Why the Greenbackers Are Wrong

by Thomas E. Woods, Jr.



One of Ron Paul’s great accomplishments is that the Federal Reserve faces more opposition today than ever before. Readers of this site will be familiar with the arguments: the Fed enjoys special government privileges; its interference with market interest rates gives rise to the boom-bust business cycle; it has undermined the value of the dollar; it creates moral hazard, since market participants know the money producer can bail them out; and it is unnecessary and at odds with a free market economy.

Liberty Was Also Attacked in Boston

by Ron Paul 

Forced lockdown of a city. Militarized police riding tanks in the streets. Door-to-door armed searches without warrant. Families thrown out of their homes at gunpoint to be searched without probable cause. Businesses forced to close. Transport shut down.

These were not the scenes from a military coup in a far off banana republic, but rather the scenes just over a week ago in Boston as the United States got a taste of martial law. The ostensible reason for the military-style takeover of parts of Boston was that the accused perpetrator of a horrific crime was on the loose. The Boston bombing provided the opportunity for the government to turn what should have been a police investigation into a military-style occupation of an American city. This unprecedented move should frighten us as much or more than the attack itself.

The US is moving to a gold standard

by Jan Skoyles

Following the news that last week Arizona lawmakers passed a bill that will see precious metals become legal tender we thought this would be the perfect time to bring you a fourth installment of The Real Asset Report. Here we look at the moves several US states are making to move to sound money. Look out for the great infographic below.

 ‘No State Shall make any Thing but Gold and Silver Coin a Tender in Payment of Debts’ 1787 US Constitution: Article I, Section 8.

When President Nixon closed the gold window in 1971, ending Bretton Woods, it signalled the final disregard for the Founding Fathers’ US Constitution.
Whilst many have long campaigned for a return to the gold standard, including Dr Ron Paul, a former Congressman and GOP presidential candidate, moves to use gold and silver as legal tender have hit the big time since the financial crisis.
There are now 20 US states that either have successfully passed bills to allow gold and silver to be used as legal tender, or have been exploring it as an option.

Ron Paul On Bitcoin: "If I Can't Put It In My Pocket, I Have Reservations"

by Tyler Durden

"You will not see economic growth until you liquidate the debt and liquidate the malinvestment out there," is the hard truth that former Congressman Ron Paul lays on Bloomberg TV in this wide-ranging interview. Paul is concerned at "the erraticness of the dollar... and its devaluation," explaining that, "people think the gold price up and down is a reflection of something wrong with gold; no, I say it is something wrong with the dollar." The topic gravitates to inflation, which Paul explains is far from missing as, "Bond prices go up. Stocks are going up. Housing prices are starting to go back up again. Education costs are going up," adding that, "CPI is not reliable." Paul is buying gold, believes "we are in as much trouble as Greece," and while fascinated by the free market nature of Bitcoin, he notes that while he doesn't fully understand it, "if I can't put it in my pocket, I have some reservations about that."

Paul on whether he's concerned about the drop in gold:

"I am concerned about the erraticness of the dollar. The dollar is up, the dollar is down. We print a lot of dollars. The dollar gets devalued. That is really the concern. If people think the gold price up and down is a reflection of something wrong with gold, no, I say it is something wrong with the dollar. People have been expressing concerns over the past couple of months about gold, but compared to what?

Keynesian Economics vs. Austrian Economics

Keynesian Economics & Monetary Economics vs. Austrian Economics

Featuring Ben Bernanke, Paul Krugman, Peter Schiff, and Ron Paul

Let the Markets Clear!

by Ron Paul - Daily Paul

French businessman and economist Jean-Baptiste Say is credited with identifying the fundamental economic principle that aggregate demand for goods in an economy will equal the aggregate supply of goods when markets are permitted to operate. Or in Say’s words, “products are paid for with products.”

English classical economist David Ricardo, among others, more fully developed this principle into what has become known as “Say’s Law.” Say’s Law, according to Ricardo, leads us to understand that market equilibrium for goods is constant. This simply means that markets, when left alone by government planners or other fraudulent actors, inexorably tend toward an “equilibrium price” which eventually balances supply and demand for any particular good. Thus markets will clearthemselves of any surpluses or shortages in the form of excess supply and demand.

