This video is absolutely the best exposition of Ron's understanding of monetary history in the US going right back to the creation of the Federal reserve.

http://www.youtube.com/watch?v=ji_G0MqAqq8

Why do you never hear the other candidates talking about it???
Take a guess! :cool:

Because its a retarded idea?

Competing US currencies. Yeah. Thats gonna work great.

I don't know enough about economics to confidently support or refute Paul's monetary policy. However, the idea of competing currencies does sound dubious from my layman POV. I'm more interested in his plans to help the economy by drastically reducing federal spending via our foreign policy.

I would love to hear an educated critique of Paul's economic policy by someone more informed on the topic.

However, the idea of competing currencies does sound dubious from my layman POV.

I would love to hear an educated critique of Paul's economic policy by someone more informed on the topic.
I dont see any concept of 'competing currencies' there...whatever that means. The basic message is that inflation is primarily a willful de-valuation of the dollar orchestrated by the Federal Reserve.

They dont fight inflation...they create inflation.

Paul wants to return to a system where the dollar is redeemable in gold, so that politicians can no longer create money (as debt) that doesnt exist...as an alternative to raising taxes or cutting spending.

Heres another good tutorial on the history of the US monetary system:

http://www.youtube.com/watch?v=iYZM58dulPE

I dont see any concept of 'competing currencies' there...whatever that means. The basic message is that inflation is primarily a willful de-valuation of the dollar orchestrated by the Federal Reserve.

They dont fight inflation...they create inflation.

Paul wants to return to a system where the dollar is redeemable in gold, so that politicians can no longer create money (as debt) that doesnt exist...as an alternative to raising taxes or cutting spending.

I'm already aware of Paul's issues with the Fed. What I was talking about is something separate, he mentioned in an interview that he'd like to establish competing currencies so that people can slowly get out of the falling dollar and into a currency that's backed by something. In theory that sounds great but in practice I can see it causing a lot of problems.

But like I said, I'm but a layman and I'd need someone who knows this stuff better to make a proper judgment.

he mentioned in an interview that he'd like to establish competing currencies so that people can slowly get out of the falling dollar and into a currency that's backed by something.
I see, where is the interview? I'd like to read it because Ive never heard him say anything about 'competing currencies'???

http://freedomchannel.blogspot.com/2007/11/ron-paul-disucusses-legalization-of.html

Ah, thanks for that. When raising the idea of competing currencies I think hes talking about currencies backed by gold issued by PRIVATE American banks, which people could use in place of Federal reserve notes.

This is what Canada had before 1935 when the National Bank of Canada was established by the federal government.

He is showing his liberterian roots, and I completely disagree with the idea.

A nation's money should be issued ONLY by the government and should be institutionally immune to devaluation by whatever means necessary.

Who cares about things like monetary policies?

Protect us from terrorism!

Who cares about things like monetary policies?

Protect us from terrorism!
No problem...the best way to prevent terrorism is to pull your military out of sovereign nations where it doesnt belong. And stop supporting other nations who do the same.

Ron's got you covered there too!

No problem...the best way to prevent terrorism is to pull your military out of sovereign nations where it doesnt belong. And stop supporting other nations who do the same.

Ron's got you covered there too!
I'm torn between Paul and Guiliani. I see Guiliani as a very competent guy. A tough guy. He cleaned up New York when everyone thought it was a lost cause. I think he could do the same as president. I also think he would kick major Islamofascist ass.

But Ron Paul is so right on many issues. I'd love to have a guy in there who wants to get rid of the IRS, who supports the constitution, who will stop the deficit spending. I also like the idea of cutting off all foreign aide and closing most of our military bases overseas. Why do we need them?

But I don't want us to be percieved as turning tail and running in Iraq or Afganistan. We have commitments there and should honor them.

What is his specific opinion on Iraq/Afganistan? Is it an immediate pull out?

But I don't want us to be percieved as turning tail and running in Iraq or Afganistan.

What is his specific opinion on Iraq/Afganistan? Is it an immediate pull out?
Yeap...day one!

"Percieved" is the operative word here...all we're doing there is saving face.

No problem...the best way to prevent terrorism is to pull your military out of sovereign nations where it doesnt belong. And stop supporting other nations who do the same.

Ron's got you covered there too!

I guess I should have added :rolleyes: to my last post.

