Should We Abolish the Federal Reserve?

Not since 1833 have there been calls to abolish a United States bank. At the time, it was President Andrew Jackson who succeeded in abolishing The Second Bank of the United States. Today it is Congressman Ron Paul of Texas who is calling for an end to the Federal Reserve.

Paul lays out his thesis in his new book, End the Fed, in which he calls for an audit, and then an end to the Federal Reserve. I recently interviewed Rep. Paul about ending the Fed, his thoughts on the dollar, and financial regulatory reform.

Paul thinks the Fed is the root cause of the financial crisis and what permitted exorbitant risk-taking by companies ranging from Bank of America (NYSE: BAC  ) to Citigroup (NYSE: C  ) and from Morgan Stanley (NYSE: MS  ) to AIG (NYSE: AIG  ) . He believes abolishing the Fed would spur people to save more and become more prudent with their finances because free market forces, instead of a central bank, would set interest rates, limiting the amount of credit in the economy.

He is in favor of returning to the gold standard and believes an end to the Fed will put an end to the dollar's long-trending depreciation. Paul also calls for more regulation on the government and not the markets.

What follows is an edited transcript of the interview.

Jennifer Schonberger: In the wake of the financial crisis, some in Congress want to give even greater power to the Fed. You want to abolish the Fed. Why?

Congressman Ron Paul: Because they caused all the trouble. A monetary policy of easy credit and artificially low interest rates was the main source of the financial bubble, and the correction is always trying to fix what the Federal Reserve has done. The only way you can address the business cycle and prevent wild swings in the business cycle is by addressing the Federal Reserve and how they cause nothing but mischief.

Schonberger: Would you put something else in place of the Fed, or revert to a laissez-faire approach and let the free market forces play out?

Paul: Yes, I believe in free markets. We don't have free markets and haven't had them. So it's convenient for people to blame the free market for the problems, but that's a fallacy. In a free market, capital would come from savings. People put their money in a savings account or something of real value, and that determines the interest rates.

When people don't save, like we as a nation have not saved for many decades, there is this illusion that there is still so-called capital, or money made for investments. [In reality] that capital came from a computer at the Federal Reserve. Therefore it sent the wrong information to businesses and savers, claiming that there was a lot of savings out there. Based on that, people overinvested and built too many houses. It's the Federal Reserve that sends out the incorrect information.

Schonberger: So this would be a world with less credit, would it not?

Paul: Yes, there would be less credit, but it would still be steady growth. You would never have periods of economic tumult if you had economic growth of 4% or 5% -- so you would never have the temptation to turn it off. … There would be enough credit, but there wouldn't be an excess amount. … It would be determined by the marketplace rather than by the artificialness of the Federal Reserve.

Schonberger: In terms of getting people to save more, what are your thoughts on the consumption-based value-added tax that's been talked about recently?

Paul: It'd be a disaster. Most people from the Keynesian side are always arguing that the main driving force of the whole economy is consumption. In free market economics, it's savings, building capital, and buying things that have value. Consumerism can be artificial if it comes in the form of easy credit from the Federal Reserve. So, if you're going to try to stimulate consumerism, and on the other hand tax it, it doesn't make any sense at all.

Schonberger: What is the biggest downside risk to abolishing the Fed?

Paul: I don't know of any risk. The biggest challenge is that people might not understand it. If there are problems they might blame the problems on getting rid of the Fed. The problem would really be coming from the fact that we had it … The first year would be tough. The problems would be due to the fact that the Fed would cause so much harm in the correction phase, which is always necessary.

Schonberger: Our economy is increasingly tied to economies around the world. What would eliminating the Fed mean for the global economy? 

Paul: It depends what you replace it with. If you allow the market to replace it with commodity money and make sure various countries believe in free trade, tariffs should go down, and free trade should reign. You should be able to have much freer travel, so it would be a real move towards globalism and global trade. If only one country does it, there's more of a challenge, and only the person who goes onto the gold standard would benefit.

Schonberger: You're of the belief that abolishing the Fed will thwart the dollar's long-trending depreciation. Explain to me how that works.

Paul: There's no dilution factor. In my book, I use the example of when I was a kid and my dad always had to check to make sure the milk wasn't diluted. Sure, it stretches the milk, but it doesn't stretch the quality. This would be the most important thing for eliminating the problems that the Fed has created.

Governments want to spend more than they have and go to war when they shouldn't, and the only way they can finance it is through the printing press. The period of time when the world accepted a notion of an international gold standard was a time of tremendous economic growth.

Schonberger: You've introduced HR 1207, the Federal Reserve Transparency Act, in which the Comptroller General audits the Fed and then gives a detailed report to Congress. What are the odds for passage? Do you think you'll be able to get legislation through the House this fall?

Paul: It's very, very popular. Every Republican in the House has signed on, and 111 Democrats have signed on. We have over 290, which in theory means that it could pass under suspension because we already have two-thirds in Congress as co-signers of the bill. … It depends on the opposition, but I think there's a very good chance it will get passed.

Schonberger: Are you at all concerned that auditing the Fed would open up the central bank to the political process and subject the bank to making monetary policy decisions based on lobbyists, politicians, and special interest groups, rather than the necessary economics?

Paul: That's the argument the opposition uses. But they want to use the political influence that they already have because it's been in secret. If you have a political influence of a company like Goldman Sachs (NYSE: GS  ) that can manipulate the benefits toward them and away from Lehman Brothers, that's political, too.

It's been known for decades that the chairman of the Federal Reserve Board always accommodates a president and tries to have the right part of a cycle come up for election time. But, the audit bill has nothing to do with managing monetary policy.

Schonberger: Briefly, Congressman, how should we reform the financial regulatory framework besides ending the Fed? In terms of regulatory structure, what about ending the SEC? Certainly the SEC dropped the ball, as did the CFTC [Commodity Futures Trading Commission]. How do we rectify the system?

Paul: I admit the SEC was a total failure. Now people have this moral hazard of saying "It's OK, the SEC has looked at their books." That encourages people to make mistakes. People should be much more cautious.

What you want is more regulation of the government -- the Federal Reserve and on Treasury -- not to interfere in the markets. We should let bankruptcy laws work. The most important way to regulate markets is to never prop up the bad investments. Regulation should be defined as enforcing contracts, no fraud, and making sure the government doesn't interfere for the benefit of special interests.

Let state laws take care of fraud cases. Insurance and ratings would all be market-oriented.

Do you agree with Congressman Paul? Disagree? Share your thoughts in the comments section below.

Fool contributor Jennifer Schonberger owns shares of Bank of America, but does not own shares of any of the other companies mentioned in this article. The Motley Fool has a disclosure policy.


Read/Post Comments (205) | Recommend This Article (268)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 25, 2009, at 12:09 PM, XMFSinchiruna wrote:

    Jennifer,

    Excellent interview and Terrific article! :)

  • Report this Comment On September 25, 2009, at 12:52 PM, rj8118 wrote:

    I know how to fix it. Force govt to one term and single item bills. This would eliminate lobby and everyone would read the bill.

  • Report this Comment On September 25, 2009, at 1:18 PM, TMFCop wrote:

    Sadly Dr. Paul was not his party's standard bearer in the last election. The only member of Congress in either party with any sense.

    Rich

  • Report this Comment On September 25, 2009, at 1:28 PM, joezhou wrote:

    Tell 'em the truth, Mr. Paul

  • Report this Comment On September 25, 2009, at 1:41 PM, catoismymotor wrote:

    Jennifer,

    Thank you for taking the time to make this interview happen. I have enjoyed reading the article and appreciate your efforts.

    Cato

  • Report this Comment On September 25, 2009, at 1:55 PM, SkepticalOx wrote:

    End the Fed? Ron Paul Is Wrong For All The Right Reasons:

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=260974&t=0...

  • Report this Comment On September 25, 2009, at 2:20 PM, fromthinair wrote:

    I completely agree with Dr. Paul. He has been the only consistent voice of sanity throughout this manufactured crisis. His grasp of economics is profound. He could certainly teach Bernanke et al a thing or two.

  • Report this Comment On September 25, 2009, at 2:41 PM, lquadland10 wrote:

    President Kennedy almost got rid of the Fed with Executive Order 11110. You remember the silver backed dollar don't you? Why pay intress on a rent a dollar backed by thin air? The Fed aka the IMF then bought up the dollars after Kennedy was killed. Congress could pass a bill to bring back the Silver Certificate dollar at say a budget of 1 trillion dollars or our President could issue and Executive Order. They could also cut their pay by 50% starting with the President and Congress. The President says share the wealth so until I see him give up 50% of his pay or Congress they are just talking the talk and not walking the walk. Also I believe that we don't owe the FED any intress on the thin air we borrow. Or if we do let us just pay them back with thin air. Way past time to audit the FED aka the IMF. Which is not even part of the government. Also do they count TAXES and FEES and the Intress on the money they lend us as inflationary?

  • Report this Comment On September 25, 2009, at 3:04 PM, fhashtpari wrote:

    Ron Paul is right on the money. The root of our financial crisis is the FED's irresponsible policies over the last 30 years. FED's abilities to manipulate the monetary system exponentially increased when we moved away from gold based USD..

  • Report this Comment On September 25, 2009, at 3:12 PM, PerfectlyLegal wrote:

    Thanks for talking to Rep. Paul. America would be a better place if more Republicans were like him.

  • Report this Comment On September 25, 2009, at 3:22 PM, catoismymotor wrote:

    He is a RINO. He is really a Libertarian.

  • Report this Comment On September 25, 2009, at 3:24 PM, deadlysaber wrote:

    Most government interventions gain the support of the masses because they are presented as "soak the rich" measures. However the day arrives when the amount of public expenditures cannot be financed by expropriating the most productive citizens of a society. Ayn Rand's prophetic book "Atlas Shrugged" explains what happens to the producers in a parasitical society-one that cannibalizes its best. Well, with our progressive tax system, that happened long ago. Our latest artificially created economic boom attracted charlatans and all forms of predators. Although some admirable and honorable entrepreneurs remain, most of the beneficiaries of the largess of the Federal Reserve System were people who are unfit to accumulate wealth under the honest social system of Laissez faire capitalism.

    The artificial boom has collapsed. The bubble has burst. Now the masses are asked to carry the burden. The bailouts are on their backs-backs that are breaking under the prohibitive weight the political establishment is dumping on them. I'm sure it won't take long for the hapless masses to "shrug". After all, they are already carrying too much weight in the form of indebtedness-indebtedness that was encouraged by the very same establishment that is attempting to heap their own debt on them. How treacherous can you get?

    -------------------

    Money without intelligence is like a car without a road.

    http://www.intelligentinvestingtips.com

  • Report this Comment On September 25, 2009, at 3:37 PM, JGBFool wrote:

    catoismymotor is right.

    Ron Paul is WAY too conservative to be a true republican these days. So is John J. Duncan.

  • Report this Comment On September 25, 2009, at 3:49 PM, Scoobrs wrote:

    I disagree with Dr. Paul's misconceptions about the fantastical world of "free market economics," which are not so much "free" as "con," but I do agree with him about the Federal Reserve. We can't keep having bubbles and massive debt-financed growth. The Fed inflates the monetary supply so that banks can capture more of it through lending this money that cost them almost nothing. Even the Fed's solution to distressed assets was yet another secret giveaway of taxpayer dollars to banks. Granted, we cannot continue to grow at the rate we were used to without an institution printing money and then manipulating its value on the market.

    In my opinion, allowing the continued existence of the Fed on American soil is not unlike allowing rats in the pantry. Sooner or later, we'll all be starved and they'll be fat.

  • Report this Comment On September 25, 2009, at 3:49 PM, whereaminow wrote:

    Thanks for interviewing a hero. This is Motley Fool's finest hour. Go Ron Paul! End the Fed!

    David in Qatar

  • Report this Comment On September 25, 2009, at 4:01 PM, RHaganC wrote:

    Right on! End AIG too please. :)

  • Report this Comment On September 25, 2009, at 4:09 PM, Chromantix wrote:

    +1 for bringing Dr Paul into an honest interview

    BTW: Support Rand Paul for Senate: http://www.randpaul2010.com/

    (Schiff too: http://www.schiffforsenate.com/)

  • Report this Comment On September 25, 2009, at 4:09 PM, Chromantix wrote:

    +1 for bringing Dr Paul into an honest interview

    BTW: Support Rand Paul for Senate: http://www.randpaul2010.com/

    (Schiff too: http://www.schiffforsenate.com/)

  • Report this Comment On September 25, 2009, at 4:17 PM, ejdodson wrote:

    One of Ron Paul's longstanding positions has been that our currency ought to be backed by gold. The period of deposit banking characterized in the 16th century by the Bank of Amsterdam supoorts the general wisdom of currencies denominated in some quantity of a stated commodity. The system we have come to, with nothing backing our currency, cannot be called a "fractional reserve system" in the true sense of this term. Teaching political economy, I describe the Federal Reserve Note as "a promise to pay nothing in particular."

    One of the problems created by our current monetary system is that it permits government to self-create credit, something none of us as individuals can do. This authority empowers government to issue bonds in exchange for Federal Reseve Note balances, under circumstances where if the Fed governors believe the issuance of new note balances will not be inflationary (or only moderately inflationary) the balances can be created out of thin air -- rather than going into the credit markets to acquire funds. And, of course, the bonds yield interest income to the Fed.

    It is not likely that the U.S. Congress (any U.S. Congress, whether dominated by Republicans or Democrats) will ever vote to cap the issuance of currency. The best we can strive for, in my view, is a competitive system that operates outside of government, a system of privately-operated banks of deposit. Individuals and businesses would purchase a basket of precious metals, deposited with one of the banks. The reason for proposing a basket of precious metals is that the market price would be les volatile than for gold alone. Against this balance (which would be adjuste members would be issued debit cards with which to purchase or sell goods or services to other members. The result over time would be to invoke Greham's Law in reverse: good money would drive out bad. Governments would eventually have to become members of the deposit banks or risk losing access to needed good and services.

    The deposit banks would not actually need to warehouse the precious metals. There are already in existence the facilities for doing so in every country. These storage facilities would need to be subject to government oversight, frequent independent auditing, and insurance guarantees.

    If Ron Paul and other monetary reformers want to achieve a meaningful return to honest money, the lessons of the the Bank of Amsterdam are worthy of attention even today.

  • Report this Comment On September 25, 2009, at 4:54 PM, AnarcoCapitalist wrote:

    The reality is Ron Paul is right. As a scholar of Austrian Economics, he understands monetary principals that other politicians don't.

    The reality is though that the Federal Reserve allows the Federal Government to spend outside of its budget, and silently additionally tax the US population under our noses.

    To say that our politicians will willingly give up the goose that lays the golden eggs, well, I wouldn't hold my breath.

    In reality, when our incomes get cut, we cut our budgets and decrease spending. In political fantasy land, the government increases spending by increasing borrowing. What would happen if we went to a lending institution and explain to the lender that we wish to triple our debt load even though our incomes were just halved? We'd be laughed at as we were shown the door, yet this is what Washington does every single day.

    You're awsome Ron. We need more of you around so we can rip this leech off our backs called government.

  • Report this Comment On September 25, 2009, at 4:58 PM, tramagli wrote:

    End the Fed! That should have been done long ago. We need to return to asset-backed currency. We are seeing first-hand the ill effects of worthless funny money and fiscal irresponsiblity encouraged by the Fed. IMHO the Fed is a demon and the SEC is a worthless boondogle. The government has no purpose other than their own devices to meddle in the markets or manipulate currency.

  • Report this Comment On September 25, 2009, at 5:07 PM, topsecret09 wrote:

    End the fed In 2010... DJIA 20,000 by 2014...... http://endthefed.us/

  • Report this Comment On September 25, 2009, at 5:12 PM, whereaminow wrote:

    If H.R. 1207 passes, Barack Obama will veto it. I find it fascinating that a man who was elected on the promise of change, a man that made TRANSPARENCY AND OPEN GOVERNMENT the hallmark of his early days in the White House, the man hailed by haughty intellectuallly superior modern day Progressives, would veto a bill that would bring about the very presidency he promised. Even more fascinating is the reaction to these proceedings by the naive fools who followed the pied piper in an over exuberant rush to put anyone but another George Bush in the White House (a smart idea, if poorly executed).

    Government can be fun.

    David in Qatar

  • Report this Comment On September 25, 2009, at 5:26 PM, unklbob wrote:

    First and foremost, most people DO NOT understand that the Federal Reserve is NOT federal. If you want to know how it was brought into existence, then read The Creature From Jekyll Island. The Fed is PRIVATE, not Federal. Also, you need to understand how fractional banking works, and how their system has used YOUR NAME to create more money. Get yourself educated, and then you, too, will understand, along with Ron Paul, why we should TOTALLY ABOLISH the FED. They need to go BYE-BYE! Once and for all! Also, read the Grace Commission Report from President Reagan's term in office. Not one nickel of the federal taxes you pay goes to providing any of us even one benefit. It all goes to pay the "federal deficit:, which is nothing more than the interest the Fed charges the government for printing and managing our money supply, which the Fed prints on OUR printing presses for free. GET EDUCATED, FOLKS! BTW, the Fed demanded, in the beginning, that they get paid in GOLD, so I wonder if there is any more left in Fort Knox. Maybe we should have a look-see!

