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The Neo-Alchemy of the Federal Reserve
Ron Paul
Prisonplanet.com
Wednesday, Dec 03, 2008
As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is “just a start,” more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.
The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.
One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.
(ARTICLE CONTINUES BELOW)
Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.
Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as “God’s money,” as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.
The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do.
Congress should reject the central bank as a failure for its manipulations of money that have brought our economy to its knees. I am hoping that in the 111th Congress my legislation to abolish the Federal Reserve System gains traction so that the central bank can no longer destroy our money.
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38 Responses to “The Neo-Alchemy of the Federal Reserve”
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December 3rd, 2008 at 5:58 am
The Illuminati love numbers. They are sacrosanct to these scumbags. I venture to say that someone in the group has a bet that before 99 years are up, that they can totally control the US and the money supply. Why do I say this? Dec. 24th, 1913, Federal Reserve Act passed ‘congress’. Oh sure, there were only three members in attendance (on Jekkyl Island), but they planned it that way for that very reason. Forward 99 years. December 23rd, 2012. Mayan calendar runs out. No one knows exactly WHAT that really means, but does anyone REALLY think this is a coinkydink?
Not me. I say J.P Morgan’s ilk are preparing to collect that one dollar bet from the Rothschild scumbags. Or a variation thereof.
December 3rd, 2008 at 7:36 am
Everything Alex has been saying would happen, is coming down all at once. Its grim baby. I think I’m going to start coming to terms with the possibility that this is the end. I mean really the end. Man. If anyone wants to come and visit me at my patriots cave blog you are welcome. Its not all expose NWO yada yada all the time, I have fun stuff too like free stuff, spiritual books you can get for free. contests. remote viewing experiments. Deep space scanner. world-wide prayer chain in case you need help. Its not all serious you dig, because this stuff gets depressing and we need to have fun a little too. Come to the cave and see us. all are welcome. all religions too. here is the link: http://patriotscave.blogspot.com/
December 3rd, 2008 at 7:53 am
Maybe Ron Paul could explain how the gold backing the dollar supply will expand or contract with the growth or contraction of the economy. What happens if the economy grows and needs more circulation and the gold supply isn’t expanding(inflation/deflation)? What happens as more dollars have to be produced to provide for the increased interest costs that produce no goods or services needed to keep the money supply (supply and demand) balanced, no inflation/deflation? To write and article on the monetary system without the mention of interest is at best an incomplete presentation. Where is the gold going to come from? Is there any left in Fort Knox? Is RP recommending gold confiscation and what price is going to be paid for the gold. This is an incomplete and idiotic article.
Does RP think we a stupid or is he?
December 3rd, 2008 at 10:25 am
@ #3
Do some research on Austrian Economics. RP has said numerous times that we should model our system after theirs.
Rest assured on this much… it can be done.
December 3rd, 2008 at 10:25 am
Hey Steve, Ron Paul is an extremely bright, personable & energetic individual, and that was HARDLY an “idiotic article”!!!! As a politician I’m sure Ron Paul has gotten called a few things over his career, but stupid sure isn’t one of them!!! In fact his article was well-written and wise.
So how about some personal growth? Why not get your head out of your Keynesian ass and look up the Austrian School of Economics, (try LewRockwell.com for starters, or go to Youtube and watch anything Peter Schiff, Bob Chapman or Ron Paul have said about the ongoing meltdown). Once you’ve educated yourself a little, you’ll look back at your posting calling Ron Paul stupid and realize how flippant and assinine your questions were just now, and you’ll gain a better understanding for how healthy companies, people, and national economies work.
December 3rd, 2008 at 11:39 am
I think you have tacked on an extra zero to the present status of the proposed bailout, not that it matters except for the accuracy of our statements, because of course, as the interest that you advocate Mr. Paul is the real cause of ever increasing prices, because it is the very thing which multiplies debt in proportion to the obligated circulation, thus the accuracy of our statements is in fact critical, because you are the loudest voice claiming thin air is the cause of our problems, and in fact advocating not only the thing which is destroying us, but higher rates of that thing, which will only destroy us all the faster.
So here’s a question for you Mr. Paul, one which of course I have asked you many times:
How is it even mathematically possible to maintain a vital circulation subject to interest, if we have to replenish that circulation of interest and principal paid out of the circulation, as subsequent sums of debt, perpetually increased so much as periodic interest?
There is no valid answer/explanation, Mr. Paul — which is why you won’t answer the question.
