“Same reason the price of oil was basically the same from 1920-1970, even through the invention of automobiles and Jet Airplanes! It’s because Nixon closed the London Gold window in 1971. That’s the whole and only reason for inflation, lack of a Standard unit of Account. We don’t need a Gold Standard because then there wouldn’t be enough liquidity, but we do need a Gold barometer to tell the Fed how much liquidity the economy needs at any one moment in time.”
What this means is that the Fed should target the price of Gold as far as adding or subtracting liquidity into the economy as whole. Gold is the most Stable Unit of Account for a whole host of Reasons, too numerous to write down here.
So how does one target Gold? Once the target has been decided, let’s say for the sake of argument $1000 per ounce. Then, if the price of Gold moves above that target, that means that there is too much liquidity awash in the market. So at that point the Fed would sell bonds to sop it up. Same thing in reverse: If the price of Gold goes below the target, that means the economy doesn’t have enough liquidity, and at that point, the Fed would purchase bonds or T-bills, to add liquidity, i.e., add fuel to a growing economy.
So an economy can grow without any inflation. In fact, growth creates more efficiencies and innovation, which cause the prices of all things to come down, in “real” terms, without any inflation or deflation, needing to come into the picture.
There were three causes, and all were the government driven:
The Congress – The Community Re-investment Act. This is what gets me: Everyone thinks it was lack of regulation that caused it. The regulation in the form of this act forced them to lend to everyone and everybody! I mean how much more ironic can it get than that? Do you think bankers in a free market are going to lend their money to people who don’t have the means to service the debt? The regulation caused the meltdown, not the lack thereof.
Freddie Mac – This is a government entity. It’s billed as a “quasi” half government/half privatized enterprise. But it’s all government. Created by congress to buy the loans and package them as securities that could be sold to other Financial institutions. Now why in the World would anyone want to do that? Supposedly to create more liquidity in the mortgage market, in order to do the very thing that everyone rails against now: Encourage more people to buy more homes! So banks could sell them their loans taking the risk of loaning off the table, and Financial institutions were willing to buy them because they knew that they were backed by the Federal Government. Freddie had a seemingly endless supply of liquidity to make good on its losses, until the hole became to big to cover up, so big that it even made a dent on the Government’s ability. Then someone had to be found to blame.
The Federal Reserve – The creator of money itself. When a private company is creating the money for the Government, but not doing anything of value for that money, then lending it out at interest, thus making a profit from the whole economy by not doing anything, how do you think that is going to turn out?
So the Federal Reserve is the drug grower, Freddie was the dealer, and Congress was the Police, who not only didn’t stop it, not only turned a blind eye to it, but encouraged it to go on! Okay, well you got me on the last one: The Federal Reserve is a private agency, but it’s existence and it’s operations are all under the protection of the Government.
This poppycot editorial by the nitwit David Brooks in the NYtimes today, “The Party of Work,” got me all stirred up to write this. I was going to write a comment, but guess what? Comments were closed! Ha! Oh, I wonder why?
Oh, and Asians, broke 3-1 against Romney because of his stupid demonizing of China, threatening trade sanctions, etc.
As much as I was dissappointed by the elections, the reality is, Romney was clueless. At best he was clueless, at worst he was another puppet of the Neo Cons, and not only would have started trade wars with Asia, but actual wars with Iran, Syria, you name it. Sure he would have been a Capitalist at home, but Romney was the “Forbes” candidate. You ever read Forbes? They’re great on economic policy, but man, their Foreign Policy is horrifying.
Plus, Obama won’t be able to get any more of his socialist programs through with this Republican House. And after two more years of this misery, the Senate will flip. Then two years after that, the Presidency, unless the Republicans continue to nominate people who are Neo Con puppets.
I know what you are saying: But Obamacare will now come into effect! Yeah, and that’s bad, but here’s the deal, and I think it’s very enlightening to see, in part, why Romney lost: During the Primaries, Romney was vehement about repealing it. During the actual Presidential debates, he said, he wanted to, but didn’t know if he could now! Now, who’s going to go out and vote for a guy like that? Exactly.
Bob Beckel, on O’Reilly the other night said it best: “People don’t go out to vote against someone. The go out to vote FOR someone.” Romney was an empty suit, that no one was energized to vote FOR.