  • Report this Comment On September 25, 2009, at 5:43 PM, outoffocus wrote:

    ejdodson

    You proposal would be a wonderful idea if it werent illegal and unconstitutional.

  • Report this Comment On September 25, 2009, at 5:50 PM, Dannysea wrote:

    Ending the FR?

    Sorry; too embedded.

    Reminds me of DST (Daylight Saving Time.) It is obsolete and no longer functions in our modern world, but what has our Congress done in the last several years? Extended the demise by another six weeks a year.

  • Report this Comment On September 25, 2009, at 6:02 PM, topsecret09 wrote:
  • Report this Comment On September 25, 2009, at 6:49 PM, sfojoe wrote:

    The idea of abolishing the Fed is lunacy and would lead to total chaos including the collapse of the world financial markets. The Fed has made mistakes, particularly under the over rated Mr. Greenspan. As much as I hate cliches, "let's not throw out the baby with the bathwater." The Fed needs to be independent in setting monetary policy and not under the thumb of the President, congress or anyone else. To charge that the Fed has been strongly influenced by Goldman and others is yet another lunatic idea.

  • Report this Comment On September 25, 2009, at 7:02 PM, whereaminow wrote:

    unklbob,

    The Federal Reserve is not "Federal", but it is not entirely "private" either, as I noted in this blog post: "More Uncomfortable Questions for Fed Supporters"

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=254244&t=0...

    The Federal Reserve has a symbiotic relationship with the government. They can never act independently, and very often the goals of the Fed and the Gov come together. Expansion of the monetary base, for example, is desirable for both parties.

    You have to be careful when engaging in this line of reasoning. Basically, you are walking into the "Fed should be independent" trap. The most significant arguments against the Fed involve the impossibility of central planning, the Fed's exacerbation of business cycles through easy credit, and the Fed's crimes against social justice by debasing the currency.

    sfojoe,

    You just need to read more. I suggest The Ethics of Money Production by Jorg Hulsmann, Meltdown by Thomas Woods, or End the Fed by Ron Paul as beginner books.

    David in Qatar

  • Report this Comment On September 25, 2009, at 7:06 PM, DavidMountain wrote:

    At last- Someone talking some sense and actually pushing for change. The Fed has always been nonsensical, the wizard of oz, no real substance but huge influence, and the more we believe it, the more we build our lives on it the bigger the crash that is imminent.

    I'd compare the US economy at the moment to the city of venice, you can keep building, and spending billions trying to prop it up but the land itself is sinking, the very foundations of the economy are on shifting sand when in the hands of an independant group who can invent money out of thin air for whatever purpose they please.

    Get rid of the FED, build your economy on actual substance and the world will follow.

  • Report this Comment On September 25, 2009, at 7:19 PM, abitare wrote:

    Good interview. Good stuff fool!

  • Report this Comment On September 25, 2009, at 7:50 PM, RideHD wrote:

    Excellent article! Its time to start the real change and reverse the chaos our government started in 1913. This is a good first step.

  • Report this Comment On September 25, 2009, at 8:18 PM, topsecret09 wrote:

    YES WE SHOULD !!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (Sorry got carried away with exclamations) TS

  • Report this Comment On September 25, 2009, at 8:32 PM, eaenglish10 wrote:

    BEST ARTICLE I have ever seen from the Motley Fool!! yes!!

  • Report this Comment On September 25, 2009, at 8:34 PM, whereaminow wrote:

    actuary99,

    Have you discovered the formula yet for economic prosperity?

    If you are an actuary, then you must also know that math is a logical science built upon deductive reasoning. Austrian School economics has the same foundation, albeit without using mathematics to explain concepts. The difference arises because economics is a study of human interaction. It is not a physical science like, well, physics.

    I don't know why you feel that having a 4.0 from an academic institution would impress anyone. It's not important at all, except to prove that you can master the material presented to you. The crucial point would be in understanding which material was presented to you, knowing which material was not, and understanding the selection process involved. That would be worth more than any 4.0 you could receive.

    If you truly did have a solid foundation of economic knowledge, you would present an analysis of unklbob's position, or perhaps the ones that I have detailed, or even Ron Paul's. Since your title implies an elevated education, you either don't feel the subject to be worthy or you have decided that Ron Paul-tards are not capable of comprehending your immense intellect. If the former is true, why waste your time posting at all? If the latter is true, why waste your time posting at all? Do you get my point?

    David in Qatar

  • Report this Comment On September 25, 2009, at 9:16 PM, higherstandard wrote:

    Ron Paul is right on and has been for many decades. It is unfortunate that a person well versed in sound money policies, should be dismissed as a fringe thinker and/or crackpot. Ron Paul may be anything else, but he is NO crackpot.

  • Report this Comment On September 25, 2009, at 9:25 PM, dc46and2 wrote:

    Thanks for the great interview. I completely agree with Ron Paul.

    "The economy" is not a machine to be tinkered with and fine-tuned like a car engine. We should strive to keep the value of money as constant as possible, just like we keep the length of a meter constant and for the same reasons. The most practical and reliable way to accomplish this is to make it exchangeable for some commodity, such as gold, whose value is reckoned to be very stable. (Although, it is not strictly necessary to abolish the Fed in order to accomplish this.)

    I encourage everyone to study the different opinions regarding monetary policy and not accept uncritically the "mainstream" Keynesian approach which undoubtedly comprised the bulk of your education. I think few people truly understand what a gold standard even means or how one is properly implemented.

    One book I found very informative was "Gold: The Once and Future Money" by Nathan Lewis. Don't be fooled by the title: this book is not an alarmist's call to stockpile bullion. Lewis provides an in-depth analysis of money in all its forms, the history of US money (including the current system), and various currency crises around the world.

  • Report this Comment On September 25, 2009, at 9:45 PM, appertjt wrote:

    I'm not an expert on monetary policy or economics so I'm not going to argue either subject. Something in Ron Paul's arguments doesn't make sense though. If the FED is the cause of booms and busts why did the panic of 1907 happen? There were 3 US recessions during the 1890s.

    The FED might not be the best or even a good solution but the evidence doesn't support blaming it for all of our problems. Don't get me wrong, the actions of the FED may have contributed. I'm just saying the FED system itself doesn't seem to be the root cause of the current recession.

  • Report this Comment On September 25, 2009, at 10:42 PM, 8ships88 wrote:

    Ron Paul is one of the few Republicans in congress who is still an AMERICAN, not just a Republican. I left the party because I beleive like him that America comes before any Party. Thanks, Ron Paul and thank you, Motley Fool.

  • Report this Comment On September 25, 2009, at 10:47 PM, Celtics17 wrote:

    Romney - Paul 2012!

  • Report this Comment On September 25, 2009, at 11:05 PM, othgang wrote:

    Ron Paul is right, the fed is a good ole boys club.

  • Report this Comment On September 25, 2009, at 11:28 PM, ConstantSkeptic wrote:

    Sorry folks, the genie is out of the bottle. A world without fractional reserve banking is not going to work. The Fed doesn't "set" interest rates, they target interest rates by using their balance sheet to buy and sell debt securities. The forces of supply, demand, and risk "set" interest rates. That is why a creditworthy borrower can get capital at 5 or 6 percent and a risky borrower has to pay much more (10 percent, 15 percent, etc.).

    Ron Paul needs to re-take macroeconomics 101.

  • Report this Comment On September 25, 2009, at 11:40 PM, withihreason wrote:

    You may not think TRoosevelt and Woodrow Wilson shared much in the way of mindset other than love of country, but significantly they shared advisors in an uncanny flow of "Wise Men" who oversaw financial panics of the rise of American wealth through power. Wilson was not that interested in a FED but his advisors like Nelson Aldrich was , who became the namesake for another Nelson we of this day are more likely to remember. He saw how panics happen and how they had a power that could be harnessed.

    No, the FED has never micromanaged the whole of our economy since its 1913 inception and its instigation of the 16th Amendment that gave us the collection agency for the FED, aka the IRS. But it has macromanaged quite a lot of what goes on. Should the US Government be picking winners and losers in the land of freedom and opportunity? How does that work? Just look around you.

    Of course, many phD's in economics will tell you, its a beautiful system, because it has honored them. Besides that tho, who else does it honor?

    Oligarchy anyone?

  • Report this Comment On September 25, 2009, at 11:53 PM, ConstantSkeptic wrote:

    Also, the problem with a "gold standard" is that it puts a lot of power into the hands of quite a few dangerous, backwards countries that happen to have large gold deposits. Did you ever think of the bloody pandemonium that would break out in gold-rich African countries? In my opinion, this is actually worse than democratic governments that issue major currencies (Dollar, Euro, Yen, etc.) despite their short comings. You think a nine-month financial crisis is scary, think about the fact that China and Russia have about double the gold production of the USA ... all of a sudden "Austrian Economics" doesn't sound to cozy and safe.

  • Report this Comment On September 26, 2009, at 12:17 AM, ET69 wrote:

    Please implement the Gold standard!

    Please abolish the Fed!

    Please let Mecantile Capitalism run the world!

    Please try to repeat the past and live in a mythical "good old days"!

    BUT when it all crashes into a world wide depression and wars Please don't complain when the Bolsheviks take over and put you all out of your schizophrenic free market capitalist misery!

    Ron Paul is a demogogue.

  • Report this Comment On September 26, 2009, at 12:54 AM, tfgray wrote:

    deadlysabre, your first paragraph contradicts the second. In the first, you claim that the progressive tax system (higher incomes pay a higher percentage) favors the parasites over the producers. In the second, you say that the oppressed masses will rebel against...let me think...Oh, yeah, those poor overtaxed guys in the highest tax brackets. So exactly who are the parasites? Make up your mind.

    Personally, I think that the notion that an unrestrained economy will produce anything other that what it has always produced--an ever-increasing concentration of wealth and power, punctuated by violence--is a false ideology. (Check out any Third World nation you like for an example.) If you think that eliminating regulation will make the economy prosper, read about the South Sea Bubble in England.(in the days before corporations were regulated.) Or you could read about the repeated boom and bust cycle that led to the creation of the Federal Reserve.

    It's all fun until somebody's kid starves to death.

  • Report this Comment On September 26, 2009, at 1:25 AM, topsecret09 wrote:

    On September 25, 2009, at 8:34 PM, whereaminow wrote: actuary99,

    Have you discovered the formula yet for economic prosperity?

    If you are an actuary, then you must also know that math is a logical science built upon deductive reasoning. Austrian School economics has the same foundation, albeit without using mathematics to explain concepts. The difference arises because economics is a study of human interaction. It is not a physical science like, well, physics.

    I don't know why you feel that having a 4.0 from an academic institution would impress anyone. It's not important at all, except to prove that you can master the material presented to you. The crucial point would be in understanding which material was presented to you, knowing which material was not, and understanding the selection process involved. That would be worth more than any 4.0 you could receive.

    If you truly did have a solid foundation of economic knowledge, you would present an analysis of unklbob's position, or perhaps the ones that I have detailed, or even Ron Paul's. Since your title implies an elevated education, you either don't feel the subject to be worthy or you have decided that Ron Paul-tards are not capable of comprehending your immense intellect. If the former is true, why waste your time posting at all? If the latter is true, why waste your time posting at all? Do you get my point?

    David in Qatar

    THAT WAS CLASSIC.... LOL !!!!!!!

  • Report this Comment On September 26, 2009, at 2:09 AM, guayaquil wrote:

    Commodity based money gives the advantage to those who go out and 'discover' more of the commodity. It was debunked years ago.

    Paul can't find a disadvantage to ending the FED! How disengenious is that!?!

    A quick negative - if banks depended on savings to provide loans no one but the very rich would ever own a house!

    I like Ron Paul and would rather see him as President than any other politician alive - but on this he is seriously wrong!

  • Report this Comment On September 26, 2009, at 2:17 AM, yenh wrote:

    If Ron Paul can't audit and abolish the Federal Reserve, the most effective option the public can use to maintain financial freedom and sovereignty is "non-compliance" with the monetary system. Fiat currency is based on "faith" that your currency HAS VALUE. It truly does not have value today. By artificially pumping up a market with empty dollars, backed by nothing, the Fed and our government are in collusion to defraud the public. Every family is now under tremendous pressure to produce enough revenue to survive, to eat, to pay bills. To remain ALIVE, we need to work...we no longer have food in our back yards. We BUY all food. WE, the public, must take our financial system very seriously, because it keeps us alive and determines our level of security as human beings. On the OTHER hand, we have financial "royalty" sitting on very expensive throne-like chairs, determining the value of the dollars you just paid for your groceries. These faux-kings and queens also eat and buy groceries, but their level of existence is on a much different plateau than yours. THEIR financial game is MONOPOLY, with free flowing multi-colored money, just like we've all played in the living room. The game WE, the public, must play, is a very serious game of "SURVIVOR". Your level of sweat while earning worthless paper money is "real". In the Fed and in DC, there is very little sweating going on, mainly because they printed the money and control the cash box, and government is not a creative force, but rather a parasitic entity. It exists by feeding off its host or hostess. We are at a "Ghandi" moment in time. Our energy and sweat, our existence belongs to US. If we must take this existence so seriously, then we must force our government and its monetary "sub-contractor", the Federal Reserve, to play the same serious game of "Life" as they expect the public to play. If the money is not "real" flowing from the Fed, then why are we taking it so seriously?? Why do we sweat April 15th, mortgage payments, utility bills, if the money in our hands is printed at will by a handful of people playing financial God with our future? We have muscle, in the form of "compliance or non-compliance". Play the game, DON'T play the game. Let's see this game for what it is, and demand to see the rules, so we know WHAT we're playing. Then, there needs to be consequences for all involved in this ruse, like prison.

  • Report this Comment On September 26, 2009, at 2:22 AM, thomdd1959 wrote:

    Ron Paul Rocks!

    The Federal Reserve Bank is Set Up as a Privately Owned Banking Cartel Controlled by a Small Elitist Group of Powerful International Bankers.

    This Same Cartel Owns Other Central Banking Systems Worldwide Including the IMF (International Monetary Fund) and World Bank.

    We Don’t Need To Just Audit “The Fed Scam”

    We Need To Cut Off Its Ugly Head Once And For All!

    The National Sovereignty of the Great U.S.A. must never, ever be compromised in any way!

    “Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the government of these United States and the people of the United States out of enough money to pay the Nation's debt. The depredations and iniquities of the Fed has cost this country enough money to pay the National debt several times over. These twelve private credit monopolies were deceitfully and disloyally foisted upon this country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions. Those bankers took money out of this country to finance Japan in a war against Russia. They created a reign of terror in Russia with our money in order to help that war along. They instigated the separate peace between Germany and Russia and thus drove a wedge between the Allies in the World War." --Congressman Louis T. McFadden, Chairman of House Banking Committee 1921 through 1931 (In a speech made before the House in 1934)

    “The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse.” --James Madison

    “Every government degenerates when trusted to the rulers of the people alone. The people themselves are its only safe depositories.” --Thomas Jefferson

    Our Freedoms, Our beloved Constitution, Our National Sovereignty, “We the People” and the fact that we are a Constitutional Republic is why the United States of America is and will continue to be the Greatest Nation in the World!

    http://www.tomdavidd.com/blog/

    “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” –Abraham Lincoln

  • Report this Comment On September 26, 2009, at 3:29 AM, guayaquil wrote:

    Commodity money is valued the same as Fiat money!

    The Value of ANYTHING is based on what people will pay for it.

    The only difference is supply.

    Commodity money still fluctuates based on either 1) growing more 2) finding more.

    Fiat money can be 'grown' or 'found' more easily.

    Switching to Commodity based currency only takes Monetary Policy options off the table.

    Why Paul is disingenous is that the Free Market needs help smoothing out the extremes. Without Monetary Policy you have no ability to smooth out the extremes. Understand what you are advocating in full, before you advocate it!

    If you are willing to endure wild swings in unemployment, then go for it!

  • Report this Comment On September 26, 2009, at 3:40 AM, dc46and2 wrote:

    ConstantSkeptic,

    Gold is not a perfect, immovable standard of value, and it would be foolish to continue a gold standard if it became clear that the value was being grossly manipulated. However, I think your vision of bloody pandemonium and your fear of gold-rich countries is unrealistic. You imagine that gold, which must be mined with great expenditure of time and effort, and whose value has remained surprisingly steady for thousands of years, could be more easily manipulated than floating fiat currencies which may be produced out of thin air?

