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End the Fed by Ron Paul

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October 27, 2009 – Comments (40)

I recently finished reading the book and wanted to let everyone know that this has been one of the best books I have ever read. This book is written with the conviction of an honest man, coming from humble beginnings learning business the old fashioned way, to being tutored and mentored by some of the greatest economic minds ever known. Ron Paul is a true patriot, and believer in the Constitution. Every point he makes he backs with history and facts, shows how it applies today's problems in America, makes the moral, constitutional arguments. Truly, a great read for someone who is wondering where the money for the stimulus bill actually comes from, where the money is going, and what it means to the common person. I was particularly pleased with the reading list he provides, since I want to know more and really didn't know where to begin. Thanks Ron for a great book. I am looking forward to reading more of your writings as well as the ones you have recommended in the book.

40 Comments – Post Your Own

#1) On October 27, 2009 at 3:10 PM, tcampbellla (80.55) wrote:

I complete agree. Ron Paul points out some huge flaws with having the Fed run our economic system which put our future, as a country, in jeopardy.  I wish the rest of our elected officials had the intelligence and guts he does.  We would be a lot better off!

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#2) On October 27, 2009 at 3:51 PM, 1315623493 wrote:

Ron Paul is hardly one to listen to on economics. He is a doctor and politician, not an economist. He fails to understand business cycles are independent of any economic system. You can have a gold standard and still have long, severe, recessions as had happened many times during the 19th and early 20th century. His solution to something that naturally happens is to end the institution that conducts monetary policy? Big LOL on that one. That's like saying, let's end the transportation department, the roads will build and police themselves! Let the traffic be free from government!!!11 Obviously, nothing but nonsense.

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#3) On October 27, 2009 at 5:00 PM, chk999 (99.97) wrote:

So where do we get the gold to have a gold standard on? There really isn't that much of it around.

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#4) On October 27, 2009 at 5:22 PM, 1315623493 wrote:

Not to mention, that if some loony libertarian government were to institute a gold standard, they'd have to fix the price of gold, while the price of gold floated in non-gold standard economies would skyrocket. 

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#5) On October 27, 2009 at 6:00 PM, booyahh (< 20) wrote:

Yeah, in the 1800s and early 1900s, there were no recessions or depressions. Ever.

See, when we were on the gold standard, everything was just hunky dory.

Kinda like how the gold standard prevented the Great Depression.

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#6) On October 27, 2009 at 6:33 PM, AvianFlu (25.10) wrote:

Beta:

You fail to realize that the reason we allowed the federal reserve to be set up in the first place to eliminate the boom and bust business cycle. At least that was the sales pitch given to the American public. Well, we can see how well that worked.

Since you discount the knowledge of a doctor and a politician, perhaps you would be more inclined to believe the analysis of someone with a Nobel prize in economics. Someone like Milton Friedman. He was of the firm belief that the 1930s depression was caused by actions taken (or not taken) by the federal reserve.

Ultimately, Friedman thought keeping the functions of the Fed was OK, but that they should be replaced with a computer program. I guess this would be OK if we could only keep the politicians from tampering with the program.

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#7) On October 27, 2009 at 10:15 PM, whereaminow (< 20) wrote:

sleepreading,

I'm glad you enjoyed the book.  Welcome to our cult :)  Here are some videos of Ron Paul I think you will enjoy:

Enjoy!

David in Qatar 

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#8) On October 27, 2009 at 11:04 PM, abitare (35.12) wrote:

Proud member of the Ron Paul cult. BetapegLLC and booyahh, you have not done due dilgence on Dr Paul. You should take the time to read his works before you attack one of the honest and best educated members of Congress. 

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#9) On October 27, 2009 at 11:33 PM, AvianFlu (25.10) wrote:

I have not seen these videos.
Wow! Why can't we find more politicians like Ron Paul? He is right. The republicans have lost their way. They had better get back on track philosophically. Where is the candidate with the charisma of Obama....but conservative?

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#10) On October 28, 2009 at 12:17 AM, 1315623493 wrote:

AvianFlu

The Federal Reserve was set up to conduct monetary policy, and prevent price volatility. Only an idiot would think business cycles could ever be avoided.

Milton Friedman is certainly one of the greatest economist of all time. But your misuse of him isn't so great. Milton Friedman blamed the Federal Reserve for INACTION. Milton Friedman's solution is the very solution the Ron Paul nuts would be against. INCREASING THE MONEY SUPPLY DURING A RECESSION. 

Lastly, ..."if we could only keep the politicians from tampering with the program." Politicians don't conduct monetary policy!!!

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#11) On October 28, 2009 at 12:25 AM, 1315623493 wrote:

 abitare

What makes you think I haven't read Ron Paul's works or watched anything about him and his views? Your assumption that because I don't support Ron Paul's economics means I haven't read into him, is completely ridiculous. I was even a Ron Paul support for a time, before I got an education in finance...

I certainly support Ron Paul's social and fiscal policy. Foreign policy, only to the point where he advocates America withdrawing from every supranational organization (loony). Monetary policy, now, this is an area he should stay far far away from. He's got good ideas, but unfortunately, a lot of those ideas are offset by the loony ones. The ones who swallow every word of it, I also question their economics competency. 

