Economics 101: Without the Bullshit

[MMIKEYJ]

Okay, I've seen enough chain letters discussing the cause of our economic woes, and they're all incorrect, so I figured it was time to write one that addressed the real issues. I've written this in plain English and have taken out any technical mumbo-jumbo so people will be able to understand it clearly. So, even though I will be leaving out some details everything in this message will be fundamentally true.


Okay, if you want to understand the problem we have with money in this country, you're going to have to understand 3 things:

1. Who makes our money.
2. How money comes into existence.
3. Inflation is nothing but a tax.

Let's tackle the first part:

PART I - Who Makes Our Money?
Here are 2 different $100 Bills. One has a red seal, the other a green seal.

Notice the top of this bill. It says United States Note. That means it is a note issued by the United States.http://i108.photobucket.com/albums/n14/mmikeyj/US_100_United_States_Note_1966.jpg?t=1239115592




Now notice the top of this bill. It says Federal Reserve Note. That means it is a note issued by the Federal Reserve. It is NOT issued by the United States at all.http://i108.photobucket.com/albums/n14/mmikeyj/HundredDollarBill.jpg?t=1239115702


Well, who is the Federal Reserve? Aren't they part of the government you might ask? The answer to that is no. The Federal Reserve is a private company, just like Federal Express. And it is no more federal than Federal Express is.

Now both of these $100 Bills cost 4 cents to produce. In the old days the govt would simply print up a red seal $100 United States Note for 4 cents and spend the money on something it wanted. Not anymore. Today, the Federal Reserve gets to produce the $100 Bill for 4 cents and then sells the $100 Federal Reserve Note to the US Government for $100 Face Amount.

That bears repeating. The Federal Reserve (a private company) gets to produce slips of paper for 4 cents ($100 Bills) and then sells those pieces of paper to the US Govt for $100 Face Amount.

Now since the government doesn't have any money of its own how does it buy these Federal Reserve Notes? It pays for them with debt: Treasury Bonds, Treasury Notes, & Treasury Bills. If you read the paper or listen to the nightly news you'll hear the media say things like "The Fed injected liquidity into the markets..." or "The Fed is buying government securities..." All this means is that the Federal Reserve is literally creating money out of thin air and then selling this money to our government for its face amount. This is the true source of our National debt, and this is the reason our debt never goes down.

If you read an economics book this will be covered under the term "Monetization of government debt."

Now some of you might be saying, "Why should I care about any of this?" I'll tell you why.
You know all that income tax that comes out of your paycheck every week? Well your money is paying for this. Your income tax dollars do not pay for things like you think. The personal income tax does not pay for the military, roads, schools, or anything like that. It simply pays for the federal reserve notes with the green seal. In fact both the income tax and Federal Reserve were created in the same year - 1913. The income tax was created to finance the federal reserve.


Okay, pretty crazy right? Why in the world would our government pay a private bank for money, and then tax it's own citizens to pay for it, when we could just issue the money ourself practically for free? There is a reason, and we'll touch on it later. Right now we're going to explain the next part.


PART II - How Money Comes Into Existence
This part explains why we have booms and busts in the economy.

We now know that the government buys it's money from the private company called the Federal Reserve. And we know that the government pays for the money by issuing government debt. Because of this, the government doesn't even own it's own money, it only rents it.
(A $100 United States Note issued in 1966 only costs America 4 cents. While a $100 Federal Reserve Note issued in 1966 costs America $100 + $5 a year in interest for a total of $315.00)


When the government buys one dollar from the federal reserve
http://i108.photobucket.com/albums/n14/mmikeyj/180px-United_States_one_dollar_bill.jpg?t=1239115753

The government automatically owes that dollar PLUS 5 cents in interest.
http://i108.photobucket.com/albums/n14/mmikeyj/180px-United_States_one_dollar_bill.jpg?t=1239115753 + http://i108.photobucket.com/albums/n14/mmikeyj/jeffB.gif?t=1239115793

The problem with this is that although the dollar is created, the extra 5 cents in interest is NOT created. This means there is not enough money in the economy for the government to pay back it's debt. After awhile it's not even possible for the government to pay the interest on it's debt unless the money supply is increased.

So out of necessity, the federal reserve & government will start a program of expanding the supply of money. The federal reserve will create more money to push down interest rates and the government will take on more debt to buy more of this money.

This causes malinvestment, which means:
People are encouraged to make wrong decisions because of false signals they are receiving from the marketplace. Businesses will tend to over expand when they shouldn't and over produce certain goods. (build too many houses for example.) Consumers will feel richer and so will wind up buying more cars, homes, etc. when they really cannot afford to.

This is where programs like the Community Reinvestment Act come into play as well as agencies like Fannie Mae, Freddie Mac, etc. Anything that encourages expansion of the money supply (like people borrowing to buy homes) will be done, and it doesn't matter whether the Republicans or Democrats are in power. They know they need to keep the supply of money growing. If they don't then this whole unstable system comes crashing down.

But since this system of money IS unstable it has to come crashing down anyway: Eventually the areas in which this money is put will form a "Bubble". It might be a Stock Market bubble or a real estate bubble, just to name a few. Eventually these bubbles will burst because they have been artificially created and are unsustainable. Inflationary booms are always followed by deflationary busts as a normal cleansing mechanism of the marketplace.

Now while this bubble is happening, the government can step in through taxation and confiscation and grab enough dollars to pay for the interest on its debt. (Income Tax). When the stock market bubble burst, they replaced it with an even bigger real estate bubble. Now that the real estate bubble is bursting they are trying to replace it with an even bigger "bond market/dollar bubble". The dollar bubble being formed now IS inflation, and will result in prices going up for everything. But like all bubbles, the dollar bubble will eventually burst and when it does the value of the dollar will be destroyed.


PART III - Inflation is a Tax (And that's all it is)

Okay, so far we have talked about two types of money, United States Notes and Federal Reserve Notes. But I have to be honest. Neither of those are actually money, they are only currency.

Here's the difference.

In 1950, you could buy 4 gallons of gasoline for ONE DOLLAR.

http://i108.photobucket.com/albums/n14/mmikeyj/180px-United_States_one_dollar_bill.jpg?t=1239115753 A paper dollar bought 4 gallons of gasoline.

http://i108.photobucket.com/albums/n14/mmikeyj/1921_PSD_Rs.jpg?t=1239115871A silver dollar bought 4 gallons of gasoline.



Now let's fast foward to 2009


http://i108.photobucket.com/albums/n14/mmikeyj/180px-United_States_one_dollar_bill.jpg?t=1239115753 A paper dollar will NOT buy you 4 gallons of gasoline.

You cant even buy ONE gallon of gasoline with it.


http://i108.photobucket.com/albums/n14/mmikeyj/1921_PSD_Rs.jpg?t=1239115871 But a silver dollar will still buy you 4 gallons of gasoline.
(The silver content is always worth the price of 4 gallons of gasoline.)


Here's another example:http://i108.photobucket.com/albums/n14/mmikeyj/8ajy8ad.gif?t=1239115916


In this picture the price of oil is calculated from the year 2000 and priced in Dollars, Euros, and Gold. In dollars, the price of oil went up 350%, in euros it went up 200%, but in terms of gold it didn't go up in price at all.

Why do commodities like gasoline and oil not go up in price when priced in either gold or silver?

Answer: Gold & Silver are real money. They have intrinsic value. Gold and silver cannot be printed out of thin air the way paper dollars can, and so they retain their value.

When the federal reserve prints paper dollars and sells them to our government, the government is able to go out and buy whatever it wants at current market prices. But as that money circulates throughout the economy, the increase in paper dollars causes prices to rise. By the time the money gets to you and me,the price of a loaf of bread or a gallon of milk has already gone up. This is how inflation taxes us. The government who gets to use the newly made money first, steals our purchasing power through inflation. The end result is that we are taxed without even knowing it. But we all know we work harder and harder just to get the same things in life we had before. That is the invisible inflation tax in a nutshell. This tax affects middle class and poor people the most. And it is the reason we hear people say "The rich get richer, while the poor get poorer."

