Follow the Yellow Brick Road...

All you need to do is change the Fed’s mandate from targeting interest rates to targeting Gold. The Fed can easily keep the price of Gold within a tight trading range by increasing liquidity when the Price of gold dips below the prescribed range (indicating deflationary pressures) and conversely selling bonds to mop up excess liquidity when the price of gold goes above a set trading range. This would create a “De Facto” gold standard and uses gold as a barometer for how much liquidity the economy needs at any given point in time. Because of it’s nature, Gold is the best monetary barometer available, much more accurate than the human guessing game which believes that growth causes inflation and that liquidity stimulus can somehow create growth. Both of which have the unintended consequences of creating inflation during downturns and starving the the economy during growth spurts.

With the technological advances of the last 50 years, we should be living in a “Golden Age” of living standards, but instead we seem to be living through unending economic disaster.

The cause of this is not the economy itself, but instead the unit of account.

Imagine trying to have a sporting match, conducting mathematics or science without a unit of account. It couldn’t be done. And the same goes with economics. Without a standard unit of account, a stable economy is not possible. And that’s what we are living through.

Maybe the only thing I disagree with Ron Paul about, is that there is a time when the Fed should create liquidity, and that time is when, like in the 90′s due to the Internet and Communications revolution, there is a period of incredible growth. A growing economy needs liquidity like a growing body needs food.

The problem is, that it’s exactly during periods of growth that the Fed turns the spicket off and starves a growing economy of the liquidity it needs. This is one of the major reasons that Web 1.0 crashed.

And then during times of recession like the past few years the Fed does the opposite. It adds liquidity, which causes inflation and “stag-flation.”

This is why we don’t need so much a “Gold Standard” in as much as we need a “De-Facto” Gold standard, meaning Gold should be used as the barometer for when liquidity should be injected and or  ”mopped up.”

Using the price of Gold as a barometer, the Fed, or whoever directs monetary policy, should keep the price of Gold in a tight trading range by adding liquidity when the price of gold dips below a certain target, and mopping up liquidity when the price of gold rises above the target.

This does two virtuous things: It gives a growing economy the right amount of liquidity it needs to sustain, and it also permanently ends inflation and deflation.

Other than that I totally agree with Dr. Paul that the Fed, as it acts now, should be ended, or given the tight mandate of using a Gold barometer for monetary policy.

Ron Paul is correct that gold is important. It’s very important. The only part of the equation that Ron Paul is missing is the demand for money. Inflation is caused by two factors: how much money is printed and how much demand there is for money (growth increases the demand) If you had enough growth it would soak up the excess liquidity and there wouldn’t be inflation.

The reason Gold is so important to this picture is because it’s intrinsic value (for a variety of factors) is the most resistant or stable to economic or political factors. So what we need is not necessarily a “Gold Standard” but rather a de facto gold standard that uses the price of gold to indicate how much cash to print. In another words, the Fed’s policy should be to keep gold in a very tight trading range. When the price of gold goes above that range, that indicates that there is more cash in the system than the system can handle or demands (like now!) and the fed should sell bonds to soak it up. If and when the price of Gold goes below the target, that’s when they should print, because that indicates the economy is demanding more liquidity.

When the fed does the opposite, which it usually does, because it ignores the gold signal, then you get the worst of both worlds: too much liquidity and no demand for it, which equals “stagflation”

Growth is stimulated through fiscal policy (lower taxes, regulation) and inflation could be controlled through a correct monetary policy, which would be to target gold. So there is no reason at all for inflation, even during tough economic times. You can’t print your way to prosperity. You have to increase productivity and add real value.

A “De Facto” gold standard would not deprive the economy of the liquidity it needs to grow, as the the opponents of such a policy argue as a scare tactic against it. Instead, it would give the economy exactly the amount of liquidity it needs to grow without any inflation. So, in a sense we could get rid of the Fed, or at least downsize it. (No more billion dollar Fed buildings needed!) Because basically it would only take one guy and a computer to effectively execute and maintain such a monetary policy.

We all should be riding on waves of light, but false monopolies propped up by Government regulation of communications has stifled innovation and business plans alike.

I was just listening to TWiT and they were having this discussion about the internet connectivity problem, the fact that we have a duopoly of telco and cable controlling it and now threatening bandwidth caps that could effect the coming consumption of video streaming that is coming online with Netflix, iTunes, Amazon, and the advent of live streaming from Ustream, Justin.tv, et. al. This is in fact the new paradigm, “Real-Time” as its known in the industry, and the falsely earned duopoly is threatening to turn off the spicket as it were just as video, a major leap forward for the net, wants to take center stage.

Leo Laporte suggested why doesn’t the government just force the cable companies to sell their access to other companies, just like they do with telco, in order to solve the problem.

Sounds reasonable, right?

No, no, no! A thousand times no! This is the very action embodied in the Telco Act of 1996 that caused the problem in the first place. It was the false propping up of competition that killed real competition.

Remember all those small telco companies that cropped up out of nowhere in the 90′s who promised you the moon and then quickly went broke?

