Posted on 07/16/2006 6:03:05 PM PDT by Robert Drobot
Federal Reserve Policy Destroys the Value of Your Savings
by Ron Paul
For years officials at the Federal Reserve Bank, including Chairman Bernanke himself, have assured us that inflation is under control and not a problem-- even as the price of housing, energy, medical care, school tuition, gold, and other commodities skyrockets.
The Treasury department parrots the Fed line that consumer prices, as measured by the consumer price index (CPI), are under control. But even many mainstream economists now admit that CPI grossly understates true inflation. The most glaring problem is that CPI excludes housing prices, instead tracking rents. Everyone knows the cost of purchasing a home has increased dramatically in the last ten years; in many regions housing prices have more than doubled in just five years. So price inflation certainly is alive and well when to comes to the largest purchase most Americans make.
When the Federal Reserve increases the supply of dollars in circulation, both paper and electronic, prices must rise eventually. What other result it possible? The supply of dollars has risen much faster than the supply of goods and services being chased by those dollars. Fed policy makers have more than doubled the money supply in less than ten years. While Treasury printing presses can print unlimited dollars, there are natural limits to economic growth. This flood of newly minted US currency can only increase consumer prices in the long term.
Mr. Bernanke has stated quite candidly that he will use government printing presses to stimulate the economy as necessary. He is famous for joking that he would endorse dropping money from helicopters if needed to prevent an economic slowdown. This is nothing short of an express policy to destroy our money by inflation. Every new dollar erodes the value of existing dollars based on simple supply and demand. Does anyone really believe the Treasury can make us rich simply by printing more money?
The coming dollar crisis is not likely to be “fixed” by politicians who are unwilling to make hard choices, admit mistakes, and spend less money. Demographic trends will place even greater demands on Congress to maintain benefits for millions of older Americans who are dependent on the federal government.
Faced with uncomfortable financial realities, Congress will seek to avoid the day of reckoning by the most expedient means available-- and the Federal Reserve undoubtedly will accommodate Washington by printing more dollars to pay the bills. The Fed is the enabler for the spending addicts in Congress, who would rather spend new fiat money than face the political consequences of raising taxes or borrowing more abroad.
The irony is that many of the Fed’s biggest cheerleaders are the same supposed capitalists who denounced centralized economic planning when practiced by the former Soviet Union. Large banks and Wall Street firms love the Fed’s easy money policy, because they profit at the front end from the resulting loan boom and artificially high equity prices. It’s the little guy who loses when the inflated dollars finally trickle down to him and erode his buying power. Someday Americans will understand that Federal Reserve bankers have no magic ability-- and certainly no legal or moral right-- to decide how much money should exist and what the cost of borrowing money should be.
Dr. Ron Paul is a Republican member of Congress from Texas.
European wishful thinking
Guess all those foreign aid checks are gonna start bouncing.
The article isn't so clear, but it does say that the major problem is the unfunded liabilities for SS, Medicare and Medicaid. That's correct, and Bush is trying to fix the problem.
Too bad so many of us would rather just wring our hands than fix the problem.
Sound theory. We need fiscal accountability.
PING PING
Ron Paul?
That's OK, the Mexicans will save us.
Not as long as we are the world's strongest military power.
Not as long as we are the world's strongest military power.
Care to elaborate?
The sky could be falling.
If we weren't, the enemies of capitalism and freedom would have incinerated us by now...or will/would in future.
This is true. By 2015 this will have been old-hat. Don't expect Social Security to be there for you. Don't expect private pension plans to be fully funded. And don't expect that politicians will be any less evil and short-term focused than they are today: they will raid wealth first to help kick the can a little further. That means they'll tax accumulations in 401K's and IRA's (a "one-time" tax to help balance the SS shortfall). Who knows where it goes from there?
>That is correct and Bush is trying to fix the problem.<
He could have fixed it by closing the borders six years ago. He could have been tougher by collecting taxes from the multinational companies, which do not pay any taxes on their billions in profits. He may help things a bit by denying illegal invaders any U.S. benefits at all from here on out. But I doubt his advisors will suggest any of these remedies to the President.
When we went off the gold standard, we, in effect, defaulted on backing our printed money (that used to be called "gold certificates" and "silver certificates" in earlier years).
Our paper money consisted of promises to pay the bearer in gold or silver (depending on the denomination). Going off the gold standard amounted to abandoning that promise.
Okay. But remember, a strong military protects a country, it doesn't bolster its economy. If the economy crumbles, so does the military.
We have one thing going for us: if the U.S.A. collapses, everyone else follows like a row of dominos. So even countries not friendly to us (like China) don't want this to happen.
But that doesn't change the fact that the U.S. government hasn't done enough to put its fiscal house in order.
Don't worry. The French will bail us out.
George W. Bush wants the U.S. bankrupt so that Republicans, Ann Coulter, and SUV owners could upset The United Nations.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.