[excerpt] For Congress-watchers, one of the best moments in Congress this year took place when Congressman Paul confronted Greenspan about the current economic condition of the United States. Donald Luskin describes the moment: Ron Paul looked the Master of the Universe in the eyes and said, "â¦we have nearly a $6 trillion debt⦠Now the Federal Reserve comes in and they buy that debt in order to maintain the interest rate that they think is the right interest rate, and they take that and they use it as an asset. You put it in the bank, you call this debt that we have created an asset, and you use it as collateral for our Federal Reserve notes. So that's a pretty good scheme. And I think in moral terms, as well as in economic terms, it's very similar to how Enron operates.Paul went on for a while longer, talking about the perils of inflated paper money -- fiat currency not backed by gold -- issued by governments throughout history. And then the big finish: "â¦So I would ask you, can you see any corollary whatsoever on what you're asked to do in running our monetary system to that which Enron was involved in?" Ron Paul brought a copy of this article with him because he wanted Greenspan to sign it for him. When Greenspan finished the last flourish of his signature, Ron Paul asked him if he didn't wish to repudiate the article he had just signed, given its open opposition to his current career choice as Chairman of the Federal Reserve, not to mention his recent testimony before Congress. Without batting an eye, Greenspan replied, "No, I still stand by what I said in this article. I wouldn't change a single word". Luskin article: http://www.capmag.com/article.asp?id=1468
I believe this next quote will go down in history as a watershed event. It will be read and re-read by many bushy tailed and wide eyed students who will look back at our days in their history books: "The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." Nov 21 2002 Fed Governor Ben S. Bernanke Full speech: http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm
I gotta go with Gekko. Alan was a follower of Rand before he turned to the dark side. This would be a piece from his better days. And, you wanna see something really scary? Cut and past the growth of the money supply into Excel and chart it out. You'll turn into a major bear just like me. I'd post the link, but it's down . www.federalreserve.gov, look for statistical data or something. You'll end up with an exponential curve for the money supply.
Wow, I thought you were going to post he had a moment of lucidity last year and wrote this. Yeah, it's pretty standard Alan for the precareer days, unfortunately. Talk about a big enemy of fiat currency.
Here's a juicy quotes I wish he'd say now: "Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes."
Do you understand why he says "Deficit spending is simply a scheme for the confiscation of wealth." ? I mean do you know the concrete mecanism to do that ? My perspective is always to understand the mechanism. So can you explain me how you understand the mechanism underlying his affirmation. I have my own ideas but I would like to hear yours before.
Well, I'll take a crack at it harry. I believe the mechanism is taxation. The government runs a deficit. They borrow to finance this deficit. They then have to pay back the debt (haha! good joke!) or simply continue to pay the interest on the debt. This interest payment increases the expenses of the government. This increase is either paid for by an increase in taxation or further deficit financing (borrowing). If it financed by further borrowing the government enters into a viciour cycle which can totally destroy the whole economy. If it is financed by an increase in taxation, the government is basically putting their hands into the pockets of you and me (members of society) and stealing our wealth. Does that explain it? or do you have a different take on things?
Whoever thought it was anything different? The question is can welfare schemes be sound policy with long term gains to society? Whether they benefit the urban or rural uneducated nonproductive poor, the farmers, certain crafty corporations, they should be employed only on an episodic basis, targeting urgent temporary needs. A jump start if you will. Institutionalized welfare breeds sloth and corruption and is corrosive to society. And Babak, 10-1 says Harry has a different take.