CAN THE FED PREVENT DEFLATION? DOES IT WANT TO? (must go to source to get all the links).

FSO ^ | January 26, 2007 | Michael A. Nystrom

[hubbubhubbub]

http://www.bullnotbull.com/archive/afta-trailer.html

http://bullnotbull.blogspot.com/2006/12/fiat-empire-closer-look-at-federal.html

[Uncle Miltie]

Clearly a whole lotta WORD inflation goin' on out there.

[CharlesWayneCT]

Some people are just too smart.

[gas0linealley]

Thanks for calling this to our attention. Very interesting.

[Moonman62]

Blah, blah, blah blah, blah, blah, ...

[theBuckwheat]

Inflation steals from lenders in favor of borrowers, because they can pay a loan back with less valuable money. Deflation reverses the advantage.

Government that issues debt, especially debt it has no intention to really repay, has a vested interest in ongoing inflation, as long as it does not get so high as to cause a political revolt.

Our Federal Reserve, a private corporation whose shareholders are exclusively financial institutions and not the government, has a policy of deliberate inflation, with a stated "target" of 2%.

The only way to kill the monstrous theft that inflation causes is to do away with fiat money.

[I got the rope]

Yep..when dollars are abundant, they are worth less. One only has to compare our currency to the rest of the world's and the gold market to figure out that the Fed is printing too much money.

Deflation is a good thing. What would be better...is if we stopped this fiat money scam.

[theBuckwheat]

Please allow me to add that fractional reserve banking allows private corporations to extend the fiat money inflation by also creating money out of thin air.

In the case of the US Dollar, this is made far worse where other nations peg their currency to the dollar. When, for example, a Panamanian bank extends a local loan, the local money it creates out of thin air is just as much part of the US money supply as any $20 bill we print up for a few cents. The reason is that money is fungible and once the Panamanian borrower gets his money, because of the dollar peg, it is has the same economic effect as if the bank had created dollars instead.

The flip side of money creation by fractional reserve bank loans is the equal amount of leverage on the contraction of the money supply when loans are reduced, either through policy or lack of demand.

The two policies of fiat money and fractional reserve banking guarantee a business cycle of expansion, boom and bust. Learn it, love it, live it, because too many people either want it that way, benefit from it, or just consider it to be the natural state of affairs.

[Malesherbes]

I still think the government will eventually inflate its way out of this country's massive debts. Deflation, on the other hand, is best explained by a close reading of Steinbeck's "The Grapes of Wrath."

[gas0linealley]

I'm surprised by your negative response. Did you read to the end? I should think this would appeal to you: Because the banks still know that as much money as they make trading and manipulating paper and financial "products," there is still only one true source of wealth, and that is human labor.

[mugs99]

I still think the government will eventually inflate its way out of this country's massive debts.

Printing more money lowers the value of the dollar. The Euro is now worth more than the dollar. If the Asians stop buying our bonds our economy will collapse. We've borrowed our way into a corner. Deflation is on the horizon, like it or not.
.

[Moonman62]

What about inventions, innovations, and investments?

The only thing I liked in the article was it correctly identified banking failures as the cause of most deflations. Other than that it is too wordy as someone else said.

[Designer II]

"But deflationists argue that this inflation cannot continue forever.."

Is anyone wondering who these "deflationists" are?

This article sounds like it was written by or under the direct supervision of the fed.

Some of us are not fooled.

[mugs99]

Some of us are not fooled.
And our numbers are growing!
.

[Hostage]

You appear as an astute poster on the subject.

One question that still fascinates me was posed by Aaron Russo (freedomtofascism.com)

http://video.google.com/videoplay?docid=-4312730277175242198&q=

and that question is why does the government pay interest to the 'Federal' Reserve (indeed no more 'federal' that Fedex). The 'Fed' does not even print money so much anymore than they just create it as digits on a computer. Simply put, the 'Fed' has the power to sit at a computer and write 1000000000 into a data field and presto they created a billion dollars. So the question he asks is why can't our government do the same and forgo the interest payments?

Of course we can get distracted and start arguing well, we really don't want our government 'printing' or creating money. That's not the point unless we seek to return to dollars backed by gold or silver. But that's getting off the point. The point is it's all about interest.