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#12) On October 28, 2009 at 12:33 AM, topsecret09 (39.58) wrote:

  Some history regarding the FED can be seen on a couple videos here........   http://caps.fool.com/Blogs/ViewPost.aspx?bpid=282185&t=01009917921919779399

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#13) On October 28, 2009 at 1:31 AM, AvianFlu (25.10) wrote:

Beta:

Perhaps my wording was not that clear. I am well aware of Friedman blamed the depression on the Fed being too tight with the money supply.

Milton suggested replacing the Fed with a computer program that would calculate and adjust the loosening and tightening of the money supply. When this function is performed by humans there is a tendency to overshoot the desired goal thus exacerbating the boom and bust cycle. At least that is what he said.

I must disagree with you when you say that politicians do not conduct monetary policy. Yes, that is the way it is supposed to be. But unlike computer programs, humans are often easily manipulated. The much vaunted independence of the Fed is a sham, at least under Bernanke. Watch some video clips of him with representatives of the administration. In my estimation they have plotted a course of action together and there does not appear to be much independence. Of course, I could be very wrong. I should call my little brother and ask his opinion. He has co-written papers with Ben Bernanke in the recent past.

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#14) On October 28, 2009 at 2:27 AM, whereaminow (< 20) wrote:

I love a good discussion on Ron Paul

BetapegLLC is repeating one of the many disproved myths of the Great Depression. 

The 1920s boom was caused by loose monetary policy via the Fed. The crash was predicted by the Austrian School.  The recession was turned into a depression by Hoover's intervention, in particular, his intervention in the labor market - refusing to allow wages to fall to reflect economic reality.  

This is documented by Rothbard in America's Great Depression and by macroeconomist Ohanian recently:

"any monetary explanation of the Depression requires a theory of very large and very protracted monetary nonneutrality. Such a theory has been elusive because the Depression is so much larger than any other downturn, and because explaining the persistence of such a large nonneutrality requires in turn a theory for why the normal economic forces that ultimately undo monetary nonneutrality were grossly absent in this episode. " - Ohanian

It's not like I can blame Beta.  He's just arguing what people have always taught him.  New information shows that he's wrong.  He can either adjust his thinking or continue to be wrong.

David in Qatar

 

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#15) On October 29, 2009 at 12:42 AM, 1315623493 wrote:

AvianFlu

I can be very safe to say that the Federal Reserve is already using a myriad of computer programs and financial algorithms to crunch the huge volume of data they have to digest. They employ very well educated economists, mathematicians, etc to do this work. A computer program by itself, cannot do what the people at the Federal Reserve do.

Also, the Federal Reserve play an advisory role to the politicians, Treasury, and President. To call that advisory role, and coordination of policy to combat a severe recession, "political", is disingenuous in my view. The board of governors decides monetary policy irrespective of what any politician wants them to do. 

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#16) On October 29, 2009 at 1:03 AM, 1315623493 wrote:

whereaminow

Gotta love the "he just believes what he's told" argument. As if you don't swallow everything that comes from the Mises Institute as holy gospel.

The 1920's boom was a result of supply-side economic policies started under President Harding. Nothing wrong with an economic boom, but when the boom gets too hot, and it did, the Feds raised interest rates can reduced credit. This ended the speculative bubble, sending the economy into a deflationary spiral, of which the Feds failed to respond to.

As for Hoover's so-called "government initiatives", too little, too late. You can't save a patient that's already dead. His first action wasn't to initiate government intervention. It was to get the private sector to fix itself! Of course it didn't.

And if you'v read from Milton Friedman's "A Monetary History of United States", the Depression lasted as long as it did because the financial system was completely collapsed. To blame it on the New Deal is to completely ignore that fact.

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#17) On October 29, 2009 at 1:13 AM, whereaminow (< 20) wrote:

BetapegLLC,

I did read "A Monetary History of the United States." I quote it often.  Especially the part where he notes the tremendous economic growth from 1871-1900, despite a contracting or stagnant money supply.  

I've read everything you have. Have you read what I have?  I challenge you to read Rothbard's AGD (free on pdf. just google it) and still claim that Hoover did too little.  Also check out the Depression of 1920-1921, which debunks the Harding supply side myth.

David in Qatar

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#18) On October 29, 2009 at 2:07 PM, 1315623493 wrote:

What page is that on? Because I know that period was marked by intolerably economic volatility. 

"In the United States, economists typically refer to the Depression of 1873–79, which followed the Panic of 1873. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction. Following the end of the episode in 1879, the U.S. economy would remain unstable, experiencing recessions for 114 of the 253 months until January 1901."

Capie, Forrest; Wood, Geoffrey (1997). "Great Depression of 1873–1896". in Glasner, David; Cooley, Thomas F.. Business cycles and depressions: an encyclopedia. New York: Garland Publishing. pp. 148–49. ISBN 0824009444.

Business Cycle Expansions and Contractions". National Bureau of Economic Research. Retrieved January 4, 2009. 

If you direct me to the page in "Rothbard's AGD" you'r referring to, I'll read it, and respond. If Hoover really did institute a real "New Deal" (which I scoff at), he wouldn't have called Roosevelt's policies "fascist"...

