Pro Fed Arguments

A good way to explain it is using a credit card analogy. Explain that our money is bills of credit which are forbidden in the constitution. They are loaned into the economy at interest by a private banking cartel the Federal Reserve. Kind of like having an unlimited credit card with the ability to expand the credit when ever you reach your limit. If you had an unlimited credit card you could live pretty high on the hog and look wealthy for quit some time. But eventually the bills come due and you loose everything because you can't pay the bills.

Ask him why he thinks the dollar is failing. And why this type of system has ended badly every time in history. 12 years after the federal reserve act was passed under the guise of stabilizing the monetary system we had the worst crash and depression in our history. Why because they were inflating the money supply beyond our gold reserves. And then the correction was abrupt We had crashes again in the 70s, 80s, and 90s, The only reason they were recessions and not depressions was because the economy was still outproducing the debt.

That is no longer true today and we are poised for even a worse depression then the 30's. We are at the end of the cycle that happens in every fiat money system. Just like Enron over extended themselves inflating their worth, the nation has done so in spades using debt as in federal reserve debt notes. The bills now are due, the world will no longer finance our debt nor accept debt notes because we do not have the ability to repay the debt. Just like the guy with the credit card who everyone thought was rich but lost everything when the bills could no longer be paid.

Ask where he thinks his income taxes go? They go to pay the national debt on the fiat currency loaned into circulation and not single penny is spent for government services as most believe, and this still does not even cover the interest on the debt. So we borrow from China, Japan, and the Saudis and many others. and that still does not cover the debt so what does congress do they ask the fed to print more money and of course they do but oh yeah that money comes with interest already attached. so they are taking out more loans to pay the interest on previous loans they cannot afford to pay the interest on. It's financial insanity. Is it any wonder the economy cannot out produce the debt? especially since all our manufacturing jobs have gone over seas?

Or see if you can get him to watch this video:

http://video.google.com/v...

Also freedom to fascism

--------------------------------------------------------
If ever a time should come, when vain and aspiring men shall possess the highest seats in Government, our country will stand in need of its experienced patriots to prevent its ruin. Samuel Adams

I have really learned a lot with all of your posts/feedback. Thank You so much. Great Information! I

I have the greatest respect for the person I am having this discussion with and a number of people in my family are being CC'd. The individual I am corresponding with is a very successful person who also has a particular interest in history as it relates to the founding fathers. I will repost his last email to me below so you can get a feel for why I am asking these questions. I want to provide a well thought out response that at least will prompt him and the other recipients to acknowledge that monetary policy is a very important issue that is worth examining and learning more about. It is amazing to me how even those who I consider to be highly educated and open minded know very little about the Federal Reserve and our monetary policy in general. I have a great opportunity to change some minds for the better or at the very least to inspire enough curiosity to cause them to research the topic on their own.

I sent out an email with a number of quotes from Jefferson, Lincoln, etc.. with regard to Gold Standard and Central Banking. His response is below.:
______________________________________________________________

Is this a replay, in part, of the debate between Alexander Hamilton
and the establishment by him, with support of Washington, of the
Federal/Central Bank with a single currency and Jefferson and others
who opposed that? I'm pretty weak on finance but it seems to me
that the Central Banks in various countries have played a positive
role in stabilization of national and global economies, in
coordination with one another through various multinational
institutions. Maybe I am missing the core issue being discussed.
I am sure that there is some obvious point being made, but it escapes me other than there being a collection of critical quotes. In the case of Jefferson and Madison, they were both ever in debt and in terrible straits at the ends of their lives. On the other hand, I believe that Washington was much better at disciplining his use of credit and money. Jefferson wrote and spoke good words in public but was pretty bad in private in many respects and was a very poor leader. He was a renaissance man which illustrates that perhaps the best leaders are not necessarily the smartest. Back to money, poor Lincoln was saddled by a spend thrift wife who put him into severe debt, as if he needed more problems on his plate.

Is the intent of the quotes, in part, to point to some, amorphous alternative to the current system? As always its so easy to wish for something different in view of flaws with what one has. But, in my experience, simplistic, theoretical solutions are seldom workable. It seems to me that, like our very flawed democracy, the current Federal banking system, with adjustments made over the years, works. But, institutions are people. My oft stated platitude is that good people can make bad institutions work well and bad people can make good institutions work badly. I've worked hard to build good institutions only to see them undermined by bad players such as Enron.

