BF2S Forums Presidential candidate questions Federal Reserve monopoly on money.

The federal reserve is perhaps the most effective and least intrusive economic regulator this sorry excuse for a government has ever employed. Eliminating it would be asking for depression. (Not that we aren't already.)

After reading that essay, I've got a couple bones to pick.

First, the author likens the fed to soviet communism and uses the sentence "Is centralized, monopoly control over our money even compatible with a supposedly free-market economy?" purely for emotional effect. While these statements may be accurate to a degree, they bring with them inherent connotations that are misleading. We do not live in a free-market economy. We live in a complex set of markets ranging from monopolies (eg utilities) to oligopolistic competition and monopolistic competition (everything else). Obviously these concepts are compatible with our "free-market economy".

Second these two paragraphs:
"The greatest threat facing America today is not terrorism, or foreign economic competition, or illegal immigration.  The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation.  It is this one-two punch-- Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference-- that threatens to impoverish us by further destroying the value of our dollars.

The Fed’s inflationary policies hurt older people the most.  Older people generally rely on fixed incomes from pensions and Social Security, along with their savings.  Inflation destroys the buying power of their fixed incomes, while low interest rates reduce any income from savings.  So while Fed policies encourage younger people to overborrow because interest rates are so low, they also punish thrifty older people who saved for retirement."

Asserting that the Fed is a primary source of inflation is misleading at best. It is the mandate of the Fed to control inflation, and the Fed is currently the ONLY segment of the government who has that mandate. Without the Fed, no one in the federal government is trying to control inflation. The author also addresses the economic harm discretionary fiscal policy creates and then he has the nerve to assert that the Fed is an acomplice by "Fed printing money to make up the difference". Yet, nowhere do I see him mention the care taken to seperate the interests of the Fed and the remainder of the federal government.

Then, the author asserts that "the validity of the fiat system itself is never challenged." The validity of the fiat system is evident in it's adoption throughout the western world. It was the validity of the fiat system that replaced the gold backed dollar. The author tries to imply the fiat system is of dubious origins and that other systems of monetary exchange have not been experimented with, while it is out of other exchange systems that the fiat system evolved. Would the author suggest returning to the barter system? Such retroactive change would severely damage the public good through the collapse of production.

Through the author's neglect to mention the Fed's attempts to control inflation, the seperation between the Fed and the federal government, and the very background or basis of fiat currency, and through the authors use of emotionally charged connotations it should be evident that the author is either himself uninformed or purposely misleading his intended audience.

thanks_champ wrote:

Great post Jonsimon.

The one thing I don't quite understand is this:

Why is it better for a central privately owned bank (The Federal Reserve) to print and loan money at interest to the US government, than it is for the government to be able to print the very same money itself interest free?

That's the seperation that's probably the most important part of a central bank. Because the Fed has it's own mandate to control inflation it won't just buy all the US debt at no cost. When governments can simply print fiat currency they end up increasing the money supply whenever they need to pay for something and in extreme cases eventually create super-inflation. A central bank is, in western nations at least, the currently accepted solution to the conflict of interests created when the legislative or executive powers in a state are given the ability to print money at a profit.

Last edited by jonsimon (2007-04-26 19:04:39)

jonsimon needs a serious reality check about the federal reserve. It is not part of the federal government, it is owned by a handful of American banking families like the Rockefellers and the Morgans (as in J.P.) It continues to impoverish Americans through its yearly charging of a nominal interest fee for the "privilege" Americans have of getting their money printed by the Federal Reserve instead of by the Treasury department. One American dollar is now worth 4 cents in buying power compared to 1900. 4 CENTS!!! That's why a cup of coffee cost 5 cents in 1950 and it now costs 1.50. That's 2900% inflation. Fiat money has historically impoverished societies that used it, to the point of collapse.

jonsimon wrote:

It was the validity of the fiat system that replaced the gold backed dollar.

Actually it was the cost of the Vietnam War and Nixon's need for alot more money which caused the gold standard to discarded in the 70s in favor of fiat money, not some inherent "validity of the fiat system."

jonsimon wrote:

Asserting that the Fed is a primary source of inflation is misleading at best.

Actually to assert that is 100% correct. The Fed's constant printing of paper fiat money is a primary source of inflation. Another is the banks' use of the money multiplier, or fractional-reserve banking, to lend out hundreds of times more money than they actually have.

By the way I think Ron Paul is one of the only real American patriots on Capitol Hill, and by patriot I mean someone who loves the constitution more than he loves his party or the power he wields. I think a presidential ticket of him and Kucinich as VP would be a patriot's dream ticket.

jonsimon wrote:

The federal reserve is perhaps the most effective and least intrusive economic regulator this sorry excuse for a government has ever employed. Eliminating it would be asking for depression. (Not that we aren't already.)

That about sums up what I was going to say.


