Ron Paul vs. Federal Reserve - news video - 7-16-08

(YouTube video - 7:22)

Prospect for Global Depression: Grim

If you wonder why we take such a pessimistic stance, read through some posts and reader comments at the Desidooru Saloon - A blog from the writers of the DailyReckoning.com.

Ron Paul's "Abolish the Fed" effort should have been successful; too bad it wasn't. But, we, the people, do not rule this country. The Power Elite do. That's too bad.

Now, who will get your presidential vote in November? We think it will be either Barack McCain or John Obama, if you get the meaning.

Rising Energy Prices and the Falling Dollar

by Hon. Ron Paul - June 9, 2008

Oil prices are on the minds of many Americans as gas hits $4 a gallon, and continues to surge. How high can prices go? How can we solve these problems? What, or who, is to blame?

Part of the answer lies in understanding bubbles and monetary inflation, but especially the Federal Reserve System. The Federal Reserve is charged with controlling inflation through interest rate manipulation, however, many fail to realize that creating money, and therefore inflation, is really its only tool. When the Federal Reserve inflates the dollar as drastically as it has in the past few decades, the first users of the newly created money go in search of investments for their dollars. They must invest this money quickly and aggressively before it loses value. This causes certain sectors to expand beyond what would naturally occur in the free market. Eventually the sector overheats and the bubble bursts. Overinvestment in dotcoms eventually led to a collapse of the NASDAQ. Next we had the housing bubble, and now we are seeing the price of oil being bid up in the creation of another new bubble. Investors are now looking to commodities like oil, for stability and growth as they pull capital out of real estate. This increased demand for investment vehicles related to oil contributes to driving up the price of the actual product.

If the Fed continues with its bubble blowing policies of the past, the new commodities bubble will continue to grow, gas prices will continue to go up, as the value of your dollars go down. We will see an overinvestment in these commodities as solutions are desperately sought for a supply shortage, which is only part of the problem. Make no mistake, though, this is not the free market at work. Government manipulations have added levels of complication and unintended consequences to the marketplace.

This is not the time for members of Congress to take political potshots at each other, or to imagine that the free market is somehow to blame. This is the time to understand and fix problems. That begins with making sure the decision makers have a firm grasp on the causes of the problems and possible effects of their decisions. This is absolutely crucial if we want to get it right this time. That is why I am in the process of calling for hearings on Capitol Hill on how the falling value of the dollar affects energy prices.

Governments need to get out of the way and let the people get back to work so that we can get our economy back on stable footing. Our destructive regulatory environment, confiscatory tax policies, and managed, rather than free trade have chased many businesses overseas. The bottom line is average Americans are being seriously hurt by these flawed policies, and they are not getting good information about the true dynamics at work. The important thing now is to get the diagnosis absolutely correct so we can administer the appropriate treatment and move on to a healthier economic future. To do this it is absolutely necessary to address the subjects of central banking and fiat money.

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[p.d.]

Read Dr. Ron Paul's other columns here.

Federal Reserve Bailout of Megabank Raises Serious Questions About Motive

What is Fed’s real relationship with JPMorgan Chase?

By Dr. Mark W. Hendrickson

The Federal Reserve crossed a Rubicon of sorts, lending tens of billions of dollars, not to a commercial bank, as has been its historical practice, but for the first time to an investment bank.

Commercial banks pay the Federal Deposit Insurance Corporation (FDIC) for deposit insurance, whereas investment banks do not, and yet the Fed suddenly made liquidity available to the latter. Commercial banks are legally allowed to use leverage to a maximum ratio of $13 of debt to every dollar of equity, whereas investment banks—ironically subject to less regulatory oversight than commercial banks—can leverage their equity by a factor of 34.

Invoking an obscure, never-before-used legislative provision, the Fed made billions of dollars available to JPMorgan Chase to acquire another investment bank, the essentially insolvent Bear Stearns.

The Fed-engineered JPMorgan takeover of Bear raises startling questions: What is the degree of cooperation between the Fed and JPMorgan? Was this an impromptu alliance, or had it been plotted in advance? Was JPMorgan drafted against its will to absorb Bear Stearns, or did the central bank give JPMorgan a plum that it already coveted? More importantly for the country, what will be the relationship of JPMorgan and the Fed going forward?

