Second Great Depression or Dr. Pauls Sound Money Policy

[jdrochon]

Dr. Paul is so right in promoting sound money.
Because of the banks fractional Reserve Lending policy, the $400 Billion subrime crisis is translating into a $4 trillion Credit crunch.
I'll explain.
The commercial banks are able (through the fractional reserve banking system) lend out approximatly 10 times more money then they have on deposit thus creating money (out of thin air). Money owed to the bank is considered an asset and under the fractional reserve lending rules set forth by the Federal Reserve this is perfectly legal. For every $100,000 dollars they have on deposit they can loan $1 million. This flowed into many assets including money loaned out to those of a sub prime risk.
So for every $100,000 worth of defaulting debt, it effectivly destroys $1 million worth of available credit. Hence the credit crunch.
Welcome to the next Great Depression.

Following the advice of Dr. Paul and his sound money policy founded through his study of Austrian Economics is the only way to reverse this is my opinion. Even if we began now, we are in for some hard times. Ron Paul President 2008

 

[OptionsTrader]

I saw the thread title and expected a Colbertism:

"The Second Great Depression, or the Greatest Depression"

 

[jdrochon]

It's by design.

 

[GravitysRainbow]

I'm sick of fiat loons going on about how a gold standard would trigger cyclical depressions.

A depression is another name for a correction. That's how economies fix themselves. It's the same way the market fixes bad products. A bunch of people die from taking bad medicine, the word gets out, people stop buying it, and the company stops selling it.

Corrections are *good*. When will the orthodox economistas get this through their heads? Yes, it will be bad for a while, but in the long run, things will return to normal.

 

[han_solo]

I read some interesting history about the gold standard....apparently one of the main reasons we got away from it was that farmers in the midwest around the turn of the century hated it because it caused deflation and made their cops too cheap to make a profit. Poor people felt that the gold standard allowed rich people to take advantage of their hard work and devalue their money.

There was a very popular 3rd party that had this as a big part of their platform...eventually the democratic party took over most of their issues and they disappeared.
http://en.wikipedia.org/wiki/Populist_Party_(United_States)

http://www.socialstudieshelp.com/Lesson_51_Notes.htm



I am not sure about the whole gold standard thing myself...I see problems both ways.

 

[JeffSchulman]

2 Words-

*Competing Currencies*

 

[danberkeley]

too late ya'll. stocks in asia are already falling

 

[RonRules]

It's not that bad. Don't forget that all large loans have a physical collateral. A mortgage has a house to back it up, typically with 80-90% equity. Some loans were made with no equity and those banks should be left to fail. It's their error.

If we bail out everybody, the same problem will reoccur in 5 years.

 

[fmontez]

Dr. Paul doens't support a gold standard.. he knows that we can not go back to that standard now.. there isn't enough gold in all the world to back all our paper.

There wouldn't be a depression either, but at some point the Government does have to stop spending... they are like the family getting evicted that doens't have money for rent but goes out and buys a big screen TV.

We all know the solution, get rid of Medicare, Social Security, welfare, and reduce our foreign policy. But it gets worse.. I know a lot of people here are all about getting rid of the IRS, but we are so far in debt we can't cut the budget enough to get out of debt... we probably need several decades of increased personal taxes and decreased corporate taxes to grow the economy (exports.)

Even with a Paul Presidency I can't imagine how you could cut taxes.

 

[hairball]

Two more words..

*Competing Currencies*[/QUOT

Bretton-Woods.

 

[hairball]

Right now the finacial situation is so bad, that ANY corrective measure will be catastrophic. I am glad som eone here has been honest enough to state that. Most of the Paulists I have met have tried to tell me that Ron would save us from finacial ruin.

Sorry boys, but if you were truly familiar with Austrian school, you would know that the corrective measure for so wide a variety of economic diddling will have the corresponding pain in the correction. We cannot avoid either a depression or recession, but what will happen AFTER will depend on what is decided for the conclusion.

We are too entangled with the world market to ever consider going back to a gold standard, but there are other ways to compete in the world market without so much debt.

The real rough part will be getting rid of the entitlements. People will march for change and fiscal responcibility until they realize they will have to give up all the 'free' money they are getting. Then they will howl.

THAT will be the hard fight.

 

[therealjjj77]

Don't forget too that 1946+62=2008. January 1st of this year the first wave of baby-boomers are beginning to collect social security.

 

[LinkClan]

Dr. Paul doens't support a gold standard.. he knows that we can not go back to that standard now.. there isn't enough gold in all the world to back all our paper.

There wouldn't be a depression either, but at some point the Government does have to stop spending... they are like the family getting evicted that doens't have money for rent but goes out and buys a big screen TV.

We all know the solution, get rid of Medicare, Social Security, welfare, and reduce our foreign policy. But it gets worse.. I know a lot of people here are all about getting rid of the IRS, but we are so far in debt we can't cut the budget enough to get out of debt... we probably need several decades of increased personal taxes and decreased corporate taxes to grow the economy (exports.)

Even with a Paul Presidency I can't imagine how you could cut taxes.

Good post, yet it appears that the only thing that the "income tax" is doing is paying the Federal Reserve its interest. None of it is balancing budgets or paying for special interests. With no income tax and a realistic lending policy, the people would understand very quickly how to save and therefore be more willing to produce.

 

[Iowa4Paul]

Could always cut a piece of the defense budget :|

 

[mello]

This is Dr. Paul's chance to get some real traction in this election. He has been talking about these consequences for years and in prior debates where all the other candidates laughed at him. He needs to keep hammering his points in future debates & to constantly remind the audience that he has said that this would happen in the previous debates.

He also needs to mention at least once in an upcoming debate that he has written multiple books on economics. He needs to get that message to sink into that huge flock of moronic sheep out there that they should vote for a president based on his/her policies & positions, not because of his/her religious beliefs.

PS. He needs to get angrier & louder when he states his beliefs about monetary policy & the Fed during the debates. Some of his best debate moments are when he's pissed off! Also mentioning Mccain's involvement in the Keating Five Scandal would slap him back a peg or two.

http://en.wikipedia.org/wiki/Keating_five_scandal