Gold is Good Money - Dr. Ron Paul, U.S. Congressman

goldseek.com

Last year the Chairman of the Federal Reserve told me that gold is not money, a position which central banks, governments, and mainstream economists have claimed is the consensus for decades. But lately there have been some high-profile defections from that consensus. As Forbes recently reported, the president of the Bundesbank (Germany's central bank) and two highly-respected analysts at Deutsche Bank have praised gold as good money.

Why is gold good money? Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce - making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history. Gold rose to nearly $1800 an ounce after the Fed's most recent round of quantitative easing because the people know that gold is money when fiat money fails.

Central bankers recognize this too, even if they officially deny it. Some analysts have speculated that the International Monetary Fund's real clout is due to its large holdings of gold. And central banks around the world have increased their gold holdings over the last year, especially in emerging market economies trying to protect themselves from the collapse of Western fiat currencies.

Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes. Fiat money benefits those who create it and receive it first, enriching government and its cronies. And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow.

This is why it is so important to allow people the freedom to choose stable money. Earlier this Congress I introduced the Free Competition in Currency Act (H.R. 1098) to permit people to use gold as money again. By eliminating taxes on gold and other precious metals and repealing legal tender laws, people are given the option between using good money or fiat money. If the government persists in debasing the dollar – as money monopolists have always done – then the people would be able to protect themselves by using alternatives such as gold that are both sound and stable.

As the fiat money pyramid crumbles, gold retains its luster. Rather than being the barbarous relic Keynesians have tried to lead us to believe it is, gold is, as the Bundesbank president put it, "a timeless classic." The defamation of gold wrought by central banks and governments is because gold exposes the devaluation of fiat currencies and the flawed policies of government. Governments hate gold because the people cannot be fooled by it.

THE BUBBLE - A chronological re-ordering of the events and arguments of the bubble

thebubblefilm.com

Who Caused it. Who Called it. What’s Next.

Coming in Fall 2012, The Bubble asks the experts who predicted the current recession, “What happened and why?” Diving deep into the true causes of the financial crisis, renowned economists, investors and business leaders explain what America is facing if we don't learn from our past mistakes. The film poses the question: “Is the economy really improving or are we just blowing up another Bubble?”

A chronological re-ordering of the events and arguments of THE BUBBLE

PART 1: THE CAUSES

The Federal Reserve and Interest Rates


Low interest rates from the Federal Reserve enticed people to borrow savings that did not exist. Both the government and the artificially lowered interest rate diverted resources into housing, creating a bubble that would inevitably burst.
· Increased home prices encouraged home owners to borrow money based on their real estate price and accumulate more debt.
· When the market responded by forcing interest rates back up, these bubble projects failed. People realized they could not afford this lifestyle.


Government Guarantees

· Fannie Mae and Freddie Mac were Government Sponsored Enterprises that subsidize and guarantee home mortgages. Their liabilities were implicitly guaranteed by the government, who nationalized them in September of 2008.

· Banks frequently underwrote bad mortgages and sold them on secondary markets created by Fannie Mae and Freddie Mac.

· Commercial bank deposits are guaranteed by the FDIC, a highly leveraged government program that allows banks to take more risks.

· The Greenspan Put was the widespread belief in the market that Alan Greenspan would intervene to bail out the financial sector whenever threatened. This was based on his reaction to the Savings & Loan Crisis, the bailout of the Mexican Peso in the 90’s, the bailout of LTCM, the liquidity approaching Y2k, and his actions forcing the interest rate down to 1% for a full year after September 11th. This was later replaced with the even larger Bernanke Put.

Government Home Ownership Policies

· The mortgage income tax deduction artificially stimulated the real estate market and led to larger home purchases.

· The Basel regulations allowed banks to be more leveraged if they held mortgage loans and even more leveraged if they held mortgage backed securities.

· Presidents Clinton, Bush, and Obama have all attempted to decrease the down payment needed to buy homes.

Nontraditional Mortgages

· Includes both subprime loans (low credit score) and alt-a loans. (low down payment, adjustable rate, no doc)

· By 2008, half of all mortgages were nontraditional mortgages.

· Fannie Mae and Freddie Mac owned more nontraditional mortgages than the entire private sector.



Affordable Housing

· The Department of Housing & urban Development required Fannie and Freddie to allocate 50% of mortgages to individuals that were at or below the median income in their communities.

· The Community Reinvestment Act required mortgage lenders to fulfill a quota for low and moderate income home buyers in certain communities. Although it was expanded in the 1990’s, the role in the housing bubble was minor.

