Hello.
Ron Paul Was Right
He's right on even more financial issues that weren't even covered here... including the housing market bubble.
Vice-Captain - #TeamWaitAndSee
Makes me wish our voices still counted.
The financial issues were what got me interested in him. I met Paul back in 2007 and got my picture taken with him. Nice guy. Too bad he won't get nominated. The men behind the throne won't let him.
don't be so quick to count him out raliv
yeah this election is still wide open. Santorum officially won Iowa, Romney won NH, and Gingrich seems as though he's going to win SC so Ron Paul is really only 1 state behind all of them.
The average American lacks common sense enough to see the value of electing someone like Ron Paul.
And the establishment's corporate/military-industrial/prison complex system will do their damned best to ensure that Mr. Paul is never even nominated.
And the establishment's corporate/military-industrial/prison complex system will do their damned best to ensure that Mr. Paul is never even nominated.
I agree with RP on certain issues, but he's made too many comments that are too far out of mainstream thought for most to swallow. For example, while most people would laud an audit of the Fed, most people are going to think it's way too extreme to abolish it or put us back on the gold standard. You would see rapid deflation. For those that want thee gold standard back, be careful what you ask for.
Everyone stands up cheers "rah rah rah" when he talks about lofty things like liberty and freedom. And I see why it has such an appeal to the young. Most the young are thinking about liberty and freedom from the social libertarian perspective. Of course many aren't thinking that a large component of that also means economic libertarianism and things like abolishing the department of education, deregulating corporations and gutting the social safety net. Liberty isn't just about social freedom, it's also has the economic libertarian component. I doubt many of RP's young supporters understand the full implication of that, or how libertarianism would increase economic inequality. Most young people I speak too want a social safety net, don't want corporations deregulated, etc. But they like the message of social liberty, and non-intervention in foreign policy. In that case, a guy like Dennis Kucinich is who they should want in office. He much the same views as RP, but without the bullshit of economic libertarianism.
Everyone stands up cheers "rah rah rah" when he talks about lofty things like liberty and freedom. And I see why it has such an appeal to the young. Most the young are thinking about liberty and freedom from the social libertarian perspective. Of course many aren't thinking that a large component of that also means economic libertarianism and things like abolishing the department of education, deregulating corporations and gutting the social safety net. Liberty isn't just about social freedom, it's also has the economic libertarian component. I doubt many of RP's young supporters understand the full implication of that, or how libertarianism would increase economic inequality. Most young people I speak too want a social safety net, don't want corporations deregulated, etc. But they like the message of social liberty, and non-intervention in foreign policy. In that case, a guy like Dennis Kucinich is who they should want in office. He much the same views as RP, but without the bullshit of economic libertarianism.
Rapid deflation wouldn't be a bad thing.
Vice-Captain - #TeamWaitAndSee
Quote: (01-21-2012 03:58 PM)Gmac Wrote:
Rapid deflation wouldn't be a bad thing.
No? It would mean for most people you'd be making less money while your house payment stays the same. Disaster.
We have been seeing rapid deflation in the housing sector for the past several years. That is why the economy is not recovering. Wages are barely treading water or going backward while the amount people owe on their homes stays the same, thus you have all these underwater mortgages and people walking away from their homes. I have a friend that walked away from his house last year. Bought it at $430k in 2005. He couldn't fathom paying a mortgage on $430k when the house had deflated to half that. Even though he could make the payment, he decided to sacrifice his credit and hand the keys back to the bank. Now you have all this glut of inventory that's not moving. This is just one effect of deflation.
Also think about what would happen for the average guy with $50,000 in student loans. If you have massive deflation, that $50,000 debt may effectively become $100k debt because the money is now worth more. Same with credit card debt.
Deflation will be good for people with a lot of cash and no debt and who have stable, salaried jobs and no mortgage. But how many fit into that category?
Quote: (01-21-2012 11:54 AM)raliv Wrote:
The financial issues were what got me interested in him. I met Paul back in 2007 and got my picture taken with him. Nice guy. Too bad he won't get nominated. The men behind the throne won't let him.