So, for the benefit of others who hold your pretended explanation of “thin air” so high as to point the way to false solution, let me remind you that at this very moment gold has failed to maintain any consistency; let me remind you a finite circulation equal to monetary gold on hand cannot sustain our industry, or arrest multiplication of debt by the interest you advocate.
Furthermore, let us quote your God, Hayek, who explained to us why “Austrian Economists” advocate interest:
“I am more convinced than ever that if we ever again are going to have a decent money, it will not come from government: it will be issued by private enterprise, because providing the public with good money which it can trust and use *can not only be an extremely profitable business*; it imposes on the issuer a discipline to which the government has never been and cannot be subject.”
So there we have it — you claiming it’s the fox guarding the chicken coup… and only wanting to be one of the foxes.
December 3rd, 2008 at 11:56 am
End the Fed!
Sound Money For America!
Support HR 2755
http://www.endthefed.us/
December 3rd, 2008 at 1:40 pm
@Steve Groves
You really should go to Mises.org a find something in the Media or Literature section. Henry Hazlitt’s “Economics in One Lesson” is usually a good place to start. Joseph Salerno’s video/audio lectures have also been very good.
I’ll try and answer some of what you ask in my own way. The gold supply is not finite. It does grow at a rate of 1-2% a year. This puts the money supply growth in the hands of miners and not politicians and bankers. That alone would make it a better system, IMO. YMMV.
“What happens if the economy grows and needs more circulation and the gold supply isn’t expanding(inflation/deflation)?”
Prices would fall. You appear to assume a constant and inflexible pricing system. Money is subject to the same laws of supply and demand as any other good. When the supply is limited to it’s demand, it’s “price” (in this case the amount of good and services the money will buy) goes up. In that case, prices would come down. If this were to continue for more than a few months, wages would also begin to fall for the same reason. The economy as a whole corrects and continues on at a lower wage/price level.
“What happens as more dollars have to be produced to provide for the increased interest costs that produce no goods or services needed to keep the money supply (supply and demand) balanced, no inflation/deflation?”
I don’t understand this. If an entrepreneur takes out a loan for a capital good, he does so with the expectation of creating a profit. The entrepreneur takes interest payments under consideration when deciding if he can make a profit or not. If a consumer takes out a loan for a consumer good, it’s because he is showing a preference for consumption now instead of later and the interest payments are the cost of consuming now instead of in the future. There is no need for an increase in the money supply in either case.
December 3rd, 2008 at 2:06 pm
@mike montagne (PFMPE)
The number is right. Bloomburg reported, but has since taken down, on $7.76 trillion in bailout money. I didn’t see it, but I would assume a good chunk of that includes the takeover of Fannie and Freddie. Another large chunk is things that the Fed is doing with little fanfare and no oversight. TARP is just a small piece.
December 3rd, 2008 at 2:07 pm
Stupid spelling… Bloomburg = Bloomberg
http://www.dailypaul.com/node/74098
December 3rd, 2008 at 2:11 pm
Abel,
You’re not answering the questions; you’re just re-asserting the assertions.
Even by your first answer, you are confessing the supply is finite; you merely offer (with no qualification whatsoever) that putting the money supply in the hands of miners would be better in your opinion. Do you have a certifiable basis for that opinion? and is it any better than your assertion a finite quantity which you only state to grow 1-2% per year is somehow “not finite”?
Then you simply state that the inability of this always finite quantity to keep pace with potentially greater (and potentially desirable) industrial growth exceeding that rate would result in a purported benefit — that prices would fall.
But you’re absolutely wrong: How is it even possible for industry attempting to sustain itself against a multiplying sum of debt — and obligated to service the costs of that debt — to continue to do so, if it must reduce its prices? It’s mathematically impossible for *all of us to do so* — which of course is the necessary adjustment, *even if we are to persist in our industry*!
You’re merely dreaming that there’s a beneficial consequence of a very fact regularly refuted by Ron Paul’s own explanation of what purportedly causes inflation/hyper-inflation.
Worse then, you don’t cite an Austrian/von Mises article which demonstrates this; and you presume we haven’t already been to see von Mises, or Hayek, or Baewerk, and all the other clowns who merely make the same kinds of unqualified assertions you are.
Let’s examine just one case of your asserted benefit. Industry would have to reduce prices if the *relative* ratio of circulation per industry is reduced by the need to sustain further industry.
You say this is just beneficial. You don’t show how.
So, show us how this is beneficial to the industry, already having to sustain itself against existent debts; and furthermore, if you are about to assert that an increase in sales will result from the falling prices as well, tell us why that industry does not resort to price reductions now, even at the brink of impossible margins of solubility.
