Victor Aguilar at Axiomatic Theory of Economics voices a silent worry I’ve been having recently (apologies if this upsets libertarians and Paul fans, among whom I still count myself):
Note: I don’t know who Aguilar is, have never heard of him, don’t endorse any of his views, since I don’t know them, and only post this because he seems to echo a recent fear of mine about the promotion of Zarlenga and Zarlenga-esque ideas in all sorts of venues, including what I always thought of as the libertarian Daily Bell.
“Stephen Zarlenga writes:
Infrastructure repair would provide quality employment throughout the nation. There is a pretense that government must either borrow or tax to get the money for such projects. But it is a well enough known, that the government can directly create the money needed and spend it into circulation for such projects, without inflationary results.
First, incorporate the Federal Reserve System into the U.S. Treasury.
Second, halt the banks privilege to create money by ending the fractional reserve system.
Third, spend new money into circulation on infrastructure, including education and healthcare.
Ron Paul (2009, pp. 204-205) writes:
While a gold standard would be a wonderful thing, we shouldn’t wait for one before we end the Fed… An end to the money-creating power and a transfer of remaining oversight authority from the Fed to the Treasury would be marvelous steps in the right direction.
Aguilar:
So we see that Ron Paul’s proposal is essentially the same as that of Stephen Zarlenga and his man in Congress, Dennis Kucinich. Like Paul, Zarlenga also believes that a gold standard is a wonderful thing, provided that it does not have to actually be implemented. Since Paul has no concrete plans for implementing a gold standard, he and Zarlenga are united in their desire to incorporate the Federal Reserve System into the U.S. Treasury as quickly as possible.
The only difference is that, once the Federal Reserve System is incorporated into the U.S. Treasury, Paul vaguely hopes that Timothy Geithner will freeze the money stock while Zarlenga hopes that Geithner will spend new money into circulation on infrastructure. If I had to guess, I would say that Geithner, once given this enormous power, is more likely to spend the money, though not necessarily on infrastructure, than to freeze the money stock.
Ron Paul (2009, 203) writes,
“In an ideal world, the Fed would be abolished forthwith and the money stock frozen in place.”
Aguilar:
Idyllic is the right word. There is no reason for Paul to think that Geithner will do this for him. The Secretary of the Treasury is appointed by the President and the President panders to the voters. And they certainly do not want the stock of money frozen. If infrastructure is the new word for pork, then they want nothing more than to get some.
“If there’s anything worse than a secret Federal Reserve, it’s Congress controlling it,” says Sen. Jim DeMint, Republican of South Carolina. I agree. I dislike the United States having a central bank (I advocate free banking) but, given the existence of the Fed, I certainly would not put it in the hands of a bunch of squirrelly politicians.
Richard C. Cook writes:
I worked with Steve [Zarlenga] on his first draft of the American Monetary Act. The time came when Steve and I began to meet with Congressman Dennis Kucinich, briefing him and others in Washington on monetary ideas.
So much has happened since then. So many more people have become aware of the evils of the debt-based monetary system. We have seen Congressman Ron Paul ignite a national wave of revulsion against the Federal Reserve System. There is now even hope that the American Monetary Act might be introduced on the floor of Congress.”
Aguilar:
As for eliminating the Fed and giving the Treasury Department free rein to print money, I have already examined Zarlenga’s proposal in my 2008 paper and I specifically spoke of Cook here. There is no need to duplicate that material here just because Ron Paul has joined them….”
My Comment:
What this tells me is that there can be collaborations with the left on civil liberties and foreign policy, but not on economic freedom, which, for me, actually precedes political freedom.
My money represents my work and my time…and my work and my time represent my life. Through them my engagement in the world unfolds. They are how I come to understand the world in the most real way.
Not in the superficial and arrogant way that one “understands” the world only to meddle in it, as someone from the political class would. To them, the world is a black-box they engineer.
Hands off my world. Hand off my money. Hands off my work. Hands off my life.
I support Ron Paul, because I believe him to stand for these things and to fight for these things. If, ultimately ,for some reason can’t…. then for me at least there is no need to endorse any one else’s platform. It would be better to forget politics, since obviously there’s no one else who’s even broaching these issues. It’s that simple.
If Aguilar turns out to be right about this, then, regretfully, I’ll have to become a “mere” libertarian. With a small ‘l’. I’d sooner look to an alliance of counter-parties to the US government to teach the banking mafia the hard lesson they need in economics and justice than follow even libertarians blindly down a dead-end.
Hands off my world.
Hand off my money.
Hands off my work.
Hands off my life.
Right on, Lila.
You nailed it.
That’s the bottom line.
