11-24-11 Freedom Watch - The Plain Truth

Ron Paul: Blame the Fed for the Financial Crisis - WSJ.com

An OpEd by Ron Paul, the only sane person in Washington, written for the Wall Street Journal

To know what is wrong with the Federal Reserve, one must first understand the nature of money. Money is like any other good in our economy that emerges from the market to satisfy the needs and wants of consumers. Its particular usefulness is that it helps facilitate indirect exchange, making it easier for us to buy and sell goods because there is a common way of measuring their value. Money is not a government phenomenon, and it need not and should not be managed by government. When central banks like the Fed manage money they are engaging in price fixing, which leads not to prosperity but to disaster.

 

The Federal Reserve has caused every single boom and bust that has occurred in this country since the bank's creation in 1913. It pumps new money into the financial system to lower interest rates and spur the economy. Adding new money increases the supply of money, making the price of money over time—the interest rate—lower than the market would make it. These lower interest rates affect the allocation of resources, causing capital to be malinvested throughout the economy. So certain projects and ventures that appear profitable when funded at artificially low interest rates are not in fact the best use of those resources.

Eventually, the economic boom created by the Fed's actions is found to be unsustainable, and the bust ensues as this malinvested capital manifests itself in a surplus of capital goods, inventory overhangs, etc. Until these misdirected resources are put to a more productive use—the uses the free market actually desires—the economy stagnates.

 

The great contribution of the Austrian school of economics to economic theory was in its description of this business cycle: the process of booms and busts, and their origins in monetary intervention by the government in cooperation with the banking system. Yet policy makers at the Federal Reserve still fail to understand the causes of our most recent financial crisis. So they find themselves unable to come up with an adequate solution.

In many respects the governors of the Federal Reserve System and the members of the Federal Open Market Committee are like all other high-ranking powerful officials. Because they make decisions that profoundly affect the workings of the economy and because they have hundreds of bright economists working for them doing research and collecting data, they buy into the pretense of knowledge—the illusion that because they have all these resources at their fingertips they therefore have the ability to guide the economy as they see fit.

Nothing could be further from the truth. No attitude could be more destructive. What the Austrian economists Ludwig von Mises and Friedrich von Hayek victoriously asserted in the socialist calculation debate of the 1920s and 1930s—the notion that the marketplace, where people freely decide what they need and want to pay for, is the only effective way to allocate resources—may be obvious to many ordinary Americans. But it has not influenced government leaders today, who do not seem to see the importance of prices to the functioning of a market economy.

The manner of thinking of the Federal Reserve now is no different than that of the former Soviet Union, which employed hundreds of thousands of people to perform research and provide calculations in an attempt to mimic the price system of the West's (relatively) free markets. Despite the obvious lesson to be drawn from the Soviet collapse, the U.S. still has not fully absorbed it.

The Fed fails to grasp that an interest rate is a price—the price of time—and that attempting to manipulate that price is as destructive as any other government price control. It fails to see that the price of housing was artificially inflated through the Fed's monetary pumping during the early 2000s, and that the only way to restore soundness to the housing sector is to allow prices to return to sustainable market levels. Instead, the Fed's actions have had one aim—to keep prices elevated at bubble levels—thus ensuring that bad debt remains on the books and failing firms remain in business, albatrosses around the market's neck.

The Fed's quantitative easing programs increased the national debt by trillions of dollars. The debt is now so large that if the central bank begins to move away from its zero interest-rate policy, the rise in interest rates will result in the U.S. government having to pay hundreds of billions of dollars in additional interest on the national debt each year. Thus there is significant political pressure being placed on the Fed to keep interest rates low. The Fed has painted itself so far into a corner now that even if it wanted to raise interest rates, as a practical matter it might not be able to do so. But it will do something, we know, because the pressure to "just do something" often outweighs all other considerations.

What exactly the Fed will do is anyone's guess, and it is no surprise that markets continue to founder as anticipation mounts. If the Fed would stop intervening and distorting the market, and would allow the functioning of a truly free market that deals with profit and loss, our economy could recover. The continued existence of an organization that can create trillions of dollars out of thin air to purchase financial assets and prop up a fundamentally insolvent banking system is a black mark on an economy that professes to be free

Ron Paul: Blame the Fed for the Financial Crisis - WSJ.com

Let the Progressives / Liberals Have Their Way - Letter to Editor

Here is a “Letter to the Editor” submitted to the Register Mail by Dick Conklin of the Galesburg TEA Party.  I hope we make the right choice!