If we used gold or silver money, the gov't would be stopped from stealing our purchasing power through inflation.

Why don't we use gold and silver for money anymore? We're supposed to. It's the law.

The United States Constitution: Article I, Section 10.
No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.

The founding fathers experienced massive hyperinflation during the Revolutionary War where the only way the country had to raise revenue was by printing paper money. Imagine having a pickup truck filled with paper money, scarcely being able to buy enough groceries to fill up your truck. It's happened before in America.

"A wagon load of money will scarcely purchase a wagon load of provisions". - George Washington, 1779.

Now this doesn't mean we have to walk around with bags of gold and silver. We can still use paper money, checks, debit cards, and electronic banking that is backed by silver and gold.

Let's take a look at how our $100 Bill is supposed to look. Unlike "Notes" which are not real money, "Certificates" are indeed real money because they are redeemable for the actual gold or silver at any time.

$100 Gold Certificatehttp://i108.photobucket.com/albums/n14/mmikeyj/100goldcert.jpg?t=1239123336

And a couple examples of paper money backed by Silver:

$5 Silver Certificatehttp://i108.photobucket.com/albums/n14/mmikeyj/money_silver.jpg?t=1239122218


$1 Silver Certificatehttp://i108.photobucket.com/albums/n14/mmikeyj/us_dollar_silver_certificate_large.gif?t=123912227 5





PART IV - Why Does Our Government Do This?


Earlier, I told you I would explain why the government does this. And the answer is because it makes it easier for politicians to get re-elected.

Under our Constitution and a sound money system like a gold standard, the government would have to tax the citizens with what's called a direct tax.

Let's say the government wants to spend money on some programs and it's going to cost $300 Billion more than they are going to take in, in revenue. That means they are going to run a deficit of $300 Billion. With roughly 300 million citizens in America that results in a cost of $1,000 per man, woman and child. So now you get a knock on your door from a tax collector and are told that your family of 4 will have to immediately pay the government $4,000 in a direct tax so the government can spend money on these programs. What would you do? You would call up your congressman and *****. You would tell him that if he doesn't fix the problem he will be out of a job.

You would take an active role in politics, and that's the last thing politicians want. They just want to get re-elected without all the hassle. So instead of taxing you honestly, they purchase money from the federal reserve, make our national debt go up, and devalue our money through inflation. And since the effects of inflation are delayed anywhere from between 6 months to 2 years, by the time gasoline or food prices go up, it can be blamed on war, greedy arabs, or bad weather, and the politician [and federal reserve] can escape the blame, even though they are the ones responsible. So the next time you hear that oil prices are higher because of a hurricane; remember it's not true.



PART V - How Do We Fix The Economy?

We got into this mess because we over spent, over borrowed, and over consumed.

So we need to do the opposite, which is save our money, pay back debt, and not consume as much.

But wait, I hear some of you say consumption is good for the economy. The nightly news tells us that the American economy is 2/3 driven by consumer spending. However, that is just another fallacy.

Production is the true measure of an economy not consumption. Anybody can eat an ear of corn, but before you can eat the corn, somebody had to grow it. Anybody can buy a new pair of jeans, but before you can buy them, somebody had to make the jeans. Somebody always has to produce before some other person can consume. And saving and spending work the same way. You have to earn and save your money before you can buy things. Here are two "fancy" economic terms and my common sense definitions for each. You should make sure you understand these because you will hear them more as the economy worsens:

Keynesian Economics: Economic theory that basically says, "Spend all the money you have. When you run out of money, borrow all you can and spend that too. When nobody will loan you anymore money, just print the money and keep spending." This is the policy our government follows. The gov't spent all our money, borrowed all we can from other countries, so now the final resort is printing even more money (and paying the federal reserve even more)

Austrian Economics: Economic theory that basically says, "If you want to buy something, make sure you have the money first. If you don't have the money then save up your money, and when you have enough, buy what you want. Pay your credit card balances in full every month and only go into debt if it's an emergency.



The Solution:

We need to let the free market function. Let the depression happen. If we let it happen, it will be over in about a year. If we drag it out with spending plan after spending plan the depression will last for 10 years or more. [Everybody has heard of the depression of 1929, but most people never hear about the depression of 1920-1921, which was actually worse. The difference was, in 1920-1921 the government didn't intervene with spending programs. Failed companies were allowed to go bankrupt, and bad debt was eliminated. After a year, the economy took off. The depression of 1929 was met with one government stimulus plan after another. The depression didn't end until after WWII, in 1946.]

Not only do we, as Americans need to cut back, but we need to produce goods and export them to other countries. We need to produce goods in America again. We need to promote jobs here and stop the outsourcing of American jobs overseas.

But in order to do this we need to decrease the size of government and increase personal liberty. We need to completely eradicate the Federal Reserve and Income Tax, and cut government spending by over $1.3 trillion a year. (which is how much the government collects each year from the personal and corporate income taxes). Basically, if we just follow the United States Constitution we can fix our problems.

Imagine the trillion dollars collected each year from the personal income tax no longer in the hands of the government but in everybodys' hands. That's a trillion dollars more people will have and they will spend their money alot more wisely than government does. Most of the time when government spends money it goes for wasteful programs and everytime the government wants to bailout somebody they wind up just bailing out their buddies.

Imagine with no more corporate income tax, how many companies would be coming back to America to open up shop here again. There would be so many companies coming here to open up shop and creating jobs, we would probably need illegal aliens to work them.



We need to bring back personal Liberty. That can be best summed up as you should have the right to keep 100% of the fruit of your labors (no income tax) and spend your money anyway you want. After all, it's your money. But with Liberty comes responsibility. If you get a paycheck on Friday and spend it all foolishly on Saturday, you can't run to the government because you have no money for food for the rest of the week. You instead will have to turn to your family, friends, and religious leaders or charity to help you. Eventually, you will learn to be responsible. In turn society benefits because the more responsible and productive our people are the better off the country will be. And as an added bonus there will be less idiots out there trying to sue McDonalds for making them fat or burning them with "Hot" coffee.

Further Reading, References, & Links

"The Creature From Jekyll Island" by G. Edward Griffin. You can download a complete audio mp3 of this book at the link: http://www.spielbauer.com/JekyllDownload.htm, burn it on a CD and after 1 hour you will know everything about the federal reserve that the government doesn't want you to know.


"Money, Banking, and the Federal Reserve" - 42 minute video. Complete history of money and banking. The first 7 minutes or so is reminscient of a high school educational video, but after that it gets very interesting. Watch it here:http://www.youtube.com/watch?v=iYZM58dulPE


Learn more about "Austrian Economics" at the Ludwig Von Mises Institute. Plenty of free mp3 downloads from various economists at http://www.mises.org

You can also Google or YouTube people like: "Ron Paul", "Peter Schiff", and "Jim Rogers", to get an honest evaluation of the economy and how it relates to current events.

Tune into http://freedomwatchonfox.com/ every Wednesday at 2pm Eastern Time to watch Judge Andrew Napolitano's internet program "Freedom Watch" where he always has new guests who explain the real deal within our government.

And sometimes it helps to talk to somebody who already understands these things. If you ever have any questions feel free to visit http://www.ronpaulforums.com. Most people at the forums are familiar with all the facts in this email and can probably help you answer any questions you might have.



And don't forget to read the Constitution and Declaration of Independence every now and then to give yourself a refresher course on Liberty. If you've never read either, then there is no time like the present to start. You'll learn a lot from these truthful and wise documents.

[Lynx]

How would the USA pay off its foreign debt if government spending were cut by 1.3 trillion per year?

[jake williams]

Fuck off loser.

[trivas7]

No, the Federal Reserve doesn't produce slips of paper for 4 cents and then sells those pieces of paper to the US Govt for $100 face amount.