    Even if an adversary had the power to flood the gold markets and send the price plummeting, that adversary would be hard pressed to enjoy any benefit from this action. They would be destroying the market for their own great resource, and their mischief would certainly be detected and thwarted.

    Suppose, for example, that the USD were pegged to gold at $1000 per ounce and the US central bank would exchange USD and gold at that rate. An adversary, through tremendous effort, floods the gold market so that the price of gold drops to $500. Let us assume that absolutely nothing is done to mitigate this obviously hostile action. An arbitrage opportunity is created and gold pours into the US central bank, where it may be exchanged for $1000. The supply of gold on the market decreases and the price increases until the $1000/oz parity is reestablished. It is arguable whether this would have any effect whatsoever on the purchasing power of the USD, but even if the USD is devalued at this point, our adversary would have only accomplished at great expense what our own central bank now accomplishes gratuitously.

    This concern over "so-and-so has more gold than us," goes back to the days of mercantilism and was addressed by Adam Smith 200 years ago. It was of little consequence then, when gold literally was money. It would be of even less consequence if money were merely pegged to gold. Remember that money in any form is not an end unto itself. It is merely a tool which facilitates commerce and economic calculation.

  • Report this Comment On September 26, 2009, at 4:00 AM, johnnymiami wrote:

    Just say No. solves the drug problem

    End the FED. solves the economic problem

    Take a pill. solves the pain, sleep, erection problem

    (unless you are sound asleep with a painfull 4 hour erection)

    Is the car or the road intelligent? driver maybe

    I don't know much about Ron but his wife make some tasty frozen fish products, cut out the msg please.

    Well, I feel better.

  • Report this Comment On September 26, 2009, at 4:02 AM, dc46and2 wrote:

    guayaquil said:

    "Fiat money can be 'grown' or 'found' more easily."

    This is precisely what we want to avoid.

    "Switching to Commodity based currency only takes Monetary Policy options off the table."

    This is precisely what we want to accomplish.

    "Why Paul is disingenous is that the Free Market needs..."

    Paul is not being disingenuous if he doesn't agree with your statement. (He could be wrong, perhaps, but that doesn't make him disingenuous.)

    "If you are willing to endure wild swings in unemployment..."

    You mean like the swing we are having right now?

    BTW, some people do know what they are advocating :)

  • Report this Comment On September 26, 2009, at 4:12 AM, dc46and2 wrote:

    guayaquil wrote: "...if banks depended on savings to provide loans no one but the very rich would ever own a house!"

    Could you justify this opinion? I've seen this before, but I don't understand this conclusion.

  • Report this Comment On September 26, 2009, at 4:36 AM, thisislabor wrote:

    I'm sorry, it's not the system that is wrong, it's the people in it. at least that's my thoughts. getting rid of the Fed wont fix the problem.

  • Report this Comment On September 26, 2009, at 4:42 AM, thisislabor wrote:

    Look at our countries banking setup, and compare that with the other countries that don't have the same banking setup. look at ours versus theirs current economies and do the math.

  • Report this Comment On September 26, 2009, at 5:00 AM, dc46and2 wrote:

    If we set aside the conspiracy theories and the objections to who owns and controls the Fed, if we focus only on the economic reasons for abolishing the Fed or not, it seems to me that all the various opinions devolve to three viewpoints:

    1. We should have money of constant value.

    2. We should have money of constant quantity.

    3. Value and quantity of money should be freely manipulated by a central economic planning board to accomplish its goals.

    I think most Fed-bashers subscribe to 1 or 2, but it's not always obvious which. The Fed-lovers are devoted to 3, but usually give a nod to 1 as a secondary objective.

    Fed-bashers also advocate a gold standard, but this is just a particular method of pursuing 1 or 2 depending how it's implemented. I feel this is a pointless addition to the argument since no one who subscribes to 3 would ever support a gold standard for obvious reasons.

    These Fed or no-Fed arguments also seem to implicitly bring up the question of fractional reserve banking. The no-Fed folks usually favor 100% reserves, while the pro-Fed people assure us that the world would implode if banks had to keep all your demand deposits in the vault.

    I think it's strange that these arguments revolve around the Fed itself, since we could pursue any of these viewpoints with or without the Fed. Since these seem to be the real issues underlying the Fed debate, I would love to see an article or articles addressing these issues specifically.

  • Report this Comment On September 26, 2009, at 5:35 AM, dc46and2 wrote:

    thisislabor,

    Perhaps you are right, maybe the people running our system are rotten. What do you propose to do about it?

    I think we should adopt a system that would not depend so heavily on the good character of its administrators for success.

    "Let no more be heard of confidence in men, but rather bind them down by the chains of the Constitution." -- T. Jefferson

  • Report this Comment On September 26, 2009, at 5:46 AM, esotericrajen wrote:

    This is a great article, but it needs to be followed up with more details and facts on the Fed, the SEC, the Treasury so that the public understand all of how it works, and how the Fed can freely print money and control interest rates.

    Once that is exposed to the public, there should not be a single member of the House opposing the audit and, eventually, the disbandment or reduced power of the Fed.

    I am not convinced about the free market angle since that is open to abuse. Some checks need to be incorporated, but the overall principle of money based on "actual value" makes a good basis.

    The only other issue is that other governments also have Central Banks that do what the Fed does in the US. How do you get the whole world to change? It is very convenient to overspend and have someone print more money for you.

  • Report this Comment On September 26, 2009, at 6:26 AM, guayaquil wrote:

    There is no perfect system, however I believe having the FED is far better than not having it, even when they do stupid things. Remember, in the course of human history a FED system is quite young. We learn from our mistakes - as is evident from our response to the recent collapse.

    Look at any major economy and they all have a central bank. They have one because it allows governments to have a monetary policy, without one you do not have the ability. It's a regulator or gas/break mechanism for the economy. Sometimes the folks driving are drunk however!

    Now look what is happening is some European countries. I am currently in a Euro country who has pegged their currency to the Euro. They rely solely on the EU Central Bank for monetary policy. Since this country doesn't have the ability for their own monetary policy (as they are pegged to the Euro) they are required to get unique. So they essentially laid off police, fire men, teachers (as they are paid by the state), and even diplomats! This has allowed the government to 'control' the currency as they have more of it now - less going out. The unemployment rate is at 15% and rising. Arguably with a central bank this country could keep the public servants employed, while putting more currency on the market, which would at least in the short term keep unemployment lower.

    dc46and2 - It is my understanding that banks can only loan out a percentage of what comes in. The banks increase the amount they can loan out, by borrowing at the FED window. So without the FED they would be restricted to a much lower amount available to loan out. The FED is a banks bank. So without the FED there is less money available to loan out, meaning only the more afluent will have access to it. Perhaps I am wrong, and I am willing to admit it if shown otherwise, however that is my understanding.

    Incidentally, the FED is audited. Making Paul's legislation seem trivial. And perhaps why so many politicians support it! (Yes, I am a cynic)

    Again, I support Paul, he's just dead wrong on this.

  • Report this Comment On September 26, 2009, at 7:30 AM, MarkEvans24 wrote:

    This man is a fool who lives in a fantasy world.

  • Report this Comment On September 26, 2009, at 7:36 AM, TMFLomax wrote:

    What a great interview, Jennifer! I was so glad to see this on Fool.com.

    Alyce

  • Report this Comment On September 26, 2009, at 8:47 AM, CityWealth wrote:

    This thread is proof most of humanity is stupid, ending the fed will not get rid of the fundemntal problems of a specialized society connected by money.

    The nature of economic crisis is one of hyper specialization combined with the use of money as medium of exchange. Money is an abstract arbitrary value invented out of thin air, it does not exist in nature. All real value comes from energy and matter that exists. Money is a double edged sword as a medium of exchange in a specialized society where no one truly resource self sufficient (money is not resouce self sufficiency), since now gaining money for it's own sake above one's needs allows others to gain more money then they know how to spend.

    There's absolutely no good reason for people to ever be unemployed ever. Everyone is born with the ability to feed and cloth themselves, as time has moved on over history more technologization of work means less jobs, means more unemployment, more part time and less full time jobs as less people are needed, more highly educated and specialized people are needed, which means large segments of the population live in a constantly tenuous economic situation.

    People in which there are no spots for employment are the sunk cost in an economy, when you have a "surplus" population who have "no marketable skills" (read: we can't think of any better economic system in which people aren't forcefully and artifically unemployed).

    The real issue is that the economy is political relationship and expression of psychology of the men and women who inhabit the world in the age in which they exist.

    "Most people would sooner die than think; in fact, they do so."--Bertrand Russell

    The real economic issues are issues that take years of dedication to figure out are often ignored and unpopular. Just like one economists paper that talked abou the risks leading to the present crisis long before it ever occured.

  • Report this Comment On September 26, 2009, at 10:29 AM, louisricci wrote:

    I agree with everything Congressman Paul has said, but the current Financial Crisis is only part of our problem and the larger problems have yet to be admitted and/or addressed.

    And, until they other hugh problems are addressed we will never again become the pwerful industrialized nation we once were.

    Let's all get together and target the real problems and get rid of those who are afraid to speak and/or admit to the truth.

    If we do not get on a more positive path as soon as possible it is going to get very ugly over the next five or ten years and those green shoots we keep hearing about are going to be lost in the struggle.

  • Report this Comment On September 26, 2009, at 10:58 AM, whereaminow wrote:

    CityWealth,

    Everyone's smart but me and my anitcapitalist friends!!

    Except that you are repeating the same economic fallacy that Eleanor Roosevelt once famously espoused in the 1930's - that technological progress causes unemployment. It's a fallacy that Henry Hazlitt famously disproved in Economics in One Lesson.

    But then again, everyone is smart but me right?

    David in Qatar

  • Report this Comment On September 26, 2009, at 11:03 AM, derfberger wrote:

    Greenspan himself admits he was part of the problem. The Fed does regulate rates

    Greenspan is blamed by the followers of the Austrian School for creating excessive liquidity which caused lending standards to deteriorate resulting in the housing bubble of 2004-2006 and the market meltdown beginning in 2008.

    here is a sad commentary of regulation

    http://dailybail.com/home/there-are-no-words-to-describe-the...

  • Report this Comment On September 26, 2009, at 11:15 AM, NOTvuffett wrote:

    whereaminow, I got a good chuckle from your interaction with actuary99 this morning.

    This is an honest question, not some oblique way of making a point: With our current deficit spending, massive debt and unfunded liabilities for the future, how could we transition from a fiat currency to one based upon a commodity?

  • Report this Comment On September 26, 2009, at 11:26 AM, eekthecat wrote:

    Why would anyone want to waste so much metal using it to back dollars? You want to have a bunch of valuable metal sitting around in a warehouse doing nothing other than racking up storage costs. That is very silly, and primitive. Furthermore, it deforms the metals market by conflating the value of metal--which should be determined by its usefulness in manufacturing and whatnot--with value in general and the value of everything else in the market. This is totally unnecessary.

    All the money that is produced, or which is extant in the market in some form, is in theory already backed by something valuable (work done, materials produced, services rendered, etc). What needs to be done is to make sure there are regulations to prevent the apparent production of money which doesn't represent any real value. This is what happened in recent years. The financial system was ostensibly producing value via all the loans they were making and packaging and reselling, when in actuality all they were doing was instigating a self-reinforcing inflation in home prices. Eventually this unsound process reached a breaking point and the world realized the hard way that there was actually a lot less "value" out there than was previously believed, and so a lot of "money" disappeared.

    How are you gold standard people not bothered by the obvious finitude of gold in the world? How is the electronics industry, for instance, supposed to continue producing affordable products when governments are stockpiling gold?

    What you should understand is that money is a not a "thing", it is just a method for keeping records. When you have a piece of paper saying it is worth "one dollar" that means that a certain amount of value has been created in some way or other, and that "dollar" is a record of it. There is no need to involve gold in this record-keeping. All dollars can be converted to gold, anyway, if you just go somewhere where they sell gold, and buy some gold. Dollars can be converted to anything of value. There is nothing special about gold, it is only valuable because it has uses, just like any other commodity. Using it "back" dollars is just going to make gold scarcer by giving it a new use (and one with very little practical value), thus driving up the demand for it.

  • Report this Comment On September 26, 2009, at 11:29 AM, whereaminow wrote:

    NOTvuffett,

    It may be painful. Americans have become used to getting their fabled honey now, and in turn, have been trading their future labor for it. What they don't realize is that we can not suspend economic law. Resources are scarce, and eventually they will pay the piper anyway.

    In Money, Bank Credit, and Economic Cycles, Jesus Huerta de Soto lays out a plan to move back to commodity money. Rothbard also laid out a plan in What Has Governmnet Done to our Money? De Soto's book is available free here:

    http://mises.org/books/desoto.pdf

    Americans would have to learn to live within their means. That would mean less fluctuations in ecomic activity, but steady growth. Unfortunately, Americans have become so dependent upon the State that cutting off the drugs of credit and tax-and-spend will be painful for many.

    David in Qatar

  • Report this Comment On September 26, 2009, at 12:58 PM, Fafnir3 wrote:

    Thank you for spreading the good word. Though I profit form the swings of the market I would give them up for a stable monetary system. That way investments would be in the form of products and services not just the playing of one artifical value against another.

  • Report this Comment On September 26, 2009, at 1:33 PM, Earendil wrote:

    Blaming the business cycle, and recessions on the Fed seems to ignore all evidence.

    We had more recessions and worse recessions (including the Great Depression) when we were on a gold standard and had no Fed (of course the Fed had been created in 1913, in response to the Panic of 1907, but it had little power at the start of the Great Depression because we were still on a gold standard) than since we have been off a gold standard and had a Fed.

    Don't know why so many people think a gold backed currency cures these things, when it is obvious from a look at history that it does not.

  • Report this Comment On September 26, 2009, at 2:18 PM, dc46and2 wrote:

    eekthecat,

    It doesn't sound like you fully grasp how a gold standard actually works. The monetary authority would not need a dollar of gold "backing" every paper dollar. Our previous gold standards have never required this either. If the monetary authority is doing its job and maintaining the value of the currency, demands to exchange dollars for gold would be pointless and rare.

    Most of the gold in the world is already doing nothing more than sitting in heavily guarded warehouses. The amount of gold needed by industry is very small compared to the available supply. Gold has historically been sought primarily for its usefulness as a medium of exchange, not for industrial purposes. This is not stupid or primitive--it's a logical action based on much experience.

    A gold standard is NOT the same thing as using gold literally as money. This is why I'm not bothered by the finite supply of gold.

    I understand the role that money plays in society. I believe money serves its purpose best, as a measure of value and instrument of commerce, when its value is held as constant as possible. History shows that the most reliable and practical means of accomplishing this is to peg the value of the money to some commodity, such as gold, and to make it exchangeable for such. You are right that there is nothing "special" about gold, except that its value has been remarkably steady over long periods of time and will likely remain so for the foreseeable future.

    The only legitimate objection to a gold standard, and the real reason why it was abandoned, is that it prevents the implementation of "monetary policy" (read inflation). This "monetary policy" is precisely what I object to and why I want a return to the gold standard.

  • Report this Comment On September 26, 2009, at 2:29 PM, whereaminow wrote:

    Gold has historically been chosen as the commensurate medium of exchange because of its fungibility and its durability. This came about through the trial and error of civilizations over the course of thousands of years. Abrogating this relationship has only occured in the past 100 years with the rise of Statism.

    Earendil,

    I've read the same history that you have, and until I read further I agreed with you. Now I know better. I invite you to read America's Great Depression by Murray Rothbard. In it, he details the cause of the Great Depression was two fold: first, the creation of a tremendous bubble through easy credit; second, and even more devastating, government interference in the labor market which prevented wages from falling to reflect economic reality. This position has recently been reinforced by a leading macroeconomist Lee Ohanian, who collected years of wage data and anaylzed the effect of Hoover's Industrial labor market program. The Friedman-Schwarz conclusion from A Monetary History of the United States has been proven incorrect, sadly, since Milton was otherwise quite brilliant.

    David in Qatar

  • Report this Comment On September 26, 2009, at 2:52 PM, CityWealth wrote:

    whereaminow,

    Your comment proves that you think you know what you are talking about but a long view of human history and human fallibility would tell you that: Mankind as a whole cannot see very far in front of their face.

    I'm not anti anything, no problem was ever solved by ideology. All wealth comes from nature it is not created, nor destroyed just changed from one thing into another. All "growth" is fueled by nature, no food or ecological stewardship = no nature = no growth.

    All I claimed was that ending the fed is not going to stop economic crisis from happening since the underpinning of any crisis is human activity and unable to understand the consequences of one's actions. "Risk" comes from limitations on human capacity to assess the consequences of their actions and acts of nature.

    Specialization means that risks will be spread throughout monetary networks, you can't simply end the fed and end the risks that these naturally existing hyper specialized trade networks represent in a global economy.

  • Report this Comment On September 26, 2009, at 2:53 PM, CityWealth wrote:

    In shot ending the fed is not going to solve anything since specialization means risks are spread throughout societies interlockign depdencies.

    This is why the government stepped in to bail out the banks otherwise these complex networks would cascade and cause even more havoc.

  • Report this Comment On September 26, 2009, at 3:20 PM, AvianFlu wrote:

    I was a McCain delegate....twice. I dismissed Ron Paul as a kook. However, it is now clear that he is about the only person in congress with his head screwed on straight. The Republican party needs to taken over by libertarians for the good of the country.

  • Report this Comment On September 26, 2009, at 3:22 PM, whereaminow wrote:

    CityWealth,

    No one is suggesting that ending the Fed ends risk. On the contrary, one aspect of the Fed we are pointing out is that it's very existence is a moral hazard that attempts to do the impossible... eliminate risk. Have you ever heard of the "Greenspan put?"

    David in Qatar

  • Report this Comment On September 26, 2009, at 4:04 PM, CityWealth wrote:

    "No one is suggesting that ending the Fed ends risk. "

    You're missing the point completely, the fed would not end "special cirumstances" in which the government would intervene in the economy, lets say we had the gold standard and the same happened and the government STILL bailed out these companies.

    You're not really grasping the problem is human beings incompetence, the problem is not government nor ideology, it's stupid human beings who don't understand the consequences of their foolish ideas about how to run the world.

    You could end up making things worse by ending the fed and then history might move back the other way.

    The real problem is human beings assume way too much about their level of knowledge needed to fix society and their long term effects.

  • Report this Comment On September 26, 2009, at 4:30 PM, whereaminow wrote:

    CityWealth,

    I understand it completely. Some people are only fit to be slaves, as Aristotle remarked. Well, as C.S. Lewis responded, I see no people fit to be masters either.

    Libertarianism does not require any change in human nature to be effective. It requires only that property rights, starting with your most important property: your body and life, be respected.

    There is nothing to cure the animal instinct of humans. I am not bothered by their base tendencies. It is the way of life.

    David in Qatar

  • Report this Comment On September 26, 2009, at 5:21 PM, Alexinthebox55 wrote:

    He doesn't see a risk to abolishing the Fed? How about hyperinflation or hyperdeflation? How will the money supply be regulated, as well as the discount rate between banks over night? At first, the economy would flounder. there would be no retraction of the credit recently extended to our economy, and banks would not know how to lend to each other....the heart of the banking and financial system in the US.

  • Report this Comment On September 26, 2009, at 5:41 PM, dc46and2 wrote:

    ImOuttaHere2008,

    Please take a moment to learn how a gold standard works before you dismiss it. We would not need $10 trillion worth of gold in order to have $10 trillion dollars in circulation. We would only need enough gold to cover the occasional demands to exchange dollars for gold. If the monetary authority does not devalue the currency, such demands would be rare and the central bank could easily obtain gold from the free market whenever it wished using its own notes.

  • Report this Comment On September 26, 2009, at 6:53 PM, whereaminow wrote:

    Alexinthebox55,

    You are so far off base on everything you've said that I can only ask you to do some research on this issue. Hyperinflation is not something that central banks protect people from. They make it more likely. Your conclusions show no serious study of the issue. Please take the time to research at www.mises.org or google hyperinflation.

  • Report this Comment On September 26, 2009, at 6:57 PM, kahunacfa wrote:

    There is absolutely NOTHING wrong with the Federal Reserve System. The Financial Crisis was engineered by poor monetary policy and Regulatory control by Mr. Alan Greenspan - a Federal Reserve Chairman who stayed in the job far, far too long. For guidance on why he stayed too long read his Memoir.

    There should be a term limit for the Chairman of the Federal Reserve System. I would suggest six years - shorter than that of a two term President of the United States; longer than the single term of an elected President.

    Kahuna, CFA

  • Report this Comment On September 26, 2009, at 7:35 PM, dc46and2 wrote:

    kahunacfa,

    You say that the Federal Reserve System allowed the poor judgment of a single man to throw the entire country into a "Financial Crisis," but you don't see anything wrong with that?

  • Report this Comment On September 26, 2009, at 7:46 PM, whereaminow wrote:

    dc46and2,

    It's a socialist fallacy, isn''t?

    "Central planning works. We just need better planners."

    He may not be a socialist. Perhaps he just doesn't realize that he was trained to think as a socialist from an early age.

  • Report this Comment On September 26, 2009, at 8:02 PM, wuff3t wrote:

    "I think we should adopt a system that would not depend so heavily on the good character of its administrators for success.

    "Let no more be heard of confidence in men, but rather bind them down by the chains of the Constitution." -- T. Jefferson"

    I couldn't tell whether that comment was meant to be ironic or not. Was it?

  • Report this Comment On September 26, 2009, at 8:33 PM, NOTvuffett wrote:

    I don't think anybody here is arguing that a commodity based currency would eliminate the natural boom and bust cycles of the economy. 1890's had a big recession while on the gold standard.

    I don't know if we even need to go to such a system, but one thing is for sure- if we are to continue on our current path, there needs to be tight control on the money supply. People are scared sh*tless about hyper-inflation, ala Zimbabwe. That won't happen but regular old inflation will eat your lunch.

    Greenspan always saw things one way, I would prefer to rely on the wisdom of the free market for monetary policy.

  • Report this Comment On September 26, 2009, at 8:45 PM, Luwingo wrote:

    Ron Paul is right. The facts back him up, and he's one of the very few people in politics these days that actually understands economics. I hope he succeeds, but this bill is only one step on a much longer road to re-establishing trust in the currency of the United States of America. If this move is succeeded by a return, whether gradual or sudden, to a hard-money, commodity-backed currency, the malinvestments and misinformation caused by the Fed's policies would stop. The Fed is the single biggest risk in the entire economy right now and has been a complete, utter, and abject failure as an institution in its 96-year history. It is high time the Fed was abolished.

  • Report this Comment On September 27, 2009, at 12:20 AM, poppycock2 wrote:

    I highly doubt the rest of the world would follow our lead in abolishing their central banks, especially at a time such as this where people are scared of losing their life savings. I agree that the Fed is an unelected and unconstitutional body, printing money out of thin air and jeopardizing our currency; however, I think abolishing the Fed may be too extreme. What needs to happen first is to stop spending money we don't have. Already, other world powers are calling for an end to the dollar dominance and reserve currency of the world status we've enjoyed since WWII. The world wide recession of 2008-9 was caused by us and our shadow banking system which few people truly understood, even at the Fed and Treasury, and the excess risk and leverage that was permitted for years. Other countries have every right to complain. I would if I were them, especially China who has helped finance our out of control governernment spending. Thomas Jefferson is probably rolling in his grave at how big, bloated, and inefficient we have allowed our government to become. Bottom line is that we need to live within our means as a country and individually. I think our political leaders deserve much of the blame for this mess we find ourselves in. Our elitist plutocrats in Washington raking in their $173,000 starting salaries do not represent the middle class. By the way the President makes a 500K a year. All they desire is to remain in office because they crave the power, money, and influence they hold. We should force a national referendum for 2012 to impose term limits on all elected officials and follow the precedent of George Washington, one of the finest Americans and a true patriot. Fool!

  • Report this Comment On September 27, 2009, at 1:01 AM, JibJabs wrote:

    End the Fed! A private institution controlling national interest rates . . . scares me.

  • Report this Comment On September 27, 2009, at 2:09 AM, thisislabor wrote:

    I'm not very smart when it comes to economics but tell me if I am getting this all strait:

    So the Fed fixes problems that they couldn't fix while on a gold standard. But doesn't fix problems that they didn't have while on it (the lack of self control to not spend more then they earned)?

    And, the only reason to go to a gold standard is because I am afraid of my dollars severely inflating and I can trade them in for gold coins to later trade back to cash to buy stuff with?

    So am I getting this all right, or am I completely wrong?

  • Report this Comment On September 27, 2009, at 2:19 AM, thisislabor wrote:

    And what we are all really mad about (in the end at least) is the Fed keeps printing off "artificial" value to end economic crisis' - which devalues the value of our "real" value (ie, it inflates our money supply).

    right? wrong?

    but no one here is really upset that they keep issueing loans out to pay for stuff today that we cannot afford tomorrow?

    right? wrong?

  • Report this Comment On September 27, 2009, at 2:25 AM, thisislabor wrote:

    why do we all want to get rid of the Fed since the Fed charges real interest (which takes money out of the money supply and keeps inflation low) to loan out fake dollars to people that can't fix their own budgets correctly so they can make real profits?

  • Report this Comment On September 27, 2009, at 2:54 AM, knighttof3 wrote:

    The Feds need the Fed to buy treasury debt since they are too chicken to raise taxes or cut spending - http://www.usgovernmentspending.com/us_20th_century_chart.ht...

  • Report this Comment On September 27, 2009, at 4:02 AM, thisislabor wrote:

    oh. I do have that relationship wrong then. ty kof3

  • Report this Comment On September 27, 2009, at 5:21 AM, thisislabor wrote:

    so why don't we just right our congressman and senators, and tell them to stop spending our money already instead of trying to abolish the Fed?

  • Report this Comment On September 27, 2009, at 5:31 AM, thisislabor wrote:

    i mean. these guys are our representatives aren't they? if they have the "wrong" idea in their head it's because we put it their (or because they are retards but that is another debate).

    to right a wrong we would have to write to the wrong.

    (do you like the play on words there?)

    at least as I see it. but then again, we would have to cut back on military spending, government pension checks, education (which without wisdom is pointless - especially in this economy - and, I think, it is currently overpriced like the housing market was because of easy credit), health care, and other areas.

    can't have your cake and eat it too.

  • Report this Comment On September 27, 2009, at 5:34 AM, thisislabor wrote:

    dc46and2,

    I wish I would have read your posts explaining the arguements, some how I missed them before I posted all my questions//comments.

    but alas I speak to fast and think to slow again. lol

  • Report this Comment On September 27, 2009, at 7:17 AM, tkrmccarty wrote:

    All of Ron Paul's arguments hinge on the belief that the self correcting free market will produce the best results. The question is, the best results for whom?

    The free market does not have the public's best interest at heart. Eventually, it tilts more and more toward the wealthy, which is why history is filled with the wealthy and the peasants. The US escaped this during its early years of unlimited expansion but the negative effects of the free market caught up with us during the industrialization.

    If returning to a truely free market was possible, I don't think it is, the balance of economic power would slide toward the very wealthy at the expense of the new peasants.

    Loose credit standards may not be the perfect solution but it gives the average Joe a better chance at the brass ring than if the monetary system is controlled only by those who can afford the unregulated interest rates.

    Without monetary policy the government has no real tools to fight unemployment spikes. While the free market will eventually self regulate it does so at the expense of the unemployed workers and to the benefit of the wealthy.

    One purpose of government is to try and protect the average person from the excesses of those able to manipulate the unregulated free market. I only suggest to those who disparage all goverment regulation that without it we risk being at the mercy of those who have no interest in what is good for the common people, only for what is good for their short-term interest.

  • Report this Comment On September 27, 2009, at 9:05 AM, whereaminow wrote:

    tkrmccarty,

    I'm very curious to know where people learn the crazy ideas you have written.

    The free market can't have anyone's interests at heart. It's not a living, breathing thing. That's like complaining that a grapefruit doesn't have the poor's interest at heart. Damn grapefruit! Capitalism is what happens when people are allowed to act freely and exchange freely. That's all it is.

    Do you think the government acts in the poor's interests? LMAO! Read Dominick Armentaro's "Antitrust and Monopoly: Anatomy of a Policy Failure." Please, just check the review on Amazon. Do you think Barack Obama isn't greedy? Really? This man received hundreds of thousands of dollars in campaign contributions from Goldman Sachs, AIG, Countrywide, etc. He's a millionaire, yet he's only worked nearly his whole life in the public sector. Hmmmm...

    As Milton Friedman once asked, "who are these angels in government that don't operate on greed?"

    I just want to know who would teach you that the government tries to protect the average person. Do you ever open a history book other than a government-approved text? Ever? They have NEVER operated in the average person's interest.

    If a businessman is manipulating the unregulated free market, who is using to manipulate it? If you said, "the government" go to the head of the class. If you said, "the poor" go sit in the corner.

  • Report this Comment On September 27, 2009, at 12:44 PM, tkrmccarty wrote:

    whereaminow

    Thank you for making my point better than I did. Everyone is greedy, including you and me. Left to our own greed we pollute the environment, prey on those who are unable to protect themselves and try to cheat to get ahead whenever possible. In your world you think the unregulated free market would take care of that. Why would it? It never did in that past.

    As for Dominick Armentaro's ideas, they are not exactly universally accepted, fringe would be a better description. And to accept them you need to believe the basic libertarian premise, which I find to be a bit of a fantasy. It works great for one person but would utterly fail as a national policy. Although, I do subscribe to some the ideas.

    As for your Obama references, I'm a long time independent moderate who simply believes that good government is possible and needed to put a brake on our own greed. I can't quite figure how your slide into antiObama chant makes your point.

  • Report this Comment On September 27, 2009, at 12:58 PM, whereaminow wrote:

    Not universally accepted = irrelevant.

    The question is, does antitrust policy represent an honest effort by government to regulate the market or is it yet another unnecessary and corrupt intrusion on the freedom of individuals. Criticize his work. Criticize his facts. If you can. You don't have to be a libertarian to research what is right and what is wrong.

    Every single monopoly in history has persisted or been granted by either direct or indirect government assistance. Every Single One. Every One. Research it. Find one example and I'll show you exactly how the government helped them.

    You don't have to be a libertarian. I'm just asking you to find one. That's all.

    "If you reject laissez faire due to greed or malice, you must for the same reason reject every form of government intervention." - Ludwig Von Mises

    That was my point of the antiObama chant, or an antiMcCain chant if you would prefer it, I don't care.

    There are no noble regulators. And even if were to find the most special, caring, kindhearted, perfect regulator, he or she would still be second to the most effective regulation in the world: bankruptcy.

    Who will regulate the regulators?

  • Report this Comment On September 27, 2009, at 2:07 PM, Advar wrote:

    I find myself aggreeing with this article (for the most part), but maybe take it a step or two further-or backwards, depending on your point of view: a partial return to the barter system.

  • Report this Comment On September 27, 2009, at 2:22 PM, tkrmccarty wrote:

    I readily agree that all monopolies have some government intervention. But unless you get rid of government and influence peddling politicians that will always be the case. As much as we would like to live in this dream world, it is just that - a dream world. Your system collapses the first time voters or politicians decide to "tweak" the system. It will happen.

    As for environmental policy, the libertarian view is naive to think that polluters not taxpayers should foot the bill. It is a nice idea but what do you when the polluter is gone or bill is just too high?

    Take global warming, or any other big issue, - there are hugh costs that must be paid today for sins of the past and present. It requires government action. Failure to take for the government action is simply pushing the cost to the next generation. But without government action nothing would get done - remember as individuals we are greedy. Doing nothing is a win for individual freedom but a loss for society.

    Individual freedom is a nice sound bite but we all live in a society and history has shown that we need some rules to survive. Without them we end up like Somalia.

  • Report this Comment On September 27, 2009, at 4:50 PM, jsdick19 wrote:

    Don't abolish the Fed. First audit it. Then have the federal gov't buy it from the private shareholders and make it a government agency. Then the gov't will own the Treasury bonds which the Fed purchased from the gov't and will no longer pay the interest on those bonds.

    The Fed purchased those bonds with money that they created. The gov't can then create money as needed, instead of borrowing it from someone who has been given the power by federal legislation to create it and profit from it, instead of exercising that power directly as the constitution provided. Then the Fed can be run as a nonprofit. Its function and powers can be redefined as needed to benefit the country instead of the private shareholders who are at present the beneficiaries.

  • Report this Comment On September 27, 2009, at 8:51 PM, csluvbbq wrote:

    Yes, I do agree with Congressman Paul that the Fed should be abolished. However, I think it should be done so in increments first. We first need to get control of the banking system by getting rid of fractional reserve banking. By doing this, we will stop banks from flooding the economy with dollars created out of thin air through debt that is diluting the value of existing dollars and lowering the living standards for hard working Americans. Secondly, we should stop Congress from borrowing money through the Feds which starts this fractional reserve banking process and robs the people of their wealth. Thirdly, let's go back to a commodity money system like our founding fathers enacted in the Constitution. Only this will restore soundness in our economy and the markets. The problem is that Congress will not let this happen because they can get any amount of money they want for their projects without having to tax the American people directly. So you see Congress gets what it wants--unlimited funding and the banks get what they want--a monopoly of the monetary system and control all at the expense of the peoples' wealth. Governments have always destroyed themselves through fiat monetary systems and it is only a matter of time before we will see this in the United States. Why do you think they are now talking about a global economy with a new exchange currency? The days of the dollar are almost over. Americans need to wake up and smell the coffee.