Russo ask why do we pay personal income taxes on our labor. Not excise taxes, not corporate taxes but personal 1040 taxes. Does it go for schools? No. Does it go for roads? No. Does it go for the military? No. (Corporate taxes pay for the military). Does it go for social security? No. (That's FICA tax). Does it go for Medicare? No.

Where do our 1040 taxes go?

Answer by Russo: to pay the 'Fed' for the interest on the debt that our government takes out, debt exchanged for money that was created out of thin air.

Was the debt taken out by our government taken for our benefit? No.

Then who benefits?

Answer: it's a secret of the 'Fed's. The individuals behind the 'Fed' curtain can create money out of thin air and reap an interest on it at a rate that they decide for themselves.

The 'Fed' controls the whole show.

Who might these mysterious individuals be? The American public does not know but we have a strong suspicion that Rockefeller is connected to them, Soros is likely connected to a connected 'Fed' shareholder beneficiary. (Money from nothing to buy and wield power)

I think it's safe to infer that the beneficial shareholders of the 'Federal' Reserve form the ruling class of the USA and are cliqued to the ruling class of the New World Order.

Russo goes on to encourage by noting that we the American people still have the 'power' to get rid of the 'Fed'. We still have the power if our voting system is not yet controlled to the point that it is ineffective for us.

And would it be a bad thing to get rid of the 'Fed'? I can't think of why we need it. Our government can create money the same as they and it would eliminate mounting interest payments and begin the process of paying down the debt. Our government could hold committees of academic scholars and business leaders to formulate monetary policy. We need not hand it over to a private corporation 'Fed' who will charge whatever interest they decide to create money from nothing.

[theBuckwheat]

One of the provisions of SARBOX is that companies must certify their financial statements. Another has the effect of requiring full and complete disclosure of unrelated entities, which was the way Enron created assets out of thin air with shell companies domesticated in tax-haven countries.

There is a very urgent SARBOX issue with respect to every commercial bank that owns any shares in the US Federal Reserve: what value to you put on the shares for purposes of reporting them as an asset? How do you 'mark to market' a share that is not traded on the open market? You cannot. Until you can, these numbers are only a guess, and I would suggest a fraudulent one.

Why is this important? Before we can cure the curse of fiat money, we must regain control of it. How would the federal government repurchase all the shares in the Federal Reserve Corporation? What is the value, in terms of US Dollars, of a corporation that has the legal monopoly on creation of US Dollars? Well, dollars cannot buy it!

Of course, this would be a gigantic political battle, if some conservative candidate for high office would care to bring it up. But you can guarantee that there would be a very long line of learned experts the MSM would parade in front of the cameras and onto talking head shows that would assure us that the Federal Reserve should be protected, not dismantled.

There are a very large number of powerful people who make lots of money from the money system we presently have. The biggest beneficiary of all is the federal government because the fiat scheme coupled with built-in inflation means they can have all the money they can get away with and never have to pay off the debt.

We are all enslaved by this system. Want to escape? Anyone who expatriates (leaves the US and gives up their citizenship), must continue to file and pay US taxes for an additional 10 years. Not only that, but the law allows them to be prohibited from ever returning.

Slavery is servitude when you cannot escape your master. The TIAs (Tax Information Agreements) the US has with many other countries insures that if you have assets in any of those countries and the IRS thinks you owe them, they can and will seize the money. Come near to them, and they will seize you too!

These issues are all part of the same power-grabbing conversion of our liberty-based Constitution to the one we have now.

[Hostage]

Thanks for your thoughts. It's refreshing to see a poster that understands the issues. But we need a Fredrich Hayek to explain it to the average Joe.

I'm curious why you think our government would want or need to buy out the 'Fed'. I haven't read all the details of the original Federal Reserve Act law but I don't recall it saying that a rescission of that law would necessitate a buyout of the 'Fed'.

I agree that our federal government has a good deal and that they can pass on interests costs to the taxpayer. Russo basically concludes (and mostly correctly IMO) that the 1040 taxes are to pay the 'Fed' bills. But they would also have a good deal if they just printed or created the money themselves under a Department of Treasury Monetary Service. The 1040 income taxes would continue on for the purpose of paying the remaining 'Fed' debt. After a generation or two those taxes would no longer be necessary.