Clearly, if Bear was “too big to fail,” then undoubtedly the much larger JPMorgan is too big to fail. JPMorgan was already a key dealer of U.S. government debt before absorbing Bear, and now it has Bear’s erstwhile share of that operation, too. Of even greater significance, even before the takeover, JPMorgan already had multiples of the kind of illiquid financial derivatives that did in Bear Stearns—in fact, more derivatives than any other company in the world—and now it owns Bear’s junk, too. This implies that the Fed will have to make good on those derivatives—even if it eventually means giving JPMorgan real money for worthless “assets”—if that’s what it takes to keep JPMorgan alive.

Apparently, investors quickly grasped that implication. The perception that
JPMorgan has a new partner—the ultimate sugar daddy, the Fed—helped JPM’s stock to soar 30 percent in the week after the Bear takeover was announced.

The Fed and JPMorgan partnership will remain implicit. There will be no official merger or formal union of the two; on the other hand, it may be no exaggeration to say that the Federal Reserve has effected a partial de facto nationalization of JPMorgan. It will be interesting to see what degree of autonomy JPMorgan will retain. There is an old saying that if someone owes the bank a million dollars, the bank owns him, but if someone owes the bank a billion dollars, then he owns the bank.

In the present case, JPMorgan appears to be under the Fed’s thumb. However, because the Fed now requires JPMorgan’s survival, it will do whatever it needs to do to accomplish that. The potential moral hazard created by this dynamic is enormous.

JPMorgan may have the Fed over a barrel, too. Treasury Secretary Paulson has proposed sweeping regulatory reforms that would extend the kind of control that the Fed now has over JPMorgan to all investment banks. Theoretically, such power is necessary to prevent investment banks from ever putting this country into such a precarious situation again. In practice, though, this would be a huge step toward a national banking monopoly.

Considering the various boom-bust cycles caused by the Fed, not to mention the loss of 98 percent of the dollar’s purchasing power under the Fed’s watch, do we really want to place our faith in a bulked-up, super-powered, but clearly fallible Fed?

For the present, Paulson and Bernanke have postponed the financial apocalypse. Gold and commodities prices are tumbling. Real estate markets are making necessary adjustments. It would be premature, though, to declare the financial crisis over. As long as trillions of dollars of derivatives—ticking financial time bombs—continue to lurk on the balance sheets of our major financial institutions, we are not out of danger.

Dr. Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision & Values at Grove City College in Grove City, Pa.

(Issue # 21, May 26, 2008)

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Ron Paul on the Fraudulent Federal Reserve - video

Aaron Russo talks with Ron Paul - 7:10

Ron Paul on U.S. Monetary Policy

Bailing Out Banks
by Hon. Ron Paul - April 13, 2004

There has been a lot of talk in the news recently about the Federal Reserve and the actions it has taken over the past few months. Many media pundits have been bending over backwards to praise the Fed for supposedly restoring stability to the market. This interpretation of the Fed's actions couldn't be further from the truth.

The current market crisis began because of Federal Reserve monetary policy during the early 2000s in which the Fed lowered the interest rate to a below-market rate. The artificially low rates led to overinvestment in housing and other malinvestments. When the first indications of market trouble began back in August of 2007, instead of holding back and allowing bad decision-makers to suffer the consequences of their actions, the Federal Reserve took aggressive, inflationary action to ensure that large Wall Street firms would not lose money. It began by lowering the discount rates, the rates of interest charged to banks who borrow directly from the Fed, and lengthening the terms of such loans. This eliminated much of the stigma from discount window borrowing and enabled troubled banks to come to the Fed directly for funding, pay only a slightly higher interest rate but also secure these loans for a period longer than just overnight.

After the massive increase in discount window lending proved to be ineffective, the Fed became more and more creative with its funding arrangements. It has since created the Term Auction Facility (TAF), the Primary Dealer Credit Facility (PDCF), and the Term Securities Lending Facility (TSLF). The upshot of all of these new programs is that through auctions of securities or through deposits of collateral, the Fed is pushing hundreds of billions of dollars of funding into the financial system in a misguided attempt to shore up the stability of the system.

The PDCF in particular is a departure from the established pattern of Fed intervention because it targets the primary dealers, the largest investment banks who purchase government securities directly from the New York Fed. These banks have never before been allowed to borrow from the Fed, but thanks to the Fed Board of Governors, these investment banks can now receive loans from the Fed in exchange for securities which will in all likelihood soon lose much of their value.