Thank you.
Presidents are selected, not elected.
Ron Paul will never be President of the United States.
Period.
Quote: (01-21-2012 04:12 PM)speakeasy Wrote:
Quote: (01-21-2012 03:58 PM)Gmac Wrote:
Rapid deflation wouldn't be a bad thing.
No? It would mean for most people you'd be making less money while your house payment stays the same. Disaster.
We have been seeing rapid deflation in the housing sector for the past several years. That is why the economy is not recovering. Wages are barely treading water or going backward while the amount people owe on their homes stays the same, thus you have all these underwater mortgages and people walking away from their homes. I have a friend that walked away from his house last year. Bought it at $430k in 2005. He couldn't fathom paying a mortgage on $430k when the house had deflated to half that. Even though he could make the payment, he decided to sacrifice his credit and hand the keys back to the bank. Now you have all this glut of inventory that's not moving. This is just one effect of deflation.
Also think about what would happen for the average guy with $50,000 in student loans. If you have massive deflation, that $50,000 debt may effectively become $100k debt because the money is now worth more. Same with credit card debt.
Deflation will be good for people with a lot of cash and no debt and who have stable, salaried jobs and no mortgage. But how many fit into that category?
Change is welcome. And I have no house payments to make.
Vice-Captain - #TeamWaitAndSee
Warning, epic post:
A gold standard would be a welcome thing.
What we have now is 100 years of bubbles, recessions and depressions caused by the Federal Reserve system. Most people don't take into account the silent tax of inflation but we all feel the consequences. Inflation today is measured by the Consumer Price Index (CPI) and is notoriously manipulated to show a lesser amount than actually occurs. The reasons for this are many, but primary among them is 1) the desire to cheaply finance our debt and 2) Social Security payments are indexed against the inflation rate in what is known as COLA (cost of living adjustments). We have roughly 80 million baby boomers who are set to collect Social Security payments and we are already running $1.6 trillion deficits on the federal government level. Take a moment to ponder that.
Annual federal tax income are running around $2.2 trillion, or nearly $6,700 per man, woman and child going by 2010 census data of 330 million people in the United States. Annual federal expenditures are over $3.5 trillion - over $10,500 per person - and the difference each year is created through an expansion of the money supply by issuing treasury bonds. Considering this, and that the definition of inflation is the expansion of the money supply, the actual number one export of the United States is inflation. For now China and the rest of the world are buying our treasury bonds because of our perception as a safe haven. This is only possible because of the reserve currency status of the United States dollar, backed by the military - and it has been the case since the Brenton Woods conference after the United States, England, and Russia won World War II.
If the rest of the world doesn't buy US treasury bonds at interest rates below the actual inflation rate (negative real interest rates), the Federal Reserve stimulates the market by printing money out of thin air and purchasing US bonds in an action euphamistically referred to as "quantitate easing." Remember, the Federal Reserve is not federal and has no reserves, so it prints the money - well not really printing per se as it's all digital. We have had QE1, QE2, and unless there are radical changes we will have QE3, QE4, etc. until we have a currency crisis disrupting the role of the United States dollar as world reserve currency. Personally, I don't see the Euro fulfilling this role as her debt problems are enormous and more immediate. In fact, the Euro may not exist for too much longer in current form. China is positioning the Renminbi to fulfill the role of the United States dollar when our time of reckoning comes.
Asia has 2/3 of the worlds population and 2/3 of the world's GDP, yet only one permanent seat in the United Nations Security Council (China).
Currency wars, however, become trade wars, and trade wars become hot wars. I don't believe that the United States, indeed the whole trans-atlantic region, will cede power to the Chinese and asia without a fight. Collapsing empires do not go quietly into the night, especially considering United States military supremacy over China. Scary times.
Back to inflation. Most money is actually created by the fractional reserve banking system. If you deposit $100 into the bank, the bank only needs to hold a fraction of your deposit (~10%) or $10. This is known as the reserve ratio. On the ledger it will show that you have $100 on deposit, but it only needs to hold $10 for reserves, and then can loan out an additional $90 to someone else - which is created out of thin air by the guarantee of the new debt. The bank survives this because historically not all depositors access their deposits at once - when they do it is known as a bank run. In the United States the federal government insures each account through the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account. This works well for localized bank failures, not systemic failures.
