zondag 18 februari 2007

The Empire 181

'Monetary Policy and the State of the Economy
by Ron Paul

Statement at Hearing of the House Financial Services Committee

Transparency in monetary policy is a goal we should all support. I've often wondered why Congress so willingly has given up its prerogative over monetary policy. Astonishingly, Congress in essence has ceded total control over the value of our money to a secretive central bank.
Congress created the Federal Reserve, yet it had no constitutional authority to do so. We forget that those powers not explicitly granted to Congress by the Constitution are inherently denied to Congress – and thus the authority to establish a central bank never was given. Of course Jefferson and Hamilton had that debate early on, a debate seemingly settled in 1913.
But transparency and oversight are something else, and they're worth considering. Congress, although not by law, essentially has given up all its oversight responsibility over the Federal Reserve. There are no true audits, and Congress knows nothing of the conversations, plans, and actions taken in concert with other central banks. We get less and less information regarding the money supply each year, especially now that M3 is no longer reported.
The role the Fed plays in the President's secretive Working Group on Financial Markets goes unnoticed by members of Congress. The Federal Reserve shows no willingness to inform Congress voluntarily about how often the Working Group meets, what actions it takes that affect the financial markets, or why it takes those actions.
But these actions, directed by the Federal Reserve, alter the purchasing power of our money. And that purchasing power is always reduced. The dollar today is worth only four cents compared to the dollar in 1913, when the Federal Reserve started. This has profound consequences for our economy and our political stability. All paper currencies are vulnerable to collapse, and history is replete with examples of great suffering caused by such collapses, especially to a nation's poor and middle class. This leads to political turmoil.
Even before a currency collapse occurs, the damage done by a fiat system is significant. Our monetary system insidiously transfers wealth from the poor and middle class to the privileged rich. Wages never keep up with the profits of Wall Street and the banks, thus sowing the seeds of class discontent. When economic trouble hits, free markets and free trade often are blamed, while the harmful effects of a fiat monetary system are ignored. We deceive ourselves that all is well with the economy, and ignore the fundamental flaws that are a source of growing discontent among those who have not shared in the abundance of recent years.
Few understand that our consumption and apparent wealth is dependent on a current account deficit of $800 billion per year. This deficit shows that much of our prosperity is based on borrowing rather than a true increase in production. Statistics show year after year that our productive manufacturing jobs continue to go overseas. This phenomenon is not seen as a consequence of the international fiat monetary system, where the United States government benefits as the issuer of the world's reserve currency.
Government officials consistently claim that inflation is in check at barely 2%, but middle class Americans know that their purchasing power – especially when it comes to housing, energy, medical care, and school tuition – is shrinking much faster than 2% each year.
Even if prices were held in check, in spite of our monetary inflation, concentrating on CPI distracts from the real issue. We must address the important consequences of Fed manipulation of interest rates. When interest rates are artificially low, below market rates, insidious mal-investment and excessive indebtedness inevitably bring about the economic downturn that everyone dreads.
We look at GDP numbers to reassure ourselves that all is well, yet a growing number of Americans still do not enjoy the higher standard of living that monetary inflation brings to the privileged few. Those few have access to the newly created money first, before its value is diluted.
For example: Before the breakdown of the Bretton Woods system, CEO income was about 30 times the average worker's pay. Today, it's closer to 500 times. It's hard to explain this simply by market forces and increases in productivity. One Wall Street firm last year gave out bonuses totaling $16.5 billion. There's little evidence that this represents free market capitalism.
In 2006 dollars, the minimum wage was $9.50 before the 1971 breakdown of Bretton Woods. Today that dollar is worth $5.15. Congress congratulates itself for raising the minimum wage by mandate, but in reality it has lowered the minimum wage by allowing the Fed to devalue the dollar. We must consider how the growing inequalities created by our monetary system will lead to social discord.'

Lees verder: http://www.lewrockwell.com/paul/paul370.html

1 opmerking:

Ed zei

A very large "PPT-maybe"

Hello Congressman Ron Paul,

Would you please first look at
http://homepage.mac.com/ttsmyf/NYTtime.gif
which is the nominal DJIA/Dow since 1/1/2006. I offer below a solid/logical “PPT-maybe” explanation for the substantial change to a sustained uptrend beginning near the vertical dashed red line. (Background note: in this country, historical asset prices, expressed in consumer purchasing power, = ‘real’, are kept well-out-of-sight, because they are too well-informing.)

I am supposing:
the very exceptional appearance of the NYTimes ‘Real Homes’ chart on 8/26-7/2006, please see here
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html
was feared to 'lead to' appearance of the directly analogous Real Dow chart
http://homepage.mac.com/ttsmyf/
which latter chart's well-showing could be expected to supplant +irrationality with -rationality re. stocksholding attraction,
which could be expected to produce price decline due to air decline (price = value + air).
I suppose that PPT (or some such) sought to avoid/oppose the preceding scenario by
intervention/manipulation to elevate prices (by adding air), in order to help price decline be "off our minds".

The following relates how I got to the preceding.

I recently was recalling/noting the sustained uptrend of the Dow lately, a substantial breakout from the preceding range. See the red trace here
http://homepage.mac.com/ttsmyf/Overlay.html
and the above-cited
http://homepage.mac.com/ttsmyf/NYTtime.gif
I wondered “why”; I thought about
intervention/manipulation, remembering the PPT hypothesis; I thought about deceivers’ concern for the viability of the big deception (by omission, = keeping the Real Dow severe roller-coaster on 3.5 decade time scale well-out-of-sight) -- see it here
http://homepage.mac.com/ttsmyf/
I tried to think of event(s) a while ago that might have produced such concern; I remembered talk of
Shiller maybe writing another “Irrational Exuberance”-type book -- did some sleuthing, indicating not so; THEN I remembered publication of the ‘Real Homes’ chart by the NYTimes on 8/26-27/2006, which is the direct analog of ‘Real Dow’ that is kept
well-out-of-sight.

Finally re. the Real Dow (the Real S&P is similar): this severe roller-coaster is the dominant historical reality, and 3.5 decades is ca. an individual’s investment lifetime, so this history is overwhelmingly relevant to long-term individual investors. Stock market participation is replete with persons motivated by representations of long-term average past performance. Just averaging through this roller-coaster, and not well-showing it, is a massive and grotesque deception by omission.