Here's how money is created.: (http://www.chrismartenson.com/crashcourse/chapter-7-money-creation)all dollars are loaned into existence. (http://www.chrismartenson.com/crashcourse/chapter-8-fed-money-creation)
(http://www.chrismartenson.com/crashcourse/chapter-7-money-creation)

[Schrödinger's Cat]

In 1950, you could buy 4 gallons of gasoline for ONE DOLLAR.How is it someone who can't distinguish between real and relative inflation is trying to submit an economic report?

$1 in 1950 is 75% of an hourly wage for the average American. The mean salary in the United States was short of $3,000. (http://www.fashion-era.com/1950s/1950s_9_timeline_chart.htm) The minimum wage this year will be over $7.

Let's do the math: 4 gallons of gas would have wiped out a full hour's wage for the average American. 1 gallon of gas even at it's peak shortage of $4 (which occurred in states where the minimum wage and average wage are higher than the national average) would have constituted a 50% reduction in an hour's wage for the minimum income worker at most. For the average worker in today's economy - an average hourly wage of $17-19 (http://www.bls.gov/news.release/empsit.t17.htm) dollars - with the national average of $1.96/gallon - you could buy 8 gallons with the same 1950s dollar. We also work less (http://en.wikipedia.org/wiki/Working_time). All of this correlates with the efficiency rate of refineries (http://msnbcmedia1.msn.com/i/msnbc/Components/Interactives/Business/TransportationOil/Squeezing_each_barrel.gif).

Inflation does have its drawbacks (and some benefits - like more long-term investments), but if you can't provide us reasonable criticisms, then why bother? You seem to think all of the dollar values incurred from inflation go nowhere but the government, who spends it on nothing. Inflation, when controlled, is not the big of a deal as long as there's either 1.) comprehensive social security 2.) private charities that keep up with inflation or 3.) noticeable long-term investment..

Edit- Made typo.

[Demogorgon]

I don't deny that the current monetary system is appalling, but it is still better than before. I am a Communist, I am hardly going to defend the current system, I want it utterly changed, but your analysis simply isn't up to scratch.

I am going to ignore the points addressed by GeneCosta as he has dealt with them just as I would and probably more eloquently, so I will be surplus to requirements there. So for my own objections:

First of all, why should I as a non-American care about the supposed constitutionality of Fiat money? It doesn't apply to me, nor to many others here. In many ways it is simply an emotive argument, appealing to the secular saints who wrote the constitution. Anyway, even if America were to suddenly go back to gold backed money it would simply put it out of sync with the rest of the world and would probably be forced to go back to Fiat money. You need an argument that applies on a worldwide basis as money is a worldwide concern.

At any rate you are confusing an economic argument with a legal argument. And besides even if it were to be found that Fiat money were unconstitutional (which it has not) there would simply be an immediate amendment to the constitution. A return to the Gold Standard simply wouldn't be acceptable to those able to amend the constitution. I doubt it would be acceptable to the people either.

A final point on the subject of you being focused on America. The Federal Reserve system is outrageous, that is true, but it has limited relevance here. Most countries have currency directly issued by Government entities (the Bank of England that is responsible for issuing Sterling is a full Government entity albeit largely independent of the elected authorities, which leads to its own problems, but they are not relevant here). The monetary system has no real differences from America.

For my second and perhaps most important objection, you are referring entirely to the issuance of M0, which makes up only a small proportion of money in circulation. The significant aspect of the increase is money over time is the private lending of banks. The fractional reserve system ought to be the target of your ire there. That existed under the Gold Standard too.

How about this for an alternative? The Government abolishes private banking and takes the issuance of currency entirely under public democratic control. Each year it calculates the amount of additional money needed for the next year to drive a realistic amount of growth, reviewing it every month or so and issues the money as direct consumer subsidies and interest free loans? Money still backed by Fiat but without the ill effects it currently has. I believe that is the best future for money and indeed superior to the Labour Credits sometimes discussed here. A lot better than returning to the failed Gold Standard and also good for a system replacing capitalism.

Next objection, your assertion that the Gold Standard would somehow increase political participation. We need only look at politics back when we had the Gold Standard to see the flaw there. Most places didn't even have Universal Suffrage and the political class was aristocratic and almost entirely divorced from the people. That wasn't because of gold specifically, the other way round if anything, but at any rate it shows it certainly didn't foster increased participation.

What would foster increased participation would be a better political system. Proportional Representation (already in place in most places mind you). Greater direct democracy. Elements of demarchy, principally assemblies chosen by sortition to supervise elected bodies. Limiting the power of political parties. Limiting the power of the media by creating greater diversity and breaking up media monopolies. Moving to destroy the political class making politics closer to the people, lowering the voting age and most important of all: getting rid of capitalism! That would increase democratic participation, not a return to nineteenth century elitism.

Now I was about to round things off here, I have a ridiculous amount of stuff needing done, I need to chase up the cover for my book so I can get it ready for printing, need to start reading for this law course I was somehow possessed to start, need to stop the dog stealing more food (you should see the amount he has snuck off with this morning!) and so forth, but I have just checked your post to make sure I haven't missed anything and it seems I didn't really read your proposed solution so God help me, my obsessive compulsive nature will keep me on this message board a while longer. Sorry for the stuck on nature of the rest of this post.


Production is the true measure of an economy not consumption. Anybody can eat an ear of corn, but before you can eat the corn, somebody had to grow it. Anybody can buy a new pair of jeans, but before you can buy them, somebody had to make the jeans. Somebody always has to produce before some other person can consume. And saving and spending work the same way. You have to earn and save your money before you can buy things. Here are two "fancy" economic terms and my common sense definitions for each. You should make sure you understand these because you will hear them more as the economy worsensConsumption not production is actually the driving force of wealth. The reason for this is that the economy is driven by demand. The current economic crises is not caused by inability to produce, we are as capable of working as we ever were, but because aggregate demand has fallen. Producers produce in order to fulfill demand. Where there is no demand, there is no supply. To an extent it is possible to create artificial demand in order to facilitate non rational production (see Galbraith) but you still need spending capability in order to do so. This is something that angers me about capitalism incidentally, that our capacity to produce need not fall one iota for us to suddenly be able to have less, because of the exploitative nature of the economy and the need to build up debt.

The Austrian notion that we can function simply by living off our production, any lending coming from deferred consumption by the lender (unrealistic in of itself but we will leave that aside for now), ignores that you need a steady increase in the money supply first of all to accommodate growth but also to drive it. Without new money you are likely to have lower growth and what growth occurs will result in deflation, likely causing growth to dry up anyway. Even under the real Gold Standard, where additional credit could be created to an extent, this was a problem. Anyway for any new credit we would be reliant on the supply of gold and you cannot be certain that will hold out, especially as gold is used for other things besides a source of wealth these days (electronics for instance), this also means the growth of the value of gold will not necessarily match the rest of the economy.

Also we will be reliant on those places that produce gold (on top of our present reliance on oil producers). I can't help also thinking that this could have led to nasty results in the past. If we had used gold in the latter part of the twentieth century, apartheid would still exist for instance because South Africa would have had the international community by the balls and sanctions and other international pressure would have been unrealistic.

Of course we could use another precious metal such as silver, but the same problems will still ultimately exist.

We need to let the free market function. Let the depression happen. If we let it happen, it will be over in about a yearSomeone doesn't know his nineteenth century history.

At any rate we aren't actually in a depression, just a recession. And current estimates have us returning to growth in a year or so anyway. Without intervention and fiat money we would be in a much bigger state. That isn't to take away from the outrage that the system lets this happen in the first place and then shelters the elites from the effects of it, but your alternative is worse.

Not only do we, as Americans need to cut back, but we need to produce goods and export them to other countries. We need to produce goods in America again. We need to promote jobs here and stop the outsourcing of American jobs overseas.The market is allocating jobs oversees, you cannot have it both ways. You will need protectionism to protect American workers from cheaper foreign competition. That or a rapid increase in wealth oversees and an end of the race to the bottom workers across the world are having to engage in.