So the question remains 'Why do we permit our federal government to pay interest to a private company calling itself the 'Fed' when our feds can do the same that the 'Fed' is doing?'. It really is an intriguing question and I think you hit on it with your 'servitude' 'slavery' notions. They basically want everyone in debt and loving it. As Russo's film says we are going to love driving that red Corvette while we are in debt up to our eyeballs.

So a thought experiment would be this: Assume the American people wise up and cause passage of a law to overturn the Federal Reserve Act of 1913. Despite the implausibility of that happening quickly or soon, assume that if it were to happen, what then?

All of a sudden a huge cash stream of interest on new debt would be foreclosed on and the 'Fed' beneficiaries would have an adjustment shock.

But here is a thought question, how would similar international central banks react to the US dollar in such a situation? Assuming again that they are all tied together in our 'global village', they would suddenly view the American worker as no longer a cash cow for future revenue projections. Because it is the American worker that is paying the bill in those 1040 returns and such workers would only continue to pay on the existing debt, not new debt. (Already I am making it too wordy to keep an attention span.) But the conclusion would be that other financial banks would change their currency base from US dollar to something else as they are attempting to do now because of inflation and other concerns. In other words the dollar would collapse? Maybe yes or maybe no. It depends on the resultant psychology of financial markets.

[theBuckwheat]

Excellent comments.

Although I wasn't there at the time, the theory is that Roosevelt declared the US was defacto bankrupt when in 1933 he forced all US citizens to sell their all their gold in exchange for Federal Reserve Notes. This was a vast liquidation of national wealth in exchange for paper money. It makes the UN Oil for Food scandal look like kids stuff.

The Federal Reserve Corporation is a stock company owned by National Banks with shares owned in proportion to their capital. I read a Federal Reserve statement that stated the corporation gives the profit it makes on the interest it charges back to the Government after taking out what it costs to run the Fed. Needless to say, they have very high costs. I have not seen any recent numbers as to how much their "donation" amounts to.

I don't want the US Government to assume the same role as the Federal Reserve. We have descended even further into tyranny through its functions. When this country was founded, money was private property. If I had a gold coin, it belonged to me. Today, all money that is not in the form of currency, actually exists in a sub-account of the Federal Reserve. Federal Reserve Notes are owned by the Federal Reserve. But we do not only not own the FRNs in our own wallet, with the recent emergency rule banning the melting of pennies, we do not own our own coinage. It is now illegal to buy pennies and do with them as you please.

Of course, the real crime is that government has so debased the currency that the last 'bullion' coin, the penny, now has more value in metal than it has as a coin.

These are not trivial concerns. They have everyday implications. If government owns the money, it has the right to tell us what usage, and purchases, are legal and what are not. They have, for example, forbidden credit card companies from processing charges relating to internet gambling, but not for example, for buying state powerball tickets.

The next step is far worse: just as felons are "debilitated" from being able to legally possess a firearm, will we come to the point where some criminals, such as drug dealers, and other unpopulars will be "debilitated" from legally possessing US currency?

So, money itself, something that government used to have to get from the citizen in taxes, now the citizen has to get it from government. And with the passage of the 16th Amendment, every dollar a person has in his wallet, no matter how he came to have it, is potentially a taxable event! It is only exempt from taxation when government decides to make it so, and of necessity every citizen is now in the position of having to prove the tax status of every penny he has.

If he fails to pay the tax and buys something with the funds, he is not only guilty of tax evasion, but of money laundering.

Thus money itself has become one of the many ways that government can keep control over citizens and insure itself an income stream from taxation. That is why I do not want the Fed to just be purchased and replaced by the US Treasury. I want the whole monster slain and for us to return to the Constitution in Exile.

[Toddsterpatriot]

Deflation is a good thing.

Why?

[Toddsterpatriot]

and that question is why does the government pay interest to the 'Federal' Reserve

Because the government pays interest to holders of Treasury securities.

Then who benefits?

Answer: it's a secret of the 'Fed's. The individuals behind the 'Fed' curtain can create money out of thin air and reap an interest on it at a rate that they decide for themselves.

LOL! Except for overnight money (Fed Funds), the Fed does not "decide" interest rates.

Who might these mysterious individuals be?

I heard they're Joooooooos.

Our government can create money the same as they and it would eliminate mounting interest payments and begin the process of paying down the debt.

The Fed returns it's "profits" to the Treasury each year.

If Aaron Russo doesn't know this, he's dumber than someone who'd post his B.S. on FR.