There’s a fiat money pyramid, and you’re likely at the bottom. New Federal Reserve dollars reach you in the form of a higher salary about when prices are already higher, so you can’t buy any more than you used to. A four-minute video about fiat money explains this and other key points about our current monetary system, most importantly that banks and governments benefit at the expense of most everyone else.
A Federal Reserve advocate warned of financial fires and “trouble” from bankers if the central bank is disbanded. Dean Baker, an economist and World Bank consultant, recycled these and other central banking scare tactics from the past 250 years at an evening debate in Washington, DC. Jeffrey Tucker, an economist and executive editor of Laissez Faire Books, argued for a free market in banking. Read more
Greece’s Prime Minister warned that Greece will leave the EU and return to the old currency, the drachma, if it does not receive more money from the EU. In essence, Greek politicians want to steal from either all EU taxpayers or just Greek taxpayers. By returning to the drachma, Greek politicians can issue as much currency as they need or want, and the value of that new currency comes from anyone holding the currency. If you’re in Greece or the EU, consider other ways to store your wealth.
See related AP article.
Thru October, Federal Reserve and its member banks have created 28 percent more dollars. This comes on top of their 18 percent increase in 2010 and a 104 percent increase in 2008. Each increase will mean a similar decrease in the dollar’s value, from what it would have been without the increase.
The vertical gray bars represent US recessions. 2011 doesn’t have a gray bar. Either recessions do not directly impact the money stock or the US is still in a recession. Or maybe 2008’s 104 percent increase relates to the recession, while the 2011 increase occurred because fewer nations, money funds, and people were lending money to the U.S., so Federal Reserve created dollars and lent them to the U.S. government.
If you’re not getting those new dollars, then you’re providing them, since the value of the new dollars comes from the value of all existing dollars. Imagine if you were filling a cupcake tray that has 12 spots and you ran out of batter before filling the final three. You would take batter from the other nine. Fed Reserve and it’s main client, the US Federal Government, and its main clients, military contractors, are eating your cake.
View original chart from St. Louis office of Federal Reserve
Raising the debt limit will likely increase inflation since most buyers of government debt, such as Federal Reserve, create new money to buy the debt. The new money lowers the value of existing money, just as an increase in any product, makes it less valuable.
For the first six months of 2011, Federal Reserve bought 85 percent of government debt. Federal Reserve usually has no reserves (never really did) and created new dollars to buy this debt. In addition, U.S. debt bought by central banks from other countries likely also came about through new units of their own nation’s money, so inflation could hit those countries as well, making the U.S. spending problem an international problem.
By inflation, I mean the monetary unit loses value. Prices won’t necessarily rise from current levels, but they will be higher than they would have been had Federal Reserve not created new dollars. Prices do not show always rise during a money devaluation because new production methods can lower production costs further than the devaluation. The dollar could lose 10 percent of its value, but if production improvements lower costs by 12 percent, prices would fall two percent, leading many to believe there is no inflation.
When it comes to inflation, prices are irrelevant, and the money quantity (known as M1) is the real information source. The money quantity has risen (or inflated) 13 percent since last July (1,722 billion to 1,947 billion), and I assume this is mostly due to purchases of U.S. debt. This means prices are or will be 13 percent higher than they would have been without these new dollars floating around.
Doomsday articles about the debt limit also complain about “rapidly rising interest rates.” If in fact they do rise, this will benefit savers. Banks now offer a measly one percent interest rates on savings accounts. The rate was more than five percent. If you have $1,000 in the bank, with a five percent interest rate, you would earn $50. With a one percent interest rate, you earn $10. The forty dollar loss goes to the person who borrowed your money.
Journalists and economists also worry about a lower credit rating for the U.S. This would be like cutting off the drunk at the bar. The U.S. doesn’t need any more debt. You can’t spend your way out of debt. And a lower credit rating might dissuade banks that enable this nightmare. A lower credit rating would require the U.S. to offer a higher interest rate to lenders, and this would the U.S. less likely to take on debt.
Creating more money for the purpose of lending to the U.S. government will harm the personal economies of individuals. People on fixed retired benefits and fixed annual salaries will have less purchasing power because their money will be devalued. Savers will continue to receive lower interest payments. And politicians will spend the U.S. into bankruptcy, turning everyone into debt serfs.
- Debt Ceiling Drama: “In fact, default happens every day through monetary policy tricks. Every time the Federal Reserve engages in more quantitative easing and devalues the dollar, it is defaulting on the American people by eroding their purchasing power and inflating their savings away.”
- What happens if the government defaults on the deficit? – “The second, a gradual informal default through inflation, is already underway. I have explained this in earlier blogs but, very briefly: The Fed has been printing money hand over fist to hold down interest rates by buying some 75% of all T-Bills it sells to finance the national deficit. It has printed more money to loan at zero percent interest to the big banks, which they immediately invest in T-Bills at a risk-free profit of 3.5%. And the Fed printed vast sums of money to enable it to buy toxic subprime mortgages which the big banks held on their balance sheets, posing a risk to their solvency.”