[Memoirs 3:420] 

"Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933 .... These ideas were first suggested by Gerald Swope (of the General Electric Company)... [and] the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part proved true." 

During the 1920's, taxes fell 50+% from World War I levels. President Coolidge saw this tax decrease realized, and prevented as much as he could government regulation in the private sector. Obviously supply-side economic policies. No way you can rail against Keynesians then, because there was no such thing as Keynesian economics! It was laissez-faire capitalism in the UK, and USA. Got to wonder about those 9 year olds working 18 hour days in coal mines and textile factories. 

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#19) On October 29, 2009 at 2:08 PM, 1315623493 wrote:

What page is that on? Because I know that period was marked by intolerably economic volatility. 

"In the United States, economists typically refer to the Depression of 1873–79, which followed the Panic of 1873. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction. Following the end of the episode in 1879, the U.S. economy would remain unstable, experiencing recessions for 114 of the 253 months until January 1901."

Capie, Forrest; Wood, Geoffrey (1997). "Great Depression of 1873–1896". in Glasner, David; Cooley, Thomas F.. Business cycles and depressions: an encyclopedia. New York: Garland Publishing. pp. 148–49. ISBN 0824009444.

Business Cycle Expansions and Contractions". National Bureau of Economic Research. Retrieved January 4, 2009. 

If you direct me to the page in "Rothbard's AGD" you'r referring to, I'll read it, and respond. If Hoover really did institute a real "New Deal" (which I scoff at), he wouldn't have called Roosevelt's policies "fascist"...

[Memoirs 3:420] 

"Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933 .... These ideas were first suggested by Gerald Swope (of the General Electric Company)... [and] the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part proved true." 

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#20) On October 29, 2009 at 2:38 PM, DaretothREdux (36.59) wrote:

BetapegLLC,

What does it take to be an economist? A four-year degree from Phoenix University? A piece of paper?

How about a life-time of study? I can promise you with 100% that Ron Paul has forgotten more about economics than you will ever know, and he's definitely studied and read more on the subject.

As to his understanding of the business cycle...I think he has that pretty well covered, after all he predicted (along with other Austrians) just about every boom and subsequent bust since the Fed was created:

The market rate of interest provides crucial information for the smooth operation of the economy. A central bank setting interest rates is price-fixing and is a form of central economic planning. Price-fixing is a tool of socialism and destroys production. Central bankers, politicians, and bureaucrats can't know what the proper rate should be. They lack the knowledge and are deceived by their own aggrandizement. -Ron Paul, End the Fed pg. 133

As to the gold standard didn't stop the boom and bust cycle, Ron's argument is not that it will stop it! His argument is that ending fractional reserve banking (creation of "easy credit" from nothing) would stop the problem. He just see gold as the best way to achieve that, but he has also spoken for competition in currency (not gov't competition but private). What do you think the dollar index would look like if a private company were to offer gold back currency in the US and it were allow to legally circulate?

Dare

 

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#21) On October 29, 2009 at 3:15 PM, booyahh (< 20) wrote:

he [Ron Paul] predicted (along with other Austrians) just about every boom and subsequent bust since the Fed was created.

The Fed was created in 1912 as a response to the Panic of 1907, which was a credit crisis similar to what we have today.

Did the Austrians predict that boom and bust cycle ? What about all the other boom and bust cycles before the creation of the Fed ? Did the Austrians predict the 1870s recession ? Was that also the Fed's fault? What about the 1890s recession ?  Or The Panic of 1857 ?

 

 

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#22) On October 29, 2009 at 3:52 PM, 1315623493 wrote:

 DaretothREdux

"What does it take to be an economist? A four-year degree from Phoenix University? A piece of paper?"

Don't claim to be an economist if you don't have the credentials. I don't claim to be a doctor when I haven't gone to medical school. Why you subscribe this level of credibility to Ron Paul is beyond me.

"How about a life-time of study? I can promise you with 100% that Ron Paul has forgotten more about economics than you will ever know, and he's definitely studied and read more on the subject."

Ron Paul has forgotten more about economics than me? You probably mean, he knows more than I'll ever know. I'm not even going to waste my time with this sort of immature argument.

"As to his understanding of the business cycle...I think he has that pretty well covered, after all he predicted (along with other Austrians) just about every boom and subsequent bust since the Fed was created:" 

I love how the so-called Austrians claim they have called every boom and bust. What a lie. If that were the case, they'd all be rich now wouldn't they? It's easy to predict a bust when that's all the Austrians ever do. It's like me saying everyday, "It's going to rain." Everyday that it does rain, I then claim I successfully predicted it. That's just intellectually poor.

":As to the gold standard didn't stop the boom and bust cycle, Ron's argument is not that it will stop it! His argument is that ending fractional reserve banking (creation of "easy credit" from nothing) would stop the problem. He just see gold as the best way to achieve that, but he has also spoken for competition in currency (not gov't competition but private). What do you think the dollar index would look like if a private company were to offer gold back currency in the US and it were allow to legally circulate?"

Stop what problem?

Currencies already compete on the foreign exchange. The value of the dollar is decided by the free market. What you want it actually contrary to what you advocate. You want the dollar's value fixed at a fixed price of gold. What happened to your "free market" principles? You want to fix the price of gold?

