end all wars" that central banking made possible.
In a chapter called "The Current Mess," Paul discusses why the housing bubble burst and why the government’s response to it will only intensify the crisis. The suffering of housing and other sectors were "symptoms of a deeper problem: the Fed and its role in sustaining an unsustainable paper money system." [p. 124] Even Treasury secretary Timothy Geithner admitted to Charlie Rose that "easy credit" was one of "three types of broad errors of policy" that created the crisis, though as Paul’s partial transcript of their conversation reveals, Geithner didn’t name the Fed as the culprit.
The Fed created moral hazard by inducing "investors, savers, borrowers, and consumers to misjudge what was going on." Fed low interest rates created opportunities for quick profits, and competitive pressures made them virtually impossible to resist. But as Paul makes clear,
The problem isn’t with the choices made by central bankers, [such as low interest rates]. The problem is that they possess the power to make any choice at all. [p. 127]
The bursting of the housing bubble, he asserts, marks the end of a monetary era – the end of the fiat dollar reserve currency system. [p. 125]
Education is key
In his final chapters he makes the case for ending the Fed from four perspectives: philosophical, constitutional, economic, and libertarian. Simply stated, the Fed "is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty. Its destructive nature makes it a tool of tyrannical government."
Nothing good can come from the Federal Reserve. It is the biggest taxer of them all. Diluting the value of the dollar by increasing its supply is a vicious, sinister tax on the poor and middle class. [p. 141]
In the last chapter he shows us the way out: "unplug the machinery of the Fed." [p. 202]
In an ideal world, the Fed would be abolished forthwith and the money stock frozen in place. . . credit would be rooted in money saved, not money created. Congress would remove the Fed’s charter, and the president would stop appointing Fed governors." [p. 203]
Along with this, the government’s gold stock would be used to guarantee the convertibility of the dollar "at home and abroad," resurrecting the dollar’s role as the world’s preeminent hard-money currency.
But Paul doesn’t stop here. We should reconsider and ultimately reject "the entire idea of a government monopoly on money." We should repeal legal tender laws and let everyone who wants to get into the business of money production. "This would create a competitive market in which the best monies would emerge over time to compete directly with the federal government’s dollar." [p. 205]
This is the ideal world, but unfortunately not the real one. Paul does not expect a "graceful transition to sound money" for various reasons, including the powerful corporate welfare-warfare constituency that demands "financing well beyond what could be paid for through taxes or even borrowing." [p. 207]
Thus, as we work for reform, we should prepare for hyperinflation, poverty, depression, and quite possibly war, "as protectionist sentiments around the world grow." [p. 208] If there’s good news, it’s that most big government supporters are people of good faith who are misinformed. We must learn how liberty works ourselves then help educate those who do not understand. We should draw encouragement in knowing truth is on the side of liberty.
Even if you’re well-read in Ron Paul, End the Fed will provide an invigorating presentation of the problems of the central bank. Personally, I couldn’t put it down. It is an invaluable resource for any advocate of sound money and liberty.
Tuesday
THE FED'S INTERESTING WEEK
It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible economist, and scare any American concerned about the value of the dollar. However, these highly sensitive decisions about our money are not made by economists, they are made by politicians. Bernanke, like most of his predecessors, is the politician’s best friend. However, there is no reason to believe any other central planner would behave any differently, considering the immense political pressure on the Fed.
Fed policies have been as bad for the economy as they are good for politicians and bankers, as the recently released numbers on the debt and deficit demonstrate. For the first time since World War II the annual budget deficit is projected to be over 11 percent of the nation’s gross domestic product. It is also projected that by 2019 the national debt will be 68�f GDP. Our path, if unchanged, is completely untenable.
The administration claims that it inherited a dire situation from the last administration, which is absolutely true. However, that hasn’t stopped them from accepting all the policies and premises that got us here, and accelerating those policies to rapidly make a bad situation much worse. The bailouts started with the last administration. They have gotten bigger with this one. The last administration gave us expanded government involvement in healthcare with a new prescription drug benefit. This administration gave us a renewal and expansion of SCHIP, and now the current healthcare takeover attempts. In reality, we can afford none of this, but shady monetary policy allows Washington to continue along its merry way, aggravating all our economic problems.
Not everyone in government finds it acceptable that the Fed wields so much power and privilege in secrecy. Last week, a federal judge ruled against Fed secrecy, compelling them to release under the Freedom of Information Act information regarding which banks received emergency loans, and under what terms. The Fed will, of course do everything in its power to fight this ruling and it is certainly not the last word on the issue. Still, it is encouraging to see that the interests of the taxpayers were defended victoriously in court, while the Fed only sees the plight of its big banker friends.
Meanwhile HR 1207 and S604, legislation to open up the Fed’s books to a complete audit, continue to gain momentum in Congress as the people continue to insist on real transparency of the Federal Reserve. One way or another, the days of Fed autonomy are coming to an end, as well they should. No one should have the power to debauch the currency and gut the economy as they do. It is time they answered for their actions, so the people can understand that we truly are better off with freedom instead of Fed tyranny.
Fed policies have been as bad for the economy as they are good for politicians and bankers, as the recently released numbers on the debt and deficit demonstrate. For the first time since World War II the annual budget deficit is projected to be over 11 percent of the nation’s gross domestic product. It is also projected that by 2019 the national debt will be 68�f GDP. Our path, if unchanged, is completely untenable.
The administration claims that it inherited a dire situation from the last administration, which is absolutely true. However, that hasn’t stopped them from accepting all the policies and premises that got us here, and accelerating those policies to rapidly make a bad situation much worse. The bailouts started with the last administration. They have gotten bigger with this one. The last administration gave us expanded government involvement in healthcare with a new prescription drug benefit. This administration gave us a renewal and expansion of SCHIP, and now the current healthcare takeover attempts. In reality, we can afford none of this, but shady monetary policy allows Washington to continue along its merry way, aggravating all our economic problems.
Not everyone in government finds it acceptable that the Fed wields so much power and privilege in secrecy. Last week, a federal judge ruled against Fed secrecy, compelling them to release under the Freedom of Information Act information regarding which banks received emergency loans, and under what terms. The Fed will, of course do everything in its power to fight this ruling and it is certainly not the last word on the issue. Still, it is encouraging to see that the interests of the taxpayers were defended victoriously in court, while the Fed only sees the plight of its big banker friends.
Meanwhile HR 1207 and S604, legislation to open up the Fed’s books to a complete audit, continue to gain momentum in Congress as the people continue to insist on real transparency of the Federal Reserve. One way or another, the days of Fed autonomy are coming to an end, as well they should. No one should have the power to debauch the currency and gut the economy as they do. It is time they answered for their actions, so the people can understand that we truly are better off with freedom instead of Fed tyranny.
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