T Nation

How to Fix the Economy! Support H.R.833


#1

Ron Paul

Madame Speaker, I rise to introduce legislation to restore financial stability to America's economy by abolishing the Federal Reserve. Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy.

In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the current economic crisis caused by the housing bubble, every economic downturn suffered by this country over the past century can be traced to Federal Reserve policy.

The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts.

With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America's exports or the low rate of savings should be enthusiastic supporters of this legislation.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy.

Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency.

The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender.

Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true freemarket economy.

In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans' standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.

Ron Paul makes a strong case. And I agree with him. Anyone else want to chime in?


#2

I wish.


#3

I don't know enough about it to talk about if it's even a possibility, but seeing the financial industry's fingers in our congress, I'll say it will never happen.


#4

I'm not sure i understand his accusation that inflation is a hidden tax.

Yes, inflation puts a penalty on "holding" money - but it also provides the opportunity for growth through borrowing, that would otherwise be unavailable with a gold standard.

Furthermore, it's incredibly difficult to fault the Federal Reserve for cycles of boom and bust. Most credit it with causing the great depression, but the 1980's was caused by fuel prices and today's is caused by government backed mortgages.

Last, his alternative is abysmal. Giving the government control over monetary possibly gives it an absurd amount of power of the people - power I would not want to give Mr. Obama.

I think a better solution would be to follow the bank of Canada in establishing an Inflation target (2%). This would bring consistency to the fed's actions and decrease the policy of manipulation.


#5

I was gonna say something, but I think Shookers beat me to it.

Reading that excerpt did make me feel all warm and gooey on the inside, though.


#6

Yup, but that is kind of the point.

Of course you can gear an economy towards investing and consuming if you make money artificially cheap or make it unattractive to safe money, but that means that you, by definition, pull the market away from the price it would set for money on its own.

Insofar the boom that causes is artificial too and must be corrected by regular corrections, leading to the boom-bust cycle.

And yeah, it is theft and government could not do it without fiat money.


#7

Money is similar to any other commodity, in that if you artificially set prices (interest rates, qualifications) too low, you get shortages. So if you set the price of money low, you almost have to inflate the money supply to insure their is enough to meet demand. Otherwise some will get money and some won't. Whose to say that those that get money will invest the wisest? What's more likely to be invested wisely, easy money or money that is difficult to get?

Pretty sippery slope. Nothing good can come out of messing with money supply. Nothing good ever has or ever will.


#8

err, the money supply doesn't just magically inflate. It inflates when people borrow. Whether or not someone can borrow is determined by banks who DO judge their whether or not the loan can be repaid. That is - the money can only go to where it can be paid back (i.e. used efficiently). It's not a lottery.


#9

No. If money is borrowed from 100% reserves there is no inflation.

Inflation can occur two different ways:

1) Fractional reserve lending/credit cards
2) Government deficit spending

In fact, most inflation comes from the national debt since it is almost never paid back.


#10

Which is borrowed.
P.S. We have a fractional reserve system


#11

It most certainly is a lottery. How did we get in this mess? Easy access to money.

Make money easy to get and cheap, and you have issues. Then you do what the republicans are proposing, and guarentee that any loans you make will be bought from freddie or fannie, creating a market for bad loans. Sounds familiar.

Even with a fractional reserve, currency is fixed. The currency doesn't inflate when people borrow unless we loosen the reserve requirements or unless banks weren't previously borrowing to full capacity. Simple math.

when gov't borrows or lends, the story changes. I am not aware that they have any reserve requirement. I could be wrong on this.


#12

I was trying to point out that borrowing money is not necessarily inflationary.