Whose going to regulate a gold backed currency? Private companies? Yea...right...That's like trusting drivers not to speed without speed limits. We already had an economy in which multiple currencies were floated inside the country and that obviously didn't work out, and won't work out. Nobody wants that kind of chaos. 

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#23) On October 30, 2009 at 11:19 AM, DaretothREdux (36.59) wrote:

booyahh,

You didn't address my point of fractional reserve banking. The boom and bust is due to "easy credit." If you have a gold standard but banks are still allowed to lend at at 100-1 reserve then you will still have boom and bust cycles. And yes they are as easy to predict as its "going to rain" as long as we continue to use that system. They would not exist under a 100% reserve system.

BetapegLLC,

You don't have to "fix" the price of Gold. You simply tie the dollar to an amount of gold (a weight). Problem solved. Let gold (ie gold-backed dollar) flucuate against other currencies and see which one comes out ahead. The currency which remains priced in something of intrinsic value or the one printed at the whim of bankers....I know what I'd bet on.

You point about who would regulate it is stupid. Who regulates the price of computer chips? Who regulates the price of ipods? No one currently regulates the price of gold (although I am sure a certain amount manipulation does occur by the big banks), so it would not need a regulator. Banks would be smaller as they would existentially be warehouse for storing gold, and those who offered the lowest storage fee and the best protection would have clients...it would be like everyone had a safety deposit box.

Now if people wanted to lend their money to the bank at interest to loan out to other people, that would be fine. The problem occurs when you have people "saving" and the banks "lending." The problem comes from the instability of both simultaneously. The money should either be reserved for lending or kept for savings. Otherwise you multiple money to whatever we allow banks to multiple at. 10-1 is still bad, just not as bad as 100-1. Either way 1000% more money exists in the system than REALLY exists!

Under the current system all banks are insolvent.

Dare

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#24) On October 30, 2009 at 2:53 PM, 1315623493 wrote:

All you'v done is replace the word "fix" with "tie" knowing full well they mean the exact same thing in this context. You want to fix the price of gold at whatever weight (doesn't matter). This is completely contrary to your supposed "free market" attitude. 

As for regulation, someone has to control monetary policy. What you want is private corporations to do that, which is utterly ludicrous. And reverting back to the defunct gold standard would do nothing but inject a huge uncertainly factor into the markets, making the price of gold skyrocket into the stratosphere. Not to mention there isn't enough gold on earth to even cover the amount of currency in circulation in just the United States. It sounds good on paper, but when facts are brought in, instituting a gold standard is economic suicide.

No, not all banks under the current system are insolvent because they can pay their current liabilities! If all banks were truly insolvent, it would be 1933 all over again. It isn't. 

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#25) On October 30, 2009 at 3:54 PM, DaretothREdux (36.59) wrote:

BetapegLLC,

I already typed this once and CAPS ate it....so since you seem to want to learn I will type this again.

Let me break this down really simple for you. A bank has deposits of gold. That same bank issues currency. They take the amount of gold they have and determine how many units (dollars) they can issue. Say they had 1million pounds of gold. And they decided that they want their dollar to be worth 1 pound of gold. This would make each of their dollar units currently worth about $16,709 USD. They wouldn't do that because it would be hard to spend....so say they make each dollar unit worth 1/1000000th of an ounce. Each unit is now worth 1/10th of penny. This is also kind of pointless as even pennies are worthless....so finally the bank decides that each unit worth 1/1000th of an ounce.

Each unit is now woth approximately $1.04 USD. The bank can issue 1000 units for every ounce of gold they have in their vaults. They have 16 million ounces, they can issue 16 million units of currency.

But here is the catch. After they issue that 16 million. They never EVER issue anymore (unless they aquire more gold deposits to back the new issues). The price of that unit will never be deflated or inflated by the bank.

The USD will continue to lose value against that unit as well as every other fiat currency that is inflated at the will of central bankers.

You can stick $1000 in that bank, and 50 years later it has lost ZERO percent of its original purchasing power while the USD will lose another 50-100%.

If you think this is a stupid idea then why not make it legal for a bank to do this? It will just fail, right? Wrong. It would instead cause the USD to fail, which is why it has been made illegal. 

You idea is what is completely contrary to my "free market" attitude. You are the one that wants a monopoly to control the money supply and be able to change its value anytime they desire to do so without the consent of the people.

I'm not "fixing" the price of gold. In dollars the price of gold will continue to rise and so will the new units issued backed by gold. Their only thing that doesn't change is that a certain amount of units buy a certain amount of gold because they are simply an easy substitute for the gold. After all, it's heavy and you would have to break it up into 1/1000th ounce pieces to be able to buy a pack of gum.

As for regulation, someone has to control monetary policy.

Why? Because your statist textbooks say so? Why does someone have to control it?

Let me ask it this way. Do you think that the gov't can determine the price of laptop computer? How about the ipod? Why not let the brilliant economic wizards Krugman and Bernacke determine how much those are worth?

Because the market is the best determiner of the price of those things. It's not different with money or interest rates. The market as you pointed out already determines the price of dollars relative to other fiat currencies of the world.

The only difference is that I am calling for an alternative that isn't controled by a government/private monopoly. I'm asking for competition because that's what drives down prices and raises the standard of living for everyone.