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About 6 weeks ago my brother-in-law suggested we let the progressives/liberals have their way. Let them give as much money away to as many people and projects as they wish. Let them tax the wealthy and anyone else however much they desire. In other words let them construct an economic lab test. This should then settle finally the issue whether this thing called Keynesian Economics will work.

Fortunately new don’t have to wait the 2 to 4 years to determine the results of this experiment. We currently have a lab experiment on this issue pretty well near completion. It’s called Greece, and the lab results are pretty well complete. As far as I have read most economists freely admit Greece’s economic collapse is due to its extremely large public employee payroll and consequent legacy costs as well as a huge entitlement class, supported by a too small private sector. In essence the private sector in Greece and the wealth it creates is not sufficient to support Greece’s generous public payrolls, benefits and entitlements. In fact there apparently isn’t enough wealth in the rest of Europe to bailout Greece from its Public Sector Largesse.  There are also at least three more of these lab experiments coming close to finishing up and from all signs it’s pretty clear the results in Italy, Spain and Portugal will be the same. There may be other conclusions we will be able to draw from these economic laboratory experiments, but none so strikingly clear as that you can’t have a public sector without a thriving private sector.

The choice now is ours. Do we learn from these laboratory experiments or do we insist that we waste our own time and money re-running this experiment. Do we want Greece here in Galesburg and in every other community across the nation?  I am sure our children and grandchildren will hold us accountable for whatever we decide.

Dick Conklin

Galesburg TEA Party

What is the FairTax plan?

The Monmouth TEA Party Group is please to be hosting Glen Ebbing, president of the Quincy Fair Tax Group at our October meeting. He will be giving a presentation on the Fair Tax and answering questions.

TIME AND LOCATION:

Monday, October 10th at 7:00pm

215 S. 1st Street, Monmouth, IL 61462

1st Street Armoury

 

Here is some information from the FairTax web site:

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 13) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax  administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

• Enables workers to keep their entire paychecks
• Enables retirees to keep their entire pensions
• Refunds in advance the tax on purchases of basic necessities
• Allows American products to compete fairly
• Brings transparency and accountability to tax policy
• Ensures Social Security and Medicare funding
• Closes all loopholes and brings fairness to taxation
• Abolishes the IRS

We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore!

The FairTax Five

The gloves are off as critics try to pick apart the FairTax. Trouble is, it's just a replay of the same five FairTax myths:

• "The 23% rate is misleading. It's actually 30%"
  Well, actually...
• "It's not enforceable and evasion will be rampant"
  Well, actually...
• "It will not be revenue neutral at 23%"
  Well, actually...
• "The FairTax is not politically viable"
  Well, actually...
• "The FairTax is regressive and shifts the tax burden onto lower and middle income people"
  Well, actually...

source: What is the FairTax plan?

Techniques of the Left, by Charlie Gruner

I have to express my gratitude to Christian Schock of Galesburg. His letter in the September 17, 2011 R-M, he gives me an opportunity to show examples of techniques he uses when he runs out of facts for his arguments.

The first technique is to try to marginalize your opponent.  Near the beginning of his letter, Schock writes that I am a TEA Party leader,assuming that many people will find that enough to dismiss my opinion. Then he adds that “facts don’t matter very much” to the TEA Party. Trying to marginalize me and/or the TEA Party makes the second technique easier if you succumb to the first.

The second technique is called mis-direction. Here’s how it works: Point out an opponent’s argument and then subtly change the subject.  In Schock’s first attempt at this he calls attention to my contention that insurance company officers would be jailed if their companies were run like Social Security. Schock then changes the subject to the relative administrative costs. My observations were on the fraudulent nature of the “product” and Schock focuses on administrative costs rather than the subject of the argument.

The next example of mis-direction is when Schock talks about the amount of income that the Social Security tax was to be levied on. He discusses the effects of inflation (though this was never explained in the promises of the original act) and says that the $3,000 figure is equivalent to$45,000 today. Granting Schock’s numbers, how does he explain that the maximum today is $106,800? That’s over three times the rate of inflation. He also ignores the fact that the rate of tax has also gone up over 600%.