Yes, the idea (as opposed to proof/theorem as in bona fide disciplines) is preposterous. When you’re pressed to the edge of affording your mortgage and other costs of sustenance, you benefit from a reduction of your wages, inflicted merely because we can come up with no better idea than to deflate the circulation from what *would* sustain the industry we are otherwise capable of?
Absolutely preposterous.
Then, we should read further from the Austrians and Mr. Paul, that interest, which inherently and irreversibly multiplies debt in proportion to a circulation is of further benefit?
If it were, then of course we should benefit right now from presuming to take on further debt, while servicing the present multiplying sums are the very thing Mr. Paul indirectly complains about, and the very cause of failure.
So that indeed is why Mr. Paul’s arguments are idiotic. He complains about an increasing circulation, while in fact we suffer deflation, even while necessarily borrowing ever more, because the interest he and your Austrian Gods advocate is the very problem!
Then he *wants* “competing” banks, while claiming the founders were against a central bank — which of course produces *the exact same consequence* of interest.
Very interesting.
December 3rd, 2008 at 2:12 pm
Stupid spelling…. Bloomburg = Bloomberg
http://www.dailypaul.com/node/74098
December 3rd, 2008 at 2:12 pm
Abel,
No, the number is wrong. Congress approved an $800 billion bailout. Period. Look it up. It’s everywhere you can look except in Mr. Paul’s preposterous assertions.
December 3rd, 2008 at 2:26 pm
Meh i appreciate the pep talk but you know damn well the Congress will not vote for that bill - It is a hopeful fallacy to think the FED will be abolished by Congress and replaced with a soverign monetary system, Most of them are bought and paid for and even if the Congress passed it the President could VETO it.
December 3rd, 2008 at 2:29 pm
Uh no its not 800 Billion there is already proof that the FED made a secret 2 TRILLION DOLLAR LOAN from Bloomberg and a lawsuit against the fed, where the hell have you been mike montagne (PFMPE). Then there is AIG, FNE FRD, and now a CITI GROUP bailout. so stop with the 800 bil nonsense you are dillusional or a disinfo operative
December 3rd, 2008 at 2:36 pm
mike montagne (PFMPE): The Austrian school is surely not right but you are surely WRONG - “So that indeed is why Mr. Paul’s arguments are idiotic. He complains about an increasing circulation, while in fact we suffer deflation,”
In a fiat currency, monatery system, when you inject 7+ Trillion dollars in capital into a contracting economy AFTER a correction you get INFLATION, go RESEARCH THE GREAT DEPRESSION JACKASS. They first had De-Flation then it turned to Inflation - Not to say the AUstrian school’s proposals to fix the problems are correct becuase they aren’t, but you are just a poor soul that thinks he knows everything - WHY ARE WE EXPERIANCING DEFLATION?
BANKS ARE HOARDING MONEY - JP Morgan Chase owes roughly 100 TRILLION dollars in Derivatives, and DERIVATIVES are the HEART of this crisis. These banks wait for the opposing Derivative contract holder to get in trouble then consolidate them, thus pumping money into the economy in spirts, then the inflation will begin. Where do you think all this money has gone? Do you think it already hit the economy? can you be that stupid?
December 3rd, 2008 at 2:41 pm
Funny if the Neo-Cons are not getting us in a War ,the Federal Reserve is charging interest
on money from thin air. Are they some kind of pain in the ass CLUB? What good are they
except for causing Problems. Don’t no anything but jerk your ass Around and War Profit.
Totally useless. They (the Club) make America no FUN.
December 3rd, 2008 at 3:10 pm
Revolt426,
Show us the 2 trillion; and even more remarkably, show us how that adds up to 8 trillion. They haven’t even finished *spending* the $800 BILLION bailout yet. Your claims are mere hearsay.
*Disinformation* by the way, is to promote not the whole truth, but a mere side of something which supports an ulterior agenda. As to your claim then, your hero and you yourself are most guilty. Nobody has injected 7 trillion in capital; and even if they did, it disappeared already, because nobody has any money.
As to all your misspelled assertions of inflation, you haven’t even shown there is circulatory inflation; and of course, the whole reason we would seem to require further circulation, is that the present circulation is insufficient to service the existing sum of debt. In other words, the very conditions you cite are an expression of needed capital, of which we are deprived.