But in order to do this we need to decrease the size of government and increase personal liberty. We need to completely eradicate the Federal Reserve and Income Tax, and cut government spending by over $1.3 trillion a year. (which is how much the government collects each year from the personal and corporate income taxes). Basically, if we just follow the United States Constitution we can fix our problems.The constitution is a legal document, not a holy text, and as constitutions go there are now much better ones. The US constitution paved the way, but others have heavily built on it. The answers to our problems no more lie in it than they do in the Bible or Koran.

Anyway if you cut all those taxes and related spending the states would just raise taxes and spending to compensate and you would be back to square one.

Imagine the trillion dollars collected each year from the personal income tax no longer in the hands of the government but in everybodys' hands. That's a trillion dollars more people will have and they will spend their money alot more wisely than government does. Most of the time when government spends money it goes for wasteful programs and everytime the government wants to bailout somebody they wind up just bailing out their buddies.Of course there would be a trillion dollars less on Government spending that people would have to compensate.

Of course there is hopeless waste in Government spending in America that could be addressed. One example is healthcare. The US Government spends more of subsidising private healthcare per capita than any country with Universal Healthcare spends on the entire system and it still has an inferior service. So what is called a single payer healthcare system would allow lower taxes, a superior service and free up individuals from having to buy insurance. There is a real improvement for you and it does not involve Austrian dogma.
agine with no more corporate income tax, how many companies would be coming back to America to open up shop here again. There would be so many companies coming here to open up shop and creating jobs, we would probably need illegal aliens to work them.No, some countries have far lower corporate taxes than America (Ireland for instance) yet they are having bigger problems. And let's not forget Iceland which came closer than any other country on earth to following your kind of policies and was praised on just about every libertarian website, blog and such until last year. How is it doing?

We need to bring back personal Liberty. That can be best summed up as you should have the right to keep 100% of the fruit of your labors (no income tax) and spend your money anyway you want. After all, it's your money. But with Liberty comes responsibility. If you get a paycheck on Friday and spend it all foolishly on Saturday, you can't run to the government because you have no money for food for the rest of the week. You instead will have to turn to your family, friends, and religious leaders or charity to help you. Eventually, you will learn to be responsible. In turn society benefits because the more responsible and productive our people are the better off the country will be. And as an added bonus there will be less idiots out there trying to sue McDonalds for making them fat or burning them with "Hot" coffee.I think I am going to have to address this line by line because there is so much in there that is wrong.

We need to bring back personal Liberty.Bring back? This is evident of both an over romantic view of a past that never existed and of a strange view of Liberty.

You are defining Liberty solely in economic terms. Even ignoring your flawed view of economic freedom (which we shall come to shortly), personal liberty is a hell of a lot more. In recent years, using the so called "war on terror" as an excuse, the Government has definitely clawed back on personal freedom, however in general things have improved. One can no longer be prosecuted for engaging in same sex intercourse, should one choose to, nor can one be prevented from marrying the person of my choice (though here it is called a civil partnership if it is same sex even though they are legal identical). Police can no longer deny us a lawyer, the courts can no longer take our lives, books are no longer censored and so on. Some of these you over in America have still not gained, but there has been major progress too. No more anti-miscegnation laws, no more Jim Crow, no more Sodomy Laws, fewer executions though they are not yet abolished altogether and so on. In the time when you say we had personal liberty, where were those things?

Now to your view of economic freedom. We could do worse than to go back to 1945 when in the British election Clement Attlee's Labour Party were poised to defeat Winston Churchill's Conservatives (which they did BTW for anyone who doesn't know). Labour was really quite moderate. Certainly not going for what those of us here would argue for. Nonetheless they were promising socialism. Fighting for his political life Churchill made a radio broadcast on the BBC:
"I must tell you that a socialist policy is abhorrent to British ideas on freedom. There is to be one State, to which all are to be obedient in every act of their lives. This State, once in power, will prescribe for everyone: where they are to work, what they are to work at, where they may go and what they may say, what views they are to hold, where their wives are to queue up for the State ration, and what education their children are to receive. A socialist state could not afford to suffer opposition - no socialist system can be established without a political police. They (the Labour government) would have to fall back on some form of Gestapo."

He was heavily influenced by Hayek, though ironically he himself was, at the time promising Universal healthcare and increased social welfare (and had been strongly supportive of earlier welfare reform as a Minister in the Edwardian Liberal Government.

The next night in his rebuttal broadcast (things were rather less rushed back then) Attlee stated the following:
"The Prime Minister made much play last night with the rights of the individual and the dangers of people being ordered about by officials. I entirely agree that people should have the greatest freedom compatible with the freedom of others. There was a time when employers were free to work little children for sixteen hours a day. I remember when employers were free to employ sweated women workers on finishing trousers at a penny halfpenny a pair. There was a time when people were free to neglect sanitation so that thousands died of preventable diseases. For years every attempt to remedy these crying evils was blocked by the same plea of freedom for the individual. It was in fact freedom for the rich and slavery for the poor. Make no mistake, it has only been through the power of the State, given to it by Parliament, that the general public has been protected against the greed of ruthless profit-makers and property owners."

That is a pretty beautiful account of freedom by Attlee I think, whatever his other flaws may have been.

That can be best summed up as you should have the right to keep 100% of the fruit of your labors (no income tax)And what about surplus value? That exploitation is preventing us taking home the entire fruits of our Labours. (It is also the reasoning for so much borrowing BTW, we do not earn enough to buy back all we have made and thus have to borrow the difference) To illustrate we earn far more after tax income (accounting for inflation) than we did back when you say we had greater freedom, yet work fewer hours (though with a return to neo-liberalism in the seventies and eighties, both trends are going backwards. Part of this can be attributed to increased productivity (though the recent decline sure as hell can't), but not entirely. We are taking home a greater amount of what we have produced than we were back in your ideal time, even taking into account taxation.

If you get a paycheck on Friday and spend it all foolishly on Saturday, you can't run to the government because you have no money for food for the rest of the week.And if you don't earn enough for the whole week? If you fall ill? People end up in trouble through no fault of their own and end up in trouble. Both my Grandfather and Great Grandfather were very hard working responsible men but the difference between them was when my great grandmother died young and my great grandfather was left to raise six young kids on his own he was in severe trouble until he married again (and had another seven by her! Monty Python's view of Catholics was not necessarily entirely inaccurate). When my Grandmother died young, my Grandfather was not left in dire straits. Granted he did have fewer children who were a bit older, but nonetheless the existence of a welfare state which he had paid taxes towards meant he was not placed in financial hardship because of this. Also Government legislation to allow women much greater scope to work (something the private sector had previously done all it could to deny them) after marriage, also allowed him my Gandmother's pension. I don't think you could say my Great-Grandfather was more free, do you? There are many more cases like this out there.

You instead will have to turn to your family, friends, and religious leaders or charity to help you.That always existed, yet was not sufficient to prevent terrible hardship.

And as an added bonus there will be less idiots out there trying to sue McDonalds for making them fat or burning them with "Hot" coffee.Given Austrians are always claiming that all disputes can be solved through the courts rather than using regulation, i doubt it somehow. Mind you, given that the absence of legal aid will make courts inaccessible to many people, maybe that will be the case. Though there will be a lot fewer legitimate cases too. This is already a problem of course. Wealthy companies can often smother smaller companies with law suits. Even if their law suit has little merit, they can simply strangle the smaller firms with legal firms and of course individuals have serious trouble suing wealthier entities because if they loose (and as they will be outspent they likely will) they are forced to pay that entities entire legal costs here. That means bankruptcy is a built in penalty for challenging wealthier entities. You might say that that isn't real capitalism, but it is. Capitalism means the wealthier and more powerful individuals and corporations have greater political influence and can make sure laws benefit them.