After running out of gas on the subject, Schock then talks about the debt incurred to Social Security and blames Republican administrations. This is another subtle change in subject because I never specified party. In fact you will find that I and most TEA Party folks hold both major parties responsible.

In no part of Schock’s argument is there any factual information refuting the actual comparisons that I made between Social Security and Ponzni Schemes. In fact, at the very end of his letter Schock says that it is not a Ponzi scheme but blames the “Bush administration” because it is one. I’m not sure how that makes any sense.

Charlie Gruner

Galesburg 9/12 Group Member

A response to: Will Schick, Tea Party book pick a great read

This letter to the editor was recently published in the Galesburg Register Mail

Thanks to Will Schick for pointing out the ant-Christian sentiments of Thomas Paine to us Tea Partiers. Apparently his point is we have no business quoting Mr.Paine as his religious beliefs are opposed to that of the vast majority of Tea Partiers. To this I would like to quote, in Thomas Paine's own words, from a section on religion in his famous treatise Common Sense. "For myself I fully and conscientiously believe it is the will of the Almighty, that there should be diversity of religious opinions among us. It affords a larger field for our Christian kindness. Were we all one way of thinking our religious disputations would want matter for probation..."  So it appears religious believers and non believers of all stripes are welcome under Thomas Paine's tent.

In reading Ed Klapp's letter of 9/20 attacking Tea Partiers I really don't see anything to respond to. Much of it was pure ranting. And yes, I am guilty as he charges. I am anti Communist anti socialist, against government intervention in business ala Solyndra and in favor of deregulation. His charge we Tea Partiers are under the influence of the Koch brothers is no different than the charge that Progressives are mere pawns of George Soros and Michael Moore. How do you disprove either charge?
 
Both his letter and that of Will Schick are really distractions from the real issues and that is what we should be debating or discussing,i.e,  how do we live with $14 Trillion and growing debt, when there is not enough wealth, not income, but wealth to appropriate to remove our debt. Further what are the consequences for our children and grandchildren if we continue on the current path of $1 Trillion or more in deficits each year to add to our debt?

 

So rather than be distracted by name calling, and charges that can be levelled at both sides and questioning the shallowness of one side's reading list, why can't we debate the serious issues that confront us? Here's a good list to start with. Does Social Security really need fixing? If so, how? We know Medicaid and Medicare need fixing. How do we do it?  Why does the Department of Justice pay $16.00 per muffin and $52.00 per person for conference coffee breaks? Who was paying for those $16.00 muffins? If Obama Care is so great why will it take 16,000 IRS workers to enforce it?  Is the cost of these IRS workers included in the Health Care Reform cost or hidden in the IRS budget?  If Obama Care is so good, why, at the latest count that I heard, are there over 1,000 entities asking for and receiving waivers from it including some of Nancy Pelosi's own largest contributors. I recently came across an alternative proposal to health care reform that on the surface looks pretty good. Yet it never saw the light of day because the then Democratically controlled congress allowed no discussion on the issue. So why is an area as important as Health Care, which represents 1/6 of our economy, not open for debate, discussion and input from both parties? Can we not even now bring this very important topic back for open discussion in Congress as well as in the public forum.  Maybe Obama care is the best solution but we will never know until it is honestly debated in the public forum.

Theses are questions that should be honestly and openly debated, not which book I have read most recently.

 

Dick Conklin

Soon to be retired Tea Party Sympathizer

Will’s article: Will Schick: Tea Party book pick a great read

U.S. Government Used Taxpayer Funds To Buy, Sell Weapons During 'Fast And Furious,' Documents Show | Fox News

Buy and give them to Mexican drug runners but restrict the constitutional rights of American citizens to buy, own, and carry our own.  Time for a TEA Party!!!!

Not only did U.S. officials approve, allow and assist in the sale of more than 2,000 guns to the Sinaloa cartel -- the federal government used taxpayer money to buy semi-automatic weapons, sold them to criminals and then watched as the guns disappeared.

full article here: U.S. Government Used Taxpayer Funds To Buy, Sell Weapons During 'Fast And Furious,' Documents Show | Fox News