PART 2: PAST CRISES

Panic of 1920

· The Depression of 1920 was worse than the first year of the Great Depression. Production fell 21%, GDP dropped 24% and unemployment went from 4% to 11.7%.

· The Federal Government cut spending in half from 1920 to 1922 and did not enact a stimulus policy.

· The Depression ended in the summer of 1921 and unemployment dropped to 6.7% in 1922 and 2.4% in 1923.

The Great Depression

· Nominal GDP was down 46% during the Great Depression.

· Both Herbert Hoover and Franklin Delano Roosevelt increased government spending while implementing wage and price controls, along with tariffs.

· The Great Depression lasted a decade and the economy did not recover until World War II was over.

Inflation In The 1970s

· America rapidly increased the money supply and abandoned the gold standard in 1971.

· The economy suffered a downturn and prices increased dramatically. The cost of oil alone went from $3 to $30 a barrel.

· To fight inflation, Federal Reserve chairman Paul Volcker allowed interest rates to rise, by slowing down money creation. This lowered price inflation from 13.5% at its peak to 3.2% in 1983.

· The high unemployment and high inflation of the 1970s was predicted by the Austrians, while the Keynesian school of economics believed that combination to be impossible.

PART 3: Response To The Current Crisis

Interest Rate Cuts

· The Federal Reserve has consistently lowered interest rates throughout the crisis.

· They have now pushed interest rates down to zero.


Bailouts

· Bear Stearns creditors were bailed out on March 14th, 2008, despite their investment bank being leveraged 35.5:1.

· Fannie Mae and Freddie Mac were taken over by the government in September of 2008. This confirmed that their debt was guaranteed by the government. Treasury Secretary Paulson claimed in July 2008 that the companies were adequately capitalized despite only having $83 billion for $5 trillion in obligations.

· Although Lehman Brothers was allowed to fail, the rest of the financial sector was bailed out by the Federal Reserve, the Treasury department, and Congress.

· When Congress did not bail out the auto companies, President Bush did.

Stimulus Spending

· In February of 2008, following uncertainty in the Subprime mortgage market, George W. Bush signed a stimulus bill for over $152 billion dollars, attempting to get people to spend again.

· To support the housing market, George W. Bush signed the economic recovery act of 2008 which added $800 billion to the national debt.

· Following the bankruptcy of Washington Mutual and the bailout of AIG, George W. Bush signed the Trouble Asset Recovery Program which authorized the Treasury to buy up to $700 billion in bad assets.

· Due to the slow moving economy, newly elected President Obama continued George W. Bush’s spending spree by signing a $862 billion dollar stimulus bill.

PART 4: What America is Facing

Education Bubble

· Student loan debt’s version of Fannie Mae is called Sallie Mae.

· Student loans have spiked over a trillion dollars, more than all the car loans in the country combined.

· Graduates are finding they cannot pay back their loans with or without a job.

Coming Price Inflation

· Prices will dramatically rise due to the money created in response to the housing crash.

· Increased prices will lower the standard of living in the country.

· The devalued dollar resulting from inflation will wipe out savings for millions of Americans, particularly in the lower and middle classes.


National Debt Bubble

· The national debt approaching $16 trillion dollars is not sustainable.

· Foreign countries will stop buying Treasury bonds and interest rates will rise.

· Rising interest rates and deficits as far as the eye can see will lead to interest payments consuming the entire budget.

· America will be forced to cut spending.

Unfunded Liabilities Bubble

· The unfunded liabilities from Social Security and Medicare are as high as $119 Trillion Dollars.

· With the already high national debt, the federal government cannot absorb these added costs.

· Both Social Security and Medicare will be forced into bankruptcy. Defense will have to be cut.

Raw footage of Ron Paul interview from The Bubble film

The Bubble is a feature length documentary that ask those who predicted the greatest recession since the Great Depression, why did it happen and what are we facing? The documentary is an adaptation of Tom Woods' New York Times bestseller Meltdown. Filmmaker Jimmy Morrison is releasing each interview in full for free before the film's release.

thebubblefilm.com

Interest Rates Are Prices

by Ron Paul - Daily Paul

 

One of the most enduring myths in the United States is that this country has a free market, when in reality, the market is merely the structural shell of formerly free institutions. Government pulls the strings behind the scenes. No better illustration of this can be found than in the Federal Reserve's manipulation of interest rates.

