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Ron Paul quote of the day:
"When the value of American's savings is deliberately eroded through inflation, that is a tax, albeit a hidden one. I call it the inflation tax, a tax that is all the more insidious for bing so underhanded: most Americans have no idea what causes it or why their standard of living is going down. Meanwhile, government and its favored constituencies receive their ill-gotten loot. The racket is safe as long as no one figures out what is going on."

I've been surfing around, reading, and suddenly inflation is everywhere. Inflation is the devaluation of paper money that happens when more of that money is printed and made available. In our case, inflation is caused by the Federal Reserve. When our government decides to "support" or "bail out" Fannie Mae and Freddie Mac, what that means is that they are printing some fresh money to give out. That decreases the value of the money that is already out there. But it does more than that, because there is a lag between the introduction of the new money and the increase in prices, and then later wage increases. And that lag time gives the beneficiary of the new government money the advantage. Whoever gets the new money, usually banks, can buy at current prices, driving the prices up. The average Joe who works for a living notices the prices going up, and pays. Much much later average Joe might get a cost of living increase. The politically-connected money recipients can to buy at low prices and sell at high, while the average Joe has to buy at high prices and then beg for increased wages. All because the Federal Reserve can print more money any time it needs. The Fed purchases bonds from banks, providing a fresh supply of cash and lowering interest rates, creating a false sense of prosperity and bubbles that pop and hurt the uninformed buyer.

The solution is hard money of course, and the abolishment of the Federal Reserve. If we take away the power of our government to print money whenever they need it, the market would find its own equilibrium, there would no longer be economic "bubbles" that shatter people's lives, and the government would have additional incentive to live within its means. Americans fought for the right to be free of inflating paper money, and eventually we'll be ready to fight for it again.

I can only be happy about this however because I am going into a great debt, so the less our money is worth, the better it is for me. So fine with me if the Fed sticks around a few more years and prints lots of money. Serves my selfish interests.

The notion that a truly free economy is dangerous, and that we must allow the government to regulate interest rates, is widely accepted and utterly false. This nation was on the gold standard until 1933, and it worked just fine. Twenty dollars could be redeemed for an ounce of gold. It wasn't until Nixon that our money was completely divorced from any relationship with precious, and become worthless. Now it is illegal to transact in precious metals without paying taxes on the metals themselves.

We didn't have a central bank until 1791 when Congress passed a bill establishing the First Bank of the United States, which was the largest American corporation of its time. It was controlled by big money interests and had a 20 year charter. In 1811 when the charter expired, congress did not renew it. It was pressure from THE PEOPLE that convinced congress that the institution was too dangerous. The Second Bank of the US passed in 1816 and was allowed to expire in 1836 because Andrew Jackson had been elected president, and helped once again save the people from governmental manipulation of our economy.

The Federal reserve wasn't the law of the land until 1913. When President Woodrow Wilson signed it, it was thought to be a masterful compromise. Wilson later said:

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world - no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men."

At the time paper money was known as "bills of credit".

The Federal Reserve System began operations just as European hostilities erupted into World War I---THIS IS WHEN OUR COUNTRY SHIFTED from a policy of fiscal responsibility and foreign diplomacy to one of debt and war. This is when we let them sell us out.

It was less than a year later when Congress created the Internal Revenue Service. We did just fine without the IRS until 1914. Times haven't changed that much. The basic principles of government and money remain the same. All that is different is the people. The people aren't fighting back against government anymore. We have become convinced that we cannot do it alone and so we need daddyo to take care of us.

Wouldn't you like to have money that is reimbursable for something of real value? The US Dollar used to be exchangeable for gold at the bank. No more. Paper money is too dirty to use for toilet paper (you might infect yourself with something), but might be greasy enough to make a good fire starter. The Germans used their money to make kites just before Hitler took power.

BANKING HISTORY SITE:
http://www.fdrs.org/banking_history.html

Comments

( 2 comments — Leave a comment )
inibo
Jul. 23rd, 2008 07:32 pm (UTC)
I was first attracted to Ron Paul because of his position on foreign policy in general and the war in particular. A year and a half ago economics and monetary policy were not really even on my radar. Now, thanks to his skill as teacher, I realize they are the most important issues. Period. Everything else flows from them. I suspect there are many more people like me. It may take some time for it to come to fruition, but the service he has done to this country by planting these seeds is inestimable.
liveonearth
Jul. 24th, 2008 05:39 am (UTC)
Yep, I agree. Ron Paul's Constitution Revolution will come to pass, it just may take a generation or so. I'm really happy he brings it back down to nuts and bolts for us, and discounts all the hype. I was hearing hype on the radio tonight, about how federal intervention to bail out fannie mae and freddie mac is needed to "stabilize the economy" and how we're going to give money to Pakistan to fix up their fighter plane fleet. Now I know what that means and it is no longer acceptable.
( 2 comments — Leave a comment )

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