  • Report this Comment On September 27, 2009, at 10:12 PM, DebtFreeDave0 wrote:

    Ron Paul is dead wrong, this is a horrible idea. The Fed exists to stabilize the financial system, not the other way around. They only have 3 powers to do so: change the interest rate charged to banks for borrowing money from the fed, buying or selling bonds from the Federal Treasury, or changing the required amount of cash banks have to have in reserves. That's it, nothing more.

    During boom times, The Fed holds things back to fight inflation by increasing the interest rate banks get charged to borrow money from the Fed, which in turn increases the rate banks charge each other, and what banks charge for loans. Or they buy bonds in the open market, essentially taking money out of the economy. Or they increase the amount of reserves banks are required to have, decreasing the velocity of the money out in the economy. These all slow the boom in order to stabilize it.

    During bad times, The Fed will lower their interest rate to keep money flowing, or they will sell the bonds they bought during the good times to inject money into the economy, or they will lower the required reserve rate to increase the velocity of money until things pick up again.

    Ron Paul and all of these conspiracy theorists need to take a few courses in marco-economics to learn what it is they are talking about.

  • Report this Comment On September 27, 2009, at 10:32 PM, DebtFreeDave0 wrote:

    Ron Paul says that The Fed causes all of the booms and busts in our economy? What about the bank panic of 1907, which the Federal Reserve was created as a response to?

  • Report this Comment On September 28, 2009, at 5:10 AM, LordLiverpool wrote:

    DaveOHern: hurray, somebody who's read a history book. Ron Paul is delusional if he thinks anything will end boom and bust. Abolishing the Fed certainly won't. Swings in the business cycle come as a result of human failings: too much optimism or pessimism, too little diligence, etc. It is precisely when you achieve stable growth that the seeds of the next crash are planted, because everyone goes to sleep - investors, regulators, shareholders, depositors. So the search for a magic formula to achieve permanent stability is foolish, and demonstrates a complete failure to learn from previous crises.

    It is, however, probably true that the Fed exacerbated the boom that preceded the bust by sustaining low interest rates for too long. Although banks have behaved irresponsibly (which might make you doubt that they'd do a better job in a free-market system), their irresponsibility was fuelled in part by the "Greenspan put". It does appear that some countries which have tried "free banking" have suffered fewer banking crises, but the evidence is far from clear.

    The diligence of individuals consumers is limited. You only have to look at the case of Landesbanki/Icesave to see this. Not only individuals, but local councils and other entities in the UK invested considerable sums in accounts in a bank in Iceland, when they were not covered by deposit insurance, and in spite of the warnings about the Icelandic banking system. The fact is depositors are only likely to pay attention to the stability of banks during and immediately after a banking crisis. When a period of stability returns, they will go back to sleep. This, incidentally, also happens to shareholders and other investors, all of whom have a great incentive to pay close attention to what banks are up to.

    whereaminow: "There are no noble regulators". Well, at least the regulators are put in place by our elected representatives, which makes them indirectly accountable to us. I'd say that's a point in their favour.

  • Report this Comment On September 28, 2009, at 1:09 PM, VictimOfFeds wrote:

    "Are you at all concerned that auditing the Fed would open up the central bank to the political process and subject the bank to making monetary policy decisions based on lobbyists, politicians, and special interest groups, rather than the necessary economics?"

    The Chairman of the Fed is appointed by a POLITICIAN!!!

    I wish he'd start pointing that out.

  • Report this Comment On September 28, 2009, at 8:06 PM, dc46and2 wrote:

    ImOutAHere2008 asked:

    "When is that you'd think that people would be looking to cash their dollars for gold? I think more than a few of our dollar holding friends, myself included, would have made a run on the fort as it were."

    If you genuinely wanted to trade your dollars for gold, you could--at this very moment--do so via the free market. The same would be true with a gold standard. The only time it would make sense to go to the central banks "exchange window" would be if you expected to get a better deal than what was available on the free market. The only time a better deal would be possible, is if the central bank had devalued the currency.

    Suppose we pegged the dollar to gold at $1000/oz and required our central bank to exchange dollars for gold at that rate. If the central bank expands the money supply too much, the value of the dollar falls, and the market price of gold, in dollars, would rise. Suppose it rose to $1050/oz. Anyone with $1000 could get an ounce of gold from the central bank and sell it for $1050 on the free market, so the central bank would be flooded with dollars. As a result, the money supply decreases and the gold supply increases--this will eventually bring the market price of gold back to $1000/oz, provided the central bank doesn't run out of gold first.

    As long as the currency is not devalued, there would be no incentive to demand gold from the central bank. If someone did demand it, the central bank could easily replenish their gold by buying it on the free market.

    As I've said before, there is no question that a gold standard works. For proof of this fact, one only needs to consult a history book. The reason we abandoned the gold-standard was not because it didn't work, but because it was incompatible with Keynesian economic theories which require never-ending inflation under the banner of "monetary policy,"

  • Report this Comment On September 28, 2009, at 8:23 PM, punterman wrote:

    Conjecture = making conclusions with incomplete information

    I consider just about all of my conclusions to be conjecture according to this definition, given that I have never really had COMPLETE information. However, it seems that my thinking and choices are more sound and useful when I can see what's going on more clearly and appreciate the different realities by having more information and facts available.

    So, why would anyone, including our president, resist or try to block an audit of the FED? I have yet to hear a reasonable explanation for opposing an audit.

    We empower the IRS to audit our neighbor the plumber because he claims $200 worth of his tools as deductions. Congress chose to borrow at interest $60 million and used an enormous quantity of man-hours to investigate Bill Clinton's sex life and personal honor, with little value to US citizens produced from that expenditure.

    What's the harm in spending a fraction of that amount to bring transparency and light-of-day to the FED system, its design, its functioning, it's choices, its owners, its beneficiaries, its loyalties, and its legal relationships?

    If it is a legitimate operation, with honest managers and owners that are loyal to America and its best interests, and it is not serving the purpose of providing easy money to Congress so that they may bypass citizen approval for expenditures, all of that will become validated during the audit. One would think that the President and the FED would encourage an audit to put the doubts to rest.

    Why not illuminate the facts and the historical data through an audit? And after that we could have more of this kind of debate and discussion in the light of expanded facts. And it would still be conjecture by the strict definition, but much better-informed conjecture.

    Withholding your sarcasm for just a moment, can anyone offer a reasonable mature explanation for not fully auditing the organization called the FED?

  • Report this Comment On September 28, 2009, at 9:13 PM, dc46and2 wrote:

    BetapegLLC wrote:

    "There is a reason why the entire world abandoned the gold standard..."

    There certainly is a reason: because they all wanted the ability to inflate their currencies. After Brenton-Woods, the world (foolishly) held mostly dollars as its reserve currency, and the dollar was pegged to gold. When the US broke its promise to uphold the gold standard and began inflating the world's reserve currency, it would have been nearly impossible for the others not to follow suit.

    "Advocating a gold standard is cute and all but I look forward to such advocates remaining on the fringe of the economics community."

    Some people find comfort in a cheery consensus, but I look forward to thinking for myself, regardless of where that lands me in the "economics community."

  • Report this Comment On September 28, 2009, at 10:46 PM, dc46and2 wrote:

    DaveOHern and LordLiverpool:

    Our arguments against the Fed are not based on the anecdotal evidence that some bad things have happened on their watch. Nor can they be refuted by the equally anecdotal evidence that some bad things happened before the Fed existed.

    I just reread the interview, and nowhere does Paul say that "the Fed causes all the booms and busts in our society." As LordLiverpool pointed out, economic swings are ultimately caused by human fallibility. We maintain however, that this fallibility cannot be erased with more of the same! When humans make mistakes, they cause real, physical consequences which cannot be avoided. To minimize those consequences, we must identify the problem as quickly as possible and take immediate action to correct the situation.

    The Fed's attempts to "smooth out" the consequences of our mistakes cannot remove the mistakes themselves. No monetary policy can recall misallocated resources, bring back the consumed capital, or transform loosing ventures into genuinely profitable ones. The best the Fed can accomplish is to spread out the pain over a longer period of time and over a larger group of people. The Fed's meddling obscures the original mistake, delaying the appropriate corrective action. In the long run, the accumulated consequences will be worse than if the Fed had not intervened. Those who administer the Fed are themselves fallible and their actions will always have additional, unintended consequences of their own.

    I am not Paul's spokesman, but I believe this is also his opinion regarding the Fed's relationship to the business cycle.

  • Report this Comment On September 29, 2009, at 3:02 AM, punterman wrote:

    Consider for a moment that the Fed’s real purpose is to facilitate government spending through inflation. This enables Congress to have funds not approved by citizens, and enables the Fed to loan infinite money to politicians at interest. What a nice arrangement.

    As an aside, do you know that the federal Dept. of Education had a recent annual budget of $53 billion, with approximately 4,400 employees? Did Americans know about and approve of that expenditure? Do Americans feel that there is justified return-on-investment from that expenditure? Is the Fed really happy to quietly loan that money to Congress at interest, regardless of the lack of value? Will any members of Congress be accountable for paying back that loan?

    Consider that the members of Congress wish to avoid imposing politically intolerable levels of taxation to pay for the spending that returns them to office election after election.

    Consider that members of Congress rely on the Fed to confiscate wealth from Americans through inflation. Consider that inflation is a hidden tax, and lessens the cost of borrowing by enabling the government to pay its debts in depreciated currency.

    Consider that if the market can forecast what the Federal Reserve intends to do, then it can preempt or frustrate the Fed’s actions. Therefore, for the system to work, implementation of the Fed's inflationary policy must be unpredictable and therefore deceitful.

    Consider that if the market knows that the Fed will increase the supply of money a month from today, producers will start today to raise prices of goods and services in anticipation of the increases in their suppliers’ prices, and in consumers’ incomes, that they expect will follow growth of the money supply.

    Consider that the Fed would like any price increases to come well after the spurt in the supply of money, because the ability of its inflationary policy to stimulate the economy depends on a lag. So, when the market forecasts and discounts the Fed’s actions, they lose their effectiveness. Conversely, when the Fed deceives the market, the more likely the Fed will achieve its desires.

    Consider that this explains why the Fed asserts political independence from Congress and the Treasury, why it refuses to operate according to fixed rules, and why it makes its decisions in secret and without audit.

    Consider that the Fed's ability to deceive depends on its power; and its power depends on its ability to deceive.

    If we consider these points-of-view, it appears as though the Fed is designed with the intent to deceive. Congress receives all of its spending money from the Fed, and that spirit to deceive is directly propagated through this relationship of dependency. It appears as though those that have the power to create laws are also in a position to counterfeit money at will and grant themselves immunity from investigation.

    Does this seem at all like a system of financial leadership intended to serve the best interests of the country that has a purpose to operate a strong lasting constitutional republic?

    Can it work to have a country with a purpose of ethics and integrity and honor, while we endorse a system of financial leadership that lacks all of these characteristics?

  • Report this Comment On September 29, 2009, at 9:07 AM, LookThinkJump wrote:

    The Federal Reserve didn't cause the problems we have, unbridled and over leveraged banks did.

    We need to go back to tight monitoring of financial institutions not the institution of a financial free for all.

  • Report this Comment On September 29, 2009, at 4:23 PM, salsmanistan wrote:

    im a young fool, but i would like to address what i see as a misunderstanding by some (certainly not all) of the "end the fed" enthusiasts.

    1. end the fed because they are private and therefore greedy with the power to print money.

    (alternatively ive heard "the government owns the fed so they can just do whatever they want with made up money)

    this is irrelevant because while it is indeed privately owned, its operation is shared by 12 independant federal reserve banks which are regulated by the board of governors appointed by the president. most importantly each of the 12 banks are unable to sell their stock and recieve ONLY 6% annual dividend. meaning that the federal reserve is not operated to increase its own profits.

    2. the federal reserve "creates imaginary money" causing all of our economic problems and inflation.

    what the federal reserve does is buy bonds from the government. it doesnt ever create money unless the government requests more, so the problem lies within the way our government is spending (and the question of where to cut that spending is a whole other monster) yes the fed regulates the economy in other ways but i was simply addressing the "they create money from nowhere" claim. as our nation grows we obviously will need a larger supply of tangible currency so logically someone must print it. and thats not a "bad" or "irrisponsible" thing

  • Report this Comment On September 29, 2009, at 4:29 PM, salsmanistan wrote:

    i guess i was specifically trying to address claims like these

    "Consider that the Fed would like any price increases to come well after the spurt in the supply of money, because the ability of its inflationary policy to stimulate the economy depends on a lag. So, when the market forecasts and discounts the Fed’s actions, they lose their effectiveness. Conversely, when the Fed deceives the market, the more likely the Fed will achieve its desires.

    Consider that this explains why the Fed asserts political independence from Congress and the Treasury, why it refuses to operate according to fixed rules, and why it makes its decisions in secret and without audit."

    the fed has no desire other than to achieve its goals of guiding the economy to greater stability. are they always successful? obviously not, but neither are they an insidious business bent on power and profit.

    and there is plenty of government regulation so your assertation that they make secret decisions and are deceitful seem to be unfounded.

  • Report this Comment On September 29, 2009, at 5:41 PM, DebtFreeDave0 wrote:

    "1. end the fed because they are private and therefore greedy with the power to print money.

    this is irrelevant because while it is indeed privately owned, its operation is shared by 12 independant federal reserve banks which are regulated by the board of governors appointed by the president. most importantly each of the 12 banks are unable to sell their stock and recieve ONLY 6% annual dividend. meaning that the federal reserve is not operated to increase its own profits."

    Not only is it irrelevant, it's just plain false. The Fed cannot print money, that is done by the Treasury. This separation of powers is one of the major differences between The Fed and other Central Banks around the world. The Fed gets it's money by charging interest to banks that borrow money from it (and banks do a lot of that!).

  • Report this Comment On September 29, 2009, at 8:51 PM, dc46and2 wrote:

    salsmanistan:

    I agree with you on #1. I find such logic distracting and irrelevant. I am glad, however, that Ron Paul does not depend on those arguments.

    Regarding #2, I think you may misunderstand some things yourself. The Fed's description of itself is available at:

    http://www.federalreserve.gov/pf/pf.htm

    Here are some excerpts from page 21:

    "Monetary aggregates [...] can be controlled to a reasonable extent by the central bank, either through control over the supply of balances at the Federal Reserve or the federal funds rate. An increase in the federal funds rate, for example, will [...] slow growth of the money stock."

    "Ordinarily, the rate of money growth sought over time would be equal to the rate of nominal GDP growth implied by the OBJECTIVE FOR INFLATION [emphasis added] and the objective for growth in real GDP. For example, if the objective for inflation is 1 percent in a given year and the rate of growth in real GDP associated with achieving maximum employment is 3 percent, then the guideline for growth in the money stock would be 4 percent."

    On page 23:

    "[The Taylor Rule] relates the setting of the federal funds rate to the primary objectives of monetary policy—that is, the extent to which inflation may be departing from something approximating price stability [...]"

    I advise reading the whole document, but it should be clear from these short excerpts that the Fed does, in fact, control money creation and inflation. In the short term, there are many things beside the central bank which may affect the supply and demand for money. However, in the long run, after the Fed has had time to notice and respond to those things, it cannot blame anyone but itself for the long-term depreciation of the dollar (or the long-term increase in prices, if you prefer that definition of inflation.)

    The Fed does NOT create money "when the government requests more" and it does much more than just buying government bonds. Money is created, for example, whenever the Fed purchases any security on the open market or extends credit at the discount window. These operations are controlled by the FOMC.

    Because of fractional reserve banking, the effective money supply (as measured by the monetary aggregates) is not rigidly linked to how much money the central bank creates. Therefore, even when the Fed is not literally creating or destroying money, it is still influencing the effective money supply.

    I agree that the government spends and borrows way too much. The Fed encourages that behaviour by keeping interest rates artificially low. But even if we could reign in government spending by other means, there would still be many good reasons to ditch the Fed. For example: it has consistently failed its mandate. One can hardly blame them though, because the Fed's mandate is inherently contradictory. It cannot boost employment today without a derogatory effect tomorrow. It cannot maintain "moderate" interest rates (read artificially low) and simultaneously prevent inflation.

  • Report this Comment On September 29, 2009, at 9:14 PM, salsmanistan wrote:

    dc46and2

    your post was accurate and quite knowledgable. im aware that the fed has many ways to attempt to achieve their mission, my simplistic explanation was to assure people that the fed doesnt simply utilize those tools or create money for its own gain.

    i agree with you fully that the fed has not been able to achieve it's goals (obviously) but that is the nature of macroeconomics....its not well understood and many actions have unpredictable consequences . while they may have failed to artificially create market stability do we truly not want them to try? when the market causes a natural period of heavy inflation do we want absolutely no way to steer our massive economy? are people not expecting every day for the gov't to "fix" this recession? how many people over the next year will judge obama based on the level of unemployement in this nation and yet our greatest way to influence economy is the institution some propose to abolish in favor of free markets. take away their tools and we will be at the mercy of this very sort of thing more frequently with much less at our disposal to solve the problems.

