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Is Ron Paul a stalking horse for Stephen Zarlenga?

Is Ron Paul a stalking horse for Stephen Zarlenga?

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Onion Eater

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Stephen Zarlenga said:
Infrastructure repair would provide quality employment throughout the nation. There is a pretense that government must either borrow or tax to get the money for such projects. But it is a well enough known, that the government can directly create the money needed and spend it into circulation for such projects, without inflationary results.

First, incorporate the Federal Reserve System into the U.S. Treasury.

Second, halt the banks privilege to create money by ending the fractional reserve system.

Third, spend new money into circulation on infrastructure, including education and healthcare.

Ron Paul said:
While a gold standard would be a wonderful thing, we shouldn’t wait for one before we end the Fed… An end to the money-creating power and a transfer of remaining oversight authority from the Fed to the Treasury would be marvelous steps in the right direction.

Stephen Zarlenga is the author of HR 6550, introduced by Dennis Kucinich:

https://www.govtrack.us/congress/bills/111/hr6550/text

Ron Paul is the author of HR 2768:

https://www.congress.gov/bill/112th-congress/house-bill/2768/text

Stephen Zarlenga would have us believe that Ron Paul represents the right wing and is opposed to Dennis Kucinich, who represents the left wing. He is pushing the followers of these two men into the streets to throw rocks at each other to see whose bill gets passed. Tweedledum and Tweedledee resolved to have a battle!

But the two bills are identical!!!

Ron Paul said as much when he described this socialist’s wet dream as being a “first step” towards a gold standard – a remarkable claim considering that there is nothing in HR 2768 about the gold standard. I’ll buy you a Double Eagle if you can even find the word “gold” in the 100-word text.

Obviously, free men only use a currency if the bank of issue is holding a reserve of assets (gold or T-Bills in modern times, cattle in antiquity; oil would also work) that they can sell in the event that inflation threatens to turn into hyperinflation. To eliminate this reserve as HR 2768 does is to create immediate hyperinflation.

Without a reserve, the only other alternative is communism. People will use an unbacked currency if the borders are closed behind high fences with sniper towers and the government is filling trenches with the bodies of people who refuse to accept the currency. But then they are not free men anymore.

The claim that the Federal government can just print money and spend it into existence is the stupidest idea EVER! No reserve of gold or T-Bills needed? Woo-hoo! We’ll build our socialist paradise on Ron Paul Bucks!
 

imagep

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The claim that the Federal government can just print money and spend it into existence is the stupidest idea EVER! No reserve of gold or T-Bills needed? Woo-hoo! We’ll build our socialist paradise on Ron Paul Bucks!

I liked your post because it brought up an interesting event.

However...

The federal government has been doing that a long time. It's not a stupid idea, it's reality.
 

Ganesh

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You might profit from taking a break from onion eating sometime, and skim through a few school economics texts.

Money is created all the time, by chartered banks, and by the Fed or similar central banks around the world. Money is worth, essentially, whatever the myriad political and economic pressures are on it at any given time. That dollar in your hand is in flux even as we trade posts, although you can't detect the movements with the bare eye. Any currency is "backed" if you will, by the assessed national economy, and various assets, including natural and human resources, and not trivially these days, by the sentiment of the investment community.

Basing it on gold, or some other commodity, is a simplistic idea from the 19th century, that wouldn't work today.
 

Onion Eater

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Dollars are created when the Fed purchases T-Bills. These bills are held in reserve and back the dollar by being available for the Fed to sell. They would do so for the purpose of withdrawing dollars from circulation in the event that inflation threatens to turn into hyperinflation. Such a sale of T-Bills is what caused interest rates to go up during Reagan's first term.

If HR 2768 passed and this reserve of T-Bills were eliminated, the sentiment you speak of would be a bit negative - actually panic. Everybody dumping their dollars would cause immediate hyperinflation, which the Fed would be powerless to check.
 