So, as you can see, the United States dollar is nothing but debt. It originates as debt (treasury bonds), it multiplies throughout the fractional reserve banking system through the creation of further debt, bank by bank. If we were to pay-off all debt, there would be no more dollars. It didn't used to be this way of course, as the dollar used to be backed by real money - gold and silver. Take some United States money out of your wallet and take a look at it. On the front, to the left of the president is a Federal Reserve seal. Below the Federal Reserve seal is written "This note is legal tender for all debts, public and private." Notice the word "note." A note is a debt. Prior to Nixon removing us from the gold standard, dollars were redeemable by gold or silver and they were called certificates. Go ahead and Google "silver certificate" and click on images. Do you notice a difference?
So, as you can see under the Federal Reserve system debt is essential. Debt is money (and war is peace right?). The Federal Reserve can't print gold out of thin air, now can it? In a system where debt is money, to expand the money supply you must expand debt. Why do you think everyone needs a credit card, student loans, car payments, and mortgage debt? Why do you think your credit score is so important? Do Fanny Mae and Freddie Mac seems so egalitarian now? If you are a debtor, you are a slave. You are not free under the Federal Reserve system.
Why expand the money supply, you ask? Why all the additional debt? The answer is baked into the system in two ways. The primary way is due to the fractional reserve banking system. When banks create money out of thin air by issuing new loans, only the principle is created. From the previous analogy, if you deposit $100 into a bank and the bank holds 10% in reserves, or $10, the bank can then lend out $90. The bank creates $90 via a new loan, but it does not ask for just $90 in return. The bank asks for principle plus interest, yet only creates the principle $90 into the money supply. This is repeated at each deposit in every bank. Over several years in the above scenario, the bank may request $120 in payments, yet it only created the principle $90 as an addition to the money supply. Therefore in order to satisfy the need for an expansion of the monetary supply, more debt must be created. More debt, more money, more inflation.
It's a viscous cycle, and is a system fundamentally based upon fraud. The fraud is the entire fractional reserve banking system which essentially allows banks to lend money (at interest) that is created out of thin air, because most depositors are too ignorant to withdrawal their deposits. Only this is not illegal, it's the law.
The secondary reason the money supply must always expand is because politicians need to get elected. Voters elect politicians who offer them something for nothing. People don't want to take personal responsibility for their lives and expect the state to take care of them (especially democrats, but republicans too). It's human nature. So politicians get elected by promising the world. Unfortunately, voters don't like to be taxed. So in order to pay for some of the promised programs, politicians can do one of three things: tax voters directly (not popular), borrow the money (issue bonds), or print the money (create inflation). There are no other options. Issuing bonds and printing money both expand the money supply and create inflation.
Unfortunately, inflation is a silent tax and the erosion of one's purchasing power affects the poorest the worst, as wages are slow to rise and generally poor people don't have a diversification of investments into different assets that appreciate (as the rich do). Elderly people on fixed incomes are particularly hurt through inflation. Inflation (and globalization) have destroyed the American middle class. Consider the following information from 30 years ago (http://www2.census.gov/prod2/popscan/p60-087.pdf): the average personal income for men in 1972 was $10,540 and women was $6,050. If we average those figures we get $8,295, even though less women worked back at that time, and if we go to the Bureau of Labor Statistics inflation calculator (http://www.bls.gov/data/inflation_calculator.htm) we see that $8,295 equals the purchasing power of $44,638.01 in 2012. These numbers from the BLS no longer represent a stable basket of goods, but take into account "substitutions" and "hedonics" to artificially lower the inflation rate. John Williams, of ShadowStats.com, painstakingly calculates the CPI the traditional way, before president Clinton and subsequent administrations changed it, which shows $8,295 in 1972 actually has the purchasing power of over $150,000 today. Uh, huh.
Back to gold.