Where do you get all these quotes?

Sincerely,

Are you referring to the point about halfway through "Money as Debt" that denounces the gold standard as unworkable due to the possibility of hoarding by the rich? (I believe that was the rationale given; I've only watched it once.)

Flexibility is a term that advocates of a central bank like to use. In actual fact, the money supply does not contract - credit does. When did the Federal Reserve actually remove circulating frns? Never!

The real reason for a central bank is to PRINT currency. The first user of this newly printed currency is government. Our politicians get the same benefit out of inflation that a counterfeiter gets from passing his product. The rest of us see the purchasing power of the dollar diminished. That's why politicians will fight tooth and nail to prevent a return to honest money. With honest money, they are unable to steal our wealth, other than by taxes.

The fact is, there is NO advantage for the American people to have a central bank that prints fiat money. We need to return to honest money - gold and silver, which the Constitution specifies.

I have really learned a lot with all of your posts/feedback. Thank You so much. Great Information!

I have the greatest respect for the person I am having this discussion with and a number of people in my family are being CC'd. The individual I am corresponding with is a very successful person who also has a particular interest in history as it relates to the founding fathers. I will repost his last email to me below so you can get a feel for why I am asking these questions. I want to provide a well thought out response that at least will prompt him and the other recipients to acknowledge that monetary policy is a very important issue that is worth examining and learning more about. It is amazing to me how even those who I consider to be highly educated and open minded know very little about the Federal Reserve and our monetary policy in general. I have a great opportunity to change some minds for the better or at the very least to inspire enough curiosity to cause them to research the topic on their own.

I sent out an email with a number of quotes from Jefferson, Lincoln, etc.. with regard to Gold Standard and Central Banking. His response is below.:
______________________________________________________________

Is this a replay, in part, of the debate between Alexander Hamilton
and the establishment by him, with support of Washington, of the
Federal/Central Bank with a single currency and Jefferson and others
who opposed that? I'm pretty weak on finance but it seems to me
that the Central Banks in various countries have played a positive
role in stabilization of national and global economies, in
coordination with one another through various multinational
institutions. Maybe I am missing the core issue being discussed.
I am sure that there is some obvious point being made, but it escapes me other than there being a collection of critical quotes. In the case of Jefferson and Madison, they were both ever in debt and in terrible straits at the ends of their lives. On the other hand, I believe that Washington was much better at disciplining his use of credit and money. Jefferson wrote and spoke good words in public but was pretty bad in private in many respects and was a very poor leader. He was a renaissance man which illustrates that perhaps the best leaders are not necessarily the smartest. Back to money, poor Lincoln was saddled by a spend thrift wife who put him into severe debt, as if he needed more problems on his plate.

Is the intent of the quotes, in part, to point to some, amorphous alternative to the current system? As always its so easy to wish for something different in view of flaws with what one has. But, in my experience, simplistic, theoretical solutions are seldom workable. It seems to me that, like our very flawed democracy, the current Federal banking system, with adjustments made over the years, works. But, institutions are people. My oft stated platitude is that good people can make bad institutions work well and bad people can make good institutions work badly. I've worked hard to build good institutions only to see them undermined by bad players such as Enron.

Where do you get all these quotes?

Sincerely,

Essentially the federal reserve exists to maintain the economy in a constant inflationary state. Inflation and Deflation are not a priori bad, as long as the populace is informed of their consequences and not lied to about the magnitude. However, as we know, inflation makes people who only save lose their money, and requires people to perpetually invest (and make smart investments) to stay afloat, which is why under a perpetually inflationary economy the wedge between "haves" and "have nots" gets wider.

So why have a perpetually inflationary economy?

1) some prices are biased against downward revision. Labor is the big one. It's difficult to renegotiate wages down. So if the economy deflates, suddenly you're paying higher labor costs and it's tough to convice people to take pay cuts on account of deflation. So jobs get lost etc. Sudden, expansive deflation can cause problems for that very reason -- which is what caused the great depression.

2) inflation forces reinvestment, which makes the market extremely liquid. People try their hands at new things. Innovation happens at much more rapid pace. However, the price for this liquidity is that there are always bubbles and it's easy for individuals to get railroaded under the economic treadmill.