- The US Debt Ceiling & I – What they don’t realise and don’t admit is that the country is bankrupt.. there will be a default. The default is occurring. The people are getting less for their money and that’s how big governments and big countries default.
The group Institute for New Economic Thinking, funded by George Soros, will host a monetary conference in Bretton Woods, New Hampshire, from April 8 to 11. The conference will assemble bankers, politicians, journalists, and activists.
Ed Griffin states:
George Soros is sponsoring a major international conference to reform the world’s currency systems, which means to create a one-world fiat money controlled by a world central bank. He claims that capitalism is the enemy of an open society. He hopes this will become as important for the future of money as the 1944 Bretton Woods conference that led to the creation of the IMF and World Bank.
A concept known as Gresham’s law states bad money pushes out good money. Bad money is an unbacked or partially backed bank note, such as Federal Reserve notes that are not backed by anything. You cannot redeem them for any product. “Legal tender” laws force people in the US to accept these notes as payment. Someone who can pay with worthless FRN’s will not use a backed note. The FRN is like a gift no one wants and one regifted to another.
Even if the US government allows people to use other products as money, FRNs will remain the most common note because of the “legal tender” law. The solution is to repeal this law, and Ron Paul introduced a bill on December 9, 2009 to do just that. H.R. 4248 the Free Competition in Currency Act, will do three things:
1. Eliminate the legal tender laws.
2. Eliminate laws that prohibit the operation of private mints.
3. Eliminate capital gains and sales taxes on gold and silver coins.
Read Ron Paul’s Statement Introducing the Free Competition in Currency Act.
Easy money. Liquidity. Sounds nice doesn’t it. That’s how the IMF is pitching the latest idea to create billions of dollars worth of “SDRs” or Special Drawing Rights. The SDRs are euphemistically called a super-currency. It’s only a super worthless currency that steals the purchasing of most if not all other fiat currencies on the planet. A former IMF official, Simon Johnson, said,
“The principle behind it is that everyone would get bonus dollars and instead of the Federal Reserve having to print them, everyone gets them. The objective is to create a windfall of cash. However if everybody goes out and spends the money it could be very inflationary.”
Let’s break that down. “Everyone” is not going to get bonus dollars, only people who work for or with national governments. You, dear reader, and I get nothing. The “windfall of cash” will only benefit said parties, and everyone else will experience their share of a windfall of theft.
The “economist” then adds this could be “inflationary” to further confuse the public since simply printing money is the act of inflation. What he should have said is the act “could” lead to price increases if the people who get the SDRs spend them.
SDRs: yet another reason to convert your fiat money into real products.
From Ron Paul:
Dear Friend of Liberty,
What unprecedented anti-Fed days these have been! We had our Audit the Fed Congressional hearing, in which the central bank â€“ for the first time in 96 years â€“ was put on the defensive. End the Fed was chosen as a Main Selection of the Conservative Book Club; this book, the first anti-central banking bestseller in American history, debuted at #2 on Amazon.com and #6 on the New York Times and Wall Street Journal bestseller lists.
End The Fed â€“ which the Mises Institute’s Lew Rockwell calls “readable and persuasive beyond belief” â€“ can climb up the NYT and WSJ lists week by week, eventually reaching #1, with your help. Please get a copy for yourself. Then encourage friends and family members to do the same. Spread the word. One businessman bought copies for all his 23 employees. Others have given them to students, a favorite use of mine. You can order the book right now at the link below:
Since 1913, the Fed has had it all its own way: booms and busts, dollar depreciation, redistribution to the government and the big banks from the middle and working classes. But just as Andrew Jackson abolished the predecessor of the Fed, we too can knock over this dangerous institution. End The Fed teaches all the fascinating history, and tells us what we can do for the future. I tried to make it easy for everyone to understand, and convincing for those who already do. It gives the constitutional, economic, moral, and libertarian arguments against what Jackson called “the Monster.”
Ever seen the Fed’s marble palace in Washington, DC, on Constitution Avenue (of all streets!)? That bunch sure knows how to live. I’ve long had a dream of being the auctioneer when the Fed is sold off for private offices, or maybe a Museum of Sound Money! Help me dull its scissors and then break them, so the Fed can’t cut down our dollar’s value. Indeed, I believe that people ought to be ashamed to work at such a place; an institution that has done so much damage to American prosperity and freedom, as well as to the freedom and prosperity of the whole world. For example, I want no more bowing and scraping to the Fed chairman when he goes to Capitol Hill to peddle his nonsense. He is just a bureaucrat, albeit a disastrous one.
And, if you are in New York City or nearby, I will be signing copies of End The Fed at the Borders right in the heart of the financial district (100 Broadway) at noon on Tuesday, Sept 29th. And if you can’t make that, I will be discussing the book on The Daily Show With Jon Stewart later that night
Together, you and I can change things. Indeed, we must. For all our futures, nothing is as important as cutting the Fed down to size. Join me: let’s End the Fed.
Congressman Ron Paul