In our modern age, physical gold and silver are the only assets you can own that are not simultaneously someone else's liability. That statement deserves close attention. Furthermore, out of the entire periodic table of elements known to man, gold and silver (and to a lesser extent palladium and platinum), are the only elements that satisfy Aristotle's framework for good money, which is that money must be 1) durable 2) portable 3) divisible and 4) have intrinsic value. Until we have discovered "free energy" and can thereby construct matter through alchemy, gold and silver will remain money. Fiat currency will remain pieces of paper with presidents faces on them. The average lifespan of a fiat currency is roughly 40 years until the parent government destroys it through the printing press.
In summation, gold and silver are the only true forms of money. It is not enough, however, to just go back to gold and silver. We must abolish the Federal Reserve and fractional reserve banking as well.
Ron Paul 2012. I hope he runs as an independent too!
A gold standard would be a welcome thing.
What we have now is 100 years of bubbles, recessions and depressions caused by the Federal Reserve system. Most people don't take into account the silent tax of inflation but we all feel the consequences. Inflation today is measured by the Consumer Price Index (CPI) and is notoriously manipulated to show a lesser amount than actually occurs. The reasons for this are many, but primary among them is 1) the desire to cheaply finance our debt and 2) Social Security payments are indexed against the inflation rate in what is known as COLA (cost of living adjustments). We have roughly 80 million baby boomers who are set to collect Social Security payments and we are already running $1.6 trillion deficits on the federal government level. Take a moment to ponder that.
Annual federal tax income are running around $2.2 trillion, or nearly $6,700 per man, woman and child going by 2010 census data of 330 million people in the United States. Annual federal expenditures are over $3.5 trillion - over $10,500 per person - and the difference each year is created through an expansion of the money supply by issuing treasury bonds. Considering this, and that the definition of inflation is the expansion of the money supply, the actual number one export of the United States is inflation. For now China and the rest of the world are buying our treasury bonds because of our perception as a safe haven. This is only possible because of the reserve currency status of the United States dollar, backed by the military - and it has been the case since the Brenton Woods conference after the United States, England, and Russia won World War II.
If the rest of the world doesn't buy US treasury bonds at interest rates below the actual inflation rate (negative real interest rates), the Federal Reserve stimulates the market by printing money out of thin air and purchasing US bonds in an action euphamistically referred to as "quantitate easing." Remember, the Federal Reserve is not federal and has no reserves, so it prints the money - well not really printing per se as it's all digital. We have had QE1, QE2, and unless there are radical changes we will have QE3, QE4, etc. until we have a currency crisis disrupting the role of the United States dollar as world reserve currency. Personally, I don't see the Euro fulfilling this role as her debt problems are enormous and more immediate. In fact, the Euro may not exist for too much longer in current form. China is positioning the Renminbi to fulfill the role of the United States dollar when our time of reckoning comes.
Asia has 2/3 of the worlds population and 2/3 of the world's GDP, yet only one permanent seat in the United Nations Security Council (China).
Currency wars, however, become trade wars, and trade wars become hot wars. I don't believe that the United States, indeed the whole trans-atlantic region, will cede power to the Chinese and asia without a fight. Collapsing empires do not go quietly into the night, especially considering United States military supremacy over China. Scary times.
Back to inflation. Most money is actually created by the fractional reserve banking system. If you deposit $100 into the bank, the bank only needs to hold a fraction of your deposit (~10%) or $10. This is known as the reserve ratio. On the ledger it will show that you have $100 on deposit, but it only needs to hold $10 for reserves, and then can loan out an additional $90 to someone else - which is created out of thin air by the guarantee of the new debt. The bank survives this because historically not all depositors access their deposits at once - when they do it is known as a bank run. In the United States the federal government insures each account through the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account. This works well for localized bank failures, not systemic failures.