That is the problem with Austrians. You always say you oppose the Government helping out the big corporations and so forth (while engaging in a fair bit of corporation worship of course) but you promote a system that will give these corporations a huge deal of political influence in practice.

Christ the "add on" to the post turned out to be longer than the main thing! There's a morning gone!

[Bud Struggle]

Demo, when I first saw your post I thought, "man, he's just waisted a lot of typing replying to a nonsense thread" but as I read it it seems you wrote a really interesting and thought provoking post. Good post.

Thanks. :)

And this:
Given Austrians are always claiming that all disputes can be solved through the courts rather than using regulation, i doubt it somehow. Mind you, given that the absence of legal aid will make courts inaccessible to many people, maybe that will be the case. Though there will be a lot fewer legitimate cases too. This is already a problem of course. Wealthy companies can often smother smaller companies with law suits. Even if their law suit has little merit, they can simply strangle the smaller firms with legal firms and of course individuals have serious trouble suing wealthier entities because if they loose (and as they will be outspent they likely will) they are forced to pay that entities entire legal costs here. That means bankruptcy is a built in penalty for challenging wealthier entities. You might say that that isn't real capitalism, but it is. Capitalism means the wealthier and more powerful individuals and corporations have greater political influence and can make sure laws benefit them. That is dead on. As the owner of a mid sized business I am constantly getting squeezed by the government and the large companies ganging up to pass "regulations" that large companies find it easy to comply with bit is fiancially burdensome for a smaller company.

[MMIKEYJ]

How would the USA pay off its foreign debt if government spending were cut by 1.3 trillion per year?

What? Are you really asking this?

[MMIKEYJ]

Fuck off loser.
That's not very nice. I don't call you a loser and tell you to fuck off, just because you don't agree with me.

[MMIKEYJ]

No, the Federal Reserve doesn't produce slips of paper for 4 cents and then sells those pieces of paper to the US Govt for $100 face amount.

Here's how money is created.: (http://www.chrismartenson.com/crashcourse/chapter-7-money-creation)all dollars are loaned into existence. (http://www.chrismartenson.com/crashcourse/chapter-8-fed-money-creation)
(http://www.chrismartenson.com/crashcourse/chapter-7-money-creation)
Maybe you need to re-read my entire post. Of course dollars are loaned into existence. The fed still makes the seignorage on the money. So in essence, the fed pays 4 cents to procure a $100 FRN from the Treasury, and then they trade this $100 Bill for $100 in Treasury Bonds. Theres your loan. The country spends the $100 cash from the fed, but now has a debt of $100.

[MMIKEYJ]

I don't deny that the current monetary system is appalling, but it is still better than before. I am a Communist, I am hardly going to defend the current system, I want it utterly changed, but your analysis simply isn't up to scratch.

I am going to ignore the points addressed by GeneCosta as he has dealt with them just as I would and probably more eloquently, so I will be surplus to requirements there. So for my own objections:

First of all, why should I as a non-American care about the supposed constitutionality of Fiat money? It doesn't apply to me, nor to many others here. In many ways it is simply an emotive argument, appealing to the secular saints who wrote the constitution. Anyway, even if America were to suddenly go back to gold backed money it would simply put it out of sync with the rest of the world and would probably be forced to go back to Fiat money. You need an argument that applies on a worldwide basis as money is a worldwide concern.

Because you are being taxed through inflation. The gold standard is the money of the people. Gold/Silver stand in the way of govt taking your wealth sneakily via inflation.

At any rate you are confusing an economic argument with a legal argument. And besides even if it were to be found that Fiat money were unconstitutional (which it has not) there would simply be an immediate amendment to the constitution. A return to the Gold Standard simply wouldn't be acceptable to those able to amend the constitution. I doubt it would be acceptable to the people either.

Its only not acceptable to people who benefit from the current system.

A final point on the subject of you being focused on America. The Federal Reserve system is outrageous, that is true, but it has limited relevance here. Most countries have currency directly issued by Government entities (the Bank of England that is responsible for issuing Sterling is a full Government entity albeit largely independent of the elected authorities, which leads to its own problems, but they are not relevant here). The monetary system has no real differences from America.

I apologize. I forget that there are alot of people on here that are from other countries. But the Bank of England works the same way as the Federal Reserve. All these private central banks collude for their own benefit, while the countries go to hell.


For my second and perhaps most important objection, you are referring entirely to the issuance of M0, which makes up only a small proportion of money in circulation. The significant aspect of the increase is money over time is the private lending of banks. The fractional reserve system ought to be the target of your ire there. That existed under the Gold Standard too.

Yes, the fractional reserve system is the prime contributor to inflation. And it hasnt escaped my ire.. I simply made this post as short and sweet as I could.. And honestly I wasnt even going to post it on msg boards as it was designed as an email. The text and picture formatting is all off for msg boards.. But I figured what the hell.

How about this for an alternative? The Government abolishes private banking and takes the issuance of currency entirely under public democratic control. Each year it calculates the amount of additional money needed for the next year to drive a realistic amount of growth, reviewing it every month or so and issues the money as direct consumer subsidies and interest free loans? Money still backed by Fiat but without the ill effects it currently has. I believe that is the best future for money and indeed superior to the Labour Credits sometimes discussed here. A lot better than returning to the failed Gold Standard and also good for a system replacing capitalism.
Yes, that would work in a perfect world, but most politicians arent honest. They will fudge the statistics, indices, and evaluations to keep pumping up the supply of money. I think Daniel Webster said it along the lines of "If I have to choose between gold and the honesty of politicians.. Ill stick with gold."


Next objection, your assertion that the Gold Standard would somehow increase political participation. We need only look at politics back when we had the Gold Standard to see the flaw there. Most places didn't even have Universal Suffrage and the political class was aristocratic and almost entirely divorced from the people. That wasn't because of gold specifically, the other way round if anything, but at any rate it shows it certainly didn't foster increased participation.

I see your point. I was just thinking along the lines that people have gotten even more complacent.. and complaceny breeds bad govt all the time.

What would foster increased participation would be a better political system. Proportional Representation (already in place in most places mind you). Greater direct democracy. Elements of demarchy, principally assemblies chosen by sortition to supervise elected bodies. Limiting the power of political parties. Limiting the power of the media by creating greater diversity and breaking up media monopolies. Moving to destroy the political class making politics closer to the people, lowering the voting age and most important of all: getting rid of capitalism! That would increase democratic participation, not a return to nineteenth century elitism.

Well, you and I will disagree on the getting rid of capitalism.. But I would definitely agree on more representation. There should be alot more than 435 representative in the US House.

Now I was about to round things off here, I have a ridiculous amount of stuff needing done, I need to chase up the cover for my book so I can get it ready for printing, need to start reading for this law course I was somehow possessed to start, need to stop the dog stealing more food (you should see the amount he has snuck off with this morning!) and so forth, but I have just checked your post to make sure I haven't missed anything and it seems I didn't really read your proposed solution so God help me, my obsessive compulsive nature will keep me on this message board a while longer. Sorry for the stuck on nature of the rest of this post.

Consumption not production is actually the driving force of wealth. The reason for this is that the economy is driven by demand. The current economic crises is not caused by inability to produce, we are as capable of working as we ever were, but because aggregate demand has fallen. Producers produce in order to fulfill demand. Where there is no demand, there is no supply. To an extent it is possible to create artificial demand in order to facilitate non rational production (see Galbraith) but you still need spending capability in order to do so. This is something that angers me about capitalism incidentally, that our capacity to produce need not fall one iota for us to suddenly be able to have less, because of the exploitative nature of the economy and the need to build up debt.

Yes, however one cannot consume before someone else has produced. You cant eat an apple until somebody grows it. Saving and spending are the same way. You have to earn and save your money before you can spend it. Now you CAN go into debt to buy, but sooner or later you will reach your limit and be maxed out. When that point comes you will be forced to stop buying until you save more money and pay off your debt. Thats the point the country is at now.

