Conza88
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If monetary inflation merely raised prices, and all prices and labor costs moved up at the same rate, and it did not cause disequilibrium in the market, it would be of little consequence. But inflation is far more than rising prices. Creating money out of thin air is morally equivalent to counterfeiting. It’s fraud and theft, because it steals purchasing power from the savers and those on fixed incomes.
People who worked hard and saved, the retired, and others on fixed incomes, are robbed, just as surely as if an armed criminal mugged them on the street. The very people who should be rewarded for their effort in caring for themselves are the ones hurt the most.
Morally, inflation is not different from the private counterfeiter printing up notes in his basement, and buying goods and services with them. Everyone sees this as stealing—fraudulently exchanging something worthless for something valuable. And this is exactly what the government does through inflation. If a private counterfeiter were never caught, his counterfeiting would “stimulate” the economy as much as the government’s.
We fail to use one particular word often enough in describing the inflation fraud. That word is debasement. It is to the debasement of the dollar that we should direct our attention, not to the price levels that merely reflect the debasement. Webster defines debase as:loss of soundness, purity, and integrity through forces that break down, pollute, or destroy; to reduce from a high quality, purity, worth, and value to a lower one; to corrupt, to debauch; moral deterioration by evil influence. A more descriptive explanation of what we have done to our money could not be given.To debase the currency is to inflate it. To inflate the currency is to distend, swell, and expand the money supply, and thereby destroy its value. To destroy the currency is to undermine and attack freedom. Without a sound and honest money, a free society cannot long exist.
If we accept the notion that government should not exert unjust force on any person, that no one should be made a slave to another, and that the fraud of paper money must be outlawed, this tragedy will be averted.
But eventually trust is always withdrawn from paper money. Fiat money evolves out of sound money, which always originates in the market. But paper money inevitably fails no matter how hard the beneficiaries try to perpetuate the fraud.
History and economic law are on the side of the gold. Paper money always fails. Unfortunately, though, this occurs only after many innocent people have suffered the consequences of the fraud that paper money represents. Monetary inflation is a hidden tax levied more on the poor and those on fixed incomes than the wealthy, the bankers, or the corporations.
When the government can replicate the monetary unit at will without regard to cost, whether it’s paper currency or a computer entry, it’s morally identical to the counterfeiter who illegally prints currency. Both ways, it’s fraud.
It works in collaboration with the banking system, where not only can the Federal Reserve create money and credit out of thin air and manipulate interest rates, it also works closely with the banks through the fractional reserve banking system that allows the money supply to expand. This is the source of a lot of mischief and a lot of problems, and if we in the Congress could ever get around to understanding this issue, we might be able to do something about the lowering standard of living which many Americans are now suffering from.
However, the primary beneficiaries of legal tender laws are financial institutions, especially banks, which have been improperly granted the special privilege of creating fiat irredeemable electronic money out of thin air through a process commonly called fractional reserve lending. According to the Federal Reserve, since 1950 these private companies (banks) have created almost $8 trillion out of nothing. This has been enormously advantageous to them.
The advantages given banks and other financial institutions by our fiat monetary system, which is built on a foundation of legal tender laws, allow them to realize revenues that would not be available to these institutions in a free market. This represents legalized plunder of ordinary people. Legal tender laws thus enable the redistribution of wealth from those who produce it, mostly ordinary working people, to those who create and move around our irredeemable paper-ticket electronic money which is, in essence, just scrip.
As the dollars circulate through our fractional reserve banking system, they expand many times over.
The number of dollars created by the Federal Reserve, and through the fractional reserve banking system, is crucial in determining how the market assesses the relationship of the dollar and gold. Though there’s a strong correlation, it’s not instantaneous or perfectly predictable. There are many variables to consider, but in the long term the dollar price of gold represents past inflation of the money supply. Equally important, it represents the anticipation of how much new money will be created in the future. This introduces the factor of trust and confidence in our monetary authorities and our politicians. And these days the American people are casting a vote of “no confidence” in this regard, and for good reasons.
The expansion of credit is one of the primary forms of inflation. It is not merely inflationary in its effects; it is inflation itself. If this $1.5 billion is created by the federal government, it will ripple and percolate through our banking system, and because of our fractional reserve system, the ultimate growth in the money supply will be far more than $1.5 billion. The standard multiplier is six; that means an infusion of $1.5 billion will eventually result in a $9 billion increase in the money supply.
Printing money, which is literally inflation, is nothing more than a sinister and evil form of hidden taxation.
The moral issue regarding money should be the easiest to understand, but almost no one in Washington thinks of money in these terms. Although there is a growing and deserved distrust in government per se, trust in money and the Federal Reserve’s ability to manage it remains strong. No one would welcome a counterfeiter to town, yet this same authority is blindly given to our central bank without any serious oversight by the Congress.
Just as empires are self-limiting in terms of money and manpower, so too is a monetary system based on illusion and fraud.
There is no economic or moral justification for giving special privilege to big bankers over the rest of business or industry. They should be subject to competition in the free market, and the legal constraints against fraud, like everyone else.
