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Sound money ping.
Posted on 08/21/2007 11:34:38 AM PDT by BGHater
As markets went on a rollercoaster ride last week, our economy is coming close to a day of reckoning for loose credit policies being followed by the Federal Reserve Bank. Simply, foreign banks we have been relying on to buy our debt are waking up to the reality of much higher default rates than predicted, and many mortgage backed securities have been reduced to “junk” ratings. Wall Street fears the possibility of tightening credit and the tightening of America’s belts. Why, they say, “if Americans spend only what they can afford, think of the ripple effects throughout the economy!” This is the cry, as the call comes for the fed to cut rates and bail out companies in trouble.
More inflation is, however, never the answer to inflation.
The truth is that business involves risk, and businesses that miscalculate risk should be liquidated, so their assets can be reallocated to businesses that correctly judge risk and make profits. Instead, the Fed has injected $64 billion into the jittery markets, effectively amounting to a bailout that keeps these malinvestments afloat, but eventually they will become the undoing of our economy.
In addition to the negative reactions in financial markets, many Americans have taken on too much personal debt owing to exotic mortgage products and artificially low interest rates. Unfortunately, these families are now in the position of losing their homes in unprecedented numbers as the teaser rates expire and the real bills are coming due.
The real answers are, and always have been, found in the principles of the free market. Let the market set the interest rates. If we had been functioning under a true and transparent free market system, we would not be in the mess we are in today. Government, like the American household, needs to live within its means to get back on stable fiscal ground.
We’ve been headed in the wrong direction since 1971. This week marks the 36th anniversary of Nixon’s decision to close the gold window, which convinced me to seek public office to call attention to the runaway money train that would come in the aftermath of that decision. The temptation to print and spend money with impunity, like the temptation to max out lines of credit, is too strong to for government to resist. While Nixon brokered exclusivity deals with OPEC to prop up demand for the tidal wave of green pieces of paper the Fed pumped into the markets, the world is tiring of marching to the beat of our drum in order to secure their energy needs. The house of cards Nixon built is now on the verge of collapsing on our heads, and on our children’s heads.
As the dollar weakens, it becomes ever clearer that we need a return to sound, commodity-based money for a secure future. Money based on real value, not empty promises and secretive backroom machinations, is the way to get out of the current calamity without causing even bigger problems.
There’s goldbuggery afoot!
And just where is Ronnie here going to find all that gold?
And we all know there were never depressions or financial panics back in the good ol' days.
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Yep just what we need is to tighten. The soup line market will flourish under a President Paul.
The Paulbearer Moonbattery Factor for this Thread HAS BEEN ELEVATED to
ORANGE
THIS IS NOT A DRILL
>> There’s goldbuggery afoot!
Yeah, it’s not a bad commentary for the first 5 paragraphs.
But then you get to the “commodity based” crapola... which you KNEW was coming...
The soup lines are coming, as the debt will come due. The only question is whether we wait longer, and make the lines longer.
>> L.Ron
ROFL!
Your parody is on the mark, too. I know a few Scienos and have studied the cult a bit. Some (not all, but some) of the Paul supporters come off every bit as spooky & cultlike as Elron’s followers. (Actually, a few, again not all, but a few) of Mitt’s supporters are the same way.
Interestingly (and this, of course, is just my opinion): whatever I may think of Giuliani, Hunter, Thompson, McCain, et al, I have yet to encounter this cultlike quality in their supporters here on FR. The closest are some of the Fred booster threads, which start to resemble a teenage girl’s slumber party discussing how cool Lindsay Lohan is.
FWIW, from a guy who has yet to make up his mind (and frankly is more than a little disappointed with ALL the (R) candidates...)
Yeah, if only we did not have full employment, good growth, solid corporate earnings, and increasing incomes. I have a hard time see any soup lines unless we get a kook to start running things and Ron Paul qualifies.
“No ... the reason people have too much personal debt has to do with ignorance of finances and lack of self control.”
Yeah, life to some is just one big payday advance after another.
The better question is, what's the Fed going to do when all those people holding our paper stop believing in its worth? Which would you prefer, a monetary system based on hard commodities or one based on wishful thinking?
This bailout amounts to pouring more sand in under the foundation. It's not a question of if the house will fall, but when. The more sand you pour in, the harder the fall.
We should return to a commodity-based money?
Here's a couple basic economics questions. What is a commodity? What is the value of a commodity?
A commodity is something of value that is traded. The value of a commodity is whatever someone will pay for it.
If we decide to back our currency with a large quantity of a commodity, we are going to instantly create a huge demand for that commodity and greatly inflate its value. We also have to take that vast amount of that commodity out of circulation. So we store it, and while it is stored it serves no useful purpose.
Dr. Paul thinks we should have never gone away from backing our currency with gold. He suggests that we should back our currency with a material that's main source of value is that people think it is pretty. Does that really have a more real value than our current currency?
Does backing a currency with gold really make it less susceptible to fluctuation and manipulation?
If countries of private organizations find new sources of gold and mine them aggressively, the value of our currency would drop. If a country with large gold holdings decided to sell off a large quantity the value of our currency would drop.
The value of our currency wasn't stable when it was backed with gold in the past, why would we expect that to change now?
Our currency is a commodity. It is traded, and it is worth whatever investors believe it to be worth. We can change the monetary supply to some extent to try and control it's value to some extent, just as OPEC tries to control oil production to exert control over the value of oil.
Returning to a gold backed currency is for all practical purposes impossible, and it is also pointless.
The main advantage is that it removes interference direct interference by our government attempting to manipulate the the economy and control inflation.
However, the proponents of such ideas never manage to explain how we are going to be protected against currency manipulation by others if our government doesn't get involved.
I have heard many valid arguments about how the Fed manages the money supply, but I've yet to hear anything resembling a realistic suggestion of how to get rid of the Fed completely.
However, the Fed makes for a good boogyman to rile up libertarians and liberals against the establishment.
However, if all they do is rile up people but don't offer real solutions, I have a lot of trouble seeing such people as a fraud.
Government bailouts, just one of the “New” conservative traits. Blackbird.
You can’t have a Free Republic when its alleged adherents want to throw the Constitution (which requires gold and silver money) into the trash can.
We already store the gold—assuming it is still there. The gold window has only been closed since 1971. It can be opened again. This is not rocket science. Do a little research and learn something about this issue.
Of course, it doesn't help that the bashers respond like Pavlov's dog to the article rather than address the points the good doctor makes.
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