The free-market did just fine before central banks, which if I am not mistaken was thousands of years of human history.

reverting back to the defunct gold standard would do nothing but inject a huge uncertainly factor into the markets

and

instituting a gold standard is economic suicide

Actually, it's the opposite. Having a private banking cartel control the money supply and interest rates is economic suicide because the Fed can make interest rates lower than the free-market would determine (which they do and still are doing) which causes massive amounts of economic uncertainty, and also allows forces people to take on more debt than capital and labor actually exists, which is the same thing as insolvency.

No, not all banks under the current system are insolvent because they can pay their current liabilities! If all banks were truly insolvent, it would be 1933 all over again. It isn't. 

The ONLY reason its not 1933 all over again is because the Fed and FDIC have promised to bail out any bank that gets into trouble. If every person holding USD went to the banks at the same time and withdrew their money the banks would only be able to pay about 10% of the people. That's insolvency.

There is 1000% more ficticious imaginary money floating throughout the system. That is what creates the boom and bust cycle. If you were to end fractional reserve banking (move to 100% reserve) and switch to a gold standard then there would be no more boom and bust.

You would only see steady 3-8% economic growth a year and you wouldn't have people able to profit by stealing from the middle and lower class through inflation, but you also wouldn't have a recession every 5 years.

There. I think that's most of what I wrote before (some lost and some gained), and I have now given you both economic and moral reasons for ending the federal reserve.

I await your rebuttle.

Dare

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#26) On October 30, 2009 at 6:47 PM, 1315623493 wrote:

You want each bank to issue its own currency? In the 19th century, states issued their own currency, and that resulted in currency exchange chaos. Having competing currencies within an economy sounds good on paper, but isn't in reality. Who is going to determine legal tender? The market? What if I get paid in Citigroup dollars, but the grocery store only takes Liberty dollars? If you are worried about losing value in your saving, then don't stuff your saving under the mattress. The need for an elastic currency is far more important than your savings stuffed under the mattress losing value.

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"You are the one that wants a monopoly to control the money supply and be able to change its value anytime they desire to do so without the consent of the people."

I am not a laissez-faire capitalist, as you are, so yea, I do want monetary policy monopolized into a single entity. So what? I am not contradicting myself.

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"I'm not "fixing" the price of gold. In dollars the price of gold will continue to rise and so will the new units issued backed by gold. Their only thing that doesn't change is that a certain amount of units buy a certain amount of gold because they are simply an easy substitute for the gold. After all, it's heavy and you would have to break it up into 1/1000th ounce pieces to be able to buy a pack of gum."

How is fixing convertibility into gold at a certain price NOT price fixing? The Feds fixed the price of gold at $35. When people would convert dollars to gold, they would not get anything less or more than $35/ounce.

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"Why? Because your statist textbooks say so?"

Why not? Because Ron Paul told you so? See, these "you believe what you believe because you'v been brainwashed" arguments are juvenile to say the least... 

"Why does someone have to control it? Let me ask it this way. Do you think that the gov't can determine the price of laptop computer? How about the ipod? Why not let the brilliant economic wizards Krugman and Bernacke determine how much those are worth? Because the market is the best determiner of the price of those things. It's not different with money or interest rates."

Asking why someone has to regulate money supply is like asking why we have to have cops on the streets. Only a central bank can conduct monetary policy, otherwise, price volatility would rip this economy into the ground. The currency's value would fluctuate wildly. Your argument that monetary policy is akin to price fixing is ridiculous. Ipods and laptop computers? Are you serious? The money supply must be regulated just like any other public commodity/service are. 

"The market as you pointed out already determines the price of dollars relative to other fiat currencies of the world.The only difference is that I am calling for an alternative that isn't controled by a government/private monopoly. I'm asking for competition because that's what drives down prices and raises the standard of living for everyone."

There already is competition between currencies. It's the foreign exchange market. Open 24 hours a day, trillions traded everyday. 

"The free-market did just fine before central banks, which if I am not mistaken was thousands of years of human history." 

No, it certainly did not do better before central banks. The era before 1913 was market by panic after panic, and the longest depression in our country's history, Depression of 1873-79 (Long Depression). The US economy experienced recessions for 114 of the 253 months until January 1901. The 20th century was marked by exponentially far more growth than the previous century...with the evil central bank!

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"Actually, it's the opposite. Having a private banking cartel control the money supply and interest rates is economic suicide because the Fed can make interest rates lower than the free-market would determine (which they do and still are doing) which causes massive amounts of economic uncertainty, and also allows forces people to take on more debt than capital and labor actually exists, which is the same thing as insolvency."

Private banking cartel? Are you serious? I am not even going to address this ridiculous argument.

A radical shift in abolishing the central bank and completely changing the currency, is economic suicide. Plain and simple. 

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"The ONLY reason its not 1933 all over again is because the Fed and FDIC have promised to bail out any bank that gets into trouble. If every person holding USD went to the banks at the same time and withdrew their money the banks would only be able to pay about 10% of the people. That's insolvency."

Wrong, not every bank, TOO BIG TO FAIL BANKS. Hundreds of banks of been allowed to fail. The financial system could not have been allowed to collapse. 