I explained to you why we are experiencing deflation: we are *constantly* paying principal and interest out of circulation. There would be no deflation of course if we were only paying principal out of circulation at the rate we consumed of it, because the remaining circulation then would at all times equal the remaining value of the wealth it is intended to represent. Nor of course would there be multiplication of debt in proportion to the obligated circulation, because we don’t have to maintain the circulation to service debts exceeding the circulation, and because to do so, we don’t have to re-borrow interest as new debt, above the previous sum of debt.
Derivatives, for your information, are not a hoarding of money: they are merely bogus, intended evidences of wealth. They don’t multiply debt; they don’t increase the cost of anything (necessarily); interest does.
Banks are not preying upon banks because derivatives have compromised them; they are preying upon banks because the banks they are preying upon are middle men for the central bank — which means that they have borrowed mere evidences of debt from the so called central bank, which thus obligate them to pay those evidences of debt (notes) back, even as the sum of debt multiplies into a terminal sum of debt. The reason some of these satellite banks are collapsing is not because they ladened themselves with artificial evidences of assets so that they continue to loan further as interest required them to do (to maintain a circulation); the banks are collapsing because this has finally engendered a terminal sum of debt.
As to your assertion that I am stupid, or that I haven’t already explained to you where the money has gone (it is perpetually paid out of circulation in the way of principal and interest), well, of course your idea is as wild and futile as your spelling and your name calling. Common estimates of the pretended value of derivatives is 400+ trillion. Obviously, if there were “money” involved, it certainly couldn’t exist in the circulation unless it exists over and over and over again, while in fact the many expressions of it are the same money.
So what was it you intended to prove me wrong at? Printing money out of thin air doesn’t multiply debt in proportion to the circulation (particularly as you can only borrow the value of the wealth the money is intended to represent)? Interest doesn’t multiply debt in proportion to a circulation? Interest then doesn’t multiply debt into terminal debt?
And so, it’s smart that Mr. Paul advocates interest, blaming the problem on the material the money isn’t even made of?
I see why you resort to name calling.
December 3rd, 2008 at 4:11 pm
@mike montagne (PFMPE)
With regard to miners, that’s just opinion, like I said. How is growth at 1-2% finite? Do my other responses appear to assume a finite money supply?
What you say shows, I think, a misunderstanding of the Austrians. I would be happy to read something that refutes the Austrians. It makes sense to me and I think I understand it, but don’t know how well I can explain it, especially to someone who says they have already understood and dismissed it.
“How is it even possible for industry attempting to sustain itself against a multiplying sum of debt — and obligated to service the costs of that debt — to continue to do so, if it must reduce its prices?”
It’s called profit. A reduction in prices does not equate to a reduction in profits per se. If prices were falling, all other costs of production would also fall. That leaves debt payments. If a company was successful, it’s profits wouldn’t fall, or fall as fast as it’s costs. It could then survive on a lower profit margin while paying down it’s debt, or if it couldn’t survive, it goes out of business. It’s called profit AND loss for a reason. There is risk inherent in all business activity. Falling prices is one of those risks.
“So, show us how this is beneficial to the industry, already having to sustain itself against existent debts; and furthermore, if you are about to assert that an increase in sales will result from the falling prices as well, tell us why that industry does not resort to price reductions now, even at the brink of impossible margins of solubility.”
I never said falling prices would be beneficial. I made the case against the idea that we need a constantly rising quantity of money to sustain us. If we had falling prices due to a contracting money supply, they would affect all the factors of production. A company could hire new employees at lower wages. They could negotiate lower wages with existing employees. Their cost of raw materials would creep downward. As you say, their existing debt payments would stay the same. Profit might go down, or it might go up too, if things were handled well. On the other hand, new capital investments would also come down, making expansion an option for companies that had saved or opening the door to new competitors. A company would reduce prices as their production costs went down, while trying to keep their demand steady, or they might reduce supply and keep prices up.
Like I said, I may not be the greatest defender of the Austrians, but you are by no means it’s greatest critic. If you have any outside sources, I’d love to know about them. I really do feel that you do not understand the Austrian position. I may not either, but that’s beside the point
We seem to be arguing over deflation, so I’ll quote Salerno here:
“The price deflation that was observed in the past three decades in selected high growth industries, however, was not an unprecedented or even unusual occurrence. In fact, historically, the natural tendency in the industrial market economy under a commodity money such as gold has been for general prices to persistently decline as ongoing capital accumulation and advances in industrial techniques led to a continual expansion in the supplies of goods. Thus throughout the nineteenth century and up until the First World War, a mild deflationary trend prevailed in the industrialized nations as rapid growth in the supplies of goods outpaced the gradual growth in the money supply that occurred under the classical gold standard.”
p.8
http://mises.org/journals/scholar/salerno.pdf
December 3rd, 2008 at 4:11 pm
I believe the Fed has never been audited. Sneaky little men can never be trusted. NEVER
What are they hiding who are they “taking care of” their Cousizins or Something. Seams
racist to Me or Clubist. Who and what are they protecting except their little buts or
big buts. No wonder Thomas Jefferson detested Hamilton. The War of 1812 was fought
over the central bankers and DC burned. Not Baltimore though…….