The Austrian notion that we can function simply by living off our production, any lending coming from deferred consumption by the lender (unrealistic in of itself but we will leave that aside for now), ignores that you need a steady increase in the money supply first of all to accommodate growth but also to drive it. Without new money you are likely to have lower growth and what growth occurs will result in deflation, likely causing growth to dry up anyway. Even under the real Gold Standard, where additional credit could be created to an extent, this was a problem. Anyway for any new credit we would be reliant on the supply of gold and you cannot be certain that will hold out, especially as gold is used for other things besides a source of wealth these days (electronics for instance), this also means the growth of the value of gold will not necessarily match the rest of the economy.

Also we will be reliant on those places that produce gold (on top of our present reliance on oil producers). I can't help also thinking that this could have led to nasty results in the past. If we had used gold in the latter part of the twentieth century, apartheid would still exist for instance because South Africa would have had the international community by the balls and sanctions and other international pressure would have been unrealistic.

Of course we could use another precious metal such as silver, but the same problems will still ultimately exist.
Someone doesn't know his nineteenth century history.

At any rate we aren't actually in a depression, just a recession. And current estimates have us returning to growth in a year or so anyway. Without intervention and fiat money we would be in a much bigger state. That isn't to take away from the outrage that the system lets this happen in the first place and then shelters the elites from the effects of it, but your alternative is worse.
The market is allocating jobs oversees, you cannot have it both ways. You will need protectionism to protect American workers from cheaper foreign competition. That or a rapid increase in wealth oversees and an end of the race to the bottom workers across the world are having to engage in.
The constitution is a legal document, not a holy text, and as constitutions go there are now much better ones. The US constitution paved the way, but others have heavily built on it. The answers to our problems no more lie in it than they do in the Bible or Koran.

We're in a depression. dont let anybody kid you. And its going to get worse. Everytime govt tries to spend our way out of it, they are only moving us backwards and making it worse.


Anyway if you cut all those taxes and related spending the states would just raise taxes and spending to compensate and you would be back to square one.
Of course there would be a trillion dollars less on Government spending that people would have to compensate.

Of course there is hopeless waste in Government spending in America that could be addressed. One example is healthcare. The US Government spends more of subsidising private healthcare per capita than any country with Universal Healthcare spends on the entire system and it still has an inferior service. So what is called a single payer healthcare system would allow lower taxes, a superior service and free up individuals from having to buy insurance. There is a real improvement for you and it does not involve Austrian dogma.No, some countries have far lower corporate taxes than America (Ireland for instance) yet they are having bigger problems. And let's not forget Iceland which came closer than any other country on earth to following your kind of policies and was praised on just about every libertarian website, blog and such until last year. How is it doing?
I think I am going to have to address this line by line because there is so much in there that is wrong.
Bring back? This is evident of both an over romantic view of a past that never existed and of a strange view of Liberty.

You are defining Liberty solely in economic terms. Even ignoring your flawed view of economic freedom (which we shall come to shortly), personal liberty is a hell of a lot more. In recent years, using the so called "war on terror" as an excuse, the Government has definitely clawed back on personal freedom, however in general things have improved. One can no longer be prosecuted for engaging in same sex intercourse, should one choose to, nor can one be prevented from marrying the person of my choice (though here it is called a civil partnership if it is same sex even though they are legal identical). Police can no longer deny us a lawyer, the courts can no longer take our lives, books are no longer censored and so on. Some of these you over in America have still not gained, but there has been major progress too. No more anti-miscegnation laws, no more Jim Crow, no more Sodomy Laws, fewer executions though they are not yet abolished altogether and so on. In the time when you say we had personal liberty, where were those things?

Liberty means you have the freedom to do what you want. It means you have the right to life, freedom of choice, property, and the right to be left alone. IM half asleep right now, so if I miss something....

Now to your view of economic freedom. We could do worse than to go back to 1945 when in the British election Clement Attlee's Labour Party were poised to defeat Winston Churchill's Conservatives (which they did BTW for anyone who doesn't know). Labour was really quite moderate. Certainly not going for what those of us here would argue for. Nonetheless they were promising socialism. Fighting for his political life Churchill made a radio broadcast on the BBC:
"I must tell you that a socialist policy is abhorrent to British ideas on freedom. There is to be one State, to which all are to be obedient in every act of their lives. This State, once in power, will prescribe for everyone: where they are to work, what they are to work at, where they may go and what they may say, what views they are to hold, where their wives are to queue up for the State ration, and what education their children are to receive. A socialist state could not afford to suffer opposition - no socialist system can be established without a political police. They (the Labour government) would have to fall back on some form of Gestapo."

He was heavily influenced by Hayek, though ironically he himself was, at the time promising Universal healthcare and increased social welfare (and had been strongly supportive of earlier welfare reform as a Minister in the Edwardian Liberal Government.

The next night in his rebuttal broadcast (things were rather less rushed back then) Attlee stated the following:
"The Prime Minister made much play last night with the rights of the individual and the dangers of people being ordered about by officials. I entirely agree that people should have the greatest freedom compatible with the freedom of others. There was a time when employers were free to work little children for sixteen hours a day. I remember when employers were free to employ sweated women workers on finishing trousers at a penny halfpenny a pair. There was a time when people were free to neglect sanitation so that thousands died of preventable diseases. For years every attempt to remedy these crying evils was blocked by the same plea of freedom for the individual. It was in fact freedom for the rich and slavery for the poor. Make no mistake, it has only been through the power of the State, given to it by Parliament, that the general public has been protected against the greed of ruthless profit-makers and property owners."

That is a pretty beautiful account of freedom by Attlee I think, whatever his other flaws may have been.
And what about surplus value? That exploitation is preventing us taking home the entire fruits of our Labours. (It is also the reasoning for so much borrowing BTW, we do not earn enough to buy back all we have made and thus have to borrow the difference) To illustrate we earn far more after tax income (accounting for inflation) than we did back when you say we had greater freedom, yet work fewer hours (though with a return to neo-liberalism in the seventies and eighties, both trends are going backwards. Part of this can be attributed to increased productivity (though the recent decline sure as hell can't), but not entirely. We are taking home a greater amount of what we have produced than we were back in your ideal time, even taking into account taxation.
And if you don't earn enough for the whole week? If you fall ill? People end up in trouble through no fault of their own and end up in trouble. Both my Grandfather and Great Grandfather were very hard working responsible men but the difference between them was when my great grandmother died young and my great grandfather was left to raise six young kids on his own he was in severe trouble until he married again (and had another seven by her! Monty Python's view of Catholics was not necessarily entirely inaccurate). When my Grandmother died young, my Grandfather was not left in dire straits. Granted he did have fewer children who were a bit older, but nonetheless the existence of a welfare state which he had paid taxes towards meant he was not placed in financial hardship because of this. Also Government legislation to allow women much greater scope to work (something the private sector had previously done all it could to deny them) after marriage, also allowed him my Gandmother's pension. I don't think you could say my Great-Grandfather was more free, do you? There are many more cases like this out there.
That always existed, yet was not sufficient to prevent terrible hardship.
Given Austrians are always claiming that all disputes can be solved through the courts rather than using regulation, i doubt it somehow. Mind you, given that the absence of legal aid will make courts inaccessible to many people, maybe that will be the case. Though there will be a lot fewer legitimate cases too. This is already a problem of course. Wealthy companies can often smother smaller companies with law suits. Even if their law suit has little merit, they can simply strangle the smaller firms with legal firms and of course individuals have serious trouble suing wealthier entities because if they loose (and as they will be outspent they likely will) they are forced to pay that entities entire legal costs here. That means bankruptcy is a built in penalty for challenging wealthier entities. You might say that that isn't real capitalism, but it is. Capitalism means the wealthier and more powerful individuals and corporations have greater political influence and can make sure laws benefit them.