"There is 1000% more ficticious imaginary money floating throughout the system. That is what creates the boom and bust cycle. If you were to end fractional reserve banking (move to 100% reserve) and switch to a gold standard then there would be no more boom and bust."

Wow. Just wow. No more boom bust cycle? That statement is not more utopian than Stalinist communism. There are booms and busts in EVERY economic, no matter what form that economy is, or currency system, gold or fiat. Read this...

http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

Hopefully you won't repeat such an fallacious statement. 

"You would only see steady 3-8% economic growth a year and you wouldn't have people able to profit by stealing from the middle and lower class through inflation, but you also wouldn't have a recession every 5 years."

There were dozens of recessions (many very severe; i.e. GREAT DEPRESSION) on the gold standard, so your belief that it would be any different is completely wrong. 

--------------------------------------------------------------

Advocating abolishing the central bank is in my view, a ridiculous anarcho-capitalist, argument, devoid of reality. Booms and busts occur independently of the economic structure, or central bank. The central bank has some influence on booms and busts, but to say they are the very cause of booms and busts is to be completely ignorant of the natural wave behavior inherent not just in economics, but in nature itself. The economy goes up and it goes down. The better we control this effect, the better for everyone. Clearly, the money supply must be elastic according to the needs of the economy, not the gold supply. 

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#27) On October 30, 2009 at 8:21 PM, DaretothREdux (36.59) wrote:

BetapegLLC,

Show me a bank failure or a recession under a 100% reserve standard and then I may come to your side.

What you have yet to understand is that I am not saying boom and bust did not happen under the gold standard. I AM claiming that such a thing would not happen if you ELIMINATED FRACTIONAL RESERVE BANKING!

let me say it one more time:

FRACTIONAL RESERVE BANKING

Gold standard is just the simpliest way to eliminate it. I don't care how it's done as long as that's eliminated.

Please address Fractional Reserve Banking and a 100% reserve system, if you can.

I suspect you can't.  You entire argument fails unless you can.

Dare

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#28) On October 30, 2009 at 10:49 PM, 1315623493 wrote:

"Show me a bank failure or a recession under a 100% reserve standard and then I may come to your side."

That's hard to come by since practically THE ENTIRE WORLD went on the fractional reserve system in 1800. No country wants to retard their economic growth just so no banks fail. Benefits obviously did not outweigh the benefits in 1800, and still don't today. No leading economist would advocate such a stifling banking system.

"What you have yet to understand is that I am not saying boom and bust did not happen under the gold standard. I AM claiming that such a thing would not happen if you ELIMINATED FRACTIONAL RESERVE BANKING!let me say it one more time:

FRACTIONAL RESERVE BANKINGGold standard is just the simpliest way to eliminate it. I don't care how it's done as long as that's eliminated.Please address Fractional Reserve Banking and a 100% reserve system, if you can.I suspect you can't.  You entire argument fails unless you can."

Advocates of full reserve banking are overwhelmingly ignored by maintstream economists. For good reason. A full reserve banking system means credit for individuals and businesses is drastically cut to such a level as to permanently stifle economic growth. Obviously the benefits of fractional reserve banking FAR FAR outweigh events such as bank failures. 

Austrian monetary theorist George Selgin says it best: Those self-styled Austrian economists, mostly followers of Murray Rothbard, who insist on its fraudulent nature or inherent instability are, frankly, making poor arguments. I don't think the evidence supports their view, and that they overlook overwhelming proof of the benefits that fractional reserve banking has brought in the way of economic development by fostering investment.

http://www.richmondfed.org/publications/research/region_focus/2009/winter/full_interview.cfm

 

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#29) On October 30, 2009 at 10:51 PM, 1315623493 wrote:

Correction second paragraph, third sentence, "Benefits obviously did not outweigh the [[costs]] in 1800..."

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#30) On October 30, 2009 at 10:51 PM, standridge (< 20) wrote:

He's the only congressman thinking in real world terms.

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#31) On October 31, 2009 at 1:00 AM, DaretothREdux (36.59) wrote:

BetapegLLC,

Copying a line from a wikipedia page is not argument. You are avoiding the question.

Have you read Rothbard's argument? Can you refute it? Or did you simply go here and repeat much of what you saw?

Simply saying that "the benefits outweigh" the "costs" or negatives is not an argument. Bank failures are clearly not the only negative. The misallocation of capital and the theft from the middle and lower class seem like much larger negatives to any lover of freedom.

And look I can use wikipedia as well! It's funny that you quote Selgin when his wiki page clearly states:

A central claim of the Free Banking School (Of which he is a founding member) is that the effects of government intervention in monetary systems cannot be properly appreciated except with reference to a theory of monetary laissez-faire, analogous to the theory of free trade that informs the modern understanding of the effects of tariffs and other trade barriers.

Even if Selgin is not in the abolish fractional reserve banking cam, he is still clearly on my side of the argument, in that he doesn't believe the Fed or any central bank can properly allocate resources (money) or determine interest rates better than a free-market could.

Dare

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#32) On October 31, 2009 at 5:17 AM, 1315623493 wrote:

"Copying a line from a wikipedia page is not argument. You are avoiding the question."

No, I clearly quoted the man, and just because you don't accept my argument, doesn't mean I haven't addressed your question. 