Here’s the best way to put it: Quantitative Easing (QE) is like saying that simply feeding a guy will make him exercise more. It doesn’t. It just makes him more fat (inflation). On the other hand, someone who is working out and growing muscle (ie, a metaphor for a growing economy) does need to be fed more (i.e. in economic terms this is the time to increase liquidity) or else his body won’t have the energy or building blocks to create the new muscle (i.e., analagous to derailing a growing economy by raising interest rates and choking it.) Either way, whether we have growth or recession, we can’t win. And that’s why we have continual crisis after crisis, at a time in our Civilization’s history when there should instead be a Cornucopia of Abundance for all and a Golden Age.
The sole mandate of the Federal Reserve, or any “Central Bank” should be to keep the supply and demand of liquidity (a fancy word for money) in balance. If there’s too much supply in relation to demand, then you get inflation. And this is the ONLY cause of inflation. They would have you believe that growth causes inflation, and that inflation is somehow a ‘natural’ occurence. But growth in no way causes inflation. Because growth causes an increase in production as much or even more so than it does in consumption. Growth also causes innovation with increases in productivity and efficiency. They try to make you believe that inflation is a natural occurance so that they can keep their jobs, their huge budgets, and their elevated status in society of some kind of Knights continuously “fighting inflation.”
On the other hand if demand for liquidity outstrips supply, which is the case usually during economic booms, not only does this cause ‘deflation’ but even worse it chokes off the “air supply” of much needed liquidity and kills the boom in it’s tracks. An example of this would be the late nineties economic boom caused by the Internet boom that went suddenly bust in 2000, not because of failed business plans, but because the air supply was cut off. An example of the deflation of that period was when oil hit $10 a barrel.
So, the Federal Reserves actions not only cause and unstable unit of account, they actually cause the downturns and “Financial Crises'” that seem to be a continual part of our lives, which is so ironic considering the times we live in: Technology and Science, whose knowledge and actual physical products are doubling in power and efficiency every 12-18 months, driving productivity increases throughout every area of our economy. Indeed, under such salutary conditions, it should be impossible to have any kind of economic crisis. There must be something that is throwing a monkey wrench, so to speak, in our economy, and unnaturally derailing it.
The biggest problem in the United States and the World is that adding Monetary Liquidity doesn’t stimulate economic activity. It only causes inflation. And through inflation, it actually sludges up and slows the economy even more. That’s the biggest problem that the World faces: is that we don’t have any Standard Unit of Account.
Only three things can increase economic activity: An increased appetite for risk, more work, or more efficiency, which is usually supplied through innovation.
People are only going to work more if there is a financial incentive (unless they are one of the lucky few who love their work so much, that they’d rather be doing that than what they like to do in the free time. This is why a lot of people advise that whatever it is that is your hobby, you should consider making into your career. Or the other famous phrase that’s been used so much that it’s almost lost its meaning: ‘Do what you love.’ Or Joseph Campbell’s famous phrase: “Follow your Bliss.”)
So, basically, the only way to achieve this kind of productivity, is through fiscal policy, reducing the amount of tax upon physical work. Allowing workers to keep more of what they earn.
Increasing productivity through efficiency is intimately tied to innovation, which not always, but almost always is tied to the first part of the equation, which is an increased appetite for Capital Risk. This second part can only be achieved fiscally as well. A decrease or elimination of all unnecessary regulation (ie, regulation that is not helping or protecting the public) and a lowering or completely zeroing out of the Capital Gains tax. Indeed, many Economists believe (Alan Greenspan being one, I think) that the no. 1 impediment to raising the standard of living for all is the Capital Gains tax.
This is not a tax on merely the “Wealthy.” For taxing Capital Gains directly decreases the amount and the rate of innovation in every area of society and the economy, which has a direct impact on the standard of living for all. Also, the Capital Gains tax is applied to every amount. So if a middle class or lower middle class person makes, say $1000 on a successful use of his mind and productive flow of capital into an area of growth in the form of a successful investment, he is taxed the same rate as someone who makes a million. And one could argue that the $300 confiscated from him is more of a discouragement as well as a practical harm, from a day to day living standpoint, than the $300,000 confiscated from the Wealthy person.
And what is more is that it’s the millions of thousand dollar investments that make up a much more huge majority of the nations Capital markets than the few million dollar investments. Whether they are in the form of a stock certificate on Wall Street or a small business on Main.