  • Report this Comment On September 29, 2009, at 9:47 PM, dc46and2 wrote:

    DaveOHern:

    You are right, the Fed cannot print money. However, this "separation of power" is irrelevant, because the Fed does not need to PRINT money in order to CREATE money. All it has to do is change some numbers on a ledger and "poof" the money exists! Sometimes we say "the Fed prints money," but this is just a figure of speech we use to avoid expressing the complexity of what actually happens. We know that it's the Fed's policies, not Treasury's, which determine the amount of money printed and the effective money supply, which consists mostly of money that is never literally printed.

    "The Fed gets it's money by charging interest to banks that borrow money from it..."

    Really? Where do you suppose the Fed got the original money that it loaned to the banks? How has the money supply continually expanded throughout the years? How does the Fed inject massive amounts of "liquidity" into financial markets in times of crises? Clearly you haven't thought this through.

  • Report this Comment On September 30, 2009, at 12:22 AM, dc46and2 wrote:

    salsmanistan, thank you for the complimentary reply. It makes me wish that I had taken a less critical view of your original post :)

    "do we truly not want them to try?"

    No, I truly do not want them to try, because I think they can only make the situation worse.

    "when the market causes a natural period of heavy inflation..."

    Stable money is an important prerequisite for economic success and is the most noble pursuit for any central bank, which is why I advocate the gold standard. While imperfect, it is the most inflation-resistant monetary system known to man.

    "are people not expecting every day for the gov't to "fix" this recession?"

    People expect it to because they've been told to expect it, not because it's reasonable. Fact is, when lots of people make mistakes, recessions happen and there is going to be some pain. The only way to make up for the mistakes is to work harder and consume less until we've replaced or rearranged the misallocated resources. The government cannot change that no matter how many "tools" they have at their disposal. The "tool" of monetary policy only provides the illusion of relief while delaying the real fix and setting us up for more problems down the road.

  • Report this Comment On September 30, 2009, at 11:22 AM, MrShahzadAnwar wrote:

    I totally agree with the Senator's remarks. There should be gold standard not only in USA but the world over, paper money is just an artificial non-existent item backed only in most countries 10% by gold and 90% by nothing....

  • Report this Comment On September 30, 2009, at 11:27 AM, MrShahzadAnwar wrote:

    The fed, the paper currency backed by almost nothing and all the other similar pathetic laws were infact passed into the Govt by the past banking 1920's banking moguls .. JP Morgan, Rockerfeller and others just to serve their own selfish money making motives....

  • Report this Comment On September 30, 2009, at 12:56 PM, MrBimble wrote:

    While a touch alarmist, Zeitgeist Addendum does a great job of illustrating Sen. Paul's side of the argument.

    http://video.google.com/videoplay?docid=7065205277695921912#

    Some of you will love it, others will not, but that's the beauty of a free country, right? ;-)

    Thanks to everyone who commented - I certainly learned a few things from you!

  • Report this Comment On September 30, 2009, at 7:14 PM, thisislabor wrote:

    I recall reading an article on seekingalpha.com by some economists, and there point was that to fix the current economy all we would have to do is require banks to have at least one dollar in actual cash for every dollar of unsecured loans issued out. it would fix our credit markets, are interest rates issued out, and housing markets.

    then there would be no more need for artificial consumerism driven up by fake stimulus money, nor a need for the fed to issue exceptionally low interest rates to artificially stimulate entrepreneurship (spelling?)//small business lending.

  • Report this Comment On September 30, 2009, at 10:45 PM, gödel wrote:

    A central bank is a necessity of government. Our Federal Reserve needs to be replaced by a government central bank that is regulated not only by banking interests but by a cross-section of economic interests: workers, industrial (manufacturing), financial and professional classes. Further, the new central bank must not be a printing press for projections of military power. No monetarization of military budgets should be permitted without appropriate increases in taxation. The problem with the Federal Reserve is that it is organized only to serve the interests of the banking establishment.

  • Report this Comment On October 01, 2009, at 2:01 PM, papamaui wrote:

    What we've had is more of the same more of the same more of the same ad infinitum ad nausea.

    Ron Paul is the #1 man around with both intellect and wisdom. Unfortunately, both run counter to "emotional politics" and whether we like it or not, it was EMOTIONS NOT WISDOM THAT elected our present leader. I don't know if WISDOM will ever win out ... the tract record certainly doesn't indicate it will ... regretfully.

  • Report this Comment On October 01, 2009, at 2:28 PM, polenium wrote:

    Yes we should.

    A privately owned, unregulated corporation should not be allowed to control the nation's money supply.

    They act to benefit themselves and a small cadre of insiders. The rest of us can and do are pushed in the ditch and run over.

    I think it was Truman that said if the American public realized how the Federal Reserve was run, it would encite a revolution.

  • Report this Comment On October 01, 2009, at 5:07 PM, starfish36 wrote:

    Andrew Jackson hasn't been with us for some years, and Raul has little or no idea of what he speaks. The current recession was caused by failure to have and especially to enforce serious banking regulation -- and by the book of pure greed by which most libertarians seem to want to live. We have laws for a reason, and we don't need the panic of 1908 or the crash of 1929 or even the crash of 2008 to remind us of the inadequacy of what we have on the books and how we operate. The Fed is far from perfect - but that's because it fails to enforce the laws and rules we have. Modern civilizations need central banks. Send Raul to the showers as the electorate did and and always will.

  • Report this Comment On October 01, 2009, at 10:39 PM, footej wrote:

    Paul is a breath of fresh air in the midst of the most appalling US government in modern times

  • Report this Comment On October 01, 2009, at 11:15 PM, thomdd1959 wrote:

    The Financial Crisis is One Big Fat Sick Joke on All of America and the World!

    The accepted version of history is that the Federal Reserve was created to stabilize our economy. The real story is more than main stream now. Almost everyone now knows the Truth!

    In November of 1910 a secret meeting on Jekyll Island off the coast of Georgia at a private resort owned by J.P. Morgan took place. This was the conception of “The Fed Scam” to set up a powerful cartel of international cutthroat bankers!

    Seven men attended this exclusive meeting where an estimated one-fourth of the total wealth of the entire world was represented.

    The five International Bankers present were Henry P. Davidson, Sr. Partner of J.P. Morgan Company; Charles D. Norton, President of 1st National Bank of New York; Frank A. Vanderlip, President of the National City Bank of New York, representing William Rockefeller; Benjamin Strong, head of J.P. Morgan’s Bankers Trust Company, later to become head of the System and Paul M. Warburg, a partner in Kuhn, Loeb & Company, representing the Rothschild’s and Warburg’s in Europe

    “Paul M. Warburg is probably the mildest-mannered man that ever personally conducted a revolution. It was a bloodless revolution: he did not attempt to rouse the populace to arms. He stepped forth armed simply with an idea. And he conquered. That’s the amazing thing. A shy, sensitive man, imposed his idea on a nation of a hundred million people.” –Harold Kellock (admiring biographer of Paul M. Warburg)

    The bankers conspired with the two most Notorious America Traitors of all time. Nelson W. Aldrich, Republican “whip” in the Senate, Chairman of the National Monetary Commission, father in law to John D. Rockefeller, Jr. and A. Piatt Andrew, Assistant Secretary of the Treasury

    They committed Treason against their own Country for Power and Money! They became low, weak, “pitiful empty men.”

    Those who attended represented the great financial institutions of Wall Street and, indirectly, Europe as well. The reason for secrecy was simple. Had it been known that rival fractions of the banking community had joined together, the public would have been alerted to the possibility that the “Banksters” were plotting an agreement in restraint of trade - which, of course, is exactly what they were doing.

    What emerged was a cartel agreement with five objectives:

    1.) Stop the growing competition from the nation’s newer banks.

    2.) Obtain a franchise to create money out of nothing for the purpose of lending.

    3.) Get control of the reserves of the banks so that the more reckless ones would not be exposed to currency drains and bank runs.

    4.) Get the taxpayer to pick up the cartel’s inevitable losses.

    5.) Convince congress that the purpose was to protect the public.

    It was realized that the “Banksters” would have to become partners with the politicians and that the structure of the cartel would have to be a central bank.

    The record shows that “The Fed Scam” has failed to achieve its stated objectives. That is because those were never its true goals. As a banking cartel, and in terms of the five objectives stated above, it has been an unqualified success.

    We Don’t Need To Just Audit “The Fed Scam”

    We Need To Cut Off Its Ugly Head Once And For All!

    Our Freedoms, Our beloved Constitution, Our National Sovereignty, “We the People” and the fact that we are a Constitutional Republic is why the United States of America is and will continue to be the Greatest Nation in the World! Americans have Heart!

    All military and government employees have taken this serious and sacred oath of office:

    To protect the Constitution of the United States of America against ALL enemies Foreign and Domestic!

    Americans have always taken this oath very seriously. To violate this oath would not only be Treason against our Great Constitution, Our U.S.A., and fellow Americans but it would result in a complete loss of all personal honor.

    “Never give an order that can’t be obeyed.” –Douglas MacArthur

    http://www.tomdavidd.com/blog/

    “The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” –Abraham Lincoln

  • Report this Comment On October 02, 2009, at 8:13 AM, actuary99 wrote:

    Whereaminow,

    I didn’t expect anyone to be impressed with my academic credentials, it was more of a visceral response to unklbob’s post. His post bothered me because I found it obnoxious and felt it implied one could not be educated in regards to economics while still not agreeing with Ron Paul’s principles.

    I felt obligated to post because of the overwhelming positive regard toward Ron Paul and all of his ideas. I find it odd that at a website where so many intelligent investors disagree so often, there seems to be little disagreement here.

    I am well-versed in mathematics and statistics, but a novice when it comes to economics. I am trying very hard to truly understand Ron Paul’s position, since so many people I respect and so many intelligent investors support him so strongly.

    I agree that economics is a study of human interaction. The overwhelming devotion to Ron Paul seems to be an example of groupthink amongst really smart investors.

  • Report this Comment On October 02, 2009, at 8:18 AM, TMFBent wrote:

    Don't forget the reverse vampires. They've got to be involved in this somehow.

  • Report this Comment On October 02, 2009, at 8:39 AM, actuary99 wrote:

    By the way, I noticed my original post was removed. Can the TMF staff explain to me why?

  • Report this Comment On October 02, 2009, at 9:52 AM, lquadland10 wrote:

    1.00 at the time of the inception of the IMF is now worth 5 cents. Why pay intress to the IMF for our rent a dollar when we can bring back the silver certificate dollar that Kennedy had done before he was killed and not pay intress on that. You know executive order 11110? Oh that is right Congress would have to run the country on a budget. But then the up side in Health Care Cost would go down with a stable dollar.

  • Report this Comment On October 02, 2009, at 9:53 AM, lquadland10 wrote:

    1.00 at the time of the inception of the IMF is now worth 5 cents. Why pay intress to the IMF for our rent a dollar when we can bring back the silver certificate dollar that Kennedy had done before he was killed and not pay intress on that. You know executive order 11110? Oh that is right Congress would have to run the country on a budget. But then the up side is Health Care Cost would go down with a stable dollar.

  • Report this Comment On October 02, 2009, at 10:30 AM, JoeyBallz wrote:

    YES WE SHOULD! We should allow interest rates to be set by the market as opposed to what political forces influence the Fed to change alter them to. Read Irwin Schiff's "The Greatest Con" and let me know what you think.

  • Report this Comment On October 02, 2009, at 10:33 AM, lanoush wrote:

    This is nonsense and I didn't expect to find serious consideration given to Ron Paul's notions on the Motley Fool. Libertarians and right-wing anti-government nuts converge in the anti-institutional notions of Ron Paul.

    Shame, Motley Fool.

  • Report this Comment On October 02, 2009, at 10:34 AM, GolfVilla wrote:

    Ron Paul is one scary fellow! First, he says we shouldn't send our troops overseas, and that the US got what they deserved on 911! He wants us to wait until our enemies come to our shores and fight our battles in our own back yard. You want a war, death and destruction in your neighborhood? Vote for Ron Paul!

    Second he wants the US to go to a gold standard. Anyone who has ever taken Economics 101 should understand why we can't use a gold standard. Ever wonder why there isn't a single country in the world who is using the gold standard? There isn't enough gold in the world to support the economy of Switzerland let alone the US and the world. I am surprised and dismayed that Motley Fool is giving Ron Paul any credibility!

  • Report this Comment On October 02, 2009, at 10:36 AM, fs001 wrote:

    agreed. They r the king of bandits.

  • Report this Comment On October 02, 2009, at 10:47 AM, toadaly wrote:

    Shutting down the Fed would be good, but it isn't enough. There are 3 heads to the hydra. The Fed is one, the ability of the Treasury to effectively print money by selling debt is the second, and fractional reserve banking is the third.

    Unless all three of these are addressed, the boom/bust cycle will continue, and will remain easily manipulated by politicians.

    The current system guarantees low savings and high consumption, because only insiders can consistently preserve wealth. For everyone else, you either spend it or watch it inflate away.

  • Report this Comment On October 02, 2009, at 11:07 AM, JCoeur100 wrote:

    OK, abolish the Fed. But let's wait until we've paid off the national debt with all those nasty inflated dollars first. Without the Fed, do you think anyone would lend the US Government a dime? Without borrowing, do you think this government would last two weeks? If you think government is bad, try no government. Among the people influential enough, wealthy enough (and old enought) to survive the economic shock of abolishing the Fed? Ron Paul.

  • Report this Comment On October 02, 2009, at 11:22 AM, LammieL wrote:

    Ron Paul makes some good points and I think I agree with his proposal to sack the Federal Reserve but implementation would be key to a successful transition and he needs to outline the "how" this could be accomplished.

  • Report this Comment On October 02, 2009, at 11:23 AM, chucklank wrote:

    Ron Paul writing a book on macroeconomics is like a high school biology student writing a book about brain surgery.

    His rants are obtuse to almost every respected economist.

    His mantra is "no government" and he offers little explaination rooted in established facts. It's almost like he found a passage in the Bible that says "no government" and therefore that's good enough for him.

  • Report this Comment On October 02, 2009, at 11:27 AM, chucklank wrote:

    Ron Paul? Irwin Schiff?

    Is this the nut house forum?

  • Report this Comment On October 02, 2009, at 12:19 PM, skillip wrote:

    awesome interview! thumbs way up motley fools!

  • Report this Comment On October 02, 2009, at 12:25 PM, LegalizeMe wrote:

    There is no doubt in my mind the Federal Reserve needs to be abolished. Anyone who thinks otherwise is a fool (and not a good fool like we have around here!)

  • Report this Comment On October 02, 2009, at 12:28 PM, larryholzer wrote:

    Just Do It .. The only thing that will save America !

  • Report this Comment On October 02, 2009, at 12:46 PM, sfcopeland wrote:

    To appertjt:

    Ron Paul mentioned in a speech one time that we had had 100 years of no inflation, so I checked with an inflation calculator from 1825 to 1900 and it is true. Then I wondered what happened before 1913 that caused inflation to start and caused the Panic of 1907.

    My conclusion was that instead of leaving the Philippines after the Spanish-American War, we stayed on and went into debt to fund the occupation. (Congress also changed the status of the soldiers so that veterans would not received pensions).

    I'm neither an historian nor an economist, but I admire Dr. Paul for his honesty and integrity and thank The Motley Fool and Ms. Schonberger for posting the interview. I also admire the Paul supporters, who for the most part are civil, intelligent, and well-read.

  • Report this Comment On October 02, 2009, at 12:48 PM, burchc3 wrote:

    Yes! The Federal Reserve should be abolish, it's not Federal anyway. Whow owns it? not our government!

  • Report this Comment On October 02, 2009, at 1:28 PM, geraldas wrote:

    Why are we in such a predicument? 12 trillion debt, perpetual wars, production going off shore, high unemployment, open borders, stimulas packages, Federal Reserve Board, bubbles galor, NAFTA, World Bank, International Monitary Fund, and the UN.

    These events don't happen by accident. They are scams that need exposing. (9/11 & sub prime fiasco)in particular. The media need to be more transparent and not the instrument of the ruleing one percent of the population or special interest.

    We need changes and honest representation.

    Ron Paul is the answer.