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imagep

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Dollars are created when the Fed purchases T-Bills. These bills are held in reserve and back the dollar by being available for the Fed to sell. They would do so for the purpose of withdrawing dollars from circulation in the event that inflation threatens to turn into hyperinflation. Such a sale of T-Bills is what caused interest rates to go up during Reagan's first term.

If HR 2768 passed and this reserve of T-Bills were eliminated, the sentiment you speak of would be a bit negative - actually panic. Everybody dumping their dollars would cause immediate hyperinflation, which the Fed would be powerless to check.

Dollars and treasuries are both created from nothing. The treasury creates bonds out of thin air, and exchanges them for dollars that the federal reserve creates

Those treasuries are backed by nothing but a promise to pay dollars. Dollars are backed by nothing other than the promise that the government will accept them for tax payments.

Interest rates went up under Reagan because inflation was up. When inflation is high, investors demand a higher ROI. Interest rates always follow inflation.
 

austrianecon

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Dollars and treasuries are both created from nothing. The treasury creates bonds out of thin air, and exchanges them for dollars that the federal reserve creates

Those treasuries are backed by nothing but a promise to pay dollars. Dollars are backed by nothing other than the promise that the government will accept them for tax payments.

Interest rates went up under Reagan because inflation was up. When inflation is high, investors demand a higher ROI. Interest rates always follow inflation.

Dollars from banks are created from nothing. Treasuries are loans (promissory notes). Fed before late 2008 wasn't the largest buyers of US treasuries. Since late 2008 with the Fed buying US treasuries have sealed the position that the Fed/Government is just creating funny money.

But the treasury bonds is the key here. It's based on full faith and credit of the US Government. Personally, I wouldn't say US credit is worth AA/AAA as US uses inflation to decrease it's debt to GDP ratio, much like Greece would have to. But the fact is.. if no AA/AAA rating.. US bond rates would be much much higher as a bond holder will take little or no return over losing money.

Let's be clear, Interest rates were raised BEFORE Reagan took office. Volcker was appointed by Jimmy Carter. Interest rates don't always follow inflation.. if it did, we'd never have long periods of inflation. Unless you accept the fact the US had purposely defrauding bond holders (defaulting).
 

austrianecon

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Basing it on gold, or some other commodity, is a simplistic idea from the 19th century, that wouldn't work today.

Actually it would work. The reality is that the public would be aware that instead of passing off a dollar from 2014 to 2015 as equal would realize that the US Government would have to revalue it's dollar to gold like FDR did.
 

Ganesh

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Actually it would work. The reality is that the public would be aware that instead of passing off a dollar from 2014 to 2015 as equal would realize that the US Government would have to revalue it's dollar to gold like FDR did.

And then when the world's economy expands more than the supply of gold, what then? Revalue gold?

Any monetary system is vulnerable in the sense that its value is based, in large part, on trust, belief, and established norms. The US has never defaulted on debt, whereas Argentina has made a spectacle of itself over and over. Where does cash go when seeking a secure location?

As for inflation, which I think you are alluding to, we all know about that. The figures are published, and even for those averse to reading statistics, a slow troll of the shopping mall will often give the same results. No one is "passing off" a dollar from year to year.
 

austrianecon

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And then when the world's economy expands more than the supply of gold, what then? Revalue gold?

Any monetary system is vulnerable in the sense that its value is based, in large part, on trust, belief, and established norms. The US has never defaulted on debt, whereas Argentina has made a spectacle of itself over and over. Where does cash go when seeking a secure location?

As for inflation, which I think you are alluding to, we all know about that. The figures are published, and even for those averse to reading statistics, a slow troll of the shopping mall will often give the same results. No one is "passing off" a dollar from year to year.

Yes, a revalue would happen.

Actually the US has default. Several times. US defaulted in 1779, 1814, 1862, 1934, and 1979. There are many more.. but these are clear cut cases of it.

Figures are published but joe six pack and jane bottle of wine doesn't get it. Inflation is a hidden tax used by Government to reduce debt liabilities. You can promise the world if inflation outpaces actual costs. Think of it this way... there is a reason why people have argued for Social Security payments to be indexed.
 
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Onion Eater

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Dollars from banks are created from nothing.

