Issue: Economic: Monetary Policy

[jon_perez]

If you can find it, take the time to watch "Money Masters - How International Bankers Gained Control of Our Economy".

Although it rehashes the same stories re the Federal Reserve's origins and purposes that conspiracy theorists love to trot out, the attitude and prescription is thoroughly different and is refreshingly free from hysteria and paranoia. The interesting twist here is that it makes a good case as to why moving back to a gold standard may NOT be a good idea and may be a reactionary mistake.

It's a VERY long documentary at 3 hours plus, and you can just jump to 3:00:00 to hear about their version of monetary reform.

 

[jon_perez]

Interesting quote from the video at 3:30:00 Beware of calls for a return to a gold standard.

I wonder if Ron Paul has viewed this video and what his comments on it would be.

 

[Broadlighter]

I saw the movie. Highly enlightening. I also did a double-take on their proscription that we do not return to a gold or silver standard. The Bank of England applied fractional reserve lending with a gold standard and that didn't make the situation any better.

The problem as illustrated in the Money Masters was not fiat currency, but fractional reserve banking - the lending of more money than exists on deposit. We can have a fiat currency as long as it's not tied to debt obligations. The problem with a Gold standard is that the gold can always be confiscated by government decree and that is more likely to happen when there is debt involved.

 

[Bradley in DC]

The goals of the Money Masters are not ours, and Dr. Paul's are not theirs.

 

[Mesogen]

I saw the Money Masters before I heard of Ron Paul (which was about 2 years ago).

When I started paying attention to what Ron Paul had to say about the Federal Reserve, I thought, "wow this guy gets it."

Then I heard Paul say he wanted a gold standard and I had to think twice about that, since the people in the movie made a hell of a lot of sense.

But, I think commodity based money wouldn't change a thing as long as fractional reserve banking is practiced.

Don't forget to watch this little video too.

I think a lot of people here have seen it.

Money as Debt
http://video.google.com/videoplay?docid=-9050474362583451279

 

[Ponce]

Gold standard.......... one oz of gold would have to be $63,739 and it would have to increase at the rate of $5.24 per day in order to keep up with the Fed.

 

[jon_perez]

The problem as illustrated in the Money Masters was not fiat currency, but fractional reserve banking - the lending of more money than exists on deposit. We can have a fiat currency as long as it's not tied to debt obligations. The problem with a Gold standard is that the gold can always be confiscated by government decree and that is more likely to happen when there is debt involved.

The way I understand it, the main reason the documentary advises against a gold standard is not because it is a bad idea per se, but mainly because it is believed that so much gold is ostensibly in unknown hands. It does not have as much of a problem with a silver standard, but it also tries to convince us that a fiat currency is not necessarily an evil.

What the documentary does not mention is that the Lincoln greenbacks that it praises so much was historically also overprinted and led to hyperinflation.

 

[Man from La Mancha]

Gold standard.......... one oz of gold would have to be $63,739 and it would have to increase at the rate of $5.24 per day in order to keep up with the Fed.

I would very much like to read where you got that amount. Please include the book or the link. Thank you

 

[Ponce]

I'll try to find it once again ....... it was on line from one of the many sites that I read every day...... going to the club to play some Texas Holdem, ciao amici.

Come to think about it, I believe that it was $36,800 and not $63.000 but the $5.15 per day is right.

 

[LibertyOfOne]

I think some are under the false illusion that a fiat currency not matter how it's done is bad. Which is inherently wrong. You need to adjust the money supply with the growth of the economy or else you get deflation which leads to shortages. Economic growth without an expansion in the money supply you start to run into problems being that there is not enough currency to properly represent the goods and capital of an economy. You need just enough currency to facilitate the exchange of goods and services. Not to little, not too much, in order for it to work fairly it needs to be just right.

 

[Jive Dadson]

I think some are under the false illusion that a fiat currency not matter how it's done is bad. Which is inherently wrong. You need to adjust the money supply with the growth of the economy or else you get deflation which leads to shortages. Economic growth without an expansion in the money supply you start to run into problems being that there is not enough currency to properly represent the goods and capital of an economy. You need just enough currency to facilitate the exchange of goods and services. Not to little, not too much, in order for it to work fairly it needs to be just right.

For fiat currency to "work", you need two things: 1) income taxes or some other payments that the government can demand must be paid with the currency 2) honest people to control the money supply. I do not want the first. How can we be sure of the second?

 

[LibertyOfOne]

You don't need an income tax for that. If the government wanted to take money out of the supply it could call in loans. If it wanted to add money to the supply it could issue grants. You don't need government for a currency anyways if it is a matter of trust. In a free market you could choose the currency you want. Someone would complain about having to change from one currency to the next, but with freedom you have to give up convenience.

 

[Bradley in DC]

I think some are under the false illusion that a fiat currency not matter how it's done is bad. Which is inherently wrong. You need to adjust the money supply with the growth of the economy or else you get deflation which leads to shortages. Economic growth without an expansion in the money supply you start to run into problems being that there is not enough currency to properly represent the goods and capital of an economy. You need just enough currency to facilitate the exchange of goods and services. Not to little, not too much, in order for it to work fairly it needs to be just right.

Without artificial interference (government manipulation), prices would naturally fall gently over time with increased efficiencies, etc. So long as prices set freely by the market, we don't need to adjust anything. The manipulation of the pricing mechanism is the principle cause of the boom and bust cycles. See Hayek's Prices and Production among many other sources.

 

[Brandybuck]

I saw the movie. Highly enlightening. I also did a double-take on their proscription that we do not return to a gold or silver standard. The Bank of England applied fractional reserve lending with a gold standard and that didn't make the situation any better.

But it is impossible to go to a universal gold standard *without* fractional reserve banking. Why? Because there simply isn't enough gold in the world to accomplish it. If the government mandated a non-fractional gold standard for all transactions, you would have a massive shortage of money leading immediately to a massive deflation. You can have a gold standard, you just can't make it the only standard.

The best solution is a free market in money. This will be crucial as we move ever closer to ubiquitous electronic online transactions.

 

[jon_perez]

Personally, even after watching movies like the Money Masters and Freedom to Fascism, I'm far from convinced that the Federal Reserve is bad. The "income tax is not supported by the law or constitution" issue I mostly buy, but the "Federal Reserve earns interest on lending money to the government" accusation seems to be untrue. According to sites like these -> http://www.geocities.com/CapitolHill/Senate/3616/FedReserveFacts.html and http://www.geocities.com/CapitolHill/Senate/3616/flaherty7.html

"The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury."

 

[fsk]

"The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury."

The Federal Reserve's open market transactions have never been audited, so how can you know what the Federal Reserve's true earnings are? They could use tricks to inflate or deflate their earnings.

The point is not the Federal Reserve's earnings. The point is the massive subsidy to the financial industry in the form of inflation. That's what's really hurting the average American. All profit to be gained by printing new money belongs to the people, not to the financial industry.

 

[rpf2008]

To me the bottom line is this : most regular politicans continue to tell us everything is ok, go back to sleep

Everything is NOT ok. Our country is run by corporations and most average Americans know this.

They are telling you lies !

 

[jon_perez]

To me the bottom line is this : most regular politicans continue to tell us everything is ok, go back to sleep

Everything is NOT ok. Our country is run by corporations and most average Americans know this.

They are telling you lies !

But corporations are, in turn, owned in large part by "average Americans" (in the form of shares ownership). It is up to average Americans to leverage that ownership into whatever societal change they want to see. No, it won't be easy. The profit motive drives everyone and most of the changes people say they want to see run counter to the former. You can't have it both ways.


When people rant against so-called "big, faceless corporations", what do they have in mind? Most of them seem to want government to stand up to these, but if you look at Ron Paul's platform, he actually wants the opposite, he wants government to STOP interfering with business (as well as to stop *subsidizing* them).

If you were to ask Ron Paul whether Microsoft should be broken up, his answer would most likely be no. Ron Paul is anti-state, not anti-business/anti-corporation (those 2 are the same, in case you didn't realize).

 

[Bradley in DC]

"The Federal Reserve rebates its net earnings to the Treasury every year. Consequently, the interest the Treasury pays to the Fed is returned, so the money borrowed from the Fed has no net interest obligation for the Treasury."

While that statement is true, you need to understand the context: the Fed determines how much it wants to spend on itself and then returns the scraps to the Treasury.

 

[Wyurm]

I completely fail to see how anyone could rationalize out how money that is based on debt could be a good thing. There are alot of things that influence the economy, but having debt-based currency only adds more risks to the equation.

As for gold and/or silver backed currencies vs. fiat currency: Why not have both? If you prefer a fiat currency, the government could print a strictly fiat currency and private companies could compete with the fiat currency by selling an asset backed currency. After all, this is what RP has already said would most likely happen. He would most likely have to keep the Fed for a while, but legalize competition. Personally, I'm sticking with asset backed currency.