Monday, September 28, 2009

Ron Paul Believes Golden Should Not Be Silenced

Ron Paul. End the Fed. New York: Grand Central Publishing, 2009.

This is a book from the perspective of a free market proponent who advocates abolishing the Federal Reserve Bank, aka the Fed. There is little consideration of opposing views as this is a book defending a proposition.

The author, U.S. Rep. Ron Paul, noted the Fed “creates money out of thin air in its abilities to print money, change interest rates, and change reserve ratios on how much can be lent according to how many deposits are on hand. Barack Obama noted “it’s important to understand that much of that wealth was illusory in the first place” when discussing the recent economic downturn.

Paul fears that the Federal debt is too high and interest rates too low. These are creating financial problems that will not easily be resolved. Paul believes they the debt has been mismanaged so badly that it would be better to dissolve the Fed. A central bank, which the Fed is, serves in the interests of favored economic and political interests at the expense of the middle class, Paul argues.

If the Fed no longer exists, the Federal government will lose its ability to fund as much spending as it now does. Paul sees this as a mean to reduce spending in both military and social programs.

Paul believes that abolishing the Fed will require banks to lend more cautiously as they would no longer have the Fed to support them when they develop financial problems.

Paul observes the adjusted monetary base, which is money that is circulated or deposited in the Fed, was $856 billion in April 2008 and $1,749 billion in April, 2009. This increase was not due to any matching increase in national wealth. It is almost all new printed debt.

This increase in debt may financially work so long as enough depositors do not withdraw their funds. If this happens, banks turn to other banks, and if that is enough, they turn to the Federal government. The recent government bailout has increased the factional reserve, meaning far greater loans may be held by banks than they have money on hand.

There had been support for creating the Federal Reserve Bank or something immediately after President Andrew Jackson closed the Second Bank of the U.S. in 1836 following a financial panic. A banking panic in 1907 was a leading cause for creating the Federal Reserve Bank a few years later.

Paul argues that bank failures and business failures are part of recurring business cycles. The Fed was supposed to minimize business cycles. Paul argues the Fed was acted in ways that mad the cycles worse.

Paul wants our government to own more gold. The U.S. and other Western banks are selling off gold because of their high debts. Paul argues the recent economic downturn is an economic correction to the overspending prior to the downturn.

Paul argues paper money is unconstitutional as the Constitution requires debt payments in gold or silver. The U.S. Supreme Court, though, consider paper money as “necessary and proper”.

Paul favors letting the free market set interest rates.

Senator Bernie Sanders, a socialist, and Paul together have introduced legislation to audit the Fed. He notes the call for an audit cuts across the political spectrum. In fact, Paul argues the actions of the Fed that cause the flow of wealth from the poor and middle class to the wealthy should concern many.


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