  • Report this Comment On October 02, 2009, at 1:46 PM, Zinj wrote:

    Rep Paul is correct in mentioning that the post-Fed adjustment period would be traumatic, which is why I think it would fail. The House completely changes over every 2 years, which may not be enough time for the benefits of an unmanipulated market to become manifest. Given our culture's tendency toward hyperbole, the press, no doubt, would breathlessly stoke fears of <i>another</i> Next Great Depression/ Y2K catastrophe and the effort would be aborted and discredited before it ever has a chance to succeed.

    Singapore might pull it off. Even the Swedes are (surprisingly to some) more inclined to do something like this. I don't see it happening here. Rep Paul (as always) is a lone voice in the wilderness -- but that doesn't make him wrong.

    "I can't understand why people are frightened of new ideas. I'm frightened of the old ones."--John Cage

  • Report this Comment On October 02, 2009, at 1:47 PM, treasurefish wrote:

    One question for Ron: Why are you wasting your precious energy on writing a bill that Obama will just veto in two seconds?

    We want you to lead this country as President. However, if Americans don't appreciate you like your fellow Texans do, we NEED you to lead the Texas Republic as our own President. To hell with the Fed.

    Thank you for everything you do. Count on Texans to have your back.

  • Report this Comment On October 02, 2009, at 1:57 PM, Polecat50 wrote:

    DUH! Read the constitution.

  • Report this Comment On October 02, 2009, at 2:32 PM, LetsTryLogic wrote:

    I'm afraid Mr. Paul troubled me in his very first sentence, saying "the Fed caused all the trouble."

    It is impossible for a single point of failure to exist in a system as complex as our economy. The Fed is merely the scapegoat. While there is a lot of emotional appeal to a 'single failure' type of argument, it only stokes people up and gets in the way of pragmatic discussion.

    I think that talk of eliminating the Fed is more of a political ploy than a meaningful economic strategy. It certainly takes all eyes off other reasons for our current dilemna, including the lack of regulation of corporations and financial markets, the removal of interest rates ceilings (usury laws), etc. - you can add your own favorite reasons to the list!

  • Report this Comment On October 02, 2009, at 2:32 PM, ARTS100MP wrote:

    Ron Paul is right on every point. I know that many will blame the present demise on "Wall Street", but the guy in the white house conspiring with the Fed will cause massive inflation, and we will all pay for it.

    Art in Virginia

  • Report this Comment On October 02, 2009, at 3:20 PM, darinfo wrote:

    Amen Ron Paul! We need more US Congressmen like you that "tell it like it is" and is not beholden to the special interests. What a novel iddea, control the Government by regulating them instead of letting them regulate the us and the free market. The politicans work for us, though most seem to have forgotten that premise. We need to demand accountability from our politicains and our Government, they have been operating in their own best interest, not ours, for too long now!

  • Report this Comment On October 02, 2009, at 3:25 PM, NWfisherman wrote:

    Ron Paul is a "loon."

    His advocacy of a return to the Gold Standard is an obvious example.

    If the dollar were to be based on gold, the control of both the quantity and the "price" dollars and of our entire economy would be in the hands of of the gold producing nations -- Russia and South Africa among others. Russia -- gold standard -- your kidding me right?

  • Report this Comment On October 02, 2009, at 3:36 PM, hctwins2 wrote:

    President Wilson said, the biggest mistake he made was establishing the fed reserve. The reserve was set up to mimic the German and French monitary system. The supposed reason was to keep the government from borrowing money too freely. Our goverment has to borrow in the market . So they borrow money that the banks borrow to loan . That way the banks make a killing when the fed borrows. If the fed borrows from the treasuary, there is no intrest to pay back. It is the only answer to our paying our debt. If we continue as we are now ,by 2019 all the money coming into the government will go just pay the intrest on borrowed money. There are a lot of more things that should be done, but the Supreme Court will not let us have term limits on Congress. Congress sure isn't going to allow it.

  • Report this Comment On October 02, 2009, at 3:42 PM, jenif1ip wrote:

    Thanks so much for interviewing Ron Paul. He's incredible. I think it is marvelous that the Audit the Fed movement is transcending party lines - as it should!

    The well-being of the American public should be the paramount concern of the federal government and legislators... NOT the government welfare (bailout) of lobbyists, bankers, and their profit margins.

    What is the Motley Fool all about? Seems to me that it is about helping people by looking for healthy investments in healthy companies who are doing good business - not by supporting predators who need government handouts (our tax money) to stay afloat. If I wouldn't invest in these companies, why should the Fed be allowed to use my tax dollars to prop them up?

    Heck yeah, Audit the Fed. Let's find out where our money is going. Anything else is irresponsible negligence to the country (and debt) our children are going to inherit.

    Jen in Santa Cruz, CA

  • Report this Comment On October 02, 2009, at 3:50 PM, NoOracleHere wrote:

    Ron Paul, What a wingnut! We didn't have a Fed in 1929. We had the Great Depression Going back to the gold standard will not eliminate bubbles. We had tulip bulb mania back when we still had the gold standard. Ron Paul is just another spoiled brat who doesn't want to pay taxes - by inflation or by any other means. I haven't heard in this blog anyone talking about the ridiculous Keynesians cutting taxes while we borrow our brains out. It's no secret that we have inflation because our populace has been unwilling to tax ourselves to buy the policies that we want. No politician can get elected if even a rumor circulates that he might raise taxes. But we want our social policies. We want to fight our wars. I suppose Ron Paul would say this supports his point. But when the bill collector comes around in the form of inflation, it is these same undisciplined citizens that don't want to pay that tax either, and are looking for someone else to stick it to. So let's go back to a gold standard, and that will fix all our problems. But the bonds have already been issued. The debt has already been incurred. If we don't have the Fed, then we will have to really raise taxes. By how much? Try something like triple. And then we will still have to cut programs. How do you like that prospect?

    So the challenge is to get the economy mobilized, to get people working together. Can we work together? Not if we continue to tear each other apart if our taxes increase in response to a need. Not if we dismantle our system just because inflation ticks up a few points. We aren't going to be able to pay off the Chinese if everyone is unemployed. Some would say that we just need to eliminate those social programs. Yes, that would save a few bucks. So now we're going to have starvation in the streets. High price to pay to avoid a few inflation points. I say quit moaning and get back to work.

  • Report this Comment On October 02, 2009, at 4:06 PM, Luwingo wrote:

    NoOracleHere,

    With all due respect, you need to take some economics lessons.

    "We didn't have a Fed in 1929"

    Yes, you did. The Fed was created in 1913 in response to the Panic of 1907. It didn't start engaging in open-market operations until 1922, but by 1929 it had created a massive credit and equity bubble that crashed in September '29.

    "Going back to the gold standard will not eliminate bubbles"

    I know of no reputable economist that argues this.

    "We had tulip bulb mania back when we still had the gold standard"

    Do some reading on Austrian economics. You would quickly come to realise that asset bubbles are created when money is printed in excess of what an economy's asset base can tolerate.

    "Ron Paul is just another spoiled brat who doesn't want to pay taxes - by inflation or by any other means"

    In which case you have no idea what Paul actually wants. He wants to roll back the 16th Amendment and return to the days when the Federal government was small and raised most of its revenues through sales of government land and import tariffs. Personally I think the latter is a bad idea, but Paul is not opposed to any and all forms of taxation- he is simply opposed to taxation at the Federal level.

    "No politician can get elected if even a rumor circulates that he might raise taxes"

    How did you people elect your current President then?

    "If we don't have the Fed, then we will have to really raise taxes"

    You will also have to dramatically cut spending. The Fed enables financing of wars and social programs, and for that very reason it should be dismantled ASAP.

    "Some would say that we just need to eliminate those social programs. Yes, that would save a few bucks"

    It would save your economy $100 TRILLION over the next 50 years. That's nearly 8 times what your economy is currently worth.

    "So now we're going to have starvation in the streets"

    People starve in the streets BECAUSE of bad government policies, not in spite of them.

    "I say quit moaning and get back to work. "

    Your Fed and your government are preventing that very thing from happening.

  • Report this Comment On October 02, 2009, at 4:52 PM, PathToWisdom wrote:

    Yes we have to either abolish or remove at least 50% of the powers of the Federal Reserve and give it to another agency. Congress can create a new agency.

    The Federal Reserve is a 99,000 pound King Kong gorilla that wants to grow bigger.

    It has no respect for others. It has enough powers, and it wants more. For some reason, the American government doesn't control the size of any agency, and just let them grow.

    In China, (I don't like China that much) the few lessons from this country I learn is that, always

    limit the amount of power any one government agency has, or it can bite you back and kill you.

    There is now an imbalance of power.

    The Checks and balances of congress did not

    include the potential damage from a powerful federal reserve.

  • Report this Comment On October 02, 2009, at 6:48 PM, foxxx333 wrote:

    Those who have read Roman history will remember the words of Senator Cato the Elder. At the end of each speech in the Roman Senate, regardless of the subject, he ended with the words, "Carthago delenda est" meaning "Carthage must be destroyed." I for years have ended messages to my economist friends with similar words: Federal Reserve delenda est.

  • Report this Comment On October 02, 2009, at 8:04 PM, jillelaine wrote:

    Of coarse the Fed ought to get audited. My God we should know what they are doing with the trillions of dollars they are receiving!!

    We should also know what they are doing with all the money they are printing,

    We should also know how they are profiting and how much they are profiting.

    Since they are a private copration we should know how much they pay in taxes including income taxes.

    We should also know if they are charging the individuals in this country interest on the money they print.

    Would should also know if the Federal Income Taxes that we pay go to the Federal Reserve Banking families to keep as private profits.

    Ron Paul is the only one I know with the guts to tell the truth.

    The last person I learned from was Ross Perot and they changed the Presidential debates permanently after that so that candidates could no longer get the public informed and gain their vote.

    They don't want us to know what the rich private "Federal Reserve"banking families are doing with OUR money.

    I didn't know that the Privat Fed Families printed our money and then loaned it to us and our government plus interest owed back. I guess they have to print more money the next time to pay the money back pluse the EXTRA interest that has to come from the printing press again, yet again, yeat again. HMMMMMM no wonder they don't want to be audited. WOULD YOU???????

    RON PAUL TO THE RESCUE*******

  • Report this Comment On October 02, 2009, at 8:06 PM, Zinj wrote:

    And...ultimately Carthage was destroyed.

    Worth a try?

  • Report this Comment On October 02, 2009, at 11:42 PM, dc46and2 wrote:

    NWfisherman says: "If the dollar were to be based on gold, the control of both the quantity and the "price" dollars and of our entire economy would be in the hands of of the gold producing nations -- Russia and South Africa among others..."

    What nonsense. Under a gold standard, the quantity of dollars would be controlled by whatever monetary authority was put in charge of the currency, not "gold producing nations". The monetary authority must be able to control the money supply, or they would not be able to keep the dollar "pegged" to gold at a fixed rate.

    As long as the monetary authority does its job, the dollar would only be subject to the same fluctuations in value as gold itself. Barring some revolution in supply or demand, there is no country that can exert more than a meager influence over the value of gold--which has remained remarkably stable for thousands of years. This is owing to the fact that mining gold is difficult, and the amount of gold that is used or produced is always very small compared to the amount of gold that is already in the world's vaults.

    The effects of the small fluctuations to be expected in the value of gold would be trivial compared to the problems caused today by floating fiat currencies and the central planners that wield them. To argue that Russia could use its gold mines to control our economy is absurd. If a foreign power wanted to mess with our economy, there are much easier and far cheaper ways to go about it. During all the years we were on a gold standard, is there any evidence of a country using its gold mines to manipulate our economy?

    There is but one legitimate reason to argue against the gold standard: it makes devaluing the currency impossible. This is either its greatest virtue or its biggest downfall, depending on which theories of economics you subscribe to.

  • Report this Comment On October 03, 2009, at 8:10 AM, MrsCathyGF wrote:

    My reaction to any major changes to the federal system is, with the current anti-american president in office doing his best the tear apart a successful gov't, why would you give this up, too ? I know, noone covers it, so how are people to know that the current administration is doing it's best to dismantle a capitalistic, free market system ? Obama passed an executive order to give $2 billion in taxpayer dollars to offshore oil interests in Brazil, rather than use that money for the US taxpayer's energy needs right at home. Don't hand them the Federal Reserve, too !

  • Report this Comment On October 03, 2009, at 8:28 AM, cooperbry wrote:

    Ron Paul, Peter Schiff - these guys should be elected President so we can get this country back in order. Our elected representatives are supposed to be working on our behalf, for the people by the power we have granted them. NOT THE OTHER WAY AROUND.

  • Report this Comment On October 03, 2009, at 9:13 AM, carlreich wrote:

    Great interview Jennifer, thank you. The more I learn about Ron Paul's view the more I respect the man. He is right on when he states we need to regulate the government, not the free market.

  • Report this Comment On October 03, 2009, at 12:51 PM, shoppin1049 wrote:

    I'm happy to see more people waking up to what's really going on with our recession. Everyone going broke, less jobs, more foreclosures and bankruptcy. I can say that banks charging $35 dollars for overdraft fees is a scam by the moneymasters. And congress bailing out the banks for their mistakes and taking it from taxpayers is not right. If all American were equally given that bailout money, each american would have been given over a million dollars to pay off our bills, pump up the economy, and be rich. Instead, congress gives the money back to the banks who messed it up in the first place. I don't understand why we, Americans, don't understand that we can't keep doing what is not working for us. I want to see change, but politics are controlled tightly. Education is the key, and a lot of people need to be educated. All our great leaders in presidency have been killed for these reasons, money. Money, controlled only by a few people, and effects everybody. It needs to stop. "The best time to buy is when there bloodshed on the streets!" The Reserves controls this game because we let them, only because we let them.

  • Report this Comment On October 03, 2009, at 12:58 PM, DanKnows wrote:

    We all know the federal reserve and the central bank are responsible for this chaos, heck our founding fathers even knew they were up to no good, they want to keep us in dept and keep us in servitude.

    Alas all the real presidents that tried to get rid of them got murdered or bought out.

    Lincoln, Kennedy

    I can go on and on on this subject but what's the use, no one sticks toghether anymore, it's been divide and conquer and we're decided, but 50% here don't know there neighbor!!!

  • Report this Comment On October 03, 2009, at 1:13 PM, gbwedinafool wrote:

    Despite recent economic woes, the period since the Depression has been marked by the greatest economic stability in American history. With a gold standard and no Fed until (roughly) the early 20th century, the U.S. experienced bank runs, panics and depressions on a regular basis. Why return to a system that never worked well?

    Gold has no intrinsic value. It is valued only to the extent that people want to accept it as valuable. In that sense, it is no different than the U.S. dollar, which is accepted as currency because people believe the dolloars they receive can be used (i.e., has value) to purchase goods and services. With a gold standard, the dollar becomes tied to a commodity which can fluctuate in value with supply, changes in fashion (which changes demand for gold in jewelry), etc. At least hypothetically, an impoverished country with no productivity whatsoever could become remarkably wealthy by finding huge gold deposits within the national borders (hmm...why not have an oil standard and let the Saudi's et al. have even greater influence in world financial markets?...). With the current system, at least the strongest and most stable currencies tend to correlate closely with those countries with the most productive and stable economies. We would be foolish to tie our monetary system to somehing that can be dug out of the ground.

  • Report this Comment On October 03, 2009, at 1:22 PM, NOTvuffett wrote:

    Gold has no intrinsic value? ask somebody to give you their gold free of charge, lol.

  • Report this Comment On October 03, 2009, at 7:53 PM, gbwedinafool wrote:

    Correct--maybe I should have said gold has litgle intrisic value. Except for, perhaps, a few industrial uses, gold's primary value is as jewelry or other artistic embellishment. We assign a monetary value to it, so no one will give me gold, of course. No one will give me a car, no one will give me a house (both of which have far more utility than a hunk of a heavy, malleable metal). The gold has been assigned a monetary value which varies with the supply and demand worldwide. So, despite the post of dc46and2, a national monetary authority cannot control the money supply, and therefore inflation and value of the currency, if gold-rich countries can flood international currency markets. Furthermore, with major economic growth, the real total economic product of the world would outstrip the growth of the gold supply, so commerce within the U.S. and other growing countries would be saddled with an inadequate money supply. The choices are then between constrained growth and investment, or inflation if the price of gold is allowed to rise, as it must in a free market when demand outstrips supply. The U.S. would be surrendering control of its currency and economy to gold-rich nations, as eloquently described by NWfisherman, above. Again, why return to a system which historically failed?

    U.S. would be surrendering control of its currency (a point made eloquently above by NWfisherman. History and logic align: the gold standard was disatrous when we had it, it would be disastrous if we returned to it.

  • Report this Comment On October 03, 2009, at 8:16 PM, whereaminow wrote:

    gbwedinafool,

    The gold standard was not disastrous. From 1871-1900 the US had the greatest expansion in productivity in world history. The money supply actually contracted. Prices went down. The standard of living of every American increased more than at any other time in human history. What a disaster indeed!