I agree completely with you about Ron Paul and "terrorism" prevention.

I dont see any concept of 'competing currencies' there...whatever that means. The basic message is that inflation is primarily a willful de-valuation of the dollar orchestrated by the Federal Reserve.

They dont fight inflation...they create inflation.

Paul wants to return to a system where the dollar is redeemable in gold, so that politicians can no longer create money (as debt) that doesnt exist...as an alternative to raising taxes or cutting spending.

Increasing money supply and slow, steady, and expected inflation growth the economy.

Just because Ron Paul says there is insidious inflation doesn't make it so. Both historically and relative to other countries, the Federal Reserve has kept inflation at remarkably low levels over the last 25 years. Even before that, when inflation was in the 10-20% range, that was considered a disaster. How he can label 2-5% inflation as "insidious" and compare it to hyperinflation in Germany and Argentina is absolutely crazy.

Increasing money supply and slow, steady, and expected inflation grow the economy.Increasing the money supply artificially doesnt create REAL growth...what it creates is a bubble that bursts.

Even before that, when inflation was in the 10-20% range, that was considered a disaster. How he can label 2-5% inflation as "insidious" and compare it to hyperinflation in Germany and Argentina is absolutely crazy.
There are two ways to create money that doesnt exist.

The first way is to print it like a counterfeiter...which is what the Weimar Rupublic did in the 1930s and Argentina also in the last decade. This causes a slightly delayed devaluation of the currency, which also devalues debt.

The US currently does this as well, but not fast enough for anyone to take notice. Its like watching grass grow. It doesnt look like its growing but you still have to cut it every week.

The second way is to create money as debt, which is the US governments preferred method. All this does is shift the problem forward in time, so that the next generation will have no choice but to opt for the first method described above...and devalue their way out of the debt crisis by speeding up the printing press.

Increasing the money supply artificially doesnt create REAL growth...what it creates is a bubble that bursts.

You're forgetting that if GDP is growing, more products and services are being sold, there needs to be more money in the system. Or you get deflation, which is in many ways worse than inflation.

Who cares about things like monetary policies? Protect us from terrorism!Geeze I hope you are being sarcastic. That kind of attitude is exactly what's wrong with America. Politicians distract us from the real issues by establishing a state of perpetual "Orange Alert." Terrorists have killed three thousand Americans in the past ten years, about the same number as bees and lighting combined. In that same period drunk drivers have killed two hundred thousand of us. Which is the more important threat?But I don't want us to be percieved as turning tail and running in Iraq or Afganistan. We have commitments there and should honor them.That's a personal vendetta by the Bush Dynasty and it has nothing to do with America. The Bush family should go over there and fight its own "honor" battle. We put the Taliban in power and propped up Saddam during the Cold War because it suited our politics. To now say, "Well we've changed our mind now that the Cold War is over so we're going to overthrow your governments and turn you all into refugees" is NOT making a commitment to a foreign people.What is his specific opinion on Iraq/Afganistan? Is it an immediate pull out?Ron Paul was the Libertarian Party presidential candidate many years ago. He has fallen from grace and abandoned some of the party's principles, most notably the one about peaceful people having the right to migrate freely, but he has not abandoned the principle that no nation has the right to interfere in the sovereignty of another except in self defense against a direct threat. A case could be made for attacking Saudi Arabia because 9/11 was their doing, if only indirectly, but Iraq had nothing to do with it and Afghanistan's only connection was that Saudi Prince Osama was using its outback as a convenient hiding place. Like all Libertarians and libertarians, Ron Paul understands that the invasion of those two countries was a criminal act and the U.S. is lucky to have gotten away without worse punishment than catcalls from the French. He will start bringing the troops home from their criminal activities the moment he completes the oath of office, probably by using his cell phone at the site of the ceremony without waiting to walk to the White House. And everyone in America except the Christofascists will cheer him.

You're forgetting that if GDP is growing, more products and services are being sold, there needs to be more money in the system.
Sure, but thats REAL growth, not a bubble created by artificially injecting money into the system that comes from nowhere.

A case could be made for attacking Saudi Arabia because 9/11 was their doing, if only indirectly, but Iraq had nothing to do with it and Afghanistan's only connection was that Saudi Prince Osama was using its outback as a convenient hiding place.
The Taliban government of Afghanistan seems like a more suitable accessory to Osama's activities than the government of Saudi Arabia.