So, as you can see, the United States dollar is nothing but debt. It originates as debt (treasury bonds), it multiplies throughout the fractional reserve banking system through the creation of further debt, bank by bank. If we were to pay-off all debt, there would be no more dollars. It didn't used to be this way of course, as the dollar used to be backed by real money - gold and silver. Take some United States money out of your wallet and take a look at it. On the front, to the left of the president is a Federal Reserve seal. Below the Federal Reserve seal is written "This note is legal tender for all debts, public and private." Notice the word "note." A note is a debt. Prior to Nixon removing us from the gold standard, dollars were redeemable by gold or silver and they were called certificates. Go ahead and Google "silver certificate" and click on images. Do you notice a difference?
So, as you can see under the Federal Reserve system debt is essential. Debt is money (and war is peace right?). The Federal Reserve can't print gold out of thin air, now can it? In a system where debt is money, to expand the money supply you must expand debt. Why do you think everyone needs a credit card, student loans, car payments, and mortgage debt? Why do you think your credit score is so important? Do Fanny Mae and Freddie Mac seems so egalitarian now? If you are a debtor, you are a slave. You are not free under the Federal Reserve system.
Why expand the money supply, you ask? Why all the additional debt? The answer is baked into the system in two ways. The primary way is due to the fractional reserve banking system. When banks create money out of thin air by issuing new loans, only the principle is created. From the previous analogy, if you deposit $100 into a bank and the bank holds 10% in reserves, or $10, the bank can then lend out $90. The bank creates $90 via a new loan, but it does not ask for just $90 in return. The bank asks for principle plus interest, yet only creates the principle $90 into the money supply. This is repeated at each deposit in every bank. Over several years in the above scenario, the bank may request $120 in payments, yet it only created the principle $90 as an addition to the money supply. Therefore in order to satisfy the need for an expansion of the monetary supply, more debt must be created. More debt, more money, more inflation.
It's a viscous cycle, and is a system fundamentally based upon fraud. The fraud is the entire fractional reserve banking system which essentially allows banks to lend money (at interest) that is created out of thin air, because most depositors are too ignorant to withdrawal their deposits. Only this is not illegal, it's the law.
The secondary reason the money supply must always expand is because politicians need to get elected. Voters elect politicians who offer them something for nothing. People don't want to take personal responsibility for their lives and expect the state to take care of them (especially democrats, but republicans too). It's human nature. So politicians get elected by promising the world. Unfortunately, voters don't like to be taxed. So in order to pay for some of the promised programs, politicians can do one of three things: tax voters directly (not popular), borrow the money (issue bonds), or print the money (create inflation). There are no other options. Issuing bonds and printing money both expand the money supply and create inflation.
Unfortunately, inflation is a silent tax and the erosion of one's purchasing power affects the poorest the worst, as wages are slow to rise and generally poor people don't have a diversification of investments into different assets that appreciate (as the rich do). Elderly people on fixed incomes are particularly hurt through inflation. Inflation (and globalization) have destroyed the American middle class. Consider the following information from 30 years ago (http://www2.census.gov/prod2/popscan/p60-087.pdf): the average personal income for men in 1972 was $10,540 and women was $6,050. If we average those figures we get $8,295, even though less women worked back at that time, and if we go to the Bureau of Labor Statistics inflation calculator (http://www.bls.gov/data/inflation_calculator.htm) we see that $8,295 equals the purchasing power of $44,638.01 in 2012. These numbers from the BLS no longer represent a stable basket of goods, but take into account "substitutions" and "hedonics" to artificially lower the inflation rate. John Williams, of ShadowStats.com, painstakingly calculates the CPI the traditional way, before president Clinton and subsequent administrations changed it, which shows $8,295 in 1972 actually has the purchasing power of over $150,000 today. Uh, huh.
Back to gold.
In our modern age, physical gold and silver are the only assets you can own that are not simultaneously someone else's liability. That statement deserves close attention. Furthermore, out of the entire periodic table of elements known to man, gold and silver (and to a lesser extent palladium and platinum), are the only elements that satisfy Aristotle's framework for good money, which is that money must be 1) durable 2) portable 3) divisible and 4) have intrinsic value. Until we have discovered "free energy" and can thereby construct matter through alchemy, gold and silver will remain money. Fiat currency will remain pieces of paper with presidents faces on them. The average lifespan of a fiat currency is roughly 40 years until the parent government destroys it through the printing press.