December 3rd, 2008 at 4:24 pm
@mike montagne (PFMPE)
Do you have any books to recommend or outside links to the theory you’re professing? I read what you’re saying but it seems your writing or your theory is convoluted.
For example:
“I explained to you why we are experiencing deflation: we are *constantly* paying principal and interest out of circulation.”
But the principle and interest doesn’t just disappear. It gets paid to a bank or the owner of a bond. That money can then be saved or spent. If it gets saved it doesn’t just disappear. It’s there waiting to be put into circulation at a later date. If it gets spent, it gets put back into circulation immediately.
December 3rd, 2008 at 4:25 pm
Maybe someone could tell me why, when money is created out of thin air by the banks, that there is any risk to the banks involved. Just print some more and/or repossess the securing asset. If there is no risk, maybe that’s why accountants often refer to interest/capital gains as unearned income, then what is the justification of charging interest. Why not a transaction fee for each payment?
Mike PFMPE expressed my sentiments on the Austrians very well.
December 3rd, 2008 at 4:31 pm
Alright Mike check this out and do a little research . I would hate to have to resort to name calling
http://www.bloomberg.com/apps/.....w&
December 3rd, 2008 at 4:33 pm
@mike montagne (PFMPE)
So Bloomberg isn’t a good enough source? Found the original:
http://www.bloomberg.com/apps/.....refer=home
December 3rd, 2008 at 4:39 pm
Figured it out. The Illuminati are “crashing” the system so the soldiers will re enlist.
By not having any good jobs for our Brave Men and Women in the civilian sector the
fearful Illuminati who hide behind the Brave Guard crash the system and maintain
ultimate power. The Illuminati do not like manual labor or fighting because its beneath
them nor they want their kids to die. Take a look at Omaha Beach Picture then go to
small towns in Pennsylvania and look at the Burial Grounds. Whole towns lost their sons in WW II. The Illuminati are prissy and they can’t help they are weak men but they like
to talk real tough guy.
December 3rd, 2008 at 5:02 pm
Abel,
“With regard to miners, that’s just opinion, like I said. How is growth at 1-2% finite? Do my other responses appear to assume a finite money supply?”
Elementary math: anything growing at 1-2% *is finite*. It could only become non-finite (infinite) across infinite time, *at the end* of infinite time — which end does not exist, because, by definition, there is no end to infinite time.
You go on then merely to state that your opinion on the Austrians should prevail, while *I quote HAYEK and Paul BOTH* in this very discussion, and disprove them both.
You don’t answer for anything. You claim *we* can negate multiplication of debt by interest, by “profit.” How exactly so? I provided the Reagan Administration with computer models which deploy the cited principle to project accumulation of debt forwardly, and which models calculated in 1983/4/5 and so forth that the present system would succumb to a terminal sum of debt at approximately 2010 AD.
Now, if you could pretend among intelligent people to disprove the thesis of inherent, irreversible multiplication of debt by interest, not only would the very irreversible, insoluble multiplication of debt everywhere around us not exist, there would be no culminating condition upon which the Austrian pseudo-science could even project failure!
You haven’t shown how “profit” can reverse or negate the process, because *all that purported profit* has to be taken *from the banking system* to negate multiplication of debt by interest!!!
You say “A reduction in prices does not equate to a reduction in profits per se. If prices were falling, all other costs of production would also fall.”
Hogwash. Industry commits not only to debts, counting on existent prices to engender soluble profit margins, but further counts on a certain price and quantity of their production to sustain that. You’re saying the price can drop on them, benefiting them above their costs and commitments to debts, which of course is impossible.
Then again, you simply state obvious things you haven’t accounted for (such as this fundamental reality of cost based on one price/cost reality, which the system undermines to the disadvantage of all industry), concluding, “Falling prices is one of those risks.”
The only reason it is “a risk” is you desire to impose a system which is inherently deflationary, and cannot sustain unlimited industry. That’s not an inherent risk; it’s inferior engineering.
