Robert C Green II .com

Ever since I entered graduate school in 2005 I have had a (probably unhealthy) obsession with the economy, poiltics, and investing. This is all the more interesting because I was ( and hopefully will be again ) studying computer science. After reading quite a bit I have come to two real conclusions:

1. I am a Constitutionalist and a Libertarian
2. Our economic problems ( and quite possibly our political problems) are based on our monetary system

I believe my first conclusion explains itself. If you read the US Constitution or the writings of the founding fathers, then you know that you should be a libertarian who believes in the US Constitution. Enough said.

My second conclusion merits a bit more explaining. As it is, I believe it is wise of me to defer to those who have already made this argument. So let me stand on the shoulders of giants and send you here (The Case For Natural Money) to begin. I’ll most likely say more about this soon.

The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.

~ Thomas Jefferson

Usually I think Glenn Beck is a bit over the top and pro war. This time he is right on the money.

Inflation/deflation actually has nothing to do with prices. A price is the value a person assigns to an object. This value changes over time, with adjustments in supply and demand, and with changes in production costs. Prices always vary and, in a capitalistic society, tend to decrease dramatically.

Inflation is an increase in the amount of available money in circulation. This erodes purchasing power and makes every dollar worth less. It also makes debt easier to pay off. This is why you cannot save and get rich. Our money is simply devalued too quickly to keep up.

Deflation is a decrease in the amount of available money in circulation. This adds to purchasing power and makes every dollar worth more. It also makes debt more difficult to pay off.

The Fed has inflated our money and financed it with debt. Welcome to the US and our fiat money system.

The US True Money Supply can be seen here. Talk about inflation. Dang. But I do have some other thoughts on the current economic situation.

One one hand we have Bernanke and his cronies inflating the life out of our money supply. Everyone knows this is bad. Nobody in their proper mind thinks that this is good. (As a side note, if economists would just agree that the definition of inflation is an increase in the money supply I think this whole debate – of whether expanding the money supply is good or not – would finally go away.)

On the other hand we have a scared public – both national and international – who are afraid to spend. So, despite the fact that the money supply is increasing dramatically, the cash is simply not circulating. This is hedging inflation to some degree.

On the mystical third hand we have the appointment of Paul Volcker as the head of President Obama’s Economic Recovery Advisory Board. Volcker is an avid inflation fighter from the Reagan days.

My conclusion (more of a guess I suppose)? The government is going to expand the money supply. Once things start freeing up and moving they will attempt to allow the dollar to devalue just enough to make the US debt manageable. Then, using a Volckeresque strategy, the US will see a rapid increase in interest rates reminiscent of the 1980s in order to scare off more inflation.

It just seems like everything is pointing in this direction.Welcome to the world of fiat money folks.

Last night I came across a quote from Ludwig Von Mises in his book Notes and Recollections:

My theories explain, but cannot slow the decline of a great civilization. I set out to be a reformer, but only became the historian of decline.

Look around the world today. The governments of the world are in deep debt and are inflating their way out of it by printing money. Liberty is being encroached upon. The size of government is swelling. Private property rights are being ignored. Protectionism is being enacted. Finances are collapsing. Homes are being foreclosed. This list only gets longer. We are still in a great decline.

I’m afraid that in the coming years historians, governments, and private citizens will look back in shame and dissapointment. What words will fall from their lips? “Mises was right.”

I just read this article and have again been reminded of why sound, private money is important to capitalism. There are a few reasons, especially in the USA. Most of these are spelled out in the article I just mentioned, but I will still repeat some here while adding a few of my own.

1. Sound, private money avoids inflation. Sound money is inherently tied to a commodity or some scarce resource. Since natural resources cannot be created out of thin air (as fiat money can) inflation is negligible and if it does occurs, occurs very slowly. This means that you’re savings actually is worth something as it is not devalued by every new dollar printed by the US government.
2. Sound, private money allows wealth creation through savings, not only investment.
3. Once wealth is earned through savings, investment is pursued as a way of gaining wealth at a higher rate.
4. Sound, private money limits the expenditures and flexibility of governments. This inherently limits government and keeps it out of your life.
5. Sound money provides just scales for commerce.
6. Private money insures competition amongst currencies.
7. The US Constitution says so: “No state shall coin money, emit bills of credit, or make anything but gold and silver coin a tender in payment of debts” (Art. I, Sec. 10)

I also feel that I should take a moment here to explain what inflation really is. In the world as it stands, countries use a monetary system known as fiat currency. This means that the currency has value simply because it is believed to have value. In reality there is no value to the currency – it is just paper and very low value metals.

Historically gold, silver, bronze, and copper had always been used as currency because the have intrinsic value and are scarce. The dollar itself was originally backed by gold as well. The old saying went, “Good as gold. Sound as a dollar.” This meant that government s could not print more money than the gold/silver that they had on hand.

After WWII, the US was in a rare position and, as its currency was backed by gold and still sound currency, it became the worlds reserve currency. US dollars were a safe investment.

Once the backing of gold was removed (Thank you FDR and Richard Nixon) the government was free to print as much currency as it wanted in order to fund programs and pay bills. They still do this and they print roughly 10% more money every year. This means that every year the money supply increases by roughly 10% and the value of your cash on hand decreases by 10%. Basically US citizens don’t only pay taxes, they also let the government steal an additional 10% of their wealth through inflation.

If a communist tells you that your plan is too socialistic, it probably is. Read here.

“The stimulus bill does that, and calls it the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept “hopeless diagnoses” and “forgo experimental treatments,” and he chastises Americans for expecting too much from the health-care system.”

This is taken from Bloomberg. The last thing I want is the government making my medical choices. The last thing I want during an economic downturn is the government stifling innovation. This is true socialism.

As Americans we should always expect more from health care because we pay for it! Get the government out of it! My life does not belong to them. My health does not belong to them.

Over here.

As President Obama is leading us in a direction of economic, political, and societal destruction with his “stimulus” package that will bury our children and their children in debt as well as dismay at what we have done to them, I came across 2 articles that gave me hope:

1. Now Drafting Ron Paul for President
2. States Rights

My hope is not that Ron Paul runs for re-election in 2012. My hope is that a young Ron Paul takes his position and runs for President in 2012. My generation is now taking up the mantle of the libertarians, the free marketers, and classic liberals everywhere. We’ve been sickened by what we’ve seen in our lifetime and we want change desperately. We long for peace, privacy, protection of private property, and prosperity that cannot be achieved or maintained through big government. We are a second generation of our founding fathers.

I hope the Republicans are getting this into their thick skulls. What happened to the promises of small government and lower taxes? What happened to the promises of privacy and protection of private property? What has happened to the Republicans. If they don’t change now then I suggest they start a re-branding campaign. Perhaps they should be “Democrats Lite” or “Almost Socialists” or “Only Out for Ourselves”. In fact, maybe they should just merge with the Democrats. I mean, we all know that they’re basically the same party anyway!

I’m amazed how no one sticks to their principals these days. Everyone is a moderate because the only important thing is re-election. The only thing I know for sure is that “Middle of the Road Policy Leads to Socialism” (Thank you Ludwig Von Mises). Perhaps you don’t believe we’re heading this way? Try reading this article at Newsweek.

But all hope is not lost! No, change is in the air. Multiple states are introducing legislation regarding sovereignty. This puts a smile on my face. It seems that someone, somewhere has been reading a copy of the US Constitution. The 10th Amendment is powerful and it is time that Washington was reminded of that. Maybe you’ve forgotten what the 10th Amendment says? Let’s take a look:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

That means that if a power is not in the Constitution and is not explicitly delegated to the Federal Government, then that power is given to the states. The plain English version of this is, “Bug off. We’re sick of you telling us what to do and screwing us over.”

Maybe the states should also remind Washington of Article I, Section 8 of the Constitution:

The Congress shall have power…. To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.

That means the government can only set the value of money, not print it carelessly and flagrantly. If you want the real reason we’re in this whole mess I have 2 words for you: Federal Reserve! (Insert sigh of frustration here) Anyway…

It is my hope that every state passes a resolution regarding its sovereignty in order to send a clear message to Washington that they have overstepped their bounds and are leading us down a path of destruction that is unjust and ungodly. Legislation is the perfect and legal way to do this. I think Washington simply needs to be reminded who their masters are.

It is my prayer that we return to being a country that is not only founded on the Declaration of Independence and the US Constitution, but also that we return to being One Nation Under God knowing that we will all ultimately answer to Him. If you really want to know what our country should be, please read the Declaration of Independence and the US Constitution. In fact, maybe we should send a few copies to Congress and the President.

This is a real bailout plan.