"Have you read Rothbard's argument? Can you refute it? Or did you simply go here and repeat much of what you saw?"

Unlike you Austrians, I don't claim to know everything. You seem to have a problem with me looking stuff up to back up my point of view.  

"Simply saying that "the benefits outweigh" the "costs" or negatives is not an argument. Bank failures are clearly not the only negative. The misallocation of capital and the theft from the middle and lower class seem like much larger negatives to any lover of freedom."

It clearly is an argument. Fractional reserve banking allowed for the credit necessary for an expanding economy. I clearly stated that. Did you read that part? 'A full reserve banking system means credit for individuals and businesses is drastically cut to such a level as to permanently stifle economic growth.'

"Even if Selgin is not in the abolish fractional reserve banking cam, he is still clearly on my side of the argument, in that he doesn't believe the Fed or any central bank can properly allocate resources (money) or determine interest rates better than a free-market could."

Even some Austrians are sensible enough to know full reserve banking is for loony tunes. I have no idea how you got to the idea that free markets could maintain by itself, price stability, and conduct monetary policy by itself. History clearly shows a market left completely alone is a harsh volatile one that leaves a multitude in the dust. Just as if we said, traffic will decide what the best speed limit is. Yes...right...

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#33) On November 01, 2009 at 6:08 PM, DaretothREdux (36.59) wrote:

BetapegLLC,

Unlike you Austrians, I don't claim to know everything. You seem to have a problem with me looking stuff up to back up my point of view. 

I never claimed to know everything. And I have no problem with you looking things up. And no, I hadnever seen that wikipedia page until I notice you had quoted it.

In fact, I want you to look things up. I want you to read more about the subject before you condem it. I want you to be able to cite someone beside the author of a wiki page....

And even more important I want you to put together a coherent argument that disproves me wrong. I just don't think you understand the debate when you present statements like:

Even some Austrians are sensible enough to know full reserve banking is for loony tunes. I have no idea how you got to the idea that free markets could maintain by itself, price stability, and conduct monetary policy by itself. History clearly shows a market left completely alone is a harsh volatile one that leaves a multitude in the dust.

You have submitted a statement of fact with zero supporting evidence to back it once again.

Read about the bank of Amsterdam (a 100% reserve bank). Not only did it see growth, but it never once failed even when thousand of banks crumbled around it.

I will happend to continue to debate with you, but I would like to see you actually present an arguement (based on logic/fact instead of opinion first).

I would also like to ask if you have read Ron Paul's End the Fed or any of his other works on economic theory?

Cause it seems to me you have not. And not only that, but you have condemned his writing much like a child condemns pees...

oohh yuck! I've heard those are gross!  I'm not gonna eat THAT!

Who's knows maybe you like pees? Maybe you could learn the counter-argument before you settle on an opinion?

I'll address the market maintaining itself at a later date. And believe it or not... speed limits are also imposed/followed in the same way the market regulates itself.

Dare

 

 

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#34) On November 01, 2009 at 7:58 PM, 1315623493 wrote:

"I never claimed to know everything. And I have no problem with you looking things up. And no, I hadnever seen that wikipedia page until I notice you had quoted it.In fact, I want you to look things up. I want you to read more about the subject before you condem it. I want you to be able to cite someone beside the author of a wiki page....And even more important I want you to put together a coherent argument that disproves me wrong. I just don't think you understand the debate when you present statements like:"

If you have no problem with me looking things up, then there was no reason for you to say, "Copying a line from a wikipedia page is not argument. Or did you simply go here and repeat much of what you saw?" For some reason, we continually come back you basically telling me, I believe in my economic view because 'I'm told so', as if you believe what you believe because Ron Paul told you so. This is what, the second or third time I'v had to brush this fallacious argument off? I have been putting together coherent arguments throughout this whole debate, but it seems like your only recourse seems to be a simple write off, such as the oft-repeated, 'you'r brainwashed' argument.

--------------------------------------------------------- 

"You have submitted a statement of fact with zero supporting evidence to back it once again."

I have provided evidence throughout. Either you didn't read it, or erased from memory. Post #18 should have demonstrated to you that a central bank free, self-regulated market, on the gold standard, with competing state currencies...basically everything you want...was highly volatile, marked by severe recessions, with one that was longer than the Great Depression. Post #26 laid out even more, as to the chaos which existed in your system, why a central bank is necessary, interspersed with simple analogies a 5th grader could understand. Meanwhile you called the central bank a 'private-banking cartel' and said "switch to a gold standard then there would be no more boom and bust." And you tell me I'm not coherent? Please...you'v been watching Money Masters haven't you?

-------------------------------------------

"Read about the bank of Amsterdam (a 100% reserve bank). Not only did it see growth, but it never once failed even when thousand of banks crumbled around it."

I have read about the Bank of Amsterdam in researching full reserve banking, and then told you in post #28 'That's hard to come by since practically THE ENTIRE WORLD went on the fractional reserve system in 1800.' The Bank of Amsterdam is one of the extremely few banks that could be found to practice full reserve banking...400 years ago! 