The net effect of all this new funding has been to pump hundreds of billions of dollars into the financial system and bail out banks whose poor decision making should have caused them to go out of business. Instead of being forced to learn their lesson, these poor-performing banks are being rewarded for their financial mismanagement, and the ultimate cost of this bailout will fall on the American taxpayers. Already this new money flowing into the system is spurring talk of the next speculative bubble, possibly this time in commodities.

Worst of all, the Treasury Department has recently proposed that the Federal Reserve, which was responsible for the housing bubble and subprime crisis in the first place, be rewarded for all its intervention by being turned into a super-regulator. The Treasury foresees the Fed as the guarantor of market stability, with oversight over any financial institution that could pose a threat to the financial system. Rewarding poor performing financial institutions is bad enough, but rewarding the institution that enabled the current economic crisis is unconscionable.

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[p.d.]
Read Dr. Ron Paul's other columns here.

Ron Paul, Monetary Policy, and the future of the USA

by JackBootedThug - Ron Paul is the only candidate running for President who is addressing this situation. Those who think he is an idiot for doing so are utterly ignorant and do not know their history. I suggest they do some reading on the subject. ... - TribalWar Forums - http://www.tribalwar.com/forums

Ron Paul on CNBC's Jim Cramer show - video

by gid - This is really a huge plug for Ron Paul. CNBC's Jim Cramer loves Ron Paul's take on the Fed. - gid - http://thegidcumbs.com/dblog/

Jim Cramer Mad Money Interview is Here
by constituent - With a central focus on the fed! Hooray!!!!!! - Ron Paul Nation - http://www.ronpaulnation.com

Ron Paul Comments on Interest Rate Cut

Average Americans pay the price for the Federal Reserve’s inflationary policies

Arlington, VA - Dec. 11 – Congressman Ron Paul, ranking member of the Subcommittee on Domestic and International Monetary Policy, Trade and Technology, and a nationally recognized expert on monetary policy, issued the following statement regarding the Federal Reserve’s decision to cut interest rates by 25 basis points:

“America ’s economic difficulties, especially the problems in the housing market, are the direct result of the Federal Reserve’s inflationary policies. While prices for gold, oil, and commodities continue to rise, the purchasing power of the dollar for all Americans continues to fall.

“Inflationary monetary policies created the problems in the economy we are seeing, and these problems will be made worse, not better, by more inflation. And today’s action by the Fed is very bad news for American workers and retirees who are about to get hit with yet another jump in prices.

“Make no mistake, the problems faced by the American people are not caused by unscrupulous mortgage brokers or the rising price of oil. These are symptoms of an economic disease caused by a spendthrift Congress enabled by loose monetary policy. Too many pundits praise the weak dollar as benefiting exporters, but they fail to see the harm done to thrifty, hard-working Americans.

“Rather than continuing to pursue a policy of easy credit and increasing debt, we need to return to a sound monetary system.”

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[p.r.]

Ron Paul on the Federal Reserve

ABOLISH THE FEDERAL RESERVE
Congressman Ron Paul
U.S. House of Representatives
September 10, 2002

Mr. Speaker, I rise to introduce legislation to restore financial stability to America's economy by abolishing the Federal Reserve. I also ask unanimous consent to insert the attached article by Lew Rockwell, president of the Ludwig Von Mises Institute, which explains the benefits of abolishing the Fed and restoring the gold standard, into the record.

Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts.

With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America's exports or the low rate of savings should be enthusiastic supporters of this legislation.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of the special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.

In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans' standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.

WHY GOLD?
By Llewellyn H. Rockwell, Jr.

As with all matters of investment, everything is clear in hindsight. Had you bought gold mutual funds earlier this year, they might have appreciated more than 100 percent. Gold has risen $60 since March 2001 to the latest spot price of $326.

Why wasn't it obvious? The Fed has been inflating the dollar as never before, driving interest rates down to absurdly low levels, even as the federal government has been pushing a mercantile trade policy, and New York City, the hub of the world economy, continues to be threatened by terrorism. The government is failing to prevent more successful attacks by not backing down from foreign policy disasters and by not allowing planes to arm themselves. These are all conditions that make gold particularly attractive.