3) deflation wrecks the value of property. This is because individuals are less willing to borrow against the equity of their property. If you're on a fixed rate mortgage, then in a deflationary cycle you might begin to be paying way more through amortization than you would have expected, in real value, even though numerically you're paying the same. So the fear of deflation will put the breaks on lending and borrowing, to a certain extent.

So, The trick is to manage your monetary supply to cushion large jumps in inflation and deflation. A managed monetary supply is NOT NECESSARILY bad, as long as its process is transparent, and as long as it allows for mild deflationary cycles which average out over inflationary cycles, and as long as it's not biased to benefit big banks over the people. The best way to do this is to have a currency backed by some commodity (or even better, a pool of commodities) with some level of leeway for a fed to iron out bumps. However, this would take a large level of responsibility, which the current fed is clearly not espousing, and an end to the fear of deflation.

It is an artificial flexibility.. you cannot get something for nothing. Someone always pay a price. So printing more money for a more ~flexible~ means of growth only institutes inflation. It is great if you are the industry... but bad if you are the worker.

So the middle and lower classes pay the price... the elite get paid. Can't see an upside for a nation under that system, unless you are all for a system that does not promote individual freedoms.

I have no use for arguments for or against the Fed. The US Constitution calls for silver and gold money. There has been no amendment to change that, therefore the Fed is an illegal institution. Period. If there is a better way to run the monetary system, fine. Then present the idea to the public, sell it, and pass an amendment. Without that, we should only be talking about restoring the rule of law to monetary policy.

http://www.youtube.com/pr...

synsolutions, this is a very good comment - it really deserves more responses.

i completely agree with the comment below by acala.
but in response, to play devil's advocate, pro fed people could argue that the fed is good because it provides a single currency which permits production. if any private bank could make their own notes of redemption, people wouldn't know which are good and which are worth nothing. and this work making doing business very hard. this is the biggest reason why the fed has been tolerated for so long -

a second argument for the fed is that it helps small banks (and even the government) in emergencies. it stops small banks crashing with bail outs which protects the customers in the short term.

hope this helps.
also be aware of that video on youtube called 'money as dept' about half way through it loses its way and makes a mess of things.

i think anyone who has watched "the money masters" and followed up with their own research understands that the federal reserve is the single largest problem out nation faces.

http://www.silverbearcafe...

I think the pro Fed people are fooled into thinking that we need the Fed because the Fed has a self-fulfilling job - they "fix" problems that they themselves create, and their fixes generally involve bank and wall street bailouts at the cost of responsible people's savings. If you understand their role in the mortgage mess after the tech stock collapse in the late 90s, then you know what role they played in generating all this artificial and unsustainable demand for housing with their 1% interest rate for a full year. Interventionist manipulation of the free market's interest rate is the NUMBER 1 reason we have all these boom/bust cycles and side issues. When you don't let banks fail for imprudent lending practices, you are screwing with the market in a very bad way and giving no incentive for banks to change their ways. It's that simple - you shouldn't reward bad behavior, because then you get more of it. The justification that they use is no different than if they used taxpayer money to bail out failed businesses from going bankrupt under the pretense that it would be bad for the economy if they did.

If we link the $ to Gold, what would happen when the price of gold drops from current levels of approx. $900 an ounce to say $500 per ounce?

It is interesting to note that the Gov't SET the price of gold and fixed it in the $19 - $21 for 130 years from 1800 to 1930. When the price of gold is fixed it is a great hedge against inflation.

How is today different? In 1980 Gold was $641 /oz in 2000 it was $272 /oz and today it is over $900 /oz. Today gold is not so much a hedge against inflation as much as a commodity that is negatively correlated with the stock market and therefore goes up when stocks decline.

Between 1800 and 1944, the world was producing gold at about the same rate as our economy was growing. In such times, of course a gold standard would provide for a stable currency.

However, today the economy is groing at a far, far, FAR faster pace than the rate of gold is being produced to back our currency.

Were we still on the gold standard, either we'd see the very same inflation we've seen since 1944 (due to producing more currency that is backed by less and less gold per dollar), or our economy would be crippled due to a lack of liquidable currency.