Their entire business plan was not competitive, not investing their own capital, but merely using government regulation that allowed them to piggy back on existing infrastructure with no capital invested.

Then the whole thing came crashing down. It sucked the life out of broadband, and since all of the business plans of Web 1.0 were based on ubiquitous broadband, we had the great internet crash of 2000.

Think about it. If you had the billions of dollars it would take to make a go of it in the connectivity market, would you invest in laying fiber to people’s homes, when the government can come in at any time and force you to resell that access at no profit to an upstart “connectivity” company, a phantom company? NO. And that, my friends, lays the problem.

We all should have a fiber connection to our home for a reasonable price. The technology is there, the market is there, but the only thing that is standing in the way is Government regulation in the first place.

People like Leo still believe that the government is on the people’s side in this issue. But it isn’t. The government is on the Oligarch’s side. It’s like the old bit of “Good cop, bad cop.” The government in the major industries plays “Good Cop,” but behind the scenes it is the industry leaders who are writing the very legislation that the Government blesses, and thus stops investment in productivity, and ends up lowering the standard of living for all.

The only solution is for the government to get out of the way. On the one hand you have to let the Telcos and the Cables do what they want and have their data caps if they want. On the other hand they have to make it very clear that they won’t interfere with any real capital that is anxious to enter the market, making it clear that they can fairly compete.

Today on CNBC they said one could make a pile of money if one could guess when they would raise rates again. This highlights one of the biggest atrocities in the World’s economic system. Trillions of dollars are tied up in the currency futures, hedging the wild swings in the value of currency, trillions that could be invested in productive activities, if only the world had a stable unit of account. The price of commodities didn’t budge an inch from 1920-1971, 51 years of the greatest economic growth in world history. Then in 1971, at the urging of the monetarists, Nixon closed the London Gold window. Gold was $35 an ounce then, and oil was $3.50 a barrel. Inflation is not a natural occurring phenomenon, and especially not due to growth and prosperity. The only thing that causes inflation and deflation is an imbalance in the amount of liquidity in the system, a balance that is the single and only charter of the Federal Reserve. It is a failure of epic proportions.

3 Democrats Could Block Health Bill in Senate – NyTimes.com

United States Senator Blanche Lincoln
355 Dirksen Senate Office Bldg., Washington, D.C.  20515
Office:  202-224-4843; Fax:  202-228-1371.

Hi,

I want to go on record as supporting Sen. Lincoln in being AGAINST the Health Care Bill. I believe real Health Care reform could be accomplished by simply removing the regulations that are in place that protects false monopolies in the industry. Blue Cross’s 70%+ market share in Arkansas, for instance, is not something they “earned.” They have that and their high prices simply because of regulations, perhaps at the state level, that crowds out honest competition. A real health care reform act would simply bring down the walls to honest competition and thereby lower prices for all. Another government bureaucracy, especially this one, would simply create another endless money pit that would perhaps bankrupt the Country (some analysts believe Medicare itself is capable of that) but for sure give no value back to the people, as taxes would rise and the money would flow to people who have not earned it, the various “hangers on” and other dishonest people close to the system, who, as is the case with all government programs, are simply there to scoop up the money without providing value.

Thank you for your time,

Stephen Pickering
Little Rock, Arkansas.

Article 1

1. The Health Insurance Industries’ exemption from the Sherman Anti-Trust Act of 1890 is hereby revoked.
2. All citizens of the United States shall not be barred from purchasing Health Insurance from any company or individual, foreign or domestic.
3. All policies may be written in any manner, for any amount, with any provisions the contractor chooses and the contractee accepts.
4. Congress shall make no laws regulating the contracts or any of its provisions for Health Insurance legally signed between the contractor and contractee.
5. Congress shall pass no laws forcing any United States Citizen to purchase Health Insurance.

The End.

This meeting is hereby adjourned.

In 1989 after the Berlin Wall came down, Boris Yeltsin, then Russia’s President, immediately handed over his countries largest industries to a handful of oligarchs. We all know what happened after that. One part of the Russian economy blossomed and was a raging bull market in the late 90s. Anybody who owned a Russian or Eastern European ETF, remembers those days fondly as their portfolios boomed, and there was the definite sense of a World changing paradigm shift underway. Simultaneously, in America the great internet, communications revolution was exploding, unleashing an unprecedented wave of legitimate wealth, creativity, and freedom to the people. No wonder, as the year 2000 approached, there was a palpable feeling in the air that the new millenium was about to usher in, not an Armageddon of religious prophesy, but a dawning of an age of Aquarius where a sense of wealth and freedom would manifest, a true Golden Age like no other. There was indeed “exuberance,” but it was not as Mr. Greenspan said, “irrational.”

The most important point to remember why this isn’t working is that crony capitalism is not free market capitalism. It’s national socialism. It’s like what Warren Buffet said, ‘The next best thing to a monopoly is a duopoly.’ He was referring, at the time, to the national socialist organizations Fannie Mae and Freddie Mac. We know what those two organizations were and what they did: Created the national housing crisis while stuffing the pockets of power with unearned millions.