~ “If there’s anything worse than a secret Federal Reserve, it’s Congress controlling it,” says Sen. Jim DeMint, Republican of South Carolina. I agree. I dislike the United States having a central bank (I advocate free banking) but, given the existence of the Fed, I certainly would not put it in the hands of a bunch of squirrelly politicians. ~
Am I reading an advocacy of keeping monetary control in the hands of a shadowy, unaccountable body?
Exactly…
so why is Ron Paul going along with this, if he is?
This is hooey. You know what will happen. They’ll print up money and it will go to various projects that their preferred constituencies want.
If debtors get a jubilee for being irresponsible, and many of them, downright criminal..(they were flipping and trying to speculate with houses)
the savers, on whom this economy depends, should have their savings doubled.
So I say that we should demand that the AMI print up money AND FOR EVERY DOLLAR OF DEBT FORGIVENESS, THEY SHOULD GIVE SOMEONE NOT IN DEBT AN EQUIVALENT DOLLAR.
Otherwise, libertarians and conservatives should fight this to the teeth
It’s a false flag of operation..
Aguilar seems to be making indictments that extract inferences from some Ron Paul quotes. Appears to be some nebulousness to all of this, as I read it.
I like your Hands off statement, which is to me rather a statement of liberty that holds similarities to many of Paul’s positions, rather than that of a ‘Ron Paul libertarian’….
Time will tell, won’t it?
while i don’t like the leftist technique for spending monetary expansion on justified land-based infrastructure, the monetary solution is the best one. the initial monetary expansion necessary for ending fractional reserve lending should go towards paying off the national debt (and suspension of income taxation or issuance of citizen dividends to the direct owners of monetary expansion, everyone). with a 25% reduction in spending by eliminating the interest on the national debt and the usual monetary expansion, you can provide a bit of agrarian justice / monetary justice.
bang head on desk… why would anyone want the deflation that comes with gold fiat. why would anyone in their right mind want to pay 5% interest on a 30-year mortgage for a house that is decreasing in price while wages are also decreasing. why? why? why?
the far left and the far right are both wrong. but if you combine the two, you got the right answer. it is the henry george way.
while i don’t like the leftist technique for spending monetary expansion on justified land-based infrastructure, the monetary solution is the best one.
the initial monetary expansion necessary for ending fractional reserve lending should go towards paying off the legitimately held national debt and suspension of income taxation or issuance of citizen dividends to the owners of monetary expansion, the citizens. with a 25% reduction in spending by eliminating the interest on the national debt and the usual monetary expansion, you can provide a bit of agrarian justice and monetary justice.
bang head on desk. why would anyone want the deflation that comes with gold fiat. why would anyone in their right mind want to pay 5% interest on a 30-year mortgage for a house that is decreasing in price while wages are also decreasing. why? why? why?
the far left and the far right are both wrong. but if you combine the two, you got the right answer. it is the old henry george way before both the far left and far right were corrupt.
Hi Keith//
“Why should anyone want…”
You’re assuming that “want” is the operative word.
We often don’t get what we want but what is the consequence of bad policy.
We “need” a contraction because it gets rid of malinvestment.
The problem is not the contraction, it’s the fake expansion.
Issuing money, without production to back it is counterfeiting and default by another name..slow motion default.
There are several ways to solve this without funny money. Funny money is totally immoral.
And it’s a second theft, unless, as I said, everyone with savings and without debt is issued twice the amount to compensate for the dilution..which will never happen.
Henry George doesn’t have much to do with it..nor is this far right.
Nothing rightist about refusing to dilute the currency. It’s everyday ethics.
Again..
“wanting” has nothing to do with it.
If you vandalize someone’s property, you have to pay for it..whether you “want it” or not.
If you phony up a book with subsidized and false investment, you have to let the phony boom subside or you risk aggravating the whole thing in the long run.
If you borrow, you have to pay back honestly.
The key word here is “ought”
These are obligations to other people.
What? You want to destroy wealth with deflation? You want those who hold monetary units to gain in wealth while those who hold debt lose wealth? You want workers to earn less to pay their mortgage which doesn’t go down? You want those with an inventory of commodities to see the inventory drop in value while those who hold the paper see their wealth increase?
The current system is assumed to be inflationary. People take loans. People use their savings for loans, purchase of commodities, and investment in capital goods. People act according to the system given to them. To allow a deflationary “correction” doesn’t solve any problems. It doesn’t stop theft. It just makes theft worse.
First by inflation, then, by deflation, the American people will wake up homeless on the continent their forefathers conquered.