The Fed has interfered with the proper function of interest rates for decades, but perhaps never as boldly as it has in the past few years through its policies of quantitative easing. In Chairman Bernanke's most recent press conference he stated that the Fed wishes not only to drive down rates on Treasury debt, but also rates on mortgages, corporate bonds, and other important interest rates. Markets greeted this statement enthusiastically, as this means trillions more newly-created dollars flowing directly to Wall Street.

Because the interest rate is the price of money, manipulation of interest rates has the same effect in the market for loanable funds as price controls have in markets for goods and services. Since demand for funds has increased, but the supply is not being increased, the only way to match the shortfall is to continue to create new credit. But this process cannot continue indefinitely. At some point the capital projects funded by the new credit are completed. Houses must be sold, mines must begin to produce ore, factories must begin to operate and produce consumer goods.

But because consumption patterns have either remained unchanged or have become more present-oriented, by the time these new capital projects are finished and begin to produce, the producers find no market for their goods. Because the coordination between savings and consumption was severed through the artificial lowering of the interest rate, both savers and borrowers have been signaled into unsustainable patterns of economic activity. Resources that would have been used in productive endeavors under a regime of market-determined interest rates are instead shuttled into endeavors that only after the fact are determined to be unprofitable. In order to return to a functioning economy, those resources which have been malinvested need to be liquidated and shifted into sectors in which they can be put to productive use.

Another effect of the injections of credit into the system is that prices rise. More money chasing the same amount of goods results in a rise in prices. Wall Street and the banking system gain the use of the new credit before prices rise. Main Street, however, sees the prices rise before they are able to take advantage of the newly-created credit. The purchasing power of the dollar is eroded and the standard of living of the American people drops.

We live today not in a free market economic system but in a "mixed economy", marked by an uneasy mixture of corporatism; vestiges of free market capitalism; and outright central planning in some sectors. Each infusion of credit by the Fed distorts the structure of the economy, damages the important role that interest rates play in the market, and erodes the purchasing power of the dollar. Fed policymakers view themselves as wise gurus managing the economy, yet every action they take results in economic distortion and devastation.

Unless Congress gets serious about reining in the Federal Reserve and putting an end to its manipulation, the economic distortions the Fed has caused will not be liquidated; they will become more entrenched, keeping true economic recovery out of our grasp and sowing the seeds for future crisis.

source : www.24hgold.com

Return to the Gold Standard ?

The Gold Standard has returned to mainstream U.S. politics for the first time in 30 years, with a “gold ommission” set to become part of official Republican party policy. Talk of a gold standard is back in focus in politics for the first time in three decades. The U.S. Republican Party will call next week for a commission to examine the possibility of returning the American currency to the gold standard .Rep. Ron Paul, (R-TX), weighs in.

End the Fed

In the post-meltdown world, it is irresponsible, ineffective, and ultimately useless to have a serious economic debate without considering and challenging the role of the Federal Reserve.
Most people think of the Fed as an indispensable institution without which the country's economy could not properly function. But in END THE FED, Ron Paul draws on American history, economics, and fascinating stories from his own long political life to argue that the Fed is both corrupt and unconstitutional. It is inflating currency today at nearly a Weimar or Zimbabwe level, a practice that threatens to put us into an inflationary depression where $100 bills are worthless. What most people don't realize is that the Fed -- created by the Morgans and Rockefellers at a private club off the coast of Georgia -- is actually working against their own personal interests. Congressman Paul's urgent appeal to all citizens and officials tells us where we went wrong and what we need to do fix America's economic policy for future generations.

More About the Author : Ron Paul, an eleven-term congressman from Texas, is the leading advocate of freedom in our nation's capital. He has devoted his political career to the defense of individual liberty, sound money, and a non-interventionist foreign policy. Judge Andrew Napolitano calls him "the Thomas Jefferson of our day." After serving as a flight surgeon in the U.S. Air Force in the 1960s, Dr. Paul moved to Texas to begin a civilian medical practice, delivering over four thousand babies in his career as an obstetrician. He served in Congress from 1976 to 1984, and again from 1996 to the present. He and Carol Paul, his wife of fifty-one years, have five children, eighteen grandchildren, and one great-grandchild.Ron Paul, the New York Post once wrote, is a politician who "cannot be bought by special interests." "There are few people in public life who, through thick and thin, rain or shine, stick to their principles," added a congressional colleague. "Ron Paul is one of those few."