Congress or The Fed

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jneo's picture
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Congress or The Fed

 

Who should be in charge of Monetary Policy, Congress or The FED?

  1. Congress gets an F for fiscal Policy, likewise The FED gets an F for monetary policy.  Congress thinks you can Tax to prosperity, while The Fed thinks you can survive with a weak currency.  
  2. Congress is owned by the Lobbyists and The Fed is owned by the Wall-Street gang.  Both sides are politicized in some form.
  3. Both sides try to cover their own A**es when put on the spot.  Congress Blames the FED, while The FED blames Congresses Mandates coupled with ridiculous "Fed Speak".
  4. The FED uses it's indicators such as consumer confidence, retail sales, manufacturing activity, industrial production, job growth and inflation, but still has failed over and over again.  We've had about 19 recessions since the FED's development, a Depression and a dying dollar.
  5. Congress still thinks  you cannot tax to prosperity. (except Ron Paul maybe some others)

If Congress controls Monetary Policy, then checks and balances would play a role in Policy making.  The FED is behind closed Doors and is basically held in secrecy and no accountability for it's actions.  Congress can be voted out of positions of power, while the FED cannot.  

Sounds like a Catch 22, but of the lesser evils, who should be in control of Monetary Policy?  

I'll go with Congress, for the very fact that, the threat of the people voting irresponsible politicians out of office would help keep things in line as opposed to The FED who does not have to worry about votes.

Now 2 Quotes to think of before you choose.

  • Suppose you were an idiot.  And suppose you were a member of Congress….But then I repeat myself.

 

  • "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation." 

 

Who do you think should get the Job?

 

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Re: Congress or The Fed

I'll go with Congress, for the very fact that, the threat of the people voting irresponsible politicians out of office would help keep things in line as opposed to The FED who does not have to worry about votes.

I would also go with Congress.  I have no illusions that they will do a better job but....

1) The consitution gave them that power.

2) They are at least loosely held accountable through elections.  The FED has far more power than is ever safe to give an unelected, unresponsive, unaccountable entity.

3) Congress will screw things up faster and therefore the inevitable screw ups with be less destructive to society.  The current system is like a really strong balloon that will grow and grow and grow.  When this thing pops it is going to be a real mess.  My feelings on this are much like my feelings on government's intervention into helping recessions.  Most of the "help" will just make the next recession that much larger because the original problems never got fixed.

4) The current fiscal/monetary split between Congress and the FED allows each one to blame the other when there are problems.  If Congress owned both, we would all know who to blame for problems and corruption.

5) The executive/judicial branches of government can try and keep Congress in line using their oversight abilities (FOI requests, criminal investigations,...).  Amazingly the FED seems to be beyond anyones oversight which can only breed corruption.

All that being said I would still prefer to just repeal legal tender laws, outlaw fractional reserve banking, and just let the market decide the shape and substance of what is money.

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Re: Congress or The Fed

this is who owns the fed:
1.Rothschilds of London
2.Rothschilds of Berlin
3.Lazard Brothers of Paris
4.Israel Seiff Italy
5.Kuhn Loeb and Co Germany
6.Warburgs of Amsterdam
7.Warburgs of Hamburg
8.Goldman Sachs of New York
9.Rockefellers of New York

100% owned by private banks , mostly European as you can see by the names. So one wonders what their main motives might
be?? Ha!!

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Re: Congress or The Fed

Someone explain to me why any government has to borrow money from people that create it for their own benefit? That should be the question.

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Re: Congress or The Fed

 

DJT, I agree.  COngress has the right to Create it's own money.  Debt Free.  As long as a country produces, it can create it's currency.  The government can Spend money into the economy and let the people obtain the money through economic activities.  

And Fractional Reserve banking give me such a headache.  It all translate into Banks loaning money they don't have, and then charging interest. The process of this, inflates the currency beyond what the market can handle, yet we still wonder why we get bubbles that POP.  

Treasury prints bonds to get money, why not just print the money and Spend it into the economy.  This entire process by which money is created seems ass backwards.  

We give such abusive Power to a small group of Financial Oligarchs coupled with all their financial jargon, every American should be furious. Instead they want to see who wins "Dancing with stars" or Watch Paris Hilton drink a Soda PoP or the Latest Tiger Woods incident.  

The FED starts out with an A, when achieving the upward cycle of the bubbles, but they always always get an F at the end of the semester when the bubbles POP.  That's like giving a Band-Aid to a Patient who needs a Tourniquet.

As much as Congress would incrementally screw things up, at least we would have some form of Accountability.  A Gold Standard would also help keep things in line too.  

 

 

 

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Re: Congress or The Fed

DJT wrote:

Someone explain to me why any government has to borrow money from people that create it for their own benefit? That should be the question.

Hello DJT,

You cut to the chase and ask the most important question in monetary policy.  Only a sovereign government has the power to issue money - if they give that away, they are giving away their sovereignty as we have done.  The people and the government are the only ones backing up our money (with collateral and promissory notes) but yet, the banks take all the benefits of issuing and controlling our money.

If the private banking cartel wanted to, they could shut-down our money supply tomorrow which would bankrupt the nation.  They are our government, congress and the president do as they say either by bribes or threats.

The reason why the U.S. was called the "great experiment" was that it was not clear if people could govern themselves.  Do we really need monarchs and elites to rule us?  It is very sad to see that many citizens seem to think that we are incapable to issue and control our own money.  The constitution clearly states that ONLY the government may issue money.

JK121 wrote: 

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation."

If the gold standard was so great, why did it fail twice in the last 80 years, the second time for good?  Why did the gold standard fail in Great Britain, Europe and everywhere it was adopted?

How much gold would we need to return to the gold standard?  Do we have enough?  I suggest it is neither desirable nor doable and just a distraction - but please correct me by explaining how it would work and how much gold we would need?

Larry

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Re: Congress or The Fed

Larry,

Why does the amount of gold matter?  It's a matter of value.  If there were only 100tons of gold the value of such gold per Oz would be adjusted to the amount of debt.  The argument of "not enough gold" has never made sense to me.

The reason a gold standard hasn't worked is that they haven't allowed the value of the gold to adjust to the amount of debt.  Also as we both know, the gold standard doesn't allow the elite to make enough profit nor does it give them enough control of the monetary system.  It as well is bad for governments that want a blank check to write for expenses incurred.

At least that's my basic understanding of the issue.  Tom Wood's book Meltdown has a very good explanation of the gold standard and how it's been vilified by the Keynsian Economists for the purpose of keeping an undoable Fiat Currency System in place. 

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Re: Congress or The Fed

 

How much gold is needed?  I cannot answer that,  Can you?  We don't even know how much gold is in Fort Knox.  

I never said anything about going back to a gold standard,  just making the connection between a gold standard and low inflation, and small government with that quote. 

All money systems fail over time.  Even if we had a money system that works, how long would even that last?  Our culture has shaped human behavior with excessive greed, corruption and moral hazard, if those characteristics are built into any moneatary system, then there is no way to have a workable monetary system right?  I could be wrong

Giving Bailouts for someone else's risky Derivatives bets, inflating peoples currency, and getting bigger and bigger government  is more than enough proof that something needs to change.  

 

 

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Re: Congress or The Fed
LogansRun wrote:

The reason a gold standard hasn't worked is that they haven't allowed the value of the gold to adjust to the amount of debt.  

If you just adjust the value of gold to meet your needs, what's the point?

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Re: Congress or The Fed

 

 You're not adjusting gold..  you're adjusting the DOLLAR. (  "regulating the value thereof" (tm) )

 Gold is gold. It doesn't change... everything else does.

 Pre 1933 the DOLLAR price was fixed at 1/20th oz.

 Then Roosevelt devalued it to 1/35th oz

 Nixon allowed it to float to a "market" rate after 1971,

 

 .... meanwhile the contents of Fort Knox await the endgame...

 

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Re: Congress or The Fed

Plato,

I don't believe that is what Logan is trying to say here.

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Re: Congress or The Fed

JK121 wrote:

How much gold is needed?  I cannot answer that,  Can you?

Thanks for asking - yes, I can generally explain how much gold would be required.  Our total money supply (M3) is just under $15 trillion dollars.

We would need $15 trillion worth of gold to back up $15 trillion dollars.

That is the reason why the gold standard hasn't worked for at least the last 100 years - there has never been, and still isn't enough gold.  The reason why it failed in 1933 was that people became suspicious that there wasn't enough gold and they were right.  In 1971, the Europeans became suspicious that there wasn't enough gold, and they were right.  Both times we defaulted.

Here are some numbers to give you an idea of how little gold there is in comparison to money.

  1. If the U.S. actually has 8,100 tonnes of gold as reported by the World Gold Council, that would be worth around $312 billion dollars at $1,200 oz.  At best, we could back up our current dollar with $0.02 worth of gold.  If we backed up our dollar with $0.02, we would be effectively devaluing the money by 98%.
  2. At $1,200 oz, we would need a total of almost 389,000 tonnes of gold to back up $15 trillion.  We'd have to add 380,000 tonnes to our 8,100 tonnes of gold.  This is more gold than has ever been mined in the world.  

Ready said:

If you just adjust the value of gold to meet your needs, what's the point?

Great point.

The really bizarre thing about the gold standard was that government backed up the money (with gold) that the private banks were profitably creating for free.  And, more bizarre is the fact that the government was borrowing money from banks, essentially, we were borrowing our own gold with interest charges added.

We are still borrowing our own money today as we alone back up the money with collateral and promissory notes.  The banks add no backing, they don't even provide any guarantees.  Our system is a scam, a gigantic Ponzi scheme.    

Larry

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Re: Congress or The Fed

Whether or not a gold standard is officially instituted (the 1920s) or not (now) it should function in nearly the same way. In the '20s, savvy individuals should have realized that the banks had over inflated the money supply and they rightly bought gold. But instead of deflating the money back to match up with the gold that once backed it, FDR made gold illegal and effectively gave his blessings to inflation.

The point of the matter is not so much whether or not gold is money. People seem to think that a gold standard ought to protect you better than a paper standard. That is only the case if you have physical possession of the gold. Otherwise, you are still dealing with political promises. Instead of a political promise to "fight inflation" (like today) a gold standard has the implied promise in it that the politicians will actually respect the gold backing and not print more money than they are supposed to.

Either way, though, it is up to the people to call the politicians out when the act imprudently or display corruption. When our country (twice) defaulted on its gold obligations, there should have been a stronger movement to clean up the economy. The gold default should have acted as the warning of problems to come. Unfortunately, we missed those opportunities. Now, with gold recently going over $1200, we again have a great opportunity to call out the politicians for their irresponsibility and corruption.

Gold standard or not, we should be striving towards a government that we can trust. But when we have two gold defaults (FDR and Tricky Dickie) and now a gold price explosion (GWB and BHO), we really need to question just how well our monetary system is being managed. This scrutiny should occur regardless of whether or not there is a "gold standard." A gold standard, after all, is just a law or statute and those can be changed very quickly if "need be."

Really the only absolute requirement I have is that the government allow private ownership of gold. If this remains the case, then whether or not we have a legalized gold standard is somewhat irrelevant. The real question is whether or not we have a political system we can trust.

Just my thoughts.

Mike

 

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Re: Congress or The Fed
JK121 wrote:

DJT, I agree.  COngress has the right to Create it's own money.  Debt Free.  As long as a country produces, it can create it's currency.  The government can Spend money into the economy and let the people obtain the money through economic activities.

And that would make too much sense. Think of it - no taxes because they print for the government debt (social programs, cost of official pay & benefits . . .) and that amount  printed could simply be added up to equal inflation of the total money supply.   EGP

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Re: Congress or The Fed

Larry wrote:

Thanks for asking - yes, I can generally explain how much gold would be required.  Our total money supply (M3) is just under $15 trillion dollars.

We would need $15 trillion worth of gold to back up $15 trillion dollars.

That does not answer the question unless you are assuming that we want the exact same system we have today but with gold backed currency.  To me that  would kind of defeat the whole point because the current system is foobar.  A better question would be could we have gotten into the current situation with commodity backed money?  I say no!

What a commodity backed currency (without fraudulent fractional reserve lending) buys you is stability.  There will always be booms and busts but such severe imbalances, like the ones we have today, could never happen under a better monetary system.

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Re: Congress or The Fed

goes211 wrote:

A better question would be could we have gotten into the current situation with commodity backed money?

Hi goes,

Yes, we had a commodity backed currency and it failed twice.  You are looking in the wrong direction if you think the specie of money is the primary fault in our system.

The primary problem is that we have a debt based system - all new money is created as interest bearing loans.  As long as we have this system, it doesn't matter if we use gold, paper or beer tops as money.

If you're worried about creating too much money, a law could be passed to limit the amount of new money created, or we could stop creating any new money.  The problem with that is that every day money is destroyed (extinguished through principal repayment).  This constant loss must be replenished or our money will start to disappear.  The inevitable end result is the exponential growth in debt - it is impossible to sustain and will eventually collapse (2010?).

Mike wrote:

Really the only absolute requirement I have is that the government allow private ownership of gold. If this remains the case, then whether or not we have a legalized gold standard is somewhat irrelevant.

Hello Mike,

I agree 100%.  I don't want to rely on banks or the government to keep enough gold.  If I want to store my accumulated savings in gold, I'm free to do so with real ownership.

Our monetary system can easily be transformed to benefit the people instead of enslaving them under debt, my post entitled "Monetary Reform - Five Point Plan to End our Financial Crisis and Restore Freedom and Prosperity" explains how.

Larry 

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Re: Congress or The Fed

Yes, we had a commodity backed currency and it failed twice.  You are looking in the wrong direction if you think the specie of money is the primary fault in our system.

Larry,

Only because fractional reserve banking built on top of it allowed creation of currency that is not backed by a commodity but was still fungible with the underlying commodity.  Fractional reserve banking is legalized counterfeiting.  If ran a business that operated like a bank does under fractional reserve banking, I would be jailed for fraud.

In other threads you seem to advocate a "commodity" based money that is backed by assets or investments of the government and spent into existence.  I have always had a hard time understanding how you consider this money to be backed by something.  To me, if the currency is not convertible into the underlying asset, I would not consider it backed.

Would you trust the Futures market for commodity prices if they were always cash settled?  I would not.  It is the ability to physically settle the futures for the underlying commodity that is the glue that keeps the market reality based.  In the same way a commodity currency that is NOT convertible into the underlying commodity as our were our recent gold standards, were fatally flawed and only gave lip service to being backed by gold.

I understand your arguments against debt based money and I largely agree with them.  However I do not have a problem with charging interest on loaned money.  Seems only natural to me that interest will be required to compensate the loan holder for the time premium and potential default risk.  The key is that the loan holder must have really had the money to loan in the first place, and not just create it out of thin air.  In that way he has a real stake in the loans outcome, and will be careful with his investment.

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Re: Congress or The Fed

 

Larry,

I'm trying to research the dates you mention where gold as money "failed".     I have yet  to read about the other nations experience.

Here in the U.S. before the Federal Reserve Act of 1913,  private  banks issued their own notes .   These notes were required to have gold backing but some banks (named wildcat banks)  routinely overissued and bank runs were prevalent, causing distress in the communties they operated.   Can we say gold failed in this instance?    The term wildcat bank could also be applied to the Federal Reserve.   Its charter called for its notes to be backed by 40% gold (if my memory serves me right),   real bills and US Treasury bonds but routinely overissued causing the banking panic of 1929.        It's the mother of all wildcat banks.

After World War 2, the victoroius allied governments created the Bretton Woods agreement.   The US dollar was to be used as reserve currency in which foreign central banks could pyramid their own currencies.  Even  the name gold standard was changed to gold exchange.  The key feature of this new financial order was that only central banks can redeem US paper dollars for gold.   The American citizen's gold coins were confiscated and exchanged for new irredeemable paper dollars.      Freed from golds discipline, the government proceeded to create as much money it wanted and the inevitable result was similar to the old bank runs.   But  instead of depositors demanding their money,    it was the foreign central banks that redeemed their US dollars for gold,  as per Bretton woods agreement.      They were not to be duped by holding paper money that was being rapidly debased by the US government.  The American people were forced to hold their inflated dollars.     Did the US Federal Reserve have enough gold backing to redeem all the US dollars the foreign central banks were redeeming?     We know that the US was losing so much gold that by Nixon's time he  was forced to renege on our agreement with our allies.  No more redeeming of US dollars for everyone, period.       Can we say gold failed in this instance?   

I agree using government bonds as backing for our currency puts us on a continuous debt spiral.

Which would bring us to   the question of what type  money we can use that prevents government  manipulation.   

 

 

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Re: Congress or The Fed

 

Manipulation comes with the money package(fiat or gold), so I thinks it's impossible to have a government that is honest. 

I agree a new system must be devised to have more honesty in the system/matrix we live in.  What will that new system be?  who knows, we will have to wait till our current system Fails.  Then more solutions will emerge.  It will either be more "patch work" or a better system. 

I take it, more people are in favor of Congress being in charge as opposed to The FED.  Correct?

 

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Re: Congress or The Fed
plato1965 wrote:

 

 You're not adjusting gold..  you're adjusting the DOLLAR. (  "regulating the value thereof" (tm) )

 Gold is gold. It doesn't change... everything else does.

 Pre 1933 the DOLLAR price was fixed at 1/20th oz.

 Then Roosevelt devalued it to 1/35th oz

 Nixon allowed it to float to a "market" rate after 1971,

 

 .... meanwhile the contents of Fort Knox await the endgame...

 

Yes, that's what I meant but I'm going to re-read a couple of examples before I post on this issue anymore.  I'm no expert by any means so I don't want to step wrong while discussing.  

Larry, I agree that our problem is that our currency is based on DEBT.  Until that's changed we're screwed.

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Re: Congress or The Fed

Actually any none growing commodity based backing system would likely work better than debt based currency. For instance lima beans work too, although I suspect many farmers would begin growing lima beans to augment their incomes.

More rationally you could base the currency international price of the effective assets of a country (all commodities, real estate etc. owned or produced) which obviously is finite, as the country progressed then the currency would rise due to higher production and efficiencies. It might even temper over consumption since that would result in an outflow of real value and thus degrade the currency strength on the international market. I'm not sure how this would work, since I thought of it about 30 seconds ago, it is potentially open to abuse (governments overstating their production assets etc. but it will ultimately resolve since a shortfall in a commodity will lead to an import of that commodity, which would result in the exporting country announcing the shortfall), however it is semi self policing, I might do some processing on this, and repost.

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Re: Congress or The Fed

Sorry to be jumping in, but why not! :)  I'm hoping this has already come up for discussion, but just in case it hasn't. 

I believe we have a way out of the debt mess ready to go.  I suggest taking a look at Stephen Zarlenga's 'American Monetary Act' - currently in preparation to be legislated.  Rep Kucinich (married Stephen's intern awhile back) is working on this.  See YouTube vid's, and Stephen's website www.monetary.org for more info, including history of it's support by most major economists in the 30's. Variations of this have been successful in the US during colonial and civil war eras.  His book is "The Lost Science of Money" (large, detailed, copiously footnoted).

The solution is predicated on having the government recover it's rightful money-making authority.  His solution is 3 part:  1) move the Federal Reserve into the Treasuryt; 2) eliminate fractional reserve banking; and spend debt-free publicly-created money into the economy via public works of all sorts, with a monetary board controlling any inflationary tendencies.   He has devised an ingenious accounting method to achieve this transition from debt money to public money practically seamlessly.

The coming 'catastrophe' may be just what the doctor ordered to deal with the current financial 'cancer'. 

 

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Re: Congress or The Fed

Carl wrote:

I'm trying to research the dates you mention where gold as money "failed".  I have yet  to read about the other nations experience.

Hi Carl,

Sorry for being vague, the first default was in 1933 when FDR issued an executive order that prohibited U.S. citizens from redeeming their dollars with gold.  The order also required citizens to turn in their gold coins, gold bullion and gold certificates at a price of $20.67 oz..  According to the Federal Deposit Insurance Corp, the money supply was around $20 billion and the gold stock was only around $4 billion.  We really don't know if any of the $4 billion gold stock belonged to the U.S.  It did in 1913, before the Federal Reserve Act but it much or all of it was seized as their collateral.  

There was no reason to make people turn in their gold since they couldn't redeem their money any more.  It was stealing.  As soon as they got the peoples gold, they changed the value to $35 oz and the private Federal Reserve sold it overseas at a handsome profit.  Foreign central banks were allowed to continue redeeming their dollars for gold.  The value of the dollar instantly dropped by over 40%.

In 1971 Nixon defaulted on the international dollar redemption promise.  According to Byron Dale (Modern Money Secrets), foreign central banks held around $32 billion dollars (Federal Reserve Notes) which which represented a claim for around 914 million oz of gold.  The problem was that the U.S. only had around 289,000 oz of gold. 

The gold standard failed in Great Britain and most of Europe in 1931.

It was inevitable that our debt based money system would collapse even with gold backing.  The money supply must constantly grow at a pace that accelerates exponentially.  The gold stock also needed to grow exponentially - which was impossible.  If we could persuade the gold bars to reproduce while in the vaults, it might work.

Carl wrote:

Which would bring us to the question of what type money we can use that prevents government  manipulation.

If the government created all new money, I think there would be much less opportunity for manipulation by both the banks and the government.  As it stands, the banks routinely manipulate markets (Federal reserve FOMC & PPT) and the quantity of money in circulation.  This is clearly a conflict of interest. 

Instead of creating money for loans, banks could be required to borrow (with interest charges) or they could pay an issuance fee.  The government would be compensated for it's sovereign power to create money.  The new revenue stream would eliminate the need for income or employment taxes.  Government could pay for itself, as it did up till the late 19th century.  They would need to downsize and then, they could be prevented from ever running a budget deficit to keep government appropriately sized for our economy.

Fractional lending would not be necessary even if the economy started to grow.

Government would create all new money but I would prefer keeping new loans under the expertise of the majority of the banks that have been responsible lenders.  Too big to fail banks would not be needed and in fact they could be eliminated.  One way would be to tax derivatives (kill two jackals with one shot).

The ingredient that must be added is direct spending of money into circulation to off set existing and new interest charges.  I'd empower states to monetize infrastructure projects, energy saving upgrades and sustainable energy alternatives.  This would help drain the swamp in washington and wall street.    

LogansRun wrote:

I'm no expert by any means so I don't want to step wrong while discussing...I agree that our problem is that our currency is based on DEBT.  Until that's changed we're screwed.

I dunno, I think most here at CM, especially you, have figured out a lot of things that the experts may not agree with.  For example, the exponential growth of debt is a concept not shared or understood by many while here it seems to be a majority opinion backed by math.

Larry

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Re: Congress or The Fed

 

 My personal preference would be some sort of "bottom up" credit system  (from credere = trust)

 

analogous to p2p . open source..   I lack the imagination to design one.. maybe someone can..  "googlecredits" ? "napsterbux" ?

 The actual unit of credit..... a metal ? the Kilojoule ? the nanosteradian (unit of earth's area) .. a portion of the real number line between 0 and 0.9999 recurring..

 Dunno.... but there's got to be a way.. that can work locally, without legislation, despite legislation......

 A formal, scalable version of the sort of trust economy that works between friends and family....

 

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Re: Congress or The Fed

Hi Everyone,

It's been a little while since I've posted but I'm still around. This thread caught my eye and I've read it through, coming to the conclusion that, in my own opinion, it would be better in many ways with neither Congress or the Fed. I watched this film through more than four times, plus had it playing in the background while working on other projects over several weeks. I feel it has validity within this discussion :-

http://video.google.com/videoplay?docid=3932487043163636261&ei=CrYdS8KFJtWC-AaUyYCWCg&q=The+Zeitgeist+Movement%3A+Orientation+Presentation#

... 'Facts', 'Beliefs', 'Opinions' and the possibility of redefining the American way of life without the need for money? Hmm, maybe hyperbole and another twist of the knife in the direction of yet another utopia \ dystopia, but ...

Whatever, it is food for thought at the very simplist of levels ...

Enjoy and, I look forward to anyone's point of view, good, bad or ugly ...

Best,

Paul

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Re: Congress or The Fed
Realteal wrote:

I believe we have a way out of the debt mess ready to go.  I suggest taking a look at Stephen Zarlenga's 'American Monetary Act' - currently in preparation to be legislated.  Rep Kucinich (married Stephen's intern awhile back) is working on this.  See YouTube vid's, and Stephen's website www.monetary.org for more info, including history of it's support by most major economists in the 30's. Variations of this have been successful in the US during colonial and civil war eras.  His book is "The Lost Science of Money" (large, detailed, copiously footnoted).

The solution is predicated on having the government recover it's rightful money-making authority.  His solution is 3 part:  1) move the Federal Reserve into the Treasuryt; 2) eliminate fractional reserve banking; and spend debt-free publicly-created money into the economy via public works of all sorts, with a monetary board controlling any inflationary tendencies.   He has devised an ingenious accounting method to achieve this transition from debt money to public money practically seamlessly.

Reading through the proposal, http://www.monetary.org/32pageexplanation.pdf, I was starting to think it was a possibility way to return to constitutional government, right up to the point where universal health care and education funding were included.  Not constitutional!  How can one take this seriously if it comes across as a means to fund anything the congress wants to promote?  Like we should trust them?

- Jim

jneo's picture
jneo
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Posts: 742
Re: Congress or The Fed

 

Hey Vanity, I am a supporter of  the ZM and a resource based economy, but society is not mentally prepared for that kind of change.  

Over time society will eventually be fed up with how we manage society/economy.  Fundamentally, we do not need money at all and people will emerge to that kind of thinking, but we gotta a while till that wonderful day.  

 

 

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Vanityfox451
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A Future Resource Based Economy ...

Hi Joe,

something from a past thread and one of my posts. The words are 50 years old, yet as fresh and wholey more relevent today than ever ...

Best,

Paul

—Ayn Rand, Atlas Shrugged

 

Rearden heard Bertram Scudder, outside the group, say to a girl who made some sound of indignation, "Don't let him disturb you. You know, money is the root of all evil--and he's the typical product of money."

Rearden did not think that Francisco could have heard it, but he saw Francisco turning to them with a gravely courteous smile.

"So you think that money is the root of all evil?" said Francisco d'Aconia. "Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor-- your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money. Is this what you consider evil?

"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions--and you'll learn that man's mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

"But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man's capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is MADE--before it can be looted or mooched--made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can't consume more than he has produced.

"To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except by the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss--the recognition that they are not beasts of burden, born to carry the weight of your misery--that you must offer them values, not wounds--that the common bond among men is not the exchange of suffering, but the exchange of GOODS. Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best your money can find. And when men live by trade--with reason, not force, as their final arbiter--it is the best product that wins, the best performance, then man of best judgment and highest ability--and the degree of a man's productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

"But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality--the men who seek to replace the mind by seizing the products of the mind.

"Money will not purchase happiness for the man who has no concept of what he wants; money will not give him a code of values, if he's evaded the knowledge of what to value, and it will not provide him with a purpose, if he's evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

"Only the man who does not need it, is fit to inherit wealth--the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve that mind that cannot match it. Is this the reason why you call it evil?

"Money is your means of survival. The verdict which you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men's vices or men's stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you'll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?

"Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

"Or did you say it's the LOVE of money that's the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men. It's the person who would sell his soul for a nickel, who is the loudest in proclaiming his hatred of money--and he has good reason to hate it. The lovers of money are willing to work for it. They know they are able to deserve it."

"Let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it.

"Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another--their only substitute, if they abandon money, is the muzzle of a gun.

"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich--will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt--and of his life, as he deserves.

"Then you will see the rise of the double standard--the men who live by force, yet count on those who live by trade to create the value of their looted money--the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law--men who use force to seize the wealth of DISARMED victims--then money becomes its creators' avenger. Such looters believe it safe to rob defenseless men, once they've passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

"Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world?' You are.

"You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it's crumbling around you, while your damning its life-blood--money. You look upon money as the savages did before you, and you wonder why the jungle is creeping back to the edge of your cities. Throughout men's history, money was always seized by looters of one brand or another, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about the evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves--slaves who repeated the motions once discovered by somebody's mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer. Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers--as industrialists.

"To the glory of mankind, there was, for the first and only time in history, a COUNTRY OF MONEY--and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man's mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being--the self-made man--the American industrialist.

"If you ask me to name the proudest distinction of Americans, I would choose--because it contains all the others--the fact that they were the people who created the phrase 'to MAKE money.' No other language or nation had ever used these words before; men had always thought of wealth as a static quantity--to be seized, begged, inherited, shared, looted, or obtained as a favor. Americans were the first to understand that wealth has to be created. The words 'to make money' hold the essence of human morality.

"Yet these were the words for which Americans were denounced by the rotted cultures of the looters' continents. Now the looters' credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide-as, I think, he will.

"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns--or dollars. Take your choice--there is no other--and your time is running out."

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: Congress or The Fed

goes211 wrote:

In other threads you seem to advocate a "commodity" based money that is backed by assets or investments of the government and spent into existence.  I have always had a hard time understanding how you consider this money to be backed by something.  To me, if the currency is not convertible into the underlying asset, I would not consider it backed.

Hi goes,

First let me try to explain by what I mean by "backing the money" with assets and productivity.  When you go to the bank to borrow money, you must back the loan with collateral and sign a promissory note.  If for example, you buy a home, the mortgage is backed by the real estate, if you don't pay, the bank will foreclose.

Every dollar (FRN) is backed by private and public collateral which endows it with value.  I think you are right in questioning the value of the collateral today.  Many mortgages are "upside down" (more is owed than the real estate is worth) which effectively debauches our money.  But it doesn't have to work like this.

For many years, banks understood how to lend mortgages and had skin in the game.  Established front-end and back-end ratios qualified borrowers with a high degree of success.  A safety cushion was added in the form of a down payment which also required the borrower to take risk.  Guidelines worked but things started to go awry when we transferred the risk from lenders to the secondary mortgage market and Fannie & Freddie "implied" guarantees.  I suggest that most banks still know how to lend money successfully and will do so when the system re-establishes lender risk.

The good thing about a flexible money supply is that economic growth is limited by productive capacity as opposed to the availability of money.

goes211 wrote:    

I understand your arguments against debt based money and I largely agree with them.  However I do not have a problem with charging interest on loaned money.  Seems only natural to me that interest will be required to compensate the loan holder for the time premium and potential default risk.  The key is that the loan holder must have really had the money to loan in the first place, and not just create it out of thin air.  In that way he has a real stake in the loans outcome, and will be careful with his investment.

Agreed, when people or entities loan money, they should receive some type of return.  Interest is one way to compensate lenders that truly take on risk.

JRB wrote:

Reading through the proposal, http://www.monetary.org/32pageexplanation.pdf, I was starting to think it was a possibility way to return to constitutional government, right up to the point where universal health care and education funding were included.  Not constitutional!  How can one take this seriously if it comes across as a means to fund anything the congress wants to promote?  Like we should trust them?

Yup, I think you're right on this.  Social credit does not endow money with value and it most likely would become a plum for votes.  It should not be a function of the federal government to pay for retirement benefits, health care and other social programs.  I think the Federal government should be as small as possible and eliminate all taxes to enable people to keep all of their income so that they can take care of themselves.

The states and local government should take more power in funding their education and infrastructure needs separate from the federal government.  The federal government should pay it's own costs to operate.  If national infrastructure projects are needed, then congress should appropriate the funds on a case by case basis.  

Larry

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