A reaction to Ron Paul's manifesto

I think we addressed all the points here, thanks for the insight.

This figure is the Consumer Price Index (CPI)
This is figure which the government uses to display yearly inflation percentages, however it just so happens that this number doesn't include energy or food.
how can someone measure Consumer Prices without accounting for energy or food?

www.Umake.it - The online resource for the Hand Made Society

he's been told and wouldn't think of questioning the official story. I feel bad for people like this. Remember logic prevails, they ask themselves. Why would our government do something that cost us more and isn't good for the country. It always talks them out of an alternate theory. It's that inherent trust in government for fear's sake. If the masses knew what was really going on they would be take up arms and revolt. It's easier to just accept it so they don't have to do anything about it.

April 19th 1933, the US Government suspends the gold standard and stocks soar 13 percent over the next two days

Stocks "soared" in terms of dollars because the value of the dollar tanked. It took more dollars to purchase the same amount of stock as previously.

August 15th, 1971, the link to gold is officially and permanently ended and the stock market goes up 4%.

Same thing. Paper money was devalued, so it took more of the money to purchase the same amount in the stock market.

Imagine the following scenario: Let's say you have enough money to purchase the stock index 1000 times. Then one day the government decides to print a whole bunch of money, destroying 10% of the value of everyone's money in the process. So, your # of dollars is the same, but your "purchasing power" was decreased by 10%. After that happens, you are only able to purchase the stock index 900 times, but for the same amount of money. To the average person, it would appear that stocks soared but what actually happened is that the value of the money tanked -- it simply took more of it to buy the stocks (because the money was then worth a lot less).

gold = no inflation. Say I invested $1 in gold 50 years ago, it would be work $X-inflation adjusted dollars today. Hurray, I've broken even.

That's the whole idea, to not have the government able to destroy the value of the money that you've saved.

What if instead of buying the gold, because it is real money and not fiat money, you simply held on to the dollar? Your 1959 dollar in 2009 would still be a dollar. My $1 in gold purchased in 1959 (0.80768 grams) would be worth $23.97 (gold, as of today, is $29.68 per gram). So, whose money was better protected from having the value (purchasing power) stolen via inflation?

Yes, our dollar is worth 6 cents today versus the dollar of 1802; that dollar of gold is worth $1.95; but that dollar invested is worth $755,163 today.

You seem to imply that gold-backed dollars are ineligible to be invested in the stock market or something. As if only fiat currency is permitted to be used in the stock market.

Why not have both? Real money, not fiat, and still be able to invest it in the stock market if you choose to do so.

The movement for a gold standard is not a movement against the stock market.

Today, items sell for less than they did yesterday, even when accounting for inflation.

In regards to prices coming down with things like your computer example - I hope you realize that technological advancements enable many items to be produced at less cost. If the dollar was stronger and did not lose so much value, those items would cost even less.

Imagine how much more affordable things would be with a gold-backed currency that did not lose value at the same time that prices came down on certain items.

Another cool factoid, real income and purchasing power today versus 1950 has almost doubled.

Do you think that correlates in any way to employees becoming more educated and productive as compared to employees from 60 years ago? For example, professionals such as accountants can handle a lot more work due to having computers available, right? Business owners can more efficiently and more accurately manage the finances and inventories of their business? What you're pointing out are improvements in production capacity, with a resulting increase in income for the increased production, but somehow you're using that as an argument for fiat currency(???).

since the Volcker years the Fed has understood the importance of keeping inflation low. Since then inflation has averaged ~3%. Not too bad.

Since the Volcker years our government has removed various items from the inflation numbers that are reported in an effort to make things look better to the average joe. This is one of the ways politicians get themselves re-elected, by making things look better than what they actually are. Sounds like you are actually using the manipulated inflation number. See http://www.shadowstats.com/ for more info on that.

the Fed announced it is essentially injecting an extra $1T into the economy. The market soared about 3%. Free markets must love this.

Hmmm... well the Europeans must love it too because the euro jumped 3% vs. the dollar. As did the swiss franc, japanese yen, and the british pound. Free markets REALLY love this, and not just in the US!

And look! Gold jumped over 3% in price, as did commodities in general! Wow, this is amazing! Everyone loves this, EVERYTHING went up. Clearly this is the way to "make free markets happy".

"Lets agree that the stock market acts as a leading indicator of future economic health. Any free market guy can agree to that, right?"

Wrong lol. Was this sheep asleep during 06-07?