Or perhaps it is not so obvious why this is true. It's been three decades since the dollar's tie to gold was completely severed, to the hosannas of mainstream economists. There is no stash of gold held by the Fed or the Treasury that backs our currency system. The government owns gold but not as a monetary asset. It owns it the same way it owns national parks and fighter planes. It's just another asset the government keeps to itself.

The dollar, and all our money, is nothing more and nothing less than what it looks like: a cut piece of linen paper with fancy printing on it. You can exchange it for other currency at a fixed rate and for any good or service at a flexible rate. But there is no established exchange rate between the dollar and gold, either at home or internationally.

The supply of money is not limited by the amount of gold. Gold is just another good for which the dollar can be exchanged, and in that sense is legally no different from a gallon of milk, a tank of gas, or an hour of babysitting services.

Why, then, do people turn to gold in times like these? What is gold used for? Yes, there are industrial uses and there are consumer uses in jewelry and the like. But recessions and inflations don't cause people to want to wear more jewelry or stock up on industrial metal. The investor demand ultimately reflects consumer demand for gold. But that still leaves us with the question of why the consumer demand exists in the first place. Why gold and not sugar or wheat or something else?

There is no getting away from it: investor markets have memories of the days when gold was money. In fact, in the whole history of civilization, gold has served as the basic money of all people wherever it's been available. Other precious metals have been valued and coined, but gold always emerged on top in the great competition for what constitutes the most valuable commodity of all.

There is nothing intrinsic about gold that makes it money. It has certain properties that lend itself to monetary use, like portability, divisibility, scarcity, durability, and uniformity. But these are just descriptors of certain qualities of the metal, not explanations as to why it became money. Gold became money for only one reason: because that's what the markets chose.

Why isn't gold money now? Because governments destroyed the gold standard. Why? Because they regarded it as too inflexible. To be sure, monetary inflexibility is the friend of free markets. Without the ability to create money out of nothing, governments tend to run tight financial ships. Banks are more careful about the lending when they can't rely on a lender of last resort with access to a money-creation machine like the Fed.

A fixed money stock means that overall prices are generally more stable. The problems of inflation and business cycles disappear entirely. Under the gold standard, in fact, increased market productivity causes prices to generally decline over time as the purchasing power of money increases.

In 1967, Alan Greenspan once wrote an article called Gold and Economic Freedom. He wrote that:
"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense--perhaps more clearly and subtly than many consistent defenders of laissez-faire--that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. . . . This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

He was right. Gold and freedom go together. Gold money is both the result of freedom and its leading protector. When money is as good as gold, the government cannot manipulate the supply for its own purposes. Just as the rule of law puts limits on the despotic use of police power, a gold standard puts extreme limits on the government's ability to spend, borrow, and otherwise create crazy unworkable programs. It is forced to raise its revenue through taxation, not inflation, and generally keep its house in order.

Without the gold standard, government is free to work with the Fed to inflate the currency without limit. Even in our own times, we've seen governments do that and thereby spread mass misery.

Now, all governments are stupid but not all are so stupid as to pull stunts like this. Most of the time, governments are pleased to inflate their currencies so long as they don't have to pay the price in the form of mass bankruptcies, falling exchange rates, and inflation.

In the real world, of course, there is a lag time between cause and effect. The Fed has been inflating the currency at very high levels for longer than a year. The consequences of this disastrous policy are showing up only recently in the form of a falling dollar and higher gold prices. And so what does the Fed do? It is pulling back now. For the first time in nearly ten years, some measures of money (M2 and MZM) are showing a falling money stock, which is likely to prompt a second dip in the continuing recession.

Greenspan now finds himself on the horns of a very serious dilemma. If he continues to pull back on money, the economy could tip into a serious recession. This is especially a danger given rising protectionism, which mirrors the events of the early 1930s. On the other hand, a continuation of the loose policy he has pursued for a year endangers the value of the dollar overseas.

How much easier matters were when we didn't have to rely on the wisdom of exalted monetary central planners like Greenspan. Under the gold standard, the supply of money regulated itself. The government kept within limits. Banks were more cautious. Savings were high because credit was tight and saving was rewarded. This approach to economics is the foundation of a sustainable prosperity.