In summation, gold and silver are the only true forms of money. It is not enough, however, to just go back to gold and silver. We must abolish the Federal Reserve and fractional reserve banking as well.
Ron Paul 2012. I hope he runs as an independent too!
Quote: (01-21-2012 03:58 PM)Gmac Wrote:
Rapid deflation wouldn't be a bad thing.
Deflation contributes to economic decline. If prices begin falling people will withhold many of their purchases for a later time when the product can be had for cheaper. Consumption spending makes up the lionshare of a countries GDP figures, a slowdown there has a big impact. A perfect example of this is Japan. Their central bank has been keeping cash rates abysmally low for a very long time now to encourage spending to reverse their deflation and pick up the economy.
We already have economic decline. What we really need is to return to a true "this for that" value standard. You can't do that with paper.
Vice-Captain - #TeamWaitAndSee
@durangotang
You defined inflation as an expansion of the money supply. That's not the definition of inflation. Inflation is when prices rise. Expanding the money supply doesn't automatically mean prices rise. They rise when that money trickles into the hands of consumers which then sends prices up. So you aren't likely to much inflation when there's low consumer demand like right now. If the money supply is expanded to give loans to banks yet the banks are holding on to it or investing it instead of loaning it out to small businesses, home buyers and consumers, it will not send up inflation. That isn't to say we may not see inflation down the road, but expanding the money supply in and of itself is not inflation.
Also, moderate inflation isn't necessarily a bad thing so long as interest rates, wages and investment returns keep up with it. In that case, the net effect of inflation is zilch. Where it becomes problematic is inflation combined with zero wage growth, interest rates of practically zero and little return in equities. Then you have stagflation, which is were you really don't want to be. I think we likely have a moderate stagflation period at the moment.
You defined inflation as an expansion of the money supply. That's not the definition of inflation. Inflation is when prices rise. Expanding the money supply doesn't automatically mean prices rise. They rise when that money trickles into the hands of consumers which then sends prices up. So you aren't likely to much inflation when there's low consumer demand like right now. If the money supply is expanded to give loans to banks yet the banks are holding on to it or investing it instead of loaning it out to small businesses, home buyers and consumers, it will not send up inflation. That isn't to say we may not see inflation down the road, but expanding the money supply in and of itself is not inflation.
Also, moderate inflation isn't necessarily a bad thing so long as interest rates, wages and investment returns keep up with it. In that case, the net effect of inflation is zilch. Where it becomes problematic is inflation combined with zero wage growth, interest rates of practically zero and little return in equities. Then you have stagflation, which is were you really don't want to be. I think we likely have a moderate stagflation period at the moment.
Quote: (01-21-2012 09:12 PM)Gmac Wrote:
We already have economic decline. What we really need is to return to a true "this for that" value standard. You can't do that with paper.
I see where your coming from, but "value" is always subjective, even with lets say Gold. The price of Gold is determined by how much people are willing to pay for it and how how much it's producers will supply it for. Nothing has a predetermined "value". It is only worth what people will pay for it.
Deflating prices on consumer goods could also lead to deflation in wages. In a perfect world, prices would remain more or less static. Remember that inflation doesn't only happen through quantitative easing (printing money in crude terms), it also happens when peoples incomes rise leaving them with more money to spend. Things become dangerous for the average person when inflation is occurring at a higher rate than wage increases. This is what has been happening in America.
Real GDP per capita is basically Gross Domestic Product (value of all goods and services produced in a year) divided by the total population and adjusted for inflation. The Real GDP per capita growth rate from 2005-2010 was only 0.07% for the States. The U.K had NEGATIVE Real GDP per capita growth of -0.29%. Never ever trust figures which haven't been adjusted for inflation. When you look at Real figures, you start to see that material living standards in the West have not improved by much in decades.
Edit: speakeasy is right on his inflation talk, but his definition of stagflation forgot an important element: High unemployment. High inflation + Low Economic Growth + High Unemployment = stagflation. I agree that the U.S is being affected by this.
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