"Yes, our dollar is worth 6 cents today versus the dollar of 1802; that dollar of gold is worth $1.95; but that dollar invested is worth $755,163 today."

Paper money doesn't increase investment returns whatsoever over any other currency. If gold was currency, we would invest it.

The difference in the price of the computers had less to do with inflation and more to do with increased consumer demand and economies of scale.

Things are only impossible until they are not.
-- Jean Luc Picard

His example states:

Basically, gold = no inflation. Say I invested $1 in gold 50 years ago, it would be work $X-inflation adjusted dollars today. Hurray, I've broken even. But what do we do with our dollars that we have? Stash them under the mattress? Nope, we buy things with it or invest it. We care about the purchasing power. Yes, our dollar is worth 6 cents today versus the dollar of 1802; that dollar of gold is worth $1.95; but that dollar invested is worth $755,163 today.

Gold is a medium of exchange i.e. money. So I living in 1802 can invest my 1 dollar's worth of gold just like inflated money. This investment can grow to 755,163 or whatever example you like. I have all the growth and none of the inflation but rather the potential for greater purchasing power and a restriction on monetary corruption as well. This leads to greater freedom and smaller government. Whats not to like?

Roger Hermann
Chicago, IL

The reason prices of technology drop even with inflation is just that, TECHNOLOGY! What if was talking about the prices of essential goods like say, bread, milk, beef, etc Those prices GO UP! Technology has enabled lower prices (factories, assembly line, etc) and tech goods themselves always get lower in prices as easier ways are learned to build them. Easier ways to build food have been learned but they are not healthy for us... (Monsanto)

Science is a quest for both consistency and completeness, an impossibility, so science is just as ‘invalid’ as religion, in other words, religion is just as valid as science. Therefore, science is good for the things you can control and religion is comfo

It prevents the government from growing, which is the same thing as saying it protects freedom. A fiat paper standard is the power to tax without consent, continuously expanding the nanny/welfare/warfare state.

-------
PRIVATIZE THE FED!!!

9/11 was "blowback," not an inside job. -Dr. Paul's position. The Federal Reserve is "a fourth branch of government," not private enterprise. - Dr. Paul's position. How about we start listening to him?

"Another cool factoid, real income and purchasing power today versus 1950 has almost doubled."

How would you address

Free market or otherwise, it is clear that the stock market is not a good indicator of anything in its or our future. The definition of a stock market crash is that the stock market is increasing in apparent value and then experiences an *unexpected* drop in apparent value. The stock market says almost nothing as an indicator.

It is important to realize that to allow the manipulation of a currency is to throw out the free market. More broadly speaking, your friend seems to be missing the (main) point that a commodity/gold/competitive monetary standard checks/prevents rampant government spending. All of the desirable events (lowered consumer costs, innovation, etc.) can also happen in a free market (sound money) economy. I think it must be admitted that some level of rapid growth may be restrained to a certain extent without artificial access to easy credit. That is to say, the United States would not have experienced the explosion(s) of growth it has in certain industries without currency manipulation. One must perhaps think carefully about this and whether or not such sudden growth (and the accompanying malinivenstment and waste) is a good thing. My conclusion is that it is certainly not a good thing. More thoughtful steady growth based on cautious investment not based on corporate (including government) interests is preferable. We ought to recognize no corporate/government interest beyond, perhaps, that of the family. And no, that is not to suggest that any government programs in the interest of families are desirable. It is only to point out that some governmental/corporate actions against violation of rights and fraud may be desirable, but it is not practical for outside entities to interfere (protect or deny) anything, including matters of rights and fraud within families. Yes, it is another matter to define what constitutes a family.

Option 1: You can continue to try and get through to him, possibly at great personal cost to your health and stress level as he does not appear too receptive.

Option 2: You can let him go about his way, believe as he likes, and mock him thoroughly whenever he comes to find out he was wrong.

Or...

Option 3: Hand him a razor blade and lay down some plastic. Spare him the suffering he is about to face.

Are you a market guy? If you're not a market guy, you would be a consumer, and so to main street you would look for future economic health.. Do you have a wide variety of markets to shop? Are main street stores closed? What development is going on?

There are two videos... Money as Debt and Southpark came out with a great episode on economics.. it was posted here last night..

http://www.dailypaul.com/node/87933

Your friend is leading you into a trap with his "markey guy"... look at the south park episode, you'll like it, it shows you where Market guys fit in the big picture, and they aren't it!