Monday, December 14, 2009

Ron Paul's Texas Straight Talk - 12/14/2009

Texas Straight Talk
A weekly column

The Fed's Money Monopoly

Last week, in the name of protecting the little guy from Wall Street, the House passed HR 4173 to increase the little guy’s false sense of security in the financial system. This mammoth piece of legislation would massively increase government regulation and oversight in the banking industry under the misguided reasoning that more government could have stopped faulty lending practices, when in actuality it caused them. This bill would also greatly increase the powers of the Federal Reserve, which too many in Congress still see as savior rather than perpetrator in this mess.

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Posted by Ron Paul (12-14-2009, 12:14 PM) filed under Monetary Policy


  1. we will not see anything like an inflation that will see "the purchasing power of an entire life savings reduced to that of a few pennies" anytime soon because the money the Fed has "created" isnt making it to main street consumers who would drive up the price of purchased goods; indeed, consumer credit is rapidly shrinking, reducing the money supply on the street...what we are seeing as the result of the Feds "quantitative easing" is a bubble is in commodities & and financial assets where that money is going...its essentially the same thing they did with the housing market with their easy money policy during the early part of this decade...

  2. I do not see mass inflation any time soon. on the contrary. People are dealing again for goods and services. They are unloading what they have. Not much new merchandise is in the pipeline. The dollar will start tanking more,once the other economies start rising. S/Korea is already out of their recession.

  3. Ron Paul is Looney Tunes if he thinks that removing the Legal Tender status of our currency wouldn't create massive problems in the economy.

    It would be good for the Credit Card companies because they charge fees for currency conversion.

  4. exerpt of The Treasury’s Monetary Policy - ... today Treasury bills are not just more like money than like other assets; from a portfolio point of view, on the margin of new issuance, Treasury bills are exactly like money. Holders of short-term Treasury bills are willing to hold them without receiving interest. Issuing more short-term Treasury bills will have exactly the same effect as issuing more money, since people are indifferent between the two. For practical purposes, as long as their interest rate remains at zero, short-term Treasury bills are part of the money stock. A Treasury bill is a million-dollar bill in the same sense that a Federal Reserve note with Abraham Lincoln on it is a five-dollar bill. Conventional monetary policy, which exchanges money for Treasury bills, is ineffective because it is no policy at all: it simply exchanges one form of money for another. To put it another way, since the Treasury can issue bills that are exactly like money, it is now the Treasury that is in charge of monetary policy...

  5. Bernanke Endorses Limited Audits of Emergency Fed - Federal Reserve Chairman Ben Bernanke, in written responses to lawmakers this month, maintained that he’s open to congressional audits of the central bank’s emergency lending programs.But he said the reviews should be narrowly tailored to avoid probing the Fed’s monetary policy decisions.”A review of the operational integrity of these facilities could be structured so as not to involve a review of the monetary policy aspects of the facility, such as the decision to begin or end the facility or the choices made regarding, the structure, scope, design, or terms of the facility,” he wrote to lawmakers including Sens. Jeff Merkley (D., Ore.) and David Vitter (R., La.) in response to written questions tied to his confirmation. (Read responses to Sens. Merkley and Vitter.)

  6. flunked, you're thinking in terms of the paradigm that we've been led to believe that the current fiat money system is sound and viable. It's not. Also, as defined in the Constitution, it's not even legal. Only Congress has the authority to coin money and determine the value thereof, and the various states can make no such thing money other than gold or silver. Those portions of the Bill of Rights have never been amended. But we've accepted the concept because we've grown up in an era that since 1933 has only had fiat money and few have ever questioned it.

    Credit card companies would not profit from the repeal of thse laws. In fact, they would probably all go bust since their ability to lend like they do is predicated on the ability of the Fed and the fractional banking system to create more money than can be supported by the lack of backing, other than pure faith and the ability to issue debt for dollars, back it with a diminishing commodity (oil) that requires a great deal of enforcement action, tax the American people and enforce the value of the dollar by military force. (see )

    So, in one respect I believe you are absolutely correct; removing Legal Tender laws would indeed have a significant impact on the economy. But the impact will come anyway, whether it happens or not. The current system is unsustainable and will collapse under it's own weight. These types of monetary systems always have throughout recorded history, and the Empires that relied on the have gone right along with them.

    What makes us believe that people are smarter now than before, and that "things are different now"?

  7. tburcher,

    There is not a single currency in the world that is not a fiat currency.

    In order to prevent deflation, the stockpile of gold would have to grow in step with the population. We as a society cannot afford to stockpile things which have practical uses.

    The Credit Card companies can raise funds for lending using a variety of methods. And what makes you think Fractional Banking would go away?

  8. Flunked, true, fiat money is used all over the world. There actually is one country, albeit teeny, that is still on PMs as their currency base. The name escapes me right now, somewhere in the Channel Islands I believe it is, but I do know that they have absolutely no debt; they print interest free money backed by gold.

    Your point is well taken never the less. Fractional baking may not go out of style completely, but with the abuses the investment banks have done have created a great deal of damage as they leveraged out over 40:1.

    Gold can always be stockpiled, for it has really few other practical uses that cannot be fulfilled by other metals. The scant amount used in electronics that have no other good substitute is minor, and all of that metal is easily recycled, which actually has created another industry to do so. Deflation might initially occur, but with the desire to increase the money supply there will also come more industries that will look for ways to find more PMs. This may be considered bad for the environment, but I think that with prudent mining practices that the impact can be minimized.

    As a side issue, population growth is [becoming, or already is?] a runaway train. The arguments for why are many, as are the solutions. I know full well that the Earth cannot for an extended period reasonably support the current population, let alone the projected growth. Therefore the increase in gold supply needed might be a moot point. Certainly we could feed us all just with what the US alone is capable of producing, but it is not possible to expect everyone to obtain the same standard of living that the "developed" nations enjoy when we consume 25% of the world's resources to satisfy 5% of the population. The simple math shows that we would all have to substantially reduce our standard of living in order to accomplish that goal, or find a technological solution far more advanced than what we have today. Maybe it will come, and I hope so for the alternative is not an acceptable option.

    I don't think that you and I will ever agree on this subject, since our beliefs and theories about what is money and how the economy works don't coincide. I totally get where you're coming from as I once believed the same money and economic theories and policies. Over time I have seen the results of those take an enormous toll on the US economy and the wealth of its people and can no longer abide by them.

    A wiser man than I, a writer by trade, wrote a line in one of his books concerning when the main character was confronted with another character that believed that something couldn't be true because it was not possible, but in fact did exist, and that line has stuck with me. The main character said 'Perhaps it's because they have other theories'. I have made it a point to explore those other theories.

    Why is Ron Paul considered a nutcase, a conspiracy theorist? Because he's pointing out that the emperor has no clothes, and the Corporate Party cannot allow that. It's easier and more effective to ridicule and marginalize the opposition than to fight them, and they know it.