Saturday, March 31, 2012
Finished Reading: 03.2012
"The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible and stable monetary and financial system." - www.federalreserve.gov
Not really. Ron Paul would beg to differ, and he does in this heated demand to abolish the federal agency which supervises the nation's money supply and banking industry. Though a topic few politicians are interested in discussing, let alone we the people with cash in hand, Congressman Paul continues to bring this national security issue to light, seeking a serious economic debate as to whether the Fed should stay or go.
Arguing that a central bank is not necessary, and in fact is "dishonest, immoral, and unconstitutional." Paul recommends a more diversified system without a single government backed entity that unwisely interferes with the free market and removes much of the responsibility and risk from the individual investor and redistributes the mistakes to everyone, all the while increasing inflation and devaluing the currency. Frequently descibing their frequent "printing money out of thin air," he advocates a monetary policy based on real commodities (such as gold) rather than the amount of ink that happens to be in the printing press or digital transaction records, which by the way, is money that doesn't ever need to be printed!
The more money the Federal Reserve prints, all of which isn't backed by gold, silver, or anything real, the less each dollar is worth. I could print money on my printer at home, but good luck buying bread with it as the government has not granted "legal tender" status on my pretty printed pictures, even if I did find someone who was willing to accept it. Both pieces of paper are otherwise worth the same.
The Fed doesn't seem to have plans to slow down the devaluation of our currency anytime soon, as the larger the machine gets the more fuel it needs to burn. But Ron Paul hopes to put the brakes on the Fed as a central issue in his bid for the white house in 2012 as it has been throughout his long political career. Unfortunately, rather than advocating change for a policy that doesn't work, most Americans are content to hope it works better tomorrow than it has for the last 99 years.
For more information: Ron Paul 2012
Monday, March 12, 2012
The Making of the Next Global Crisis
Finished Reading: 03.2012
While not as well known as the World Wars, James Rickards sheds light on the very real and very serious Currency Wars - the third of which is underway. For a long time the dollar has been the supreme uncontested leader of the economic markets. Other lesser currencies were subject to its whims. Now lead by the euro, the yuan and possibly the ruble, a slow siege is underway against the mighty dollar. Though the outcome is unknown, Rickards gives a few plausible expectations.
He begins by recounting a war games exercise he participated in a few years ago with high level government and military officials at the Pentagon. The object of the game, as always, was to play out possible war scenarios in one form or another, and learn something useful that can be implemented in real future combat. This particular war games exercise was different for its use of economic warfare which includes the potential destruction of financial markets and currencies by foreign powers.
Rickards, an investor / banker, tried to open the eyes of the government brains and military muscles to show that what could really happen is far beyond what anyone in Washington imagines, let alone has made plans for, and he came away from the exercise convinced that they still don't get it. American overconfidence in its great strength, cunning, and exceptionalism could leave it in a vulnerable position when a different kind of bomb is dropped in this or another currency war.
Explaining the weapons of devaluation, quantitative easing, exchange rates, and others arrows in the economic quiver, Rickards takes a look at the previous currency wars this past century and the more peaceful times before. He forms a reasonable explanation of what we face today as countries battle to establish the lowest exchange rate for their currency, some fighting with gold while most battle with paper. In the age globalization, this is a war fought in every country, in every city, in every wallet. Money is now fully global, despite the remaining distinct currencies, and should it suffer a lethal blow few will stand unscathed.
Saturday, March 10, 2012
Finished Reading: 02.2012
Written only a decade after the U.S. went completely off the gold standard in the early 1970's, the plunge into the deep end of full bodied fiat money was fresh in the minds of the authors. The hard money crowd was still dripping wet and pissed. Interestingly, thirty subsequent years have passed and our economic picture has not improved on the whole.
The authors describe in great detail the history of the economic system of the United States, including various high and low moments, and warn against the present spin away from a gold standard and the imminent economic destruction we might come to expect. Simply stated, money backed by gold has real value because gold has real value. Money not backed by gold is only worth what the people in charge say it's worth, and that's not very comforting.
There have been various dark moments in history when a sovereign nation, such as our own, neglects to back its currency with gold for one reason or another. This was once the exception rather than the rule, though its occurrence has been maddeningly reoccurring. The point of view taken by the authors is only the minority opinion, then as it is now, but history will play out and opinions will no longer matter.
Economic destruction follows the debasement of currency after a short period of popular improvement, as has happened to the dollar and other currencies before. The Civil War and the Great Depression are two notable nodes in our national timeline which may not have been such sticks in the mud if policy decisions had been made differently in regards to the currency. Following that war and then that depression, there were periods in which gold shown a little brighter than they had before or after, and our nation was better for it. The authors warn that we are yet again in an economic tailspin that is in part caused by official disinterest in gold which could be cured, at least in part, by a new gold standard in one form or another.
We've seen many changes since this book was first published, but Ron Paul, who has run for president three times, has the same message because our problem are the same. Sadly no one seemed to be listening then as they are not listening now. Today, only gold is "good as gold."