Why do you insist that *can only* be inherently deflationary in every instance where desirable industry would require a greater circulation, is to our benefit? Why not sustain the prices which are necessary to the enduring solubility of existing industry, against the costs it has so far endured? Just because neither you or Ron Paul can come up with an intelligent answer?
You further say:
“I never said falling prices would be beneficial. I made the case against the idea that we need a constantly rising quantity of money to sustain us.”
Good. Obviously, *such* a cause of falling prices (if deflation even necessarily results in falling prices which cannot sustain existing industry) in fact are even terminal!
On your latter point, you’re simply stating one issue which you aren’t accounting for. We *don’t* presently need a rising circulation (or escalating rates of borrowing), but to maintain a vital circulation subject to interest. There is nothing you can do about that, but eradicate interest, because *all the profit we make ***from each other**** does *nothing* to negate the fact that we have to borrow what we pay out of circulation back, in order to maintain the circulation.
So then, you have Paul and the Austrians arguing *for* interest!
Then you quote Salerno:
“The price deflation that was observed in the past three decades in selected high growth industries… etc..”
But Salerno isn’t tying the resultant effects of advancing industrialization/productivity with *all* prices, and his first sentence, which reaches *even for an undefined sector of prices* itself proves this!
Homes are our major expense; and thus reflect the predominant trend. Are we experiencing a trend of price deflation there? Absolutely not. Yes, with the collapse of the purported boom, we’re seeing falling prices; but until then the trend was upward *in proportion even to income*!
That’s price *inflation*, no matter how you slice it; and that particular price inflation is abetted. It is not offset by advanced productivity or the fact slave labor from out of the country is dedicated to vast building ever cheaper product at ever inflated costs. Debt, debt, and more debt drives the costs of all things upward; and when you add to the multiplication of debt by the circulation, the further taking of unearned profit by a willingness to finance every penny of earnings that can be devoted to artificial multiplication of debt by exploitation, you have altogether a thing *which you have made* to be at the brink of a wholly artificial failure.
At the core of that failure is *interest*, because a circulation subject to interest inherently and irreversibly multiplies debt in proportion to the obligated circulation — no matter how much “profit” *can* be made *from each other* (versus from the banks), in attempting to sustain ourselves against that escalating multiplication of debt into terminal debt.
December 3rd, 2008 at 5:06 pm
I want my war profits will you die for me and guard me I am scarred and useless. I have
no talent but blabibng my Big Mouth and making up big words and jerking paper around.
But I have a really big ego and I think I am Great. I am just a Phonie and I need my war
profits and my interest payments. Be my slave please.
December 3rd, 2008 at 5:09 pm
Bloomberg isn’t a good enough source?
“Nov. 24 (Bloomberg) — The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.”
Absolutely not. Obviously, their article refers to the bailout, which is some $800 billion — not trillion.
How easily can you see this is an error (despite the fact the right figures are everywhere from NYT, Reuters…)?
If you were versant in any of the figures, you’d notice the blatant error plainly from the article itself: If 8 trillion were half our GDP, the GDP would have to be 16 trillion.
So, while offering you a higher number, they’re actually understating the relational extent of the injustices. How so?
GDP is 1 trillion. The federal government is running up approximately that in annual deficits. $800 billion therefore is 80 percent of GDP — which of course is substantially more than half.
December 3rd, 2008 at 5:23 pm
“Maybe someone could tell me why, when money is created out of thin air by the banks, that there is any risk to the banks involved. Just print some more and/or repossess the securing asset. If there is no risk, maybe that’s why accountants often refer to interest/capital gains as unearned income, then what is the justification of charging interest. Why not a transaction fee for each payment?”
Steve,
There obviously isn’t any risk. Here’s the question for Ron Paul and the Austrians:
I build you a house. You agree to buy it for $100,000, which you will pay me over time. You give me a promise to pay (note). I circulate that as currency; and if in fact the debt can be collected, the note is so good as currency.
What happens in a central banking system is “a banker” (usurer) intervenes on our arrangement, demanding that you issue your promise on their paper, and further demanding that you pay him 2 *more* houses for the one you’re intending instead to pay me.
The real question then, is why is this arrangement right, not just between you and I, but across a whole country — which hasn’t even given its assent to the arrangement?
Of course, it isn’t right: they are merely intervening as if they are the real creditor (me); and as if requiring you to use their paper imposes such a risk beyond the value of the paper itself (if any), that you should pay them 2 houses for the 1 I have delivered you!
Worse, because all the profit we can make *from each other* does nothing to negate having to re-borrow whatever we pay out of the general circulation, if we/you are going to continue servicing your debt, we have to borrow back the principal and interest we pay out of the circulation, merely to continue servicing the initial (and further) debt which is created.
