Perhaps if Ron does get this position, he would be able to point out that yesterday’s actions by the Fed are not an economic stimulus (ha ha) but rather an another attempt to shore up the banking/financial systems and stop its slow-motion failure.
Source link: http://archive.mises.org/14494/ron-paul-to-oversee-fed/
Ron Paul to Oversee Fed
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We can only hope he gets that position. I cannot think of a better qualified person for that job. Honestly, I cannot think of a worse thing for them to do at this moment and I am no economist!
This is very GOOD! He can’t do it alone, it,s time for ALL LT to get busy. The timeing is right for an all out campaign for 2016.
This may be the best thing that will come from the recent election.
As a supply side economist I undertsand that keeping taxes below point “E” on the Laffer curve and a stable currency are the policies to allow the economy to grow. It appears that the election has given us enought Republican and fiscally conservative Democrats to deal with tax issues.
If Ron Paul makes the right waves, and I fully expect him to do this, then we could see the stable currency that has been missing from the mix for about 15 years.
It seriously appears that recovery is on the way.
The Republican Conference has to vote him in first, and I seriously doubt that will happen. Even if he somehow became chair, there are many established DC hacks will do something to disrupt anything he does. In previous episodes, they merged committees and even resorted to recruiting a senior congressman to the committee to prevent him from becoming senior ranking member. Who knows what garbage these people have up their sleeves?
There is too much on the line for connected interests for Paul to be allowed to do anything except ask embarrassing questions and maybe run an crippled audit. The previous actions of Mel Watt, congressman from NC and Bank of America puppet, is just an example of some of what will happen. The war mongers love inflation, they need it for their war machine and its connected interests. The socialists also love inflation, without it it’s more difficult to create various entitlement schemes. All groups in the know, that feed at the trough, will team up to hamper Paul.
I mean, the level of debt coming down the pike is gigantic. That has to be paid for. Even if they raised taxes, it still wouldn’t be enough, and it would weaken the economy in the process. That doesn’t even take into account some of the unfunded liabilities that are also coming on line thanks to the boomer generation retiring and expecting entitlements.
So, they’re turning to inflation, hence the QE2. I think all this talk of “stimulus” is just dissembling Fedspeak. Stimulus is not the objective, payment of debt is. Maybe I’m wrong on this, but I expect a 20% devaluation in the dollar within the next 2 years.
If Paul makes chair, I will consider it a major stroke of luck. If somehow he accomplishes anything, I will consider I will consider it a miracle. If somehow he can do something about the coming inflation, I will assume hell has frozen over.
You hit the nail on the head Cortez. It would certainly be a good thing if Ron Paul makes chair but realistically there’s too much against him for him to make any real lasting change.
This weatherman forecast of 20% devaluation in the dollar consists of speculation and innuendo. Why listen to the weather forecast when you can open your windows.
Actually, 20% is conservative. Here’s an open window, but I hope you have a broom to sweep up all the scraps of green paper blowing in.
http://www.caseyresearch.com/editorial/3791?ppref=CRX175ED1010A
Maybe he can at least do something about the Fed’s recent (and disastrous) decision to pay interest on “excess reserves” deposited at the Fed by the private banks. The Fed started paying 0.25% or something in October 2008, and instantly, over a trillion dollars was sucked out of the economy and parked at the Fed. That’s the black hole of money (or, at least the paper they force us to call “money”).
Bankers have legal duties imposed on them to do something with their cash — they must find the best, safest place to put it. They are not allowed to do nothing. Plus, holding it in cash looks bad, because it not only pays a nominal rate of 0%, but someone can always come along and accuse you of missing some opportunity.
But private lending is risky nowadays, too (largely because credit has dried up all of a sudden), so the banks are facing a potential rate of return of -20% if they lent it out to the usual borrowers. Compare that to a guaranteed return of 0.25% that the Fed is offering, and suddenly parking the cash there seems like the best option. Plus everyone is doing it, so this choice becomes the de facto standard of acceptable banker conduct. As a result, it is highly unlikely that any one bank will decide it wants to be the first one to step off the life raft of the Fed’s “excess reserves” interest-paying program, and stick its neck out and start lending again.
You’ll notice that as of late 2008, no one has any cash. It’s because the Fed is paying banks not to lend.
Obviously we both see the Fed as a problem, but I disagree with your take on interest on reserves.
On one hand, yes, it’s crowded out lending. While loans are important to any economy, for them to be the casino like free-wheeling loans of the previous boom is a major mistake. With the economy in the tank, obviously loans would contract.
In the interest on reserves scheme, in addition to the bad economy, the amount of lending contracts even more. But that could be a good thing for a few reasons. For one, it increases the level of prudence for lending (provided no other government puppeteering via Fannie Mae/Freddie Mac, etc, which is distortive enough.) I mean, you already have a guaranteed return on the reserves. If you loan them out, it will be only to the most credit worthy. Secondly, and I think most important, the interest on reserves contains the massive amount of inflation the Fed created when the bust came.
And I think that’s the point. Bernanke and company doubled the monetary base within a year of the bust. Why didn’t all the extra money Bernanke shoveled to the banking system turn into hyper inflation? The best explanation is because of interest on reserves. With that in place, all that money isn’t getting into the economy, and if it is, it’s in amounts that are minor. So it’s effectively bottled up the base to stop a possible hyper inflation.
Of course, I think all this will change in the next few years. I expect QE2 to be an obstacle for anybody that’s not on Wall Street.