This is the problem with ANY commodity-backed currency. Everything works splendidly when the rate of producing that commodity is about the same rate as economic growth. However, any time there is a change in the production rate relative to economic growth there will be problems with the commodity-backed currency.

at this point in time is that we are currently undergoing the greatest global bank run in history. The central banks of the world are currently the only force in the financial system that is keeping it alive. At this time, that is a seemingly strong argument for a central bank able to create liquidity from nothing.

I have had discussions with people that simply assume that the Fed is full of smart business people that try to keep the economy stable. You are up against a lack of knowledge about the Fed wrapped in a fog of assumptions. Good luck!

personal life was saddled with debt. He was in financial straights and saddled with debt toward the end of his life. George Washington, who was in favor of a central bank, was very frugal and always had sound personal finances.

But he practiced it. Washington freed his. Just because you can't walk the walk doesn't make your words any less true.

Dr. Paul is the only candidate that even brings up the issue of our failing monetary system. Tell them this about what the Federal Reserve has done to our money:

Consider this: a person making $32,000 per year today has the equivalent purchasing power of $5,907.40 1970 dollars. So, the same person making $15.38 per hour today is equal to making $2.84 per hour in real purchasing power in 1970 dollars. It is not the price of goods and services that have risen so much, but the purchasing power of our dollar that has been so drastically reduced. Our standard of living has been effectively reduced through fiat money inflation.

Is there any wonder that poverty is becoming rampant? The government has no other choice but enforce minimum wages in order to keep the working poor at some level of subsistence. At the current $5.85 per hour a person has the same 1970 purchasing power of $1.08 per hour, at 40 hours per week that person is effectively making $43.20 per week to make ends meet.

What are we waiting on, to become serfs of the State?

Real economic growth comes from people deciding to postpone the spending of their income and instead making it available for investment in the means of production. Investment in the means of production eventually makes production more efficient so prices go down and everyone gets richer. The level of the people's willingness to save (and therefore invest in improving the means of production) is reflected in the interest rate. That is what tells businessmen how much to borrow to build new factories and such.

Fed-induced "growth" comes about when the Fed pours credit into the market thereby reducing interest rates without there being additional savings. This does a couple of bad things. By lowering interest rates artificially, the Fed discourages people from saving by paying them less for postponing their consumption than they think such a postponement is worth. But at the same time, the low interest rates send a false signal to business that the people really want them to borrow more and use the money for expanding the means of production. It is this fundamental malinvestment - overinvestment in the means of production - that the market tries to correct when the inflation stops. To keep the correction from happening, the Fed has to keep inflating the currency, making the malinvestment worse and worse.

The Fed is now desperately pouring credit into the market to try and keep the market from correcting the malinvestment created by the Fed's prior inflation.

Eventually, the Fed's artificial boom will fail. Either because they get scared and let the correction happen, leading to a deflationary depression, or because they destroy the currency with hyper-inflation.

The Fed's manipulation of the money supply and the interest rate creates a boom and bust economy.

If you want steady, stable growth, you need to get rid of the Fed, restore sound currency, and let the interest rate be set by the market in light of people's savings rate.

On the other hand, if you want a boom and bust economy where people who save are punished, people on fixed incomes are impoverished, the middle class is wiped out, and the financial elites like bankers and government contractors get rich, then you want the Fed.

Economic activity has been more erratic, with bigger downturns since the creation of the Fed. You can thank the Fed for inflation...we didn't have any before it was created.

On the positive side, it makes the rich richer and politicians more powerful.
Read what Jefferson said about central banks and "fiat" money.

Hard to come up with something good to say. I mean, MAYBE, sometimes they can lower the interest rates to provide a short boost to the economy, but that boost is short-lived.

And how can money with interest be better than money with no interest?

And when THEY control the rates (price fixing), things can get out of hand, like they are now. The MARKET should control rates. If there is too much easy credit (like now) and lenders start losing money and loans start being defaulted on (like now) then the lenders themselves will tighten their underwriting guidelines and raise their rates (like they should be doing now, but aren't).

A free market economy takes care of itself. It needs no oversight.

There is simply nothing positive I can see about a private bank charging our government interest for money which our government ought to be creating for us. It's a sham, plain & simple.

Good luck though.

Statist says, "We need a central bank to fund the welfare-warfare state through the monetization of debt".

USSA Today