The Saudis expelled him from the country in 1991.

Personally, I dont believe any sovereign government should have been targeted, as we're dealing with a organized crime group that operates internationally.

It would be like overthrowing the Italian government to stop the mafia.

You're forgetting that if GDP is growing, more products and services are being sold, there needs to be more money in the system. Or you get deflation, which is in many ways worse than inflation.

Yes the GDP is growing, but have you seen the prices lately even at the low price leader WalMart? Compare last weeks price from a year ago. People have to spend 15 to 20 percent more and sometimes 50% for medicines etc to get the same amout of comfort. That makes the GDP grow a lot!

Ron Paul acts as if our inflation is much higher than it actually is. He speaks about it as if its 1979 and people are get murdered on double digit inflation rates. This is clearly not the case. He's doing what every other politician does: scare people into voting for him.

Thats fine, i guess. Its just annoying when all these Ron Paul supporter act like hes the most honest man out there. That hes somehow above it all - unlike everyone else in the race. Its BS.

Ron Paul acts as if our inflation is much higher than it actually is. He speaks about it as if its 1979 and people are get murdered on double digit inflation rates. This is clearly not the case. He's doing what every other politician does: scare people into voting for him.
The inflation (devaluation) rate would be far higher than what was experienced in the 1970s if the US had to print enough money to pay off its debt.

In this case, massive debt is massive inflation in waiting.

That could be years, decades, or generations from now. And the government could always raise taxes to pay it off as opposed to printing money. Considering most of the debt is owed to ourselves, its not ALL bad. The external debt would send money out of the economy, but i believe the external debt is only like 10-20% of the total debt position.

And an interesting post about the debt:



Back in the summer of 2004, Nouriel Roubini and I published a paper arguing that large trade deficits implied a deteriorating US net international investment position and a deteriorating “income” balance.

Our analysis was couched in the terms of the debt-sustainability analysis then the rage at the IMF. But it basically made a very simple argument: if you borrow a ton to spend more than you earn, your debts will rise and you will eventually have to start borrowing even more to cover the interest on your debts. And if you cannot borrow ever larger sums, you will have to cut back.
Foreign Exchange Reserves

Seems reasonable, right?

Alas, we were wrong. At least our forecasts were wrong. The US has run large deficits ever since we wrote the paper. $640b (revised) in 2004. $755b in 2005. $810b in 2006. Maybe $755b in 2007 (assuming a $190b deficit in q4). That sums up to a bit less than $3 trillion in cumulative deficits. The United States net international investment position hasn’t deteriorated by anything close to $3 trillion. It didn’t actually deteriorate at all between 2003 and 2006 if US FDI abroad is valued at market rates (data). While we don’t yet know the total for 2007, the dollar’s slide should generate another round capital gains on America’s investments in Europe.

The income balance (the difference between the interest and dividends the US receives from the world and what it pays to the world) also has not swung into deficit. Interest payments on US debt are rising. But income on US direct investment abroad has increased faster. The BEA didn't help by revising the income balance up by around $40b when there published their comprehensive data revisions earlier this year. However, the 2007 income surplus looks to be bigger than the 2006 surplus. That isn’t explained by a new method for calculating US interest payments.

Nouriel and I didn’t ignore valuation gains from currency moves. We did though argue that the US couldn’t consistently count on valuation gains from the dollar’s slide to offset large deficit – foreigners would eventually demand an interest rate to compensate them for the risk of dollar depreciation (see Delong). Alas, there is little evidence that happened. And we didn’t consider the possibility than foreign equity markets would consistently outperform US equity markets –

The (revised) bottom line: large US deficits won’t lead to a deterioration in the US net international investment position so long as the US can consistently finance its deficits by selling the world depreciating assets. Or, if not depreciating assets, assets that underperform America's own foreign assets.

To put it in more pithy terms, the US deficit is sustainable – that is, the US won’t pile up unsustainable debts...

More at RGEMonitor (http://www.rgemonitor.com/blog/setser/233036#readcomments)

And the government could always raise taxes to pay it off as opposed to printing money. Considering most of the debt is owed to ourselves, its not ALL bad. The external debt would send money out of the economy, but i believe the external debt is only like 10-20% of the total debt position.
Its actually 25% currently.

The reason governments print money artificially or borrow it is to AVOID raising taxes.