That is the problem with Austrians. You always say you oppose the Government helping out the big corporations and so forth (while engaging in a fair bit of corporation worship of course) but you promote a system that will give these corporations a huge deal of political influence in practice.

Christ the "add on" to the post turned out to be longer than the main thing! There's a morning gone!


Hey I gotta run right now.. But I will respond to the rest of your post later.. It was very good to interact with you. I look forward to continuing this conversation tonight.

[Dust Bunnies]

If the Federal Reserve leads to the collapse of Capitalism and the rise of the proletariat faster than I find it acceptable.

[Demogorgon]

Because you are being taxed through inflation. The gold standard is the money of the people. Gold/Silver stand in the way of govt taking your wealth sneakily via inflation.That doesn't answer my question as to why I should care about whether it is constitutional in the United States. This is an economic argument, not a legal one after all, and besides the section you cite would be very problematic today interpreted as you wish to interpret it. It also says that Congress regulates the value of foreign currency and that would seem to forbid the Dollar from being on a floating exchange rate which hardly seems realistic to me.

As for the argument about inflation being a tax, again I defer to GeneCosta, I have said enough in this thread without repeating what others have said.

Its only not acceptable to people who benefit from the current system.As was the Gold Standard. Like I say, it was a system very much benefitting the elites. Let's not forget that in the nineteenth century in America it was the elite that wished for gold to be the sole source of currency while the free silver movement was more progressive and populist and the Greenback party and those associated were more progressive and populist still. It wasn't the elites who were moving against gold.

I apologize. I forget that there are alot of people on here that are from other countries. But the Bank of England works the same way as the Federal Reserve. All these private central banks collude for their own benefit, while the countries go to hell.But it isn't a private bank. It is a Government owned entity integrated into the civil service and indeed until 1997 didn't even have the normal powers of a central bank (setting the base interest rate principally), those belonging to the Chancellor of the Exchequer (effectively minister of finance). Despite this the monetary system is the same as America, so outrageous as the nature of the federal reserve is, it is only tangential to this discussion.

Yes, that would work in a perfect world, but most politicians arent honest. They will fudge the statistics, indices, and evaluations to keep pumping up the supply of money. I think Daniel Webster said it along the lines of "If I have to choose between gold and the honesty of politicians.. Ill stick with gold."Which is why you implement safeguards like a transparent decision making process and the body being independent of the rest of the Government and responsible in a different manner. No system is ever going to be perfect mind you, but the above would be a hell of a lot better than both what we have now and the gold standard. Whether it would work under capitalism is pretty doubtful however.

I see your point. I was just thinking along the lines that people have gotten even more complacent.. and complaceny breeds bad govt all the time.Maybe, but that is another issue entirely. People tend to feel that politics is not really related to their lives. The political process is opaque and blocks participation. And every gain we make to make it more open seems to lead to politicians learning new tricks to work around it. Look at California for instance. Apart from the undemocratic nature of the legislature, it seems to have a decent system with different posts all being individually elected and recallable at any time and extensive powers of initiative and referendum with the people, but in reality the people are shut out from the political process through money and corruption and a media happy to facilitate this and that is just one example. Ideally people would get involved in politics, but that will only happen with a more democratic, transparent, participatory and above all accountable system.

This isn't really relevant to the monetary system though.

Well, you and I will disagree on the getting rid of capitalism.. But I would definitely agree on more representation. There should be alot more than 435 representative in the US House.That might be a start. More representatives would mean them being closer to the people, but all the same a majoritarian rather than proportional voting system along with the fact that politicians have established themselves as a separate class from the rest of us and are in bed with corporate power means that alone wouldn't solve much.

Looking forward to continuing this.

[jake williams]

That's not very nice. I don't call you a loser and tell you to fuck off, just because you don't agree with me.
This [email protected] business has gotten really old. Folks get tired of it.

[Lynx]

What? Are you really asking this?
Yes, I really am.

[Dejavu]

Interesting thread. I'll reply when I get more time.

[MMIKEYJ]

How would the USA pay off its foreign debt if government spending were cut by 1.3 trillion per year?

Well, firstly govt spending isnt necessarily paying off any foreign debt so Im not sure how you even put them both together in a question like this.

[Kassad]

You know, there's one question that the laissez-faire, free-market types always shit themselves when you ask them it. The Federal Reserve banking monopoly came into power because the United States' government did not properly regulate and maintain the monetary system. This allowed predator bankers and private interests to formulate an economic hegemony over the monetary creation and distribution in the United States. Therefore, it's obvious that proper regulation of banks and the bankers themselves would have prevented such an atrocity from taking place. Thus, why do paleoconservatives and libertarians claim that we should deregulate the market, when that exact deregulation caused this banking cartel to establish its power?

Oh, irony. You are the cruelest of fiends.

[trivas7]

The Federal Reserve banking monopoly came into power because the United States' government did not properly regulate and maintain the monetary system.

Both Jefferson and Madison were against a central mint or bank, believing it would not benefit the South; the Fed was the third central banking system in US history.


This allowed predator bankers and private interests to formulate an economic hegemony over the monetary creation and distribution in the United States. How so? AFAIK libertarian/RonPaul types want to go back to the gold standard and do away w/ the Fed.

[Kassad]

Well, let's see here. Thomas Jefferson was a rich, white slave owner who is notable for fucking the slaves he owned. Such a reputable figure, I'd say. James Madison, though I don't know if he owned slaves off the top of my head, I assume he did, but even if he did not, he was still a rich, white landowner who assited in the formulation of the Constitution and the Bill of Rights. Quite the load of achievements, right? Everything that isn't listed in a minute list of liberties is left to the states. Sounds great, huh? Does that include slave fucking, rape, murder and incest? Sounds like a foolproof plan, doesn't it? I do not see anything that came out of the mouth of the Founding Fathers to be relevant or reputable, as all of them were rich, white landowners who did not have the interest of the common mand in mind. They cared about preserving money and they established a nation on that platform.

You're missing the point, as usual. The Ron Paul types advocate deregulation of the market and the deregulation of the market allowed bankers, who were totally left without restraint, to claim the central banking system when the economy became weak. Due to the fact that no impediments, no regulations and no shackles kept them from claiming the monetary system for their own desire, they were able to rise to power incredibly swiftly. Though Ron Paul and the laissez-faire fascists would like to claim they support the abolition of the Federal Reserve and such, they never acknowledge that their deregulatory schemes allow corporate entities to manipulate the system, speculate totally without oversight and exploit the cititizens of the world. That is the prime cause for the economic crisis at the present time, with deregulatory schemes which became popular during the Reagan era coming back to bite us. Ron Paul supports economic schemes which promote social and economic inequality, as well as economic planning that has witnessed some of the most atrocious levels of debt, lack of education, lack of healthcare and lack of general common sense in the American republic.

Deregulation is what they advocate and deregulation is what allows corporations to wreak havoc unchecked. Sounds like a plan, right?

[Demogorgon]

Well, firstly govt spending isnt necessarily paying off any foreign debt so Im not sure how you even put them both together in a question like this.
The question is where the money would come from to pay of the existing debt. The US Government owes an extraordinary amount of money and meeting the interest on it alone is taking up most of the yearly income tax take. If you seriously want big tax cuts you need to reduce the amount of interest the US Government pays each year and that will require paying of the debt. Where is the money for that going to come from?

[trivas7]

You're missing the point, as usual.

Deregulation is what they advocate and deregulation is what allows corporations to wreak havoc unchecked. Sounds like a plan, right?
IMO it's the state that allows a monopoly on banking and colludes to allow banks to manipulate the system. Banks have been heavily regulated since Roosevelt.

[Demogorgon]

IMO it's the state that allows a monopoly on banking and colludes to allow banks to manipulate the system. Banks have been heavily regulated since Roosevelt.
Which Roosevelt? If you mean Franklin, the Federal Reserve itself predates that. If you mean Theodore, do you know what the economy looked like before his trust busting?