We don't have that system now for the country or the world, but individuals are showing their preferences once again. By driving up the price of gold, prompting gold producers to become profitable again, the people are expressing their lack of confidence in their leaders. They have decided to protect themselves and not trust the state. That is the hidden message behind the new luster of gold.

Is a gold standard feasible again? Of course. The dollar could be redefined in terms of gold. Interest rates would reflect the real supply and demand for credit. We could shut down the Fed and we would never need to worry again what the chairman of the Fed wanted. There was a time when Greenspan was nostalgic for such a system. Investors of the world have come to embrace this view even as Greenspan has completely abandoned it.

What keeps the gold standard from becoming a reality again is the love of big government and war. If we ever fall in love with freedom again, the gold standard will once more become a hot issue in public debate.

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[p.d.]

Fed's Mortgage Mess may cause Worldwide Depression

biz.yahoo.com - Nov. 24, 2007 - There is increasing evidence that another downturn has begun. Borrowers who took out loans in the first six months of this year are already falling behind on their payments faster than those who took out loans in 2006...

Federal Reserve vs. Ron Paul

by BurmeseGoldBull - That was a great show.. Federal Reserve vs. 2008 Republican Presidential hopeful Ron Paul. It's about gold vs fiat money. Observe! ... - Burmese Gold Bull - http://burmesegoldbull.blogspot.com/

U.S. GOVT. COMMITS ARMED ROBBERY

Feds raid Liberty Dollar offices
Gold, silver for 'private voluntary barter currency' confiscated

© 2007 WorldNetDaily.com - Nov. 16, 2007

A company that makes and distributes Liberty Dollar coins in various denominations has announced it is shut down – for now – after a raid by FBI and U.S. Secret Service agents in which documents, records, coins and gold and silver were confiscated.

Liberty Dollar produces and distributes the coins as "private voluntary barter currency," or coins that compete with the Federal Reserve notes used in general economic circulation.

[Now that you know what kind of criminal government you have in the U.S., what are you going to do about it? Those who do nothing will continue to be nothing more than bleating sheeple. It's past time for a citizens' revolt. - ed.]

Ron Paul on inflating the dollar

by PC - Republican presidential candidate Ron Paul makes an awful lot of sense when he talks about what he knows: how central banks destroy the value of a currency. ABC News summarises his questioning of Fed chairman Ben Bernanke, ... - Not PC - http://pc.blogspot.com/

Ron Paul, The Federal Reserve, JFK and M3

Kennedy tried to dismantle the Federal Reserve before he was assassinated, and more recently, presidential hopeful Ron Paul had a few choice words for Ben Bernanke, the current Chairman of the Board of Governors of the Federal Reserve ... - novus.liber - http://novus.liber.us

Ron Paul on the Fed

by GoldSilver - The failed fiat monetary system. - Blog @ GoldSilver.com - http://blog.goldsilver.com

Our Expansion Experiment

As Ron Paul asked the Fed Chair, how is it morally justifiable to deliberately depreciate our currency?

by Doug French - lewrockwell.com - Oct. 18, 2007

Financial pundits, led by CNBC’s Larry Kudlow, were rooting for the Federal Reserve to "shock and awe" the market with a 50 basis point cut on the Federal Funds rate at the central bank’s September meeting. Fed chair Ben Bernanke didn’t disappoint, and investors recognized further dollar devaluation and sent gold, stock and commodities markets through the roof and the U.S. dollar to the basement. ...

[At this posting, 10/18/07 - 9:55pm ET, $1.4286 USD will buy 1 Euro. - ed.]

Ron Paul in The Economist

by Miche - Abolishing the federal income tax is a priority for supporters of Ron Paul, a congressman from Texas who is running for the Republican presidential nomination on a libertarian platform. Mr Paul reckons it would be possible to accomplish ... - Ideas from free minds - http://ladyliberty.wordpress.com

Ron Paul in CNBC Oct. 9 Debate - on "the Fed"

Ron Paul at tonight's GOP debate on the Fed's blatant destruction of the US dollar and how that benefits the rich at the expense of the middle class ...

VOTE IN THE CNBC DEBATE POLL HERE

"Hot off the presses, here's the debate of tonight's CNBC debate, with Ron Paul laying it out. Too bad 99% of Americans aren't smart enough to understand what he's saying." - HousingPANIC blog