Why? Because they would be voted out of office.

The fact of the matter is there is very little inflation at the moment. People are starting to freak out because inflation measures are approaching the 3-4% range. I have a hard time believing that Bernanke is going to let himself be known as the Fed Chairman that brought back inflation after its been gone for 25 years. He may be walking a tightrope at the moment, but I suspect that if inflation does start reaching dangerous levels, he will sacrifice the banks and the rest of the economy.

I dont worry about inflation.

And Ron Paul is being very deceitful in the way he presents his monetary policy goals.

The fact of the matter is there is very little inflation at the moment.

I dont worry about inflation.
You have a lot in common with the American public, who are holding a time bomb...unconcerned because it hasnt gone off yet.

The Taliban government of Afghanistan seems like a more suitable accessory to Osama's activities than the government of Saudi Arabia. The Saudis expelled him from the country in 1991. Personally, I dont believe any sovereign government should have been targeted, as we're dealing with a organized crime group that operates internationally. It would be like overthrowing the Italian government to stop the mafia.Every analysis I've seen identifies Saudi money as the source of funding for about 90% of the Islamic anti-Western terrorist groups on earth, all the way to Indonesia and the Philippines. Syria and Iran are bit players in this drama. The Saudi government knows the game of politics and it was politically expedient to exile Osama to a place where he could continue to harrass America without embarrassing the Bush family and the other "Americans" who have more loyalty to their petro-partners in Arabia than they do to their fellow citizens. The Saudi government has done nothing to stifle the wave of anti-American sentiment that characterizes its people and its culture, and it has no controls in place to stem the outflow of money from the Saudi economy into terrorist training camps and weaponry.

As I indicated, I do not quite believe that this would have given us the right to bomb Riyadh--much less Mecca--but I would at least have understood the motivation behind those attacks. And since most Americans lack libertarian scruples most Americans would probably have cheered those attacks if the truth about the Saudis and the Bush-Saudi connection had been more widely known on 9/11. I can understand your reasoning about attacking Afghanistan even if I disagree with your conclusion, but it's a triumph of Bush Dynasty propaganda that the majority of Americans believe Saddam had any role in 9/11.Yes the GDP is growing, but have you seen the prices lately even at the low price leader WalMart? Compare last week's price from a year ago. People have to spend 15 to 20 percent more and sometimes 50% for medicines etc to get the same amout of comfort. That makes the GDP grow a lot!I was offered admittance to a master's program in economics (although I didn't take them up on it) so I can assure you that economists have to have a good background in mathematics. When they talk about changes in the GDP from one year to the next, the figures are indexed for inflation. That is real growth they're talking about, not arithmetic sleight of hand.Ron Paul acts as if our inflation is much higher than it actually is. He speaks about it as if its 1979 and people are get murdered on double digit inflation rates. This is clearly not the case. He's doing what every other politician does: scare people into voting for him.Yes, he learned a lot after losing two elections running on the Libertarian Party ticket. He has learned the fine art of politics. Nonetheless most Libertarians and libertarians will vote for him because even with all his faults he's preferable to Tweedledum and Tweedledumber, whoever they turn out to be. My wife is an active Hillary supporter because she so much wants to break the male domination of the White House, but even she will vote for Ron Paul if it looks like he actually has a chance of winning.Thats fine, i guess. Its just annoying when all these Ron Paul supporter act like hes the most honest man out there. That he's somehow above it all - unlike everyone else in the race. Its BS.He's no more honest than the next politician when it comes to getting votes. We support him because he is our best hope for achieving two of our most important goals: breaking the stranglehold of the Nanny State and ending the War on Islam.And Ron Paul is being very deceitful in the way he presents his monetary policy goals.He is a paleo-Libertarian, still mired in the 1960s-1970s when the movement first gained momentum and Ayn Rand and Ludwig von Mises were its heroes. However, I have heard him speak and when he's in a friendly crowd speaking frankly he shows a lot more sense and practicality. I suspect that if he actually won the office he would not wreck the economy--at least not any more than will be necessary in the short run to start paring down the size of the federal government. Most libertarians are sensible and humane enough to agree that the only way to do that is by attrition, with an across-the-board hiring freeze, until about 90% of the employees retire and we learn to get along with a government of the size that worked just fine only 30 years ago.

You have a lot in common with the American public, who are holding a time bomb...unconcerned because it hasnt gone off yet.


Yes, a lot in common with the fixed income traders on Wall St as well. They dont seem to be too worried either. Are yields on the 10 year still under 5%? i believe so.

Yes, a lot in common with the fixed income traders on Wall St as well. They dont seem to be too worried either. Are yields on the 10 year still under 5%? i believe so.

Again, I don't know enough to properly debate the issue, so I can only ask questions on what other, more informed people say about it.

Jim Rogers seems to be a big guy in economics and he endorsed Paul, and wouldn't vote for anyone else even if Paul lost the nomination (http://youtube.com/watch?v=G_HCZeSAmqs).

So does Peter Schiff (http://www.youtube.com/watch?v=9UuivYdiS5w) and he even sent a letter to all of his clients to support Paul (http://www.dailypaul.com/node/6092).

And then we have not so much an endorsement but more of a possible sign of support: at 30 seconds, the traders all cheered for Paul's statements during Bernanke's recent testimony (http://youtube.com/watch?v=z8GtXKP6bmQ).

Are the reasons for this support of Paul BS? Do these guys need to be reeducated when it comes to economics?

That's an honest question by the way, it's not meant to be some sort of snide hypothetical.

Geeze I hope you are being sarcastic. That kind of attitude is exactly what's wrong with America. Politicians distract us from the real issues by establishing a state of perpetual "Orange Alert." Terrorists have killed three thousand Americans in the past ten years, about the same number as bees and lighting combined. In that same period drunk drivers have killed two hundred thousand of us. Which is the more important threat?

Fraggle: I was being sarcastic, man. Read post #14. I agree with your points, by the way.

This video is absolutely the best exposition of Ron's understanding of monetary history in the US going right back to the creation of the Federal reserve.
I agree with Ron Paul on abolishing the Federal Reserve , an act whereby the publics money is put back in the control of the public . However Ron Paul's commitment to freemarket economics contradicts this as the basis of this economic ideology is the private control of wealth .

Yes, a lot in common with the fixed income traders on Wall St as well. They dont seem to be too worried either. Are yields on the 10 year still under 5%?
Its around about 4.72% currently, and with a devaluation rate of 3% that doesnt make for an enticing prospect.

Meanwhile the price of gold has gone up 26% per year against the crumbling US dollar.

I agree with Ron Paul on abolishing the Federal Reserve , an act whereby the publics money is put back in the control of the public . However Ron Paul's commitment to freemarket economics contradicts this as the basis of this economic ideology is the private control of wealth .
The Fed is in a sort of gray area on the border of public and private. The chairman is appointed by the president, and he does have to make an annual report to congress.

This isnt always pretty btw. After this scathing attack years ago Greenspan had little to say aside from asserting that 0.5% of the economy is producing the most advanced technology in the world.

http://www.youtube.com/watch?v=nBnKh6B2cMw

The Fed is in a sort of gray area on the border of public and private. The chairman is appointed by the president, and he does have to make an annual report to congress.
The FED as I understand it is fully private created under the Federal Reserve Act (http://www.federalreserve.gov/generalinfo/fract/) , in fact as I see it this FED actually dictates economic policy to Congress .
This isnt always pretty btw. After this scathing attack years ago Greenspan had little to say aside from asserting that 0.5% of the economy is producing the most advanced technology in the world.
The Fed issues all money in the US economy yet :
Article 1, Section 8 of the US Constitution (http://www.usconstitution.net/xconst_A1Sec8.html)
Article 1 - The Legislative Branch
Section 8 - Powers of Congress
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Why is US currency originating from a private banking system rather than the US Treasury?

The FED as I understand it is fully private...
If it was 'fully' private the board of governors would not have to be appointed by the president and approved by the senate. They can also be removed by the president. The current chairman is a lifetime economics professor, not a businessman.

The member banks however are fully private corporations.

As far as issuing money, coins and notes are issued by the Treasury department, but the Fed issues most forms of virtual money like treasury bills and bonds.

Ron Paul represents well one side- the advantage of money tied to gold (or some baskets of rare durable goods would be better). That advantage is that it is not possible for governments to create money which Ron correctly identifies (as Milton Freeman / Chicago economic school did more formally and more academically earlier) the power to create money "out of thin air" as the root of inflation.