Advocating an economic system as you are, in which no bank fails because they all have full reserves is no more utopian than a communist classless society. In order to attain a no bank failure economy, you have to sacrifice credit, thus stifling economic growth. Just as a classless society can be attained only by making everyone poor. It all sounds great, but in reality, as I'v said before and say again, is much different.

--------------------------------------

"I would also like to ask if you have read Ron Paul's End the Fed or any of his other works on economic theory? Cause it seems to me you have not. And not only that, but you have condemned his writing much like a child condemns pees..."

I used to be a fundamentalist libertarian Ron Paul supporter just like many on this board. That was before I got an education in finance and really studied exactly what Ron Paul advocates. I don't have to read every book he's written to know what he advocates. Gold standard, laissez-faire capitalism, no centralized monetary policy, etc. Back then I read everything I could about libertarianism and all the stuff you are telling me here I don't know. I have done my critical analysis, and after doing so, I have decided on what I believe is the correct economic system. So I'd appreciate if you dropped the 'you are ignorant of my side' and 'you believe only what you'r told' arguments, because I have dutifully examined your point of view far before this debate even started. If you want to liken me to a child, be my guest, only it makes your side even more distasteful if you truly are trying to convince me of the rightness of your point of view. 

--------------------------------------------------

"I'll address the market maintaining itself at a later date. And believe it or not... speed limits are also imposed/followed in the same way the market regulates itself."

Another instance of claiming anarchy as the best course of action. Practically everyone wants freedom, in economics, or politics. But you sir, are advocating anarchy, and no one but radicals want that.

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#35) On November 01, 2009 at 8:16 PM, whereaminow (< 20) wrote:

BetapegLLC,

Your information on the "Long Depression" of the 1870s has been disproved. It is simply bad info. You didn't even read the Wikipedia article that you linked to. Because if you had, you would have seen that most economists believe the recession turned in 1875, not 1879. Even mainstream economists in the New York Times have admitted that the 1870s was a period of spectacular growth.

Look! Here's leading Progressive economist Charles Morris in the New York Times telling you that you are wrong. That he was wrong. That Keynesians and Progressives and academic historians were wrong:

Historians long attributed the turmoil to a "great depression of the 1870's." But recent detailed reconstructions of 19th-century data by economic historians show that there was no 1870's depression: aside from a short recession in 1873, in fact, the decade saw possibly the fastest sustained growth in American history.

The fastest sustained growth in American history

Wow!

How about that? So, anyway, let's just start there. I'm very pressed by time right now, and even though it would be fun to slice you to pieces all at once, I'll have to take it day by day.

David in Qatar

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#36) On November 02, 2009 at 1:13 AM, 1315623493 wrote:

Whereaminow

Wow! An opinion piece devoid of any data! Awesome! So you'r all hung up on when the 'Long Depression' ended? Frankly, it doesn't matter. The point I made is, the gold standard, decentralized monetary policy, deregulated, free banking, laissez-faire system you guys want was a harsh, volatile, system in which there was no recourse of action in the event of a currency crisis. 

I'll let you imagine you'r "slicing me to pieces". The fact of the matter is, there isn't a country in the world loony enough to follow your economic philosophy. I think the word is, "devolution"...

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#37) On November 02, 2009 at 8:06 AM, whereaminow (< 20) wrote:

BetapegLLC,

That was pathetic. You can't respond. You just insult me. Debate over.

David in Qatar

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#38) On November 02, 2009 at 8:11 AM, DaretothREdux (36.59) wrote:

BetapegLLC,

The following article has pretty charts and data for your viewing pleasure ;)

It doesn't 100% prove you wrong, but it certainly knocks one big hole in this argument:

In order to attain a no bank failure economy, you have to sacrifice credit, thus stifling economic growth.

And this one...

a central bank free, self-regulated market, on the gold standard, with competing state currencies....was highly volatile, marked by severe recessions, with one that was longer than the Great Depression.

In fact, the Great Depression was probably the result of going off the gold standard, and not the other way around.

Of course, we also have to give a lot of credit to central banks (fiat money) and gov't interference in the market (new deal, price/wages fixing), but then I am arguing against those things as well.

Dare

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#39) On November 02, 2009 at 2:14 PM, 1315623493 wrote:

whereaminow

Sorry I don't fall head over heels over your op-ed. I made a point. You then decided to nit pick on various opinions of when the 'Long Depression' actually ended, which is not addressing my main point. You are the pathetic one. 

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#40) On November 02, 2009 at 2:22 PM, 1315623493 wrote:

DaretothREdux

That is a long read. If you could please point me to the passages you want me to read, I'd appreciate it.  

"In fact, the Great Depression was probably the result of going off the gold standard, and not the other way around.Of course, we also have to give a lot of credit to central banks (fiat money) and gov't interference in the market (new deal, price/wages fixing), but then I am arguing against those things as well." 

I want to refute this but I'd feel like we'll just be repeating the same arguments over again. We'v had a long and spirited debate and I think at this point, it's best to just respectfully agree to disagree. I'm not going to lie and say full reserve banking and the gold standard don't have some characteristics which make them seemingly desirable. Unfortunately, I believe, as well as an overwhelming majority of economists and policy makers, that such systems are not practical. I'm content that I have argued my case well, and further argument will just be repeating old arguments. Thanks for the exchange of opinion.

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