    The gold standard under a central bank is not a gold standard at all. It gets murkier after gold is confiscated, as FDR did in 1933. It gets even murkier when it's a gold exchange standard as it was after Bretton Woods. It gets real bad when you try to fix the price at $35/ounce (hello price fixing!) and print dollars for Vietnam and a War on Poverty.

    You might want to also look up bi-metallism (price fixing again!) to see what happens when countries on the gold standard tried to fix the price of gold-to-silver.

    Also check out the Worgl experiment in Austria in the 1930's to see what happens when a socialist central bank finds out about a competing currency.

    Your study of history shouldn't stop at high school history class.

    David in Qatar

  • Report this Comment On October 03, 2009, at 8:38 PM, whereaminow wrote:

    Also, for those that are really interested in what Ron Paul is saying, I can not stress enough these two free books:

    The Ethics of Money Production by Professor Hulsmann

    http://mises.org/books/moneyproduction.pdf

    Money, Bank Credit, and Economic Cycles by Jesus Huerta De Soto

    http://mises.org/books/desoto.pdf

    Hulsmann's book contains an excellent history of the use of money. It explains exactly why people view gold as money, why it has intrinsic value, historical experiments with currency, government intervention in the currency market, the rise of fractional reserve banking, various gold standards, and fiat currencies.

    De Soto's book focuses primarily on fractional reserve banking and central banking. It includes a long history of fractional reserve failures going back to before Christ up to modern day. He shows the Keynesian view of central banking and then the Austrian view. He outlines a plan to eliminate the central bank.

    They are well worth your time, and will give you plenty of ammunition to destory the ridiculous and ignorant arguments of the brainwashed drones that fill the message boards.

    David in Qatar

  • Report this Comment On October 03, 2009, at 8:46 PM, whereaminow wrote:

    One last thing for all the great lovers of liberty that have come across this post, here are some works by yours truly that may help inspire you as well.

    Can You Support the Troops and Support the Federal Reserve?

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=269418&t=0...

    The Federal Reserve and Social Justice: Questions for Fed supporters

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=252757&t=0...

    More Uncomfortable Questions for Fed Supporters

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=254244&t=0...

    The Liberty Blog

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=240719&t=0...

    Understanding Keynes from Marx to Krugman

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=172492&t=0...

    Inflation! What is it good for?

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=164132&t=0...

    And a ton more under my home page.

    David in Qatar

  • Report this Comment On October 04, 2009, at 4:46 AM, mizzensheet wrote:

    Jennifer I think you have done well in your articule. I have have been reading about this ' fed problem' for years, I think Ron Paul is right. A thing I have not seen mentioned is the way that inflation is played by the people that print the money, it is not just intrest that bring very steady retuns to these people, when they print a ten dollar bill for UUss and we use it and thenin a little while they redeem that old ten dollar bill it may only have a value because of inflation of eight dollars. WHO GETS THE TWO DOLLARS? The other problem that I am seeing as I read though these posts is of course we can only guess at how many deep beyond all reason economics texts have been sponsered by the people putting the two dallors in their pockets. Economics has always been as conveluted or as simply as we personaly wish it to be.

  • Report this Comment On October 04, 2009, at 5:16 AM, mizzensheet wrote:

    David in Qatar, please except my thanks for your wonderful post I have enjoyed them very much. I would add that those that are so inclind could pray for Ron Paul and his associates for many that have opossed the Fed have died before thier time.

  • Report this Comment On October 04, 2009, at 12:33 PM, LeeMI wrote:

    Part of the problem is that the Fed is tasked with cross purposes. The Humphry Hawkins Bill created a mess. As usual Congress passed laws with good intentions and bad plans. The Fed is tasked with maintaining full employment and maintaining the dollar. Good Luck. Now let's give them some more to do. How about regulating the banks, wall street, insurance, commodities, or anything Congress can dream up. Enough. Shut it down.

  • Report this Comment On October 04, 2009, at 1:39 PM, RadioFreePG wrote:

    This article has strident overtones for me. The biggest problem that I see IS the political influence the fed has. By flooding the banks with <1% money-for-hire, they become unwilling to pay the depositor very much in the way of interest. That's what we now have. I cringe everytime the Savings account statement arrives in the mail.

    If they paid more and continue to operate the fed, I suppose the worry is that there would be a tendancy towards inflation and an even sicker stock market (which becaomes the haven for investors looking for any kind of returns at all -- let's face it, if the bank is paying you 0.5% annually on your money you are motivated to take risks!) and broader economic malaise (nobody would buy anything).So that option doesn't look too appealing either. They are willing to let these almost non-existent savers take it on the chin for now because the noise level is bearable. But, you can't keep the floodgates closed for very long without having a flood... sooner or later they have to pay up when the water level gets too high. We are looking at some pretty stiff inflation if those presses keep printing money we ain't got.

    The "adjustment period" he talks about probably refers to reduced consummerism as well, because money becomes tighter when you can't borrow all that you want and goods and services would eventually become cheap: we would see a downward adjustment in wages, labor and real property values and obtaining a home loan would be more difficult in terms of income requirements and downpayment minimums. I think we would have 2-5 tough years, but sidestep the horrendous inflation that is coming our way if we stay the present course (which is probably going to give us 9-10 tough years)

    The winners here are seniors and folks living on fixed incomes or savings. We will all be forced to keep reserves a little higher, but in the end those savings are going to last a little longer. Younger wage earners are going to pay pretty hard, but do they want to pay now or later? (when they either retire or are forced to pay higher taxes to keep an indigent, aging population afloat.) Makes sense to me, but the odds that the big O is going to sign anything like it are next to 0 -- too much loss of political advantage for him. What do you think?

    - Radio

  • Report this Comment On October 04, 2009, at 4:07 PM, c0ffeen0te wrote:

    With savings near zero, who would finance routine business activity like imports/exports? How would people buy houses? How would an entrepreneur raise capital to start a business?

    If you think money is easy to get right now, try to set up a new import/export business and go visit your banker. Even established businesses are screaming about the cuts to their credits which reduces the amount of business they can do and they have tough decisions to make about laying off employees.

    If you think the economy is bad now, wait till we bring our businesses to their knees with no credit at all.

    "I can't see any risk" to this plan says Mr Paul? Pretty blind for a "visionary."

  • Report this Comment On October 04, 2009, at 6:00 PM, etdiii wrote:

    It seems I am always later entering the discussion about the weekly topics but nonetheless, here goes. I consider myself a conservative in economic matters but I do not share former Congressman Paul's enthusiasm for getting rid of the Fed. The Fed has certainly made its share of mistakes but then who hasn't? The test of whether mistakes should lead to termination of an organization has to be whether the organization has learned and responded in a manner to correct the result of its mistake. The Fed has done this. When I think of a world without the Fed, I find myself thinking about the numerous crises and crashed that were the hallmark of the economy in the period 1800 through 1930. I think those crashes were much worse than what we have experienced since October 2007. The Fed deserves to continue but with objective scrutiny and less political pressure.

  • Report this Comment On October 05, 2009, at 8:54 PM, JET9EX wrote:

    Ron Paul is a gentleman! He has the courage and wisdom to be an effective leader. It would be a pleasure to have him as our President.

    As for the SEC...

    Unfortunately, the government is filled with incompetent folks earning some great wages. Did anybody really think the SEC has people with knowledge working for them? Anybody with the knowledge to complete a true and accurate audit is in the marketplace making a a great living! The folks in the SEC are obviously incompetent! Their recent work proves it!

  • Report this Comment On October 05, 2009, at 9:41 PM, RedneckEconomist wrote:

    Most red-blooded Americans should not have a hard time agreeing with most of Ron Paul's conservative views. However, abolishing the Fed Reserve is not one that I believe we should engage. I have written several articles on Fools about the failures of the Fed and it Board Chairmens' actions over the past 30 years causing the major financial crisis this country has faced. But, the Fed does have a serious and important role in our economic system.

    My history tells me that the Fed was founded by Congress to provide stability in the banking system and the economy by 1) serving as the one clearinghouse for all negotiable instruments passed by businesses in the US and aboard; 2) serving as the custodian of US currency (the US Treasury prints the currency); 3) serving as a bank to banks; 4) serving as the financial arm of the US Government in relation to foriegn banks and governements.

    My history further tells me the Fed regulated the credit extended to any bank by another bank, and by the Fed to any bank. In the 30's thru 60's, a majority of credit issued to US businesses and individuals came from the banks regulated by the Fed, the US Treasury, and state banking commissions. In the late 60's other sources of credit were made available to those in our economy and the world - namely companies like GE, GMAC, Ford, Sears, JC Penney, oil companies, etc. The Fed had no control over those credit lines like it had over bank credit. Then the credit card industry erupted with VISA, MasterCard, American Express, Diners Club, etc. In the 90's and this decade, new sources of mortgage monies poured into the country from overseas and from local investment houses. Again, the Fed did not have authority to regulate those sources of credit. Congress, not the Fed, encouraged subprime mortgage markets and forced the banks to absorb most of the credit risks.

    I say we stop calling a car manufacturer a bank. Give the Fed the authority to regulate credit through the banking system by prohibiting non-regulated companies from creating credit. Strengthen the regulatory process of the banking industry. Get security houses and insurance companies out of doing what banks should be doing. The funds would flow back into the banks, strengthen them, and return the US to the leading banking system in the world.

    I reserve the right to address whether we should be on the gold standard in another piece.

    The Redneck Economist.

  • Report this Comment On October 05, 2009, at 9:48 PM, TexanSooner wrote:

    Great article - It is highly disturbing to see our currency manipulated to benefit narrow special interests at the expense of the rest of us. Another fine example of why we need to regain control of our government.

  • Report this Comment On October 05, 2009, at 9:58 PM, wuff3t wrote:

    "Not universally accepted = irrelevant."

    Really? And Darwin's theory of evolution...?

  • Report this Comment On October 05, 2009, at 10:01 PM, blesto wrote:

    The Amero is not far away from becoming a reality.

  • Report this Comment On October 06, 2009, at 12:03 AM, oneM0718 wrote:

    The article is an exemplary application of "thinking outside of the box". A bold first step by Congresman Ron Paul to shatter and alter the existing mindset paradigm of the folks in Washington D.C.

  • Report this Comment On October 06, 2009, at 12:09 AM, Philyogy wrote:

    If I recall. There is a law written, that makes it pretty much impossible to audit the FED... This law would need to be amended or abolished, for congress to pass what Mr. Paul wishes to happen....

  • Report this Comment On October 06, 2009, at 12:36 AM, AvianFlu wrote:

    The fed is the answer to a question that nobody asked.

    To avoid political manipulation and corruption their function should be replaced by a computer program, per Milton Friedman's suggestion.

  • Report this Comment On October 06, 2009, at 10:11 PM, professorjimB wrote:

    Seems like a lot of support for a change in the system without clear thought.

    As a college instructor we get into these discussions constantly, but none of my colleagues have presented the counter-arguments any better than the The Redneck Economist.

    Earns a A in my class.

  • Report this Comment On October 07, 2009, at 2:17 PM, dm222 wrote:

    The quote above from the FED's own website reinforces my belief that, in spite of the public reasons for its existence, one of the real reasons the FED exists is to depreciate our currency. The FED intentionally maintains a positive rate of inflation.

    Who benefits from inflation? Borrowers.

    Who is the biggest borrower? Our 'benevolent' government.

    I recall that the national government ran deficits on the order of 30 Billion per year during the Johnson years. Due to inflation, those deficits are now almost meaningless. Congress depends on the FED continuing inflation to cover the extravagant spending they use to get re-elected. Of course, those of us who save or invest for retirement are the ones hurt by this game.

    David in Qatar, I don't see a URL to find your blog.

  • Report this Comment On October 09, 2009, at 4:47 PM, CircleGame wrote:

    Ms. Schonberger's interview with Dr. Paul obviously stimulated me, but American voters will realistically never leave our monetary system to computer programs nor nominally "free" global gold markets. As long as we retain huge national debt, and consider our national survival paramount, the government will be politically compelled to manage a national currency, and the foundations of banking.

    Yet, the questions of whether specific Fed actions, policies, and secrecy are productive or appropriate for our time should always remain important to leaders and the public, who should support generally less interventionism. Keep the Fed insulated from short-term politics.

    Sorry Wall Street! AIG, GM, my friend the real estate agent, and the defense contractors masterminding our ill-fated attacks on poppy-growing bomb fanatics in Afghanistan shouldn't be allowed to bleed the Dollar to death. Feeding hordes of starving, unemployed Americans, or keeping the Iranian Army off our shores would be worthy emergencies.

    For my money, I agree that stampeded government leaders have been far too eager to save their skins short-term, after long-fueling the real estate bubble. Letting investors large and small take the pain of their speculations, while enforcing against fraud is the right mindset for monetary health. Paul's unreal choice between extremes of over and under regulation is sensational, but rightly stimulates questioning of recent easy assumptions such as "too big to fail".

    RadioFreePG's and dm222's comments seem right on. The Fed cannot forever save our Dollar from the impacts of over-spending, and we should be more "reserved" in our use of the Fed as a temporary buffer. Current low interest rates warn us to think hard about our U.S. stock investing prospects, and to let the foreigners have all our bonds. Still hearing lots of dishonest talk from our policymakers about how that unscrupulous Chinese government holds its currency down? Maybe gold isn't a bad standard for personal investments right now . . . .

  • Report this Comment On October 12, 2009, at 10:20 AM, Alpo8181 wrote:

    Jennifer,

    Thank you for doing this interview. I enjoyed it very much!

    Christian

  • Report this Comment On October 13, 2009, at 4:09 AM, MAURIZIO400 wrote:

    wow! if there are still congressmen like that there might still be hope for the land of the free.

  • Report this Comment On October 13, 2009, at 10:09 PM, medial wrote:

    All legal money is created by three entities: the U.S. government that only mint coins amounting to $36.4 billion, or just 0.07% of the $50 trillion plus money supply; the Federal Reserve that issues paper currency amounting to $998 billion, or about 2% of the money supply, and paying the U.S. printing office to print the currency; and commercial banks that Issues checkbook money in the amount of about $48 trillion, or 98% of the money supply.

    The money created by the Federal Reserve and commercial banks is created as debt that is extended into the economy as loans that must be repaid with interest. Since these institutions create only the principal of the debt, not the interest, collectively fulfilling the loan obligations is impossible. If the total principal is repaid there is no money left to pay interest; if interest is paid from the money supply, there is insufficient money to repay the principal. In either case meeting, the terms of all the contracts are impossible.

    When it is expressed as a mathematical inequality, the difficulty is evident: the sum of all principals cannot equal the sum of all principals plus the sum of all interest payments. (P does not equal p + i)

    In order to give the banking system the appearance of solvency and stability, banks continually create an increasing number of new, larger loans, using the new money to service old loans. Drawing its value from existing currency, the new currency dilutes or devalues the old currency. This process is euphemistically termed inflation.

    Using gold as Congressman Paul advocates, or any other commodity, to back money is useless. The problem arises not from what backs the nation’s money, but from whom issues it.

    Only a national government has the inherent sovereign authority to issue the nation’s money. The delegation of that authority to a privately owned cartel of corporations is the root cause of our national financial crisis. Only the government has the power and flexibility to issue a stable currency needed to build a sustainable economy, for it can lend money like the banks, issue and spend money directly into the economy and regulate the economy’s growth and direction with appropriate taxation.

  • Report this Comment On March 19, 2010, at 6:50 PM, claudewilbur wrote:

    Question: How does any commodity-based currency handle long term growth in the global economy? If global goods and services increase at 3% a year for a century what happens to the currency? Do we need to find/create 19x more of the commodity? Does the purchasing power each unit of currency increase by 19x? Does the "value" of your commodity reserves increase by 19x?

    Aside from that, I suspect that a commodity-based currency doesn't eliminate the temptation for governments to attempt to manage debt by manipulating the currency. I suspect that it merely makes that manipulation a little more obvious. I am afraid that such manipulation will continue until political careers or party influence is strongly damaged by it.

  • Report this Comment On August 24, 2011, at 2:07 PM, sirloin869 wrote:

    is it even possible? they literally own the u.s.

    still waiting on the zombie apokolypse

  • Report this Comment On July 01, 2012, at 6:28 PM, TenthAmendment wrote:

    We should abolish the Federal Reserve for the simple reason that it violates the Constitution. Its primary charge -- regulating the monetary supply, setting the value of money, and controlling interest rates -- is a violation of Article 1, Section 8.

    See the complete analysis here:

    http://www.tenthamendment.net/home/federal-reserve-fed-ron-p...

  • Report this Comment On July 04, 2012, at 2:26 PM, Anukpuc wrote:

    "Money" is obsolete....like religion,war and crapitalism....earth is flat and center of the universe.

Add your comment.

DocumentId: 993072, ~/Articles/ArticleHandler.aspx, 7/26/2014 12:01:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement