Wednesday, February 21, 2007

Money is the blood of our economy

There is a column by U.S. Representative and Republican candidate for President Ron Paul titled, "Monetary Policy is Critically Important", and it describes the philosophy and outcome of money, and it's not too good.
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For almost a century (since 1913), Congress delegated the power to "coin money" (an unconstitutional act, by the way) to a group of private banks called the Federal Reserve. The "Federal Reserve" is a misnomer, because it isn't "federal" (like "Federal Express", or a chain of "Federal Pizzas"), and it has no "reserves". And Congress has to borrow money from a private organization, it has to pay interest on the debt. And Congress has to tax its citizens just to pay the interest on the money borrowed from the Federal Reserve, as the Grace Commission discovered.

If Congress has to pay interest to borrow money when the Constitution gives Congress the power to make money interest-free, why don't Congress take that option? The answer is, if you would believe it, Congress is bound to follow the Constitution. Now, the Constitution only gives Congress the power to "coin money" (metal), not to "print money" (paper). But Congress delegates the power to print notes to the Federal Reserve. That "delegation" is also unconstitutional, but they do it anyway. The Constitution gives Congress the power to do certain things, not to delegate it away to someone else. Congress doesn't have the power, only We the People (us) have the ultimate power. But We the People don't guard that power wisely, and there is a price to pay for it.

The principle that the Federal Reserve (and most Americans) used to purchase things is the Federal Reserve notes. Most Americans call these "dollars" or "money". But it is not money--they are notes; they are promises to pay a debt. Most Americans call it money, but it is really fiat-paper money backed by nothing. Because they are just paper, the Federal Reserve can print to its hearts content...and print out of thin air. It costs the bank nothing to print fiat-paper money, but you have to work hard to earn "money". That's why the biggest building in the city are the government and the banks. And since banks print money out of thin air, that money inflates, and that money is worth less and less as time goes by. A dollar in 1913 is worth 2-4 cents today.

Now, the Federal Reserve is not totally private, the government and the Federal Reserve have a relationship. In exchange for always having money if the government ever needs it (which makes bureaucrats happy), the government makes Federal Reserve notes "legal tender". Whenever a creditor (e.g., credit cards, mortgage companies, car loan dealers, etc.) wants to settle a debt with a debtor (e.g., you or me), the creditor by law must accept legal tender money. Else, the debt is wiped clean. If there is no legal tender laws, the creditor can choose which currency to accept. If a creditor will have the option to choose money backed by gold and silver (real money) or money backed by nothing (fiat money), I have no doubt the creditor will pick gold and silver backed money. But if the fiat money is legal tender, the creditor must accept fiat money, and that's what we have now.

Like I said, the Federal Reserve is the most evil institution imaginable, if you wake up and see it for yourself. That is why we must abolish the Federal Reserve, or the Federal Reserve will destroy us.

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