I wrote a comment to this Yahoo post: “So true. Monetary “Stimulus” doesn’t stimulate anything except inflation. There’s no evidence of it ever stimulating economic activity or “growth.” The only way to create a runway for growth and jobs is to maintain a stable unit of account, which should be, in fact, the only mandate of a Central Bank. “
Just because he doesn’t want to bomb other countries. Just because you don’t want a ‘World’ government, a centralized control system that takes away the liberties of the individual, doesn’t make one “Isolationist.” He wants to be friends with other countries, trade with them, visit them, have them visit us, respect their sovereignty. That’s the opposite of “Isolationist”! That’s engaging the rest of the World in friendly, sincere way. And not wanting to be some kind of control freak of a country which in essence is no different from bigotry and Imperialism.
“Calling Ron Paul an isolationist is like calling your neighbor a hermit because he doesn’t come on your property and break your windows” -Chris Lyspooner
I saw a headline on Drudge this morning entitled “Iowa Gov: Ignore Paul Win.” which links to a Politico article entitled “Will Ron Paul kill Caucuses?”
So, does the Iowa governor decide who the nominee is? Or is this a democracy? The caption of the photo says, “GOP elites in Iowa are worried about the ramifications of a Ron Paul victory there. | AP Photo”
What are they worried about? That democracy may prevail? The jist of the article is that a Ron Paul victory there would discredit Iowa as a whole, and especially as the “lead off” state in the Primaries.
So let me get this straight: They’re worried about their status as being a lead off state, but what is the point of being a lead off state if you’re not allowed to have a choice of whom to vote?
Would you rather be the lead off state in a totalitarian regime or the last state in a true democracy?
Would you rather be the lead off state in a Propaganda machine, or the last state in a country that values real principles over sound bites?
Is Ron Paul an ‘Isolationist’?
Towards the end of the article, Politico makes the statement “Paul’s isolationist foreign policy views came to the fore at the Sioux City forum.”
That really caught my ire. Because rather Democrat or Republican, the Establishment seems to label anyone who doesn’t want to use force or “bully” the rest of the World an “Isolationist.”
Is that their definition of Isolationism: Not using force to coerce the rest of the World? Respecting other countries’ sovereignty, treating them as equals? Wanting to be friends and have free trade?
That’s the opposite of isolationism. That’s having the rest of the World really respect you and your principles.
In short, if Ron Paul, or anyone else, doesn’t win in a fair and free election, that’s fine with me. But if people don’t vote for who they want, and instead only vote for their leaders, whether in the media or political establishment, “ordain” or “nominate” then how is that a democracy? If someone says to themselves, “I’m not voting for him because they say he can’t win” how is that a democracy?
Update: 12/27/11: I saw this article today come through my Facebook feed:
Encouraging title and article, but also what caught my eye as it relates to this post is the first replier to the article said this to the author: “Ms. Schultz, please learn the difference between non-interventionist and isolationist; Ron Paul is the former. He’s the opposite of isolationist.”
I was glad to see someone shared and understood my same view that I wrote above, i.e., not only is he not an ‘isolationist’ he’s the opposite! More likely to earn us goodwill around the World. Amazing what some principles can do.
I replied to him: “Exactly. The press seem to think not wanting to attack another country or otherwise manipulate them with money or threats to do our bidding is “isolationist.” Being friendly with other nations, which is what Paul wants, treating them respectfully, respecting their sovereignty, and otherwise ‘engaging’ them as equals and partners, instead of places that are somehow ‘beneath’ us is the opposite of ‘Isolationist’ and might actually garner some real respect. As well as being the moral thing to do.”
“He who is forced against his will, is of the same opinion still.” – Deepak Chopra
I’m sure you know the back story: Last week, Rand Paul, son of Congressman Ron Paul (R) Texas, won the Republican nomination for Senate in the Commonwealth of Kentucky. The day after his victory, his Democratic opponent, Jack Conway, announced on “Hardball” that one of the reasons voters should consider him “out there” or “extreme”, I can’t remember Chris Matthews’ exact words, but you know the typical descriptions of Libertarians: “Wacky, Looney, Tea-baggers, etc.” designed not to intelligently debate them, but to label them in order not to have to have the debate itself. Conway stated, for one reason, is that Paul wanted to repeal the 1964 Civil Rights Act, implying in its entirety. You can imagine all the hairs on the back of Matthews’ standing up. Later that night, on the “Rachel Maddow Show” is when the real firestorm or controversy began. Paul was on the show being interviewed and pressed on this exact question. He explained that his position was that 9 of the 10 sections of the law he agreed with, but the aspect that delt with private businesses, he was against. The red boiled to Maddow’s face.