Along the way, what we pay in the way of principal is re-borrowed as new debt equal to the former debt it otherwise would have resolved. Thus we fail to pay down the sum of debt. But what we pay against interest and necessarily re-borrow then inherently multiplies the sum of debt, because the re-borrowing of interest increases the sum of debt so much as the periodic interest on an ever greater sum of debt.
So, the debt grows and grows and grows in proportion to the obligated circulation, until we suffer a terminal sum of debt.
What is the risk?
Nothing but the paper (if any)!
If it cost $0.01 even to publish a $1,000-bill into circulation, then it costs $1.00 to publish $100,000 for your home. When you pay that $1, they break even — and everything above that is unearned profit, imposed upon unassenting subjects (except the folks here who seem to agree with the arrangement [which is advocated by Mr. Paul and his Austrian friends]).
In any case, so if your payments are $1,000 per month, the banking system’s profits are 1,000 times their costs, in the very first payment you make!!!
December 3rd, 2008 at 5:39 pm
Abel,
I am the author of the two theories I espouse, namely a) that any purported economy subject to interest ultimately terminates itself under insoluble debt; and b) that there is one and one only integral solution to 1) inflation and deflation, 2) systemic manipulation of the cost or value of money or property, and 3) inherent, irreversible, and inevitably terminal multiplication of debt in proportion to the vital, obligated circulation.
For your information, the thesis of mathematically perfected economy was first published in 1979, while I spoke of it for some 10 years prior. Ron Paul’s right hand man and “foremost authority on constitutional money,” Edwin Vieira first advocated MPE, and/or its causes, then split off without refuting my proofs of cause and solution, to support the gold standard, which my work so long ago even had already invalidated.
The so called “Debt Virus Theory” is simply a stealing of my work, and re-packaging of it by a man who doesn’t even seem to understand the problems identified so long ago. My work is all over the very first page of that ridiculous later work which cites a story *I invented* as actual history! Obviously, Jaikaran never researched it!
So, G. Edward Griffin and William B. Ryan claim as you have that profit or some other perception negate multiplication of debt by interest. These things have been argued out for 3 decades already; and if you want to see the results of those arguments, my invalidations post links back to Mr. Griffin’s material, Kent State Capital Ownership Group, and so forth. Mr. Vieira has even written me lately claiming *not* to have co-authored the New Hampshire Bill advocating the state coin gold money.
The answers I’m citing you are 30 years old. I’ve written scores of thousands of lines of software code which projected the present failure. Maybe you ought to listen. I’m only trying to save my country.
December 3rd, 2008 at 6:48 pm
Sounds to me like Mike has some very sound solutions, maybe Ron Paul could learn something from him in a debate or discussion, Alex as well. It’s obvious that Mike is only trying to give Ron, Alex, the people an obvious solution based on sound facts and a scientific approach. All I see is Ron Paul mania, no questions asked. Let’s hold his feet to the fire and get something more then sounds bites out of him on the economy, let’s talk solutions! If they would just answer to the interest questions raised on this forum would be a good start.
December 3rd, 2008 at 7:18 pm
I thought the writer of this article was quoting the Zeitgeist Addendum ( http://www.zeitgeistmovie.com ) for a second it started coming out nearly verbatim. What with the talk of scarcity and all and hyper inflation. I’m sorry Alex Jones despises Peter Joseph and the Zeitgeist Movement ( http://www.thezeitgeistmovement.com ) we could really do alot more for educating people and get everyone on the right track if the two of them would work in tandem instead of Alex being a jack ass.
December 3rd, 2008 at 8:04 pm
OneLoveliness,
Since when does Zeitgeist identify the cause of this failure, or its solution?
Is there more than one solution to inflation and deflation? Is there not but one way to maintain a circulation which is at all times equal to the remaining value of the wealth it is intended to represent?
Is there but one solution to systemic manipulation of the cost or value of money or property?
Is there but one solution to inherent, irreversible multiplication of debt by interest?
Did Zeitgeist author the integral solution of these categoric faults of contemporary monetary systems?
On the contrary, Zeitgeist is just another late comer, re-presenting yet again the same research I raised 30 years ago as a basis for understanding the imposition of usury, its consequences, and singular solution. To claim to be the author of any of that now is simply preposterous. The question is, why isn’t Zeitgeist either supporting mathematically perfected economy, or invalidating the proposition it is the singular integral solution for the categoric faults of the present, imposed systems?