It is an odd catechism of the Libertarian faith that the only way to stop corporations colluding is to remove regulations preventing them from colluding. Of course that itself makes me wonder, if they only collude when there is regulations, why did regulations appear in the first place?

[trivas7]

Which Roosevelt? If you mean Franklin, the Federal Reserve itself predates that. If you mean Theodore, do you know what the economy looked like before his trust busting?

FDR. IMO It's an odd argument to make that regulation by the state is the way to get to the stateless society.

[Dimentio]

FDR. IMO It's an odd argument to make that regulation by the state is the way to get to the stateless society.

I concur :scared:

[Kassad]

It's like arguing with a brick wall. Corporations and businesses are created for profit. They will do anything to maintain and enlarge profit. This is shown by businesses consistently laying off workers, cutting back benefits and creating mediocre products and commodities to save money. Products are not produced by private corporations to help people. McDonald's doesn't give us the best quality meat in the world because it's too expensive. Apple doesn't use the most up-to-date, efficient technology, as that could be bad for their profit margin.

Therefore, why would you want to deregulate them even more so they can be even more ruthless in their crusade for profit? Why would you want to leave these organizations totally unchecked? Why do you think Apple dropped the price of the iPhone right after its release? Because they knew people who wanted it that badly would pay anything and they did. Why do companies use mediocre products produced by child slaves in third world countries? Because it's cheaper. Do you really think these corporate executives and entities care? Are you really that delusional?

[Demogorgon]

FDR. IMO It's an odd argument to make that regulation by the state is the way to get to the stateless society.
I never made that argument. Anyway, if you are talking about FDR, your entire argument is pointless. The Federal Reserve had been formed and banks were very powerful long before him.

[trivas7]

I never made that argument. Anyway, if you are talking about FDR, your entire argument is pointless. The Federal Reserve had been formed and banks were very powerful long before him.
I argued that banks have been heavily regulated since FDR. Are you arguing otherwise?

[Demogorgon]

I argued that banks have been heavily regulated since FDR. Are you arguing otherwise?
On and off, though it depends what you mean by "heavily". There was considerable deregulation from Reagan onwards.

What exactly is your argument anyway? That regulation long after the establishment of the federal reserve caused the federal reserve to form?

[Schrödinger's Cat]

I concur :scared:

Almost as weird as an "anarchist" arguing that one form of authority and oppression is more just than another.

[MMIKEYJ]

You know, there's one question that the laissez-faire, free-market types always shit themselves when you ask them it. The Federal Reserve banking monopoly came into power because the United States' government did not properly regulate and maintain the monetary system. This allowed predator bankers and private interests to formulate an economic hegemony over the monetary creation and distribution in the United States. Therefore, it's obvious that proper regulation of banks and the bankers themselves would have prevented such an atrocity from taking place. Thus, why do paleoconservatives and libertarians claim that we should deregulate the market, when that exact deregulation caused this banking cartel to establish its power?

Oh, irony. You are the cruelest of fiends.
The reasons for the fed coming about are a little bit more complicated than that.. it is explained in G. Edward Griffin's "The Creature from Jekyll Island"

And fractional reserve banking should indeed be either severely cutailed or eliminated altogether, I dont think anybody is going to argue with you there.. That process of fractional lending would be illegal in any other business, so banks should not be allowed to do it - its illegal and immoral.

[MMIKEYJ]

The question is where the money would come from to pay of the existing debt. The US Government owes an extraordinary amount of money and meeting the interest on it alone is taking up most of the yearly income tax take. If you seriously want big tax cuts you need to reduce the amount of interest the US Government pays each year and that will require paying of the debt. Where is the money for that going to come from?
Well firstly, under our current system we use debt as money so the govt has no incentive to pay off any debt. The more they pay off, the more they would increase the value of the dollar , and they dont want that. The US government, instead will just repudiate its debt. The question is whether it will be an honest repudiating like a default, or a sneaky repudiating by inflating the money supply to the hilt to pay back creditors with worthless money.

And Im not concerned about big 'tax cuts' as much as big 'spending cuts'. The govt could eliminate the income tax right now, but with the current money system we will just pay the difference with the inflation tax because we have a dishonest money system.

[Demogorgon]

And fractional reserve banking should indeed be either severely cutailed or eliminated altogether, I dont think anybody is going to argue with you there.. That process of fractional lending would be illegal in any other business, so banks should not be allowed to do it - its illegal and immoral.
Yes but you need a viable alternative that will allow the supply of money to increase at a rate that will both drive new growth and accommodate it. A pure gold standard with no fractional reserve (and BTW the fractional reserve system goes back a long way into the history of the gold standard, so it is difficult to even know what will happen under your system) simply cannot supply the increase in money needed for that. We come back to deflation.

Also it will become very expensive to borrow money. I think the reasons for that are obvious. And remember, under capitalism we (as a group) need to borrow. We are not paid enough to buy back the products we have made and the excess money the capitalist pockets is often reinvested rather than buying the goods made so spending on borrowing is needed to keep the economy in equilibrium.

Also we need to consider that under this system banks are needed to store all the gold (or whatever) as we can hardly cart it around with us. We will need to use paper certificates (or their electronic equivalents) for obvious reasons. And that will require banks. However banks will now have to charge for their gold storing and certificate issuing services, deprived of their current source of revenue. And with the level of money currently used, that is something we will all need to pay for. In the past most people only traded in small denomination coins anyway, in the modern age that is not an option in the west. I don't know about you but the prospect of having to pay the bank so I can spend my money is not terribly appealing to me.

Now if you have an alternative to avoid this, by all means tell us, I'm always interested in new monetary theories. But right now my proposal for fiat money without private banks or usury is most appealing to me.
Well firstly, under our current system we use debt as money so the govt has no incentive to pay off any debt. The more they pay off, the more they would increase the value of the dollar , and they dont want that. The US government, instead will just repudiate its debt. The question is whether it will be an honest repudiating like a default, or a sneaky repudiating by inflating the money supply to the hilt to pay back creditors with worthless money.You are being too specific to America again. There are countries out there that have paid off all or most of their debt without the effects you mention. Denmark for instance has paid off massive amounts over the past couple of decades. Its economy still looks "normal". The reward for doing it was real too. Less Government spending is tied up with interest payments.

As for your scenarios for paying off debt, neither is realistic. The US cannot default on its debt, nor can it turn the Dollar into Zimbabwe style useless money. The effects would be catastrophic. Consider the source of its debt. Plenty is owed to foreign Governments for a start. Japan, China and the United Kingdom (in that order) have bought up billions of dollars of treasury bonds. They won't be too happy if America defaults. Secondly the US Government (in a feat of breathtaking stupidity in my opinion) has taken money from the Social Security fund for its current spending (including useless military spending) again replacing it with treasury bonds. Regardless of what you think of America's Social Security system, people have paid a lot of their earnings into that over the years and are entitled to expect the rewards they were promised. How are they going to feel if that is taken away from them?

Lastly a lot of the debt is owed to Private Individuals, mostly, though not exclusively, inside the US. Treasury Bonds are seen as a very safe investment (albeit with lower rewards) so people see it as a good place to put their money. What will their response be to the US defaulting or trying to fob them off with worthless currency? No, the US, barring a complete overhaul of the global economy, is going to have to pay back its debt honestly.

As an aside, going for major inflation and trying to use worthless currency to pay off debt won't work either. One thing Zimbabwe's incredible inflation hasn't done is reduce its enormous level of debt.


And Im not concerned about big 'tax cuts' as much as big 'spending cuts'. The govt could eliminate the income tax right now, but with the current money system we will just pay the difference with the inflation tax because we have a dishonest money system.
I'm sure you can see the problem here. Asking people to accept a big spending cut without a tax cut is not going to be popular. It isn't realistic to say that such a thing can be compensated for by more money. Trying to meet debt payments by effectively printing more money doesn't work. Ask the Weimer Republic.