Robert C Green II .com

Right here.

Some things are funny because they are true. This is one of those times. Though it makes me cry a little as well.

Click here to listen

Courtesy of Mises and SoundMoneyCafe

I was listening to NPR this morning on my way to work. They had an interesting segment on how to save the financial system (The story can be found in written form here).

The first part of this story is really what we all already know – we are going to pay for being so indebted. Nationalization and socialism is just around the corner. Obama will raise taxes. Our debt burden will slow down the economy and make life quite difficult.

The section called “Twin Peaks” is what really fascinated me . The point is that there are two moments in US history where our debt levels have been equivalent to 100% of the GDP – 1929 and 2007. This is not happy news.

We are in massive debt just like we all were in the 1920s. Who let us get here? To put it simply, the Federal Reserve. We have been operating at record low interest rates since 2001. Now the interest rate is around 0%. That means that credit and lending have been super cheap. Cheap enough to cause market distortions that would encourage us all to borrow more than we could afford.

In the late 1920s the Fed knew the interest rates were too low but did not raise them quickly enough. Credit was too cheap and the country was in too much debt. The following is taken from http://eh.net/encyclopedia/article/Smiley.1920s.final:

By early 1928 the Fed was again becoming worried. Stock market prices were rising even faster and the apparent speculative bubble in the stock market was of some concern to Fed authorities. The Fed was also concerned about the loss of gold and wanted to bring that to an end. To do this they sold securities and, in three steps, raised the discount rate to 5 percent by July 1928. To this point the Federal Reserve Board had largely agreed with district Bank policy changes. However, problems began to develop.

During the stock market boom of the late 1920s the Federal Reserve Board preferred to use “moral suasion” rather than increases in discount rates to lessen member bank borrowing. The New York City bank insisted that moral suasion would not work unless backed up by literal credit rationing on a bank by bank basis which they, and the other district banks, were unwilling to do. They insisted that discount rates had to be increased. The Federal Reserve Board countered that this general policy change would slow down economic activity in general rather than be specifically targeted to stock market speculation. The result was that little was done for a year. Rates were not raised but no open market purchases were undertaken. Rates were finally raised to 6 percent in August of 1929. By that time the contraction had already begun. In late October the stock market crashed, and America slid into the Great Depression.

If you want to blame someone, then blame the Federal Reserve. The Fed has distorted the credit market by keeping interest rates artificially low and the money supply artificially high through a combination printing fiat money (money that is worthless) and fractional reserve banking. This intervention in the free market has caused many speculative bubbles that are now all bursting (dot.com bubble, housing bubble, the list goes on) and crashing our economy. Had the free market been left to work, lending would have slowed long ago under higher interest rates. This would have at least lessened these bubbles if not stopped them altogether.

If you really want to help, then End the Fed so this will hopefully not happen again.

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.

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.