Dollars and treasuries are both created from nothing.

You two sound a lot alike! You’re not the same person are you?

You are both equally wrong, but I do detect a tiny difference:

imagep desperately wants to believe that dollars are created from nothing because this misconception fuels his wet dreams of a socialist paradise.

austrianecon desperately wants to believe that dollars are created from nothing because he has built a career on whining about Keynesianism.

Typical of the non-Keynesian approach, Congressman Paul and some others railed against possible Keynesian solutions. When their big moment arrived, they had no solutions.

Of course, whining is as far as it goes; the Austrians have no solutions. They’re just whiners.

But, motivation aside, the Austrians and the socialists are united in promoting Ron Paul’s bill, HR 2768.

https://www.congress.gov/bill/112th-congress/house-bill/2768/text

So, effectively, there is no difference between Austrian economics and socialism. The former relies more on whining and the latter more on pie-in-the-sky promises, but this is just a difference in style. Actions speak louder than words and, by their actions (promoting HR 2768), they are identical.
 

Ganesh

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Yes, a revalue would happen.

Actually the US has default. Several times. US defaulted in 1779, 1814, 1862, 1934, and 1979. There are many more.. but these are clear cut cases of it.

Figures are published but joe six pack and jane bottle of wine doesn't get it. Inflation is a hidden tax used by Government to reduce debt liabilities. You can promise the world if inflation outpaces actual costs. Think of it this way... there is a reason why people have argued for Social Security payments to be indexed.

Yes well if you think those technical events are on a par with an Argentina, or a Greece, or a Zimbabwe, then I'd just say be very careful where you put your hard earned savings, as you may receive an unpleasant surprise. Money, especially in a crisis, tends to migrate to higher ground, those areas with a track record of minimal foolishness, or at least less of such in relation to other areas. Therefore you have London and New York favoured over Buenos Aries and Harare.

The problem with a gold standard is that gold in inherently unrelated to economic policy. It is a holdover from the 19th century, and probably from the conquistadors from before that. Gold would not allow for the free creation of money when necessary, nor for the functioning of other monetary instruments.

And if you are going to revalue gold when deemed necessary, then how does that differ from simply managing the value of money without it? The bottom line is that economies must be managed, and that means economists making decisions about the money supply, inflation, etc. Money is actually an abstraction, and not a fixed quantity. I think this is a point that many on the far right don't seem to understand.
 

Onion Eater

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Richard C. Cook said:
I worked with Steve [Zarlenga] on his first draft of the American Monetary Act. The time came when Steve and I began to meet with Congressman Dennis Kucinich, briefing him and others in Washington on monetary ideas.

So much has happened since then. So many more people have become aware of the evils of the debt-based monetary system. We have seen Congressman Ron Paul ignite a national wave of revulsion against the Federal Reserve System. There is now even hope that the American Monetary Act might be introduced on the floor of Congress.

Observe that, while publically pitting the right-wing Paul against the left-wing Kucinich, in their internal documents they casually refer to Ron Paul as a bought-and-paid-for congressman that is promoting Stephen Zarlenga’s American Monetary Act for him. When Cook says that Ron Paul made people “aware of the evils of the debt-based monetary system” he means that Ron Paul believes in the Debt Virus Theory; that is, inflation is caused by the Fed purchasing bonds and therefore – pick your jaw off the floor here – the Treasury printing dollars and Congress spending them into existence is not inflationary.

In 1990, Austrian economics stopped being an academic subject and degenerated into a bunch of camp followers to Congressman Paul. They have not had anything to do with the gold standard for over thirty years. The founders (Mises, Hayek, et al) would roll over in their graves if they knew of the crackpot scheme being promoted in their names. Gold-bug talk serves only as a stalking horse for the bill that Congressman Paul introduced:

https://www.congress.gov/bill/112th-congress/house-bill/2768/text

Apparently Congressman Paul is banking on his gold bug followers being too stupid to actually read the 100-word bill that they are supporting. It is not the first time a politician has sold his followers down the river.
 
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