Moreover, bring us the raw arguments how whatever Zeitgeist proposes is a monetary solution at all. Those who divert us from solution are in fact the problem, not the solution. So bring more than claims, and draw them together into veritable solution, rather than more claims. Until you can refute mathematically perfected economy or prove an alternate solution, I’ll have to agree with Alex. Who are you to claim Zeitgeist is a contributor to the truth, versus an enemy of it?
December 3rd, 2008 at 8:09 pm
Steve,
Thanks for the kind words. I’ll put my feet to Alex’ fire, or Mr. Paul’s any time they’re ready.
What about it Alex? Are we just now going to start talking about solution, 30 years after the “possible” fact? Is there more than one solution to 1) inflation and deflation, 2) systemic manipulation of the cost or value of money or property, and 3) inherent, irreversible multiplication of debt in proportion to a circulation?
Or does just anything we pretend to engineer fly, no matter the fact that gold cannot arrest further multiplication of debt by interest, and thus inevitable, terminal debt?
Send me an email. Give me a call. Let’s put all the other stuff behind us, and get at the real work at hand — hammering out the difference between actual mathematic solution, and whatever anything else is.
December 3rd, 2008 at 9:11 pm
Interesting debate on here. Time will judge who is right. Let’s all hope that present policies do not lead to a re-enactment of the Weimar Republic. Because the U.S. dollar is also the reserve currency of the world, the whole planet would be affected to a degree if things go bad.
An alternative to the debt-money system and Keynesian style economics is presented here.
http://www.michaeljournal.org/whatsnew.htm
December 3rd, 2008 at 10:05 pm
Mike, I’ve found your comments very enlightening but at the same time somewhat confusing. As soon as I think I know where you’re headed with an argument, I kind of lose the thread. I have only just now Googled your info so I haven’t had a chance to read any of it yet.
But for the benefit of the forum (or at least me), could you explain what you’re getting at in the simplest possible terms? Talk to us (or at least me) like we (or at least me) are five-year-olds.
For example, you seem to be saying that the Fed doesn’t create money out of thin air. Or have I misinterpreted what you wrote? If they do create it out of thin air (which their own literature seems to indicate), then some other posters (and possibly you) have an excellent point–why should they be allowed to charge interest?
In my limited understanding, interest is, for lack of a better term, a necessary evil if the lender makes a loan of hard currency and literally is deprived of the use of that currency for the duration of the loan period.
But if the Fed and banks in general are actually able to create money out of nothing, then they are not deprived of the use of any currency because they never had it to begin with–it did not and does not exist. If that is the case, then the interest they charge (as well as the principal) is literally a gift of free money to them, not a rental fee for the use of their money.
Any clarification you could provide would be very much appreciated.
December 4th, 2008 at 3:42 am
Mr. Paul, just so you know, the difference between real alchemists and charlatans is an avenue of oceanic proportions. There were once some ( and there still is ) individuals who CLAIMED they were alchemists, and their sole purpose was the pursuit of that coveted yellow metal, gold. They were materialists and pretenders to the spiritual, and bilked, milked and murdered many people thoughout history to feed their bottomless, soulless pits for the prize of possibly just an ounce. They were rightly called charlatans, but were commonly known in the day as ” Puffers “. But there were some ( and there still is ) people whose only interest and desire was an internal knowledge, a mystical communion which cannot be spoken of because there are no words for it, a ready desire for the service and betterment of souls of their brothers and sisters…spiritual gold. The Summum Bonum. Anybody who is a real Alchemist knows what I speak of. It is true there were some Alchemists ( capitalized so there is no confusion with charlatans ) who hid themselves with the blind of a mountebanke to protect not just themselves but also the uninitiated ( this is also a common Sufi trick when a master wishes to protect the novice…it’s also extremely necessary ). Protect themselves from whom? Not from duped aristocrats, but from the machinations of Inquisitors, whose purposes were more political of course, and from the expliotation of black magicians. There are some species of knowledge that SHOULD be guarded. It sounds silly but these people actually might consider belly lint more useful than a block of boullion. If you want a more expanded idea of what separates a real Alchemist from a charlatan then I suggest books by Dennis William Hauck, Maria Sforza, and Israel Regardie. My best to you, sir!
December 5th, 2008 at 3:09 am
Two Presidents tried printing money,same end result….Shot to death.
Lincoln and Kennedy.
Kennedy wanted the Fed out, actually printed some money from the treasury dept.
Nationalise the Fed.
Get rid of the crooks.
Stabilise the dollar.
Prosecute Rockefellar.
Throw the key away.