“Are you saying that businesses should be allowed to not serve black people if they so chose?”
Mr. Paul tried to explain his position in a philosophical context, demonstrating for instance the idea that if we think of private businesses as “public” spaces that the proprietor of said establishment would not have the right to ban guns.
Ms. Maddow would have none of it. She was out for blood.
“Just answer the question, yes or no.”
Mr. Paul was flustered. He knew that by giving a simple answer of “Yes” that a piece of video tape a few seconds long would be produced in order to smear him and possibly destroy his campaign completely. Why? Because answering that question “Yes” without explaining the philosophical context for your reasoning would automatically label him as a racist. Loaded sound bites like these, whether text or video, are like reflexes in the brain. They automatically fire. They are like branding a cattle. They stick for life.
Blood Ms. Maddow did draw. She definitely left him mumbling and stumbling. To say he didn’t handle it well is an understatement, but by know means a death blow, because he did emphasize his reasoning, that he was definitely not a racist, nor would support such a business personally. While she won the debate and definitely drew blood, he definitely didn’t come off as the typical politician, seeming like a puppet. He definitely came off, if stumbling on PR Grades, as someone who was authentic and thoughtful. I don’t think anyone watching it, even an African American, would truly think Paul is a racist, though it was clear it was Ms Maddow’s intent to brand him this way.
I would like to argue that Mr. Paul is right and that Ms. Maddow and her ilke are wrong with two main points.
That the point is moot.
While Mr. Paul did say he “philosophically” disagreed with the commerce section of the Civil Right’s Act, he did say he clearly had no intention of repealing and that was not part of his platform. His thoughts and point of view were simply to display his overall philosophy. Opponents argue that it is impossible to separate his position on this topic as a demonstration of his philosophy from the danger that he would actually repeal the law, assuming he had such power, and bring back segregation to the country. But this is simply not true. For one, no one could ever have the power to over turn the Civil Rights Act. It would entail overturning the whole law, which no one is for, or could ever have the political will to do so. Overhauling such a law would be a mammoth undertaking: the commerce clause has already been decided in the courts, and no one want to change it because the facts of America today are that no one’s interested in going back to the way it was. We don’t want discrimination based on race even in private business, and the facts of America today is that by and large we don’t have that. Now whether that fact is because of the law itself, or that time and the country have simply moved past it naturally might be up to debate. But no one’s really interested in it. We’ve arrived at the place we wanted. Does it matter now whether it was by boat, train, or plane? No matter how you slice, dice, or cut it, the point of the specific law is history and moot. Mr. Paul clearly demonstrated that he and any reasonable person understood it to be that way. Ms. Maddow, if anything, demonstrated she did not. And I would argue that anyone who thought the point of the specific legislation itself wasn’t moot at this point in time would be the one who is “looney” or “extreme.”
2. One can use a moot point to make a broader philosophical argument
Just because a specific action in the past today is moot, doesn’t mean the action itself can’t be used to make a broader philosophical point, and that philosophical point of view from Mr. Paul’s perspective is this: Freedom is the highest value in our country. Why? Well, I won’t pretend to get in the founder’s head or hearts, but if I were guessing I would say this: In psychology there is the tenant that every brain has a light and dark or “shadow” side. But in order to quell or not let the “dark” side display itself in public, one must somehow find a way, not to exorcise the dark side (that only makes it grow) but somehow ritualistically acknowledge and honor the “shadow” in a private way. It is found that if the shadow side of our nature is honored in a private way, it will tend not to display itself in a public way. For the subconscious knows no difference in “private” or “public” and it’s energy is released with any kind of sincere acknowledgement. Freedom is chosen as the highest value of society for precisely this same reason: a population that is forced in behaving in a way that is deemed socially acceptable, (instead of “choosing” to behave in that way), is a population whose dark side, shadow, and resentment grows, along with its corruption. Instead, a population that has private freedom, has a sacred space in order to deal effectively with their shadow energies, and in turn gives birth to more energy for good in the public arena. A society that chooses to do good, instead of being forced to do good, is the kind of transcendent society that the founders, I believe, had set as a goal, and freedom is its sole and primary driving force. The Founders in their day had seen bad and mediocre societies come and go, but they wanted to build the platform which would foster not just good, but a great society, and the solution they found was a very illuminated one, and as all such solutions are, a very ironic and paradoxical one: the secret to harnessing the greatest amount and best energies of an individual in the service of his society, was not to control him, but instead to free him.