I engage in conversation on another political/religious message board. Some are hostile to RP message, others are open but skeptical. Most are very intelligent and very well informed. Below is a sample of a reply regarding a conversation on sound money. Can anyone here help me answer? Please don't direct me to videos or other websites unless the presentation is succinct enough to put into a reply. If you know about this stuff and can actually present what a system operated with commodity backed money would look like, or if you think anything in the below comment needs refuting, then please reply here. Thanks.
From the MessageBoard
"Sound money" is simply a currency that is managed so as to avoid excessive inflation. Now, if you want to argue that 1.5-3.5% annual inflation (as we've had the last decade) is excessive, then I'm willing to listen. But I think that targeting the Federal Reserve as a problem is misguided.
First, there are inflationary contributors to the economy that have nothing to do with money supply, and everything to do with the free market. Just look at fuel prices and the economic impact it has on the cost of goods and services. Goods such as food, housing costs (heating, electricity), and services such as healthcare, are everyday expenses that have the highest impact on the poor and middle class, but have little correlation to monetary policy, and more toward supply/demand volatility.
Second, the Fed doesn't "create" money (print), the Treasury does. The Fed simply manages liquidity in the marketplace by altering reserve requirements and setting the Fed Funds rate for banks. Their objective is to stay within ranges of acceptable short term interest rates, which is their most efficient real time benchmark of inflationary pressures. They are also mandated to follow policies that encourage maximum employment and economic growth. I may not always agree with their decisions in fulfilling their mandate, and perhaps that's RP's complaint, but I don't disagree with their objectives. It's interesting, because most economists would tell you that the Fed is a lagging influence versus a leading influence. Other than short term interest rates, it takes months to assemble wide ranging economic data to make decisions on. Just look at the stock and bond speculation that goes on leading up to Board of Governors meetings.
Finally, the biggest pressure on our economy is the deficit spending of our federal government. The spending is so out of control and large that both Greenspan and Bernanke have continually warned Congress that it is creating economic influences that may exceed the ability of the Fed to effectively manage monetary policy according to it's mandated objectives. But the Fed doesn't create the debt, the US Treasury does. Blaming the Fed in this process is like blaming your stock broker for the performance of the Dow.
The answer to the problem at hand is well known to all, but the political courage to do what is necessary isn't there. Cutting government spending to a level required to not only reverse current trends, but to make a dent in the deficit we've accumulated requires tough decisions that don't always support electability. I actually believe Ron Paul believes in a policy of cutting spending significantly. I just think his method of approach, ala limiting money supply, is economically detrimental and unnecessary when simple good leadership and legislation will acheive the objective.
P.S. I agree with you that if anything, Ron Paul has brought greater attention to certain economic issues that certainly get overlooked in most elections. Kudos to him for that, and I hope the American population in general is listening to the debate."
From the MessageBoard
"Sound money" is simply a currency that is managed so as to avoid excessive inflation. Now, if you want to argue that 1.5-3.5% annual inflation (as we've had the last decade) is excessive, then I'm willing to listen. But I think that targeting the Federal Reserve as a problem is misguided.
First, there are inflationary contributors to the economy that have nothing to do with money supply, and everything to do with the free market. Just look at fuel prices and the economic impact it has on the cost of goods and services. Goods such as food, housing costs (heating, electricity), and services such as healthcare, are everyday expenses that have the highest impact on the poor and middle class, but have little correlation to monetary policy, and more toward supply/demand volatility.
Second, the Fed doesn't "create" money (print), the Treasury does. The Fed simply manages liquidity in the marketplace by altering reserve requirements and setting the Fed Funds rate for banks. Their objective is to stay within ranges of acceptable short term interest rates, which is their most efficient real time benchmark of inflationary pressures. They are also mandated to follow policies that encourage maximum employment and economic growth. I may not always agree with their decisions in fulfilling their mandate, and perhaps that's RP's complaint, but I don't disagree with their objectives. It's interesting, because most economists would tell you that the Fed is a lagging influence versus a leading influence. Other than short term interest rates, it takes months to assemble wide ranging economic data to make decisions on. Just look at the stock and bond speculation that goes on leading up to Board of Governors meetings.
Finally, the biggest pressure on our economy is the deficit spending of our federal government. The spending is so out of control and large that both Greenspan and Bernanke have continually warned Congress that it is creating economic influences that may exceed the ability of the Fed to effectively manage monetary policy according to it's mandated objectives. But the Fed doesn't create the debt, the US Treasury does. Blaming the Fed in this process is like blaming your stock broker for the performance of the Dow.
The answer to the problem at hand is well known to all, but the political courage to do what is necessary isn't there. Cutting government spending to a level required to not only reverse current trends, but to make a dent in the deficit we've accumulated requires tough decisions that don't always support electability. I actually believe Ron Paul believes in a policy of cutting spending significantly. I just think his method of approach, ala limiting money supply, is economically detrimental and unnecessary when simple good leadership and legislation will acheive the objective.
P.S. I agree with you that if anything, Ron Paul has brought greater attention to certain economic issues that certainly get overlooked in most elections. Kudos to him for that, and I hope the American population in general is listening to the debate."