Samuel Johnson in the Rambler said that this attempt to create wealth without effort was, "the reigning error of mankind." Attaining wealth and a decent standard of living by mysticism, deceit, or fraud cannot work in the future and never has worked in the past.
The answer to the monetary dilemma is to have a non-fraudulent, 100 percent reserve, gold-coin standard.
The belief by most that the corrective action needed to stop inflation will cause pain and suffering prompts the delay in making the needed exchanges. It must be realized that if inflation is stopped swiftly and completely, suffering will be minimal. But this suffering must be blamed on the inflation, and not on those making the difficult decisions to stop the fraud.
The answer -- for those who challenge gold as archaic -- is that inflation is archaic. Throughout history kings have debased the metals in order to inflate. Fraud associated with money is an ancient tradition. A non-fraudulent commodity money is one of the most modern freedom ideas known to man. It is the fear of change and a clinging to the past that compels men to reject gold and endorse inflation.
A free society must incorporate a precise understanding of the nature of
money. If we do not understand the close connection between liberty and money, we will help to perpetuate the greatest fraud in the history of man-today's worldwide debasement of the monetary system.
The warehouse receipts of the goldsmiths soon came to be used as a surrogate for the gold itself. By the end of the Civil War, in the 1660s, the goldsmiths fell prey to the temptation to print pseudo-warehouse receipts not covered by gold and lend them out; in this way fractional-reserve banking came to England.12
12 Once again, ancient China pioneered in deposit banking, as well as in fractional reserve banking. Deposit banking per se began in the 8th century A.D., when shops would accept valuables, in return for warehouse receipts, and receive a fee for keeping them safe. After a while, the deposit receipts of these shops began to circulate as money. Finally, after two centuries, the shops began to issue and lend out more receipts than they had on deposit; they had caught on to fractional reserve banking. (Tullock, "Paper Money," p. 396.)
Out of the bitter experiences of the Panic of 1819 emerged the beginnings of the Jacksonian movement, dedicated to hard money, the eradication of fractional-reserve banking in general, and of the Bank of the United States in particular.
Andrew Jackson himself, Senator Thomas Hart ("Old Bullion") Benton of Missouri, future President James K. Polk of Tennessee, and Jacksonian economists Amos Kendall of Kentucky and Condy Raguet of Philadelphia, were all converted to hard money and 100 percent reserve banking by the experience of the Panic of 1819.M
In the monetary sphere, this meant the separation of government from the banking system and a shift from inflationary paper money and fractional-reserve banking to pure specie and banks confined to 100 percent reserves.
The first important step was to abolish central banking, in the Jacksonian view the major inflationary culprit. The object was not to eliminate the BUS in order to free the state banks for inflationary expansion, but, on the contrary, to eliminate the major source of inflation before proceeding, on the state level, to get rid of fractional reserve banking.
Instead, they simply increased their money issues proportionately with the huge increase of specie. Of course, the basic fractional reserve banking system is scarcely absolved from responsibility, since otherwise the monetary expansion in absolute terms would not have been as great.76
The Democratic drive was toward the outlawry of all fractional reserve bank paper.
But the most pernicious aspect of "free" banking was that the expansion of bank notes and deposits was directly tied to the amount of state government securities which the bank had invested in and posted as bond with the state.
From our historical analysis, it becomes clear that the problems of money and the business cycle under the gold standard, of inflation and contraction in the 1818-36 era, of World War I inflation, of the boom of the 1920s and the disasters of the Great Depression of 1929-33, stemmed not from the gold standard but from the inflationary fractional- reserve banking system within it. This inflationary banking system was made possible by the government's imposition of a central bank: the Federal Reserve, the Bank of the United States, or by the quasi-centralized system of the national banking era after the Civil War.
Fractional reserves, wildcat banking, the National Banking System, and the issuance of greenbacks all contributed to the instability experienced during the 19th century.
Inflation, being the increase in the supply of money and credit, can only be brought about in an irredeemable paper system by money managers who create money through fractional reserve banking, computer entries, or the printing press. Inflation bestows no benefits on society, makes no new wealth, and creates great harm; and the instigators, whether acting deliberately or not, perform an immoral act. The general welfare of the nation is not promoted by inflation, and great suffering results.
In chapters two and three, we demonstrated the disruptive effects fractional reserve banking has caused in the United States. Since we still suffer with that system, it is imperative that a fundamental reform of it be made. That reform is simply that all promises to pay on demand, whether made in the form of notes or deposits, be backed 100 percent by whatever is promised, be it silver, gold, or watermelons. If there is any failure to carry 100 percent reserves or to make delivery when demanded, such persons or institutions would be subject to severe penalties. The fractional reserve system has created the business cycle, and if that is to be eliminated, its cause must be also.
YouTube - Ron Paul Madoff "Irrelevant SEC + Congress + Moral Hazard + US Gov't Ponzi Schemes"
"FRB is a ponzi scheme."
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