What knocked the wheels off this apple cart bringing the “forbidden” fruit from the Garden of Eden? It was not the desire of the people, the “unwashed masses” to be rich and free or the greed of entrepreneurs, as the Establishment and its mouthpiece the corporate “mass” media would have us believe. On the one hand in Russia, the abuse of the Oligarchs, which is not a free market system (analagous to our Financial, Energy, Insurance, and Telecommunications industries in America), created a wave of crime and instability that was too powerful a force for the freed “cottage” industry system, a true free market, freed by eliminations of regulation and a 13% flat tax, to bare. The Russian Oligarch abuses and criminality is well documented, and what it did was open the door for an authoritarian style regime, led by Vladimir Putin, to fill the vacuum. In America a watered down, but no less effective, version of this took place with its epicenter being the Telecommunications Act of 1996 which caused the internet crash of 2000. On the surface it seemed as if the act was designed to protect the little guys and restrict the Oligarchs of Telecom. But this was a “false flag” destruction, creating a false vacuum of national socialism, or Oligarchy. The bill was designed, not to help small telecoms, but to put a knife in the side of free market creativity by retarding the natural flow of capital into this industry. The result is what we have today, an Oligarchical system in the Telecommunications industry, controlled by a few small players. These are false monopolies, false vacuums if you will, created and protected by Governmental regulation. This is national socialism which has nothing to do with free market capitalism.

The same system holds sway in America’s Health, Energy, and Financial industry. Who writes the policies for these industries? The Oligarchs and their paid for representatives in the Government. Witness Dick Cheney and friends writing energy policy in the early part of this decade. But this same playbook has happened in Insurance, Financial (need I remind you of what came to fruition last year there?) and Telecommunications.

The Health Insurance industry is an Oligarchichal, Government Regulated, Protected system that gives us higher prices and lower quality at we the people’s expense, for the benefit unearned gains of a few powerful elite class of Oligarchs.

But the solution to this national socialism is not “socialism socialism”, whereby the quality degrades even further, and the prices do not go down but are simply transferred from bloated premiums to bloated taxes, and the power and money is pocketed in an unearned fashion by the same people, simply wearing different hats. What’s even worse about this scenario is that, since the majority of tax money is pocketed by governmental Oligarchs and their various pals and interests, the debt will crack the U.S. Government, like it did the Soviet Union, and which Medicare itself threatens to do all by itself in the next two decades.

The solution to the Healthcare problem is simple. It’s almost too simple for people to accept. “De-regulation” has an ugly connotation. People have the subconscious sense that regulation is always beneficial to the people. And indeed a lot of it is. Real justice as regulation, the rule of law as applied to justice is a benefit, indeed a necessity to the public. But regulation in the name of protecting a false vacuum, a false monopoly, Oligarchical system such as what exists in the Health Insurance Industry today, works against the people and works against prosperity and creativity.

All that needs to happen to bring down prices and increase quality in Healthcare is to outlaw governmental lobbying, to outlaw the Health Insurance Oligarchs from writing Healthcare Insurance regulation and policy. The effect of this so far has been eliminating free market forces from bringing efficiency to the industry. The Healthcare Reform Act could be written on one sheet of paper. One of the most important revisions would be to allow all citizens to buy health insurance in a free open market from anywhere in the country, anywhere in the world for that matter. In other words, regulate against fraud and misconduct but don’t regulate against free choice (for the benefit of a few large corporations to ride an unearned money train). If such an Act were passed a flood of capital would come flowing into this market and a rich ecosystem of diverse, energized, competition would blossom, fulfilling every niche in American society with a cornucopia of products and choices. Not only would needs be met, but opportunities would also manifest. Innovation, like it always does, would spur quality and efficient prices to the consumer and wealth and abundance to a whole new generation of entrepreneurs who would simultaneously create great paying, fulfilling jobs to the society itself.

The premise of free market capitalism is this: Whenever wealth is created in an open, free market, in an ethical, non criminal, non false vacuum way (meaning propped up by Government protection disguised as “regulation”), the benefit to society as a whole and the individual is inversely proportional to the wealth that is generated for the capital, businesses, and individuals invested.

I was so excited. This is the email I wrote to her:

“Dear Senator Lincoln,Thank you for sponsoring S.604.

Perhaps the largest problem in our and the World’s economy is an unstable unit of account, the wild swings in the value of our money. The sole charter of the Fed is to stabilize our unit of account and yet in a misguided effort, they do just the opposite: they cause the wild swings which result in inflation and deflation that reek havoc on the economy. All that has to be done is for them to target the gold price instead of targeting the interest rate. When the price of gold becomes to high, they should sell bonds to soak up the excess liquidity. When the price of gold becomes too low the can inject liquidity by printing. If they just followed this one simple rule there would be no more inflation or deflation, and the economy would have exactly the amount of liquidity that it demands. I also worry about the ever increasing amount of regulatory power they are being given. They should be reigned in and held accountable, not given more unaccountable power. If they are indeed a branch of the government, they should work for the people and be held accountable to the people and its representatives. If they are not, then the Congress should take back its Constitutional authority to coin money.

Thank you again,

Stephen Pickering
Little Rock, Arkansas

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