Mcminty.

When I read the thread title, I thought it said

"  Presidential candidates advocate  using monopoly money @ Federal Reserve . "
and I was all, like  " fuck yes, I'm all over this thread. "

Then I reread the title. Nevermind.

jonsimon wrote:

Cougar wrote:

Ron Paul is entirely too intelligent to remove the Federal Reserve in a way that would cause a depression or anything of that nature.  The man is by far the smartest politician in our government today.  It's a shame he won't win, I've supported him for years, he just doesn't kick up enough controversy or public attention.

Reading up on his positions in wikipedia, I certainly agree on points (like abolishing the unconstitutional income tax), however, returning to commodity money? That just seems a little reactionary after almost a century of success and tweaking with the fiat system.

Lame, income tax isn't unconstitutional. 16th amendment, if I recall correctly.

UGADawgs wrote:

Lame, income tax isn't unconstitutional. 16th amendment, if I recall correctly.

It is unconstitutional save for that amendment, which, by the by, there is no record of the majority vote needed to ratify.

KEN-JENNINGS wrote:

Did anyone actually read the article/link?  My guess is no.

I did. My post adressed the article directly.

Last edited by jonsimon (2007-04-28 06:42:59)

jonsimon wrote:

UGADawgs wrote:

Lame, income tax isn't unconstitutional. 16th amendment, if I recall correctly.

It is unconstitutional save for that amendment, which, by the by, there is no record of the majority vote needed to ratify.

KEN-JENNINGS wrote:

Did anyone actually read the article/link?  My guess is no.

I did. My post adressed the article directly.

What kind of dumb statement is that? I could say that it's night time except the sun is out, but it's obviously daytime. I don't see why you feel that amendments are somehow inferior, but income taxes are just as constitutional as the other parts (obviously excluding things like Prohibition, etc.). Also, you'll have to cite this conspiracy theory that the 16th amendment's vote record conveniently "disappeared."

Turquoise wrote:

While it is true that the income tax is constitutional and necessary, it is still worth noting (as Jon did) that an amendment is ultimately ratified not by the people but by politicians elected by the people.

So? It's not as if the establishment forced the tax upon America; in fact, it was hailed by Populists and Progressives as a way to strike back at the rich.

UGADawgs wrote:

jonsimon wrote:

UGADawgs wrote:

Lame, income tax isn't unconstitutional. 16th amendment, if I recall correctly.

It is unconstitutional save for that amendment, which, by the by, there is no record of the majority vote needed to ratify.

KEN-JENNINGS wrote:

Did anyone actually read the article/link?  My guess is no.

I did. My post adressed the article directly.

What kind of dumb statement is that? I could say that it's night time except the sun is out, but it's obviously daytime. I don't see why you feel that amendments are somehow inferior, but income taxes are just as constitutional as the other parts (obviously excluding things like Prohibition, etc.). Also, you'll have to cite this conspiracy theory that the 16th amendment's vote record conveniently "disappeared."

The 16th amendment is contradictory to the body of the constitution. A strict constitutionist would interpret amendments as additions to the constitution, not changes. Justifying the 16th amendment and the income tax as "an indirect tax" because it taxes the event of earning income and not the person itself is simply the exploitation of a loop-hole in the original phrasing of the constitution. Because amendments are legally equal to the body of the constitution, it is legally possible to ratify an amendment abolishing the democratic process. I personally don't think our courts should have supported this kind of abuse.

jonsimon wrote:

Turquoise wrote:

UGADawgs wrote:

So? It's not as if the establishment forced the tax upon America; in fact, it was hailed by Populists and Progressives as a way to strike back at the rich.

Good point.  But we can now see that this idea has somewhat backfired due to things like the AMT.  The Alternative Minimum Tax (which admittedly was passed much later than the original income tax) hasn't been adjusted much for inflation since it was created in 1969 -- a policy originally aimed at the rich but now affects a large portion of the general population.

Exactly, the income tax is now lengthening the divide between rich and poor. A tax on income also affects the poor much more than the rich, since the poor, having no wealth, need their income to survive, while the rich can survive purely on their untaxed wealth. The wealth divide in America is even larger than the gap in incomes, and much more idicative of the current status of society.

Very good points.  I will add though that an income tax is still better than the proposed Fair Tax.  Replacing the federal income tax with a significantly higher sales tax would even worsen the fate of the poor and working class.

Basically, property tax is the "fairest" of all taxes, if property is also defined in terms of financial assets like stock options.

jonsimon wrote:

It is the mandate of the Fed to control inflation, and the Fed is currently the ONLY segment of the government who has that mandate.

The Federal Reserve "controls" the inflation in such a way that the manipulate the market to actually create the inflation. Its all part of the web of deception to maintain control. If the banking system of the US wasn't based on fractional reserve banking there would be no interest hence no inflation.