Phen and Cortez,I was just reading about the early 1930s last night and something jumped out at me that I had not been aware. Check out the massive liquidity pumping the FED did in 1932. You will find that with the creation of the Reconstruction Finance Corporation the Hoover administration engaged in massive quantitative easing, even though the common wisdom says that there was a contraction in the money supply. It distributed $1.5 billion in 1932, $1.8 billion in 1933, and $1.8 billion in 1934. The directly expressed intent of the RFC was quantitative easing though they did not use that word in 1932. But how this is pertinent to this discussion is that most of the money that was distributed went directly into reserves and NOTE there was no interest paid on reserves.
Money flowed into reserves in 2008 for the same reason as in 1932, with the contraction and business failures there was no one to borrow. Businesses today just like businesses in 1932 have borrowed beyond their ability to pay. They simply cannot borrow any more.
Politicians make a serious mistake about borrowing. They assume becasue the government can borrow an infinite amount because it can pay the interest out of money creation and inflation that business can do the same. Business cannot create money.
Bernanke has claimed that he can control the excess reserves with the interest rate paid on the reserves. That is absolutely false and I actually believe he knows it is a lie. If he could get the money out of reserves and into the economy he would do it, and banks would gladly lend for 3%-4% rather than take the paltry interest rate paid by the FED.
Having Ron Paul as chairman of this committee is the most important thing that the Republicans can do. If they do not allow him this position they will go down in history as the party that brought on the double dip recession. I can only pray that they are not that stupid.
Money going into reserves without interest in the 1930′s is something to take a look at. Where did you read that? I didn’t know that. That’s kind of creepy a similar thing has played out today. I assumed Bernanke actually did something smart via the interest on reserves. Maybe I’m wrong and those extra reserves would’ve stayed in place without that interest, like in the depression example you cite?
RFC worked similarly to TARP, and both are wasteful bailout, but RFC was a bailout only in a fiscal sense. I probably need to read on up the depression and the RFC, but the RFC isn’t quantitative easing as I understand the term. QE, as I understand it, is the direct action of a central bank to inflate, to increase the money supply. TARP was administrated by the Fed, whereas the RFC was a gigantic bureaucracy outside Fed control. Maybe this is semantics, or I’m missing a piece here or there, but we can both agree this is all bad.
Re: Paul. Yes, I would say any politician (excepting Paul) is that stupid. He knows how it works, and being a one of the few people in that town with ethics, he will try to stop it. But the others (regardless of party affiliation) aren’t interested in ethics, they’re interested in milking what’s there. They will try to block him, somehow. I said it before, if Paul makes it, I will be surprised. If he actually gets anything done, I will probably be struck by lighting on the same day.
I had two sources for the information. First was Benjamin Anderson’s Economics and the Public Welfare a great book on the 1920s and 30s. Also Lords of Finance by Liaquat Ahamed. A word of caution on Ahamed’s book, you have to read it with a skeptical mind. He has a higher opinion of Keynes that he deserves and he does lean a little toward central planning. That said the book is a great read for the information it contains, especially when it is considered in conjunction with other works such as Rothbard and Anderson.
I realize that pumping more money into the economy is the root of the problem.
All I am saying is that this unprecedented decision to pay even minimal interest on excess reserves was a way of making life easier for the bankers. It’s a way of allowing bankers to avoid the consequences of economic reality — they over-lent, primarily to the housing market, but also to every other business that was dependent on all of that easy housing credit, which was just about everyone, in varying degrees.
I advocate anything that makes bankers face the natural consequences of their actions, even the bad consequences (especially those, actually). If they are forced to lend to more risky borrowers than they are normally comfortable doing, then that’s what they ought to do. If they are forced to hold their reserves in actual cash in their own vaults, thus exposing them to the legal risk that someone is going to accuse them of missing investment opportunities while the cash rapidly loses its value, then that’s what they ought to do.
Parking their reserves at the Fed is a purely mythical transaction — it takes the money out of circulation, where it exists neither as cash, commodity reserves (!), or investments in the real economy. If the banks were forced to put their money into real places, then those transactions would have an effect on the economy somewhere, and everyone else could react accordingly. But when it’s parked at the Fed, it might as well not exist. It’s the economically-neutral move that NO ONE else in the economy is allowed to make, not unless you have a Fed account.
But that’s what the Fed is — it’s the bankers’ bank. It serves their purposes. It has managed to exempt itself from economic reality, and is now giving its members a time-out from an unpleasant reality, at our expense.
I believe that the consequences of that reality should be made visible, as bad as they are, because that will at least give us information on which to make decisions about where the most-needed changes need to be made. It will mean lots of banks will go under overnight. But that’s reality. Making the banks temporarily immune from that reality only makes the situation worse in the long run for the rest of us who have to live in the real world, in real time, with no safe haven when things get bad.
We can call our newly elected Senators and tell them we support his tenure on the board as well as his Liberty Amendment. One could also “GET the Word” out @ the local levels through newspaper blogs…Utube…facebook…twitter, you get the idea, i,m old school so newspapers are my outlets.
Oh dear. What will happen if he doesn’t get the post? He’s much more visible and well liked by the public this time around.
I loved watching Bernanke (Greenspan, etc.) squirm when it came turn for Paul to question him.
Now I will love it even more.
DEMAND that the GOP allow Ron Paul to be Chair of Monetary Subcommittee! Audit the Fed! Please go to this link: http://teapartypatriots.ning.com/forum/topics/support-ron-paul-for-chair-of. From there you can send a message to Rep John Boehner (expected new Speaker of the House).
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