Unfortunately, the advantage is also its main disadvantage also. It makes the Keynesian ideas impossible and thus creates a boom / bust economy. I.e. there is a "business cycle." I.e. when "x" is in short supply, most of the producers of "x" expand production and then there is a surplus of "x".

One way to moderate this cycle is to adopt central planning as USSR did, but as Adam Smith noted 300 years ago, central planners are never as good as the "invisible hand" of the free market place. (Perhaps the current government of China*, or the post WWII government of Japan have a good hybrid. I.e. the major infrastructure of the economy with long time constants is government planned, but not the production of shorter time constant items, like chickens, which Adam Smith's market economy, including free trade, control.)

Another way, as most know, when in the slow part of the business cycle, Keynesians want the government to increase expenditure, (using debt/ borrowing if needed). Those democratic governments gladly do. The problem with Keynesian ideas, in practice, is that when business is good these democratic governments rarely raise taxes, curtail spending and/or increase interest rates. (Even if they did, the time lag of these measures may even cause their "bite" to occur so much later that the government should be doing the "inflate the economy" phase actions)

SUMMARY: Mankind has not yet found a perfect monetary system. Although few American would even seriously consider the idea, the current Chinese economic system may be the best every developed. (Japan did nearly the same immediately post WWII and recovered rapidly. - For example, Japan's government decided that Japan would make steel and use it to build ships and supplied the capital to do this. In that decade Japan became the main supplier of ships and the economy grew very fast and became very productive.) China has had three decades of double digit growth - an unprecedented advance for any economic system. China operates with a 50 year plan. Is now signing many 30year contracts in Africa and South America to assure it will have the energy, raw materials and food imports it will need for decades. The US planning does not extend beyond the next election.

Unfortunately, the advantage is also its main disadvantage also. It makes the Keynesian ideas impossible and thus creates a boom / bust economy.
I would think the Fed's process of inflating and deflating the money supply artificially creates the boom and bust patterns you describe.

The current chairman acknowledged in one his speeches that the Fed inadvertently caused the great depression in this manner...and went on to state that this mistake will never be repeated.
Most of his academic research as a economics prof was on this period in history.

What is more likely is that when backed into a corner he will simply point to Argentina as the only solution, and then proceed to devalue the US debt by printing fake money...after which a new currency unit will be issued to replace the dollar.

Argentina has been doing this on and off for decades now.

I would think the Fed's process of inflating and deflating the money supply artificially creates the boom and bust patterns you describe....And you are correct but what has occurred in the last 15 to 20 years is not the Keynesian advantage of paper money. It is a perversion of it, with the details of the mecanism described at:

http://www.sciforums.com/showpost.php?p=1502039&postcount=1

What Greenspan did after the "dotcom bubble" burst (driving interest rates down to 1%, a negative real rate) was done to protect investors, who had been foolish, from the losses they deserved. (Quite ironic that now these same sophisticated people the government shielded for greater losses are very vocally complaning about the government trying to assist simple poor people to keep their homes, rather than dump them by foreclosure on an already overstocked supply of unsold homes. Note that very sophisticated bankers created new types of mortgages and marketed them to these ill educted poor and they too now blame the "foolish poor" for the "sub-prime" mess, not themselves and their "no-money down" "teaser rate" etc. mortgages)

Big Al thru "moral hazard" out the window and created the real estate boom which now that mortgage defaults are rising, home prices falling etc. is a much greater threat to the entire global economy. Under Keynesian doctrine, properly applied, the government should make credit easier ONLY when the economy is slowing, not when it is booming, even if stock market is falling, as Greenspan did.

I.e. The FED did exactly the opposite of employ the Keynesian advantage of fiat money. It is sort of like fire. Fire has certain advantages, but if one ignores those real advantages and uses fire only to burn down buildings, one should not then conclude that there are no advantages to fire.

My post, to which you are responding, I acknowledged that there are different advantages to BOTH currency linked to gold and to fiat money. Both also have different disadvantages. China seems to be developing a "middle way" which gets at least some of the advantage of both and lessen the disadvantages of both. I.e. they control the value of their currency, sort as if linked to gold, rather than let it freely float or print it in excess. Yet for investments in infrastructure items with long time constant, such as dams, railroads, pipelines*, electric plants, even space exploration technology, China makes the capital so available cheaply (or interest free) that other factors (such as skilled manpower) are what is limiting their advances, not funding.

PS in related post, made yesterday, I called what has happened in last 15 years a "perversion" of Keynesian theory's advantage. Please see that post at:

http://www.sciforums.com/showpost.php?p=1687627&postcount=587
-----------------
*China is building a large diameter 1000 mile long pipeline to bring oil from its mountainous western provinces. This area has not been well explored**, but as it is the same geology as Iran’s oil fields, it may be a large field. China must think it is as they are already using about 1/3 of the world's total production of steel and would not be building such a large pipeline if the field were insignificant.
**By western oil companies. It is too far from any port and under Chinese control, so even a giant field would not justify the investment for western oil companies.

Ron Paul.
An uncharismatic older man who talks about political philosophy.

He is the Democrat's dream Republican candidate.

Its actually 25% currently.

The reason governments print money artificially or borrow it is to AVOID raising taxes.

Why? Because they would be voted out of office.

You are correct, but the central bank could raise interest rates which would naturally slow liquidity. However, that would obviously be an unpopular move with the mortgage mafia, and myriad other special interest groups that would raise hell. The dollar is toast if they don't step up and make the hard choices.

So if I understand this thread, Ron Paul is suggesting going back to the gold standard? I wonder, would that work?

Of course it wont.

For it to work the rest of the developed would would have to follow suit. Thats not gonna happen.

You are correct, but the central bank could raise interest rates which would naturally slow liquidity. ...The problem being discussed is the increasing debt. What you state is a true effect of raising interest rates. (China has done this 6 times in 2007 alone to try to cool their red hot economy some.)

Increasing debt is not a problem by itself IF the people lending the money do not want to be paid back - i.e. when the bonds mature they are willing to "roll them over" into new bonds with a later maturity date (and the prevailing interest at the time of maturity, of course). That was the case until quite recently for most bond holders.

They current problem for the Treasury is that many want out of dollar based investments and will not roll the maturing bonds. Raising interest rates will persuade some to roll instead of redeem their bonds, but with the US economy either already in a recession or headed that way, the FED and Treasury also to some extent, must worry about sending the economy into depression. Depression is not just a problem for the "mortgage mafia" and "special interest groups." It is a problem for Joe American, who without a job is sure to soon be homeless and living on the street.

So, in answer to your final question: No return to the gold standard would not revive the US economy. It is dead already, but just does not know it for perhaps a few years more. I.e. there is no escape from the coming depression now - GWB has ruined any possibility of return to a balanced budget with his needless wars, and doubling the debt. US will continue to go into debt to pay the interest on the old debt and the factories will continue to close, jobs to be outsourced, the baby boomers to retire, termining their tax paying years and switching to Social Security collection instead. etc.

US is like a plane far out over the ocean with too little fuel to either reach the other shore or return to the land it left. No pilot or new president can save it now. Sometimes I think the best option now available is the "unthinkable one." Simply declare default and start over with what we have and can produce domestically only. (No one will help after US after it defaults.)

US is like a plane far out over the ocean with too little fuel to either reach the other shore or return to the land it left. No pilot or new president can save it now. Sometimes I think the best option now available is the "unthinkable one." Simply declare default and start over with what we have and can produce domestically only.
I think thats what Russia did in 1911 thereabouts...just repudiated its debt by declaring it null and void.

I dont think a country as important as the US could pull that off now...not in todays global economy.

Billy, what do you think of MadAnthony's idea of selling off federally owned land to pay down the debt???

So if I understand this thread, Ron Paul is suggesting going back to the gold standard? I wonder, would that work?
It already has worked as a montary system in many periods of US history. Politicians usually scrap it when they need extra cash for wars.

There are already many private companies offering a kind of gold standard exchange. You can even make payments in gold grams to other account holders.

http://goldmoney.com

...Billy, what do you think of MadAnthony's idea of selling off federally owned land to pay down the debt???I commented on it in thread where he suggested it, shortly after he made suggestion. Basically the problem is to whom do you sell?

Most find it unacceptable to sell muchof the US to China, Japan, S.Korea or the oil rich arab states.

Joe American is already up to his ears (if not completely under water in debt) so he can not pay / buy it, and few will lend him to do so.

I took MadAnthony's reference government owned acrage and debt data (Ref is from from 2003 as I now recal, updated debt data to reflect the great increase in the debt GWB has caused) and then divided by the 300million Americas. Results were, as I recal, the typical family of 4 would need to pay about $20,000 to buy their share.

If instead, the best sections (few want to pay $20K to own some waterless land in a hot desert) are offered for price high enough to make a significant dent in the debt, that 1% of Americans who could afford it are already trying to get the assets out of the US and dollars, so for less they could buy a small island in the tropics. (Some have done that).

If, however, that rich set of buyers is offered the best land for a muchlower, but still highprice per acre, then there will be Congressional investigations (Like the old "tea-pot dome" scandle - land "give away" to the politically well conected- which, lets be honest when speaking of the very rich tend to be mainly republicans.) Thus with a democratic Congress, this will never fly.

Summary: It sounds nice, but is not very feasible, in fact, when you look at the numbers and details.

PS Since the Russains are also oil rich now, I suggested that we sell Alaska back to them in my earlier reply to Mad Anthony. As a new thought, because the "big one" is many years over due, Lets offer the Russians a four state deal. - All of the west coast of the USA. That might be enough to make a significant reduction in the debt.

Note: I asked James to move the posts on solar power to a new thread in General Science called 'Current Solar Technologies'.

Summary: It sounds nice, but is not very feasible, in fact, when you look at the numbers and details.

James Turk has thought of this also, while contemplating how the US will get out from under...and estimates the numbers for a massive firesale of federal lands:

http://www.financialsense.com/editorials/turk/2008/0109.html

"For example, the government reports that its deficit for the fiscal year ending September 30, 2007 was $162.8 billion. In other words, expenses exceeded revenue by this amount. This shortfall of course needs to be made up by borrowing, which the report itself acknowledges by saying: “The Government borrows from the public to finance the gap between expenditures and revenues”.

But a little digging into the numbers reveals that the government is borrowing far more than its reported deficit. Total federal debt during the past fiscal year actually grew from $8,530.4 billion in 2006 to $9,030.6 billion in 2007, which is a $500.2 billion increase – or more than three-times the reported deficit.

Why the big difference between the growth in debt and the annual deficit? It seems reasonably clear that the accounts were prepared and are being reported to the public to make the financial picture of the US government look better than it really is. And believe me, after reading the recently released Fiscal Year 2007 Financial Report of the United States Government, there is every reason to believe that the US government financial position is even worse than we think.

Did you know that the US government has accumulated $53 trillion of direct and indirect debt? If so, you are no doubt in a minority because most people are oblivious to the size of the government’s debt.

What about all the US government’s assets? Good question. The report values them at $1.6 trillion, but this total excludes the value of so-called StewardshipLand, which equals about 650 million acres, most of which is barren Alaska tundra and desert in Nevada and other Western states. What is this land worth? Yellowstone National Park is worth more than frozen tundra, but let’s say that the land is worth $10,000 per acre on average, which is probably a generous valuation. The total therefore is $6.5 trillion, which when added together with the $1.6 trillion of assets in the financial report, totals $8.1 trillion, which is just 15% of the US governments total debt obligations. Any way one looks at it, the US government has a huge negative net worth, and owes far more than it can possibly repay."

This has been brought up before from time to time. The problem with backing U.S. dollars with gold is that there isn’t nearly enough gold to do it. All the gold in the world is worth an estimated $3.65 trillion, while the total supply of U.S. dollars is around $7.3 trillion. So what are you going to do after you buy all the gold in the world and still have half your dollars left over? If you simply divide the gold by the number of dollars, you end up with each dollar only being worth about half as much as before.

This has been brought up before from time to time. The problem with backing U.S. dollars with gold is that there isn’t nearly enough gold to do it. All the gold in the world is worth an estimated $3.65 trillion, while the total supply of U.S. dollars is around $7.3 trillion. The 'not enough gold' argument has been brought up and answered many times in discussing gold standards.

An increasing quantity of value within any gold standard system simply means an ever increasing purchasing power per ounce.

The government decided to go off the gold standard during the depression in order to create fake money which would stimulate the economy.
This required a program to confiscate all the gold held by US citizens.

The gold was bought for a price fixed at $20 per ounce and stored at the newly built underground vaults at Fort Knox.

But this gold has been quietly sold off gradually for the last few decades, so there is only a fraction of it left.

So the transition to a new gold standard would be very difficult. Obviously the open market price would skyrocket during a massive government buying spree.