Money is a legal entity whose quantity represents gross production of all people. Private banks don’t own monetary expansion. The people, the public at large, owns monetary expansion. And the bankers have worked tirelessly to deceive people and distort understanding of the abstract concept of money so they can own monetary expansion and create inflation and deflation so smaller banks can’t competite in the business that should be the sole business of banks, savings and loans, with transparent rates free of inflationa and deflation.
Deflation is not justice. Ending the theft and allowing the public to own monetary expansion is justice.
Again, the system of fractional reserve lending and creation of money through debt is the crime, robbing people through inflation, but mostly, through monetary expansion.
The crime is not the people who took a loan to buy a home while they work their ass off to pay for it for 30 years. A deflationary correction punishes those with loans.
Just the act of dollars getting exported to Mexico or immigration is enough of a reason to expand the monetary supply. That is the main reason the borders are open because the banks get to expand the monetary supply without causing inflation.
That is the problem. The bankers get the benefits of monetary creation, rather than the people who are born and enter the economy, working their ass off to buy a piece of land.
Hi Keith you would be right, if there had been a bust without a boom.
But there was a boom and that was the problem, because it wasn’t a boom of rising productivity and wages.
It was asset price inflation.
So the deflation that corrects that is the return of money to its proper value.
Money is far too cheap in relation to debt. That’s why debt based assets have to decline in value.
So you can’t equate the deflation of the excess with the deflation of a depression…
but we will have the latter too because we have to get rid of malinvestment.
Deflation is better for the worker, because wages aren’t going to fall nearly as fast as prices so his real wages will be better
and once we’re through, genuine productivity can start
Yes, I think money is far too cheap.
A lot of people are living on other people
s savings and not paying them the fair price of the money
That’s theft
A certain amount of price deflation is both natural and right..the whole point of growth in productivity is to make things cheaper so more people can afford more..
The bad rap given to price deflation (cheap goods) is one of those idiotic propaganda numbers the left has done on the public.
the federal reserve system is based on the commodity of debt and backed by income taxation. it is inflationary, which is theft. the rate of monetary expansion is throttled by a central authority by setting rates. the changing rates and inflation makes it hard for small banks to compete. therefore, you get low savings rates and high interest rates because it allows private banks to operate like a monopoly. it puts ownership of monetary expansion in the hands of the banks and the tax payer on the hook if things go bad. worse, it is based on the commodity of debt, like a ponzi scheme, where people must take on debt to have money to trade. the only people who get debt free money are the bond holders and banks, the wealthy. the system is rigged to favor the banks and the wealthy. the inflation itself can be destructive to paper put under the mattress and can be destructive to those with investments and savings since it lowers the effective rate of return on investments or savings. yes, the system is bad. however, collapsing the ponzi scheme with deflation would be extremely destructive, not just with the wealth the deflation will destroy and transferred to those with just savings or cash under the mattress, it would compound the problem of people going bankrupt because they’re less able to afford the interest on the debt and the taxation on their labor.
all problems could be fixed by ending the federal reserve, and most importantly, ending fractional reserve lending. as private debt is paid, the u.s. treasury can print dollars to pay off debt and fund government without having to extract taxation on people’s labor as they replace the fractional reserves with real reserves. the people can have full oversight and congress should write rules where money can only be printed at the rate of monetary expansion needs to prevent both deflation and inflation. the banks would return to the business of savings and loans with rates predictable and free of distortion without inflation and deflation, which would open competition for banking to provide the best rates.
with public control over public money and with public monetary expansion providing public funding, the free market, especially in banking, can work without distortion.
Hi Keith –
IMO you’re mixing up a number of things.
The problem really isn’t the fact that the Federal Reserve is private (it’s not fully, it’s partly public as well). The problem is the printing of money and intervention in the market rate which is something done by the FED CHAIRMAN, who is a GOVERNMENT APPOINTEE.
The big banks, believe it or not, wouldn’t be able to control us if they didn’t have the government to work through.
The idea that the government is an innocent by stander in all this is farcical.
Strictly speaking, it’s not debt, or fractional banking that’s the problem either.
It’s endlessly deferred debt.
If you paid you debts when they were due, this wouldn’t happen. Never paying debt creates a capital hole and literally has wiped out savers.
Workers aren’t hurt nearly as much.
An economy doesn’t need debt to function.
Millions of people all over the world save without access to credit.
I did. I still don’t own a credit card and was refused a mortgage or a loan because of it, while people who didn’t have a dime to their names and had no intention of paying anyone off, were taking out houses to flip.
When I lose money in the stock market, no one compensates me. Why should anyone be compensate for their investment in government bonds?
If there was active fraud in the markets, then all should be compensated.
Why is canceling some people’s debt more important and in the public good than making other people’s savings more valuable?
The real problem is not debt.
it’s endless deferred debt.
Read Antal Fekete on this.