Tuesday, November 03, 2009

Please Read 'End The Fed'

Fiat money, Austrian school, moral hazard, easy credit, fractional reserves, the money printing press, boom and bust cycles, banking secrecy, statism, objectivism, Greenspan, Bernake, are all explored in Ron Paul's wonderfully written book End The Fed. Here are some thoughts...

The Federal Reserve -- the American central bank -- is "responsible for the boom-bust cycles; price inflation recession, depression and excessive debt."

"Only the Fed can inflate the currency, create new money, and credit out of thin air, in secrecy, without oversight or supervision. Inflation facilitates deficits, needless wars, and excessive welfare spending."

When government grows, liberty suffers, regardless of the justification. The Fed is core to this growth. Its design to protect profits and socialize losses is flawed at its core.

We need to forgo the idea that the government is to protect us from our individual poor decisions. This is a moral hazard. We allowed the government to dictate our personal financial decisions -- that we could afford a large house, multiple cars, second homes/vacation properties, motor toys, and all the other things we purchased with debt, using the notion that life is great and tomorrow will only be better than today.

Our trade balance is not solved by tariffs; they make things worse. Tariffs are taxes. The issuing of the reserve currency of the world gives us license to inflate. High taxes, excessive regs and over priced labor cause our jobs to be exported.

Americans including the politicians and bankers attempt to solve our messes with more of the same -- more spending, more deficits, more regulations, and more inflating of the currency. None help. They compound the problem. The people who and policies that got us into this problem are being tasked to get us out, when the truth is they will only exacerbate the problem.

We do not need more regulations and regulators to protect us in the traditional sense. Sarbanes-Oxley did nothing to protect us, it just created more expense and bureaucracy. Government sponsored enterprises like Fannie and Freddie tell investors and lenders that there is no real deal that can go bad because they will be there to cover.

Paul states, without the Fed we "would enjoy all the privileges of modern economic life without the downside of business cycles, bubbles, inflation, unsustainable trade imbalances and the explosive growth of government that the Fed has fostered."

There are more bank failures now than there ever have been in our history. It has nothing to do with lack of regulation but everything to do with too much government control. The free market works. We just do not have this. The Fed makes it so.

We all have heard the claim that we needed the government to act, to solve the financial problems we found ourselves in after this last 7-8 year borrow and spend season. Who benefits? Those that set the policies, not the people.

Lenin stated that the best way to destroy the capitalist system was to debauch the currency. The Manifesto asks for centralization of credit, a national bank with state capital and an exclusive monopoly.

The 1913 Federal Reserve Act's purpose was to "furnish an elastic currency to afford means of rediscovering commercial paper, to establish a more effective supervision of banking in the US and for other purposes." The premise is inflationary. Stretch money? How? By making more with nothing behind it. Only the Fed is responsible for inflation and recessions. All other participants are reactionary to the Fed's policies.

Through the central bank, power is solidified through deficits, taxes, fear and fiat money (legal tender with no intrinsic value nor backing reserves). It "funds" bail outs, stimulus programs and other wealth transfer efforts. The corporate welfare/warfare system can end with the phasing out of the Fed.

The Fed is "cheating. It is a tax. It is counterfeiting. It benefits the few at the expense of the many. It breaks the rules of contracts. It causes suffering and punishes the innocent. It enables world wars and vast payoffs to the powerful."

No comments: