Ron Paul: "You Can't Reinflate the Bubble!"
Although Alan Keyes was my candidate of choice in this past election, I give Ron Paul a lot of credit for his honesty and his respect for constitutional dictates. In this video he's talking about how we cannot re-inflate the bubble that was our economy with faux currency, and he's absolutely right. 

It is deceptive to say that the government is trying to spend its way out of the current economic morass. Uncle Sam is trying to print its way out of it.

The sad fact of the matter is that our Federal Reserve is a legalized counterfeiting operation. To illustrate the problem, consider that about 100 years ago the dollar was worth 100 cents when valued against gold or silver. What is it worth at this point?

About four cents.

For many decades now our government has been printing money that has nothing behind it, and this has diluted the value of our greenbacks. This is called "expanding the money supply," and it is a form of hidden taxation since it leads to inflation and devalues the dollars in our pockets.

The way I see it is that our whole monetary system is a sham. We need a currency backed up by more than just the good faith and credit of the U.S. government -- part of which is Barney Frank.

Comments

[Walt]

Paul is exactly right. Every time the Fed turns on the printing press, without destroying an equal amount of old currency, they produce counterfeit dollars. Every dollar in existence before the creation of new currency has a tangible value in the market as determined by those who use it. Currency is merely a token of the value of labor and assets, and that is all that backs the value. Infusing unbacked money in the market is akin to...let me use an analogy.

Say you own a Ming Dynasty vase; one of only 100 known to exist. The value of the vase is enhanced by its rarity, and its value is determined in the fair market based upon demand. Let also say all 100 of these vases have been know to exist for 100 years. Over the 100 years many of the vases have traded hands and by doing so the value has been established via supply and demand. Lets say today’s value was $10,000, and based upon comparison with commodity indexes the actual value of the vases have remained stable over the 100 years. One day, out of the blue, 50 more identical vases were discovered and hit the market. The vases look the same and were made by the same people but the question is would they, and the ones in prior existence, be worth the same as they were before? Of course not. What would they be worth? That is the crux of the issue. Establishing a new value would take time since all of the vases would not be on the market at the same time. Of course there would be appraisers and dealers that would attempt to set or influence a market price but the true value could only be established in the market with actual money changing hands. This is exactly what printing money does to the market; confuses, and dilutes it. Lets add one more tad bit of confusion into the mix; credit.

Let’s say during the establishment of the new value of the vases a few people bought the vases and put them on credit. The sale of the vases was a baseline to the new value of the vases, or was it? Were the vases worth more because of the additional interest expense? Lets also assume those who bought the vases on credit and established a new value were unable to meet the terms of credit and the vases were repossessed, and eventually will be resold. In the mean time the credit buyer’s transaction influenced the value of all of the vases, even though a true viable transaction did not take place. Printing and borrowing money is a weapon of mass confusion. Make no mistake they are not doing is because they don’t understand these principles.

[Philip France]

In agreement with Selwyn, and with compliments to Walt for a fine post, Ron Paul is a passionate defender of our Constitution. His argumnts should be considered deeply. I differ from him in foreign policy, however. I do not disagree with his passionate defense of the intent of our Founding Fathers, but I reluctantly admit that we have strayed so far from this intent that we must adjust to current circumstance (with regard to foreign policy).

As for our econimic malaise, I encourage readers to learn of the sudden and rapid drain of the money markets that occurred on September 15, 2008. The coincidence is too frightening to be ignored. McCain (permit me to declare that I did not like him but felt that he was an infinitiely better choice than Obama) had been surging in the polls after naming Sarah Palin as his running mate. Suddenly, our money markets were being siphoned in astronomical proportions, resulting in a refocus toward economic despair and a perfect storm for an uninformed electorate to favor Chancellor Obama.

To paraphrase Machiavelli; too many of us are willing to accept appearances. That the majority of us are willing to accept things as they seem, rather than how they are. Community Organizer-in-Chief Obama knows this and his henchmen are shoving this down your throat.