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  • tradethisok tradethisok Dec 2, 2008 11:08 PM Flag

    Will America be facing hyperinflation? by Ron Paul

    DEC.1 "As the printing presses for the bailouts run at full speed, those in power are no longer even pretending that the new giveaways will fix our problems. Now that we are used to rewarding failure with taxpayer-funded bailouts, we are being told that this is 'just a start,' more funds will inevitably be needed for more industries, and that things would be much worse had we done nothing.

    The updated total bailout commitments add up to over $8 trillion now. This translates into a monetary base increase of 75 percent over the last two months. This money does not come from some rainy day fund tucked away in the budget somewhere – it is created from thin air, and devalues every dollar in circulation. Dumping money on an economy, as they have been doing, is not the same as dumping wealth. In fact, it has quite the opposite effect.

    One key attribute that gives money value is scarcity. If something that is used as money becomes too plentiful, it loses value. That is how inflation and hyperinflation happens. Giving a central bank the power to create fiat money out of thin air creates the tremendous risk of eventual hyperinflation. Most of the founding fathers did not want a central bank. Having just experienced the hyperinflation of the Continental dollar, they understood the power and the temptations inherent in that type of system. It gives one entity far too much power to control and destabilize the economy.

    Our central bankers have had a tremendous amount of hubris over the years, believing that they could actually manage a paper money system in such a way as to replicate the behavior and benefits of a gold standard. In fact, back in 2004 then Fed Chairman Alan Greenspan told me as much. People talk about toxic assets, but the real toxicity in our economy comes from the neo-alchemy practiced by the Federal Reserve System. Just as alchemists of the past frequently poisoned themselves with the lead or mercury they were trying to turn to gold, today’s bankers are poisoning the economy with accelerated fiat money creation.

    Throughout the ages, gold has stood the test of time as a consistently reliable medium of exchange, and has frequently been referred to as 'God’s money,' as only God can make more of it. Seeking superhuman power over money in the way alchemists did in ancient times caused society to shun them as charlatans. In much the same way, free people today should be sending the message that this power and control over our money is no longer acceptable.

    The irony is that even had the ancient practice of alchemy been successful, and gold was suddenly, magically made abundant, alchemists still would have failed to create real wealth. Creating gold from lead would have cheapened its status to that of rhinestones or cubic zirconia. It is unnatural and dangerous for paper to be considered as precious as a precious metal. Our fiat currency system is crumbling and coming to an end, as all fiat currencies eventually do."

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    • UAW should go directly to Congress and bypass management and tell them they want New management and a New Plan. This is the same management that saw the 1970s oil crises and how did they respond?

      ...they built the Hummer...a Bigger Suburban....bigger and thirstier gas guzzlers.

      all standing in card holders....airlines.....and on and on...all want handouts.....what happened to responsibility? Accountability? Free market?

      • 1 Reply to ben.franklin36
      • That solution is just as bad as them allowing Barney Frank and Chris Dodd to be in charge of solving these problems. They are the cause of these to begin with. The unions are a big part of the problems with the automakers, along with the conplacency of the managements for a very long period of time. They need to have new management in place that has plans whicjh include much larger concessions from the unions than the token concessions they have came up with so far. What it's going to boil down to is a worker making 47 dollars an hour better agree to work at the same wage as Honda or Toyota workers, or they will be not working at all for zero. Also the unions proposals to delay payments is just digging a deeper hole later on. That is exactly what got them in the hole they are currently in today.

    • How can the market remain healthy if the hording of cash with a value placed on it by those that are hording it. I am sorry but there is no value to the over two trillion in dollars that has been printed and given to the banks to be used amongest themselves never intended to reach its target main street america to be used in trade. If you cant use it it is deemed worthless and if you over produce it as is going on the overabundance makes it also worthless. The joke is that those incharge of the funds have failed the taxpayer in the fact they agreed to be transparent at the time the money was given them but have done a 360 hiding the fact where these funds are going and what and how this is being used. Bottom line is main street america was stolen from by the system and capitalism is dead.

    • ""Deflation is not necessarily a bad thing""

      "In the short term, for a few things it's fine. It was great for computers. It's terrible for the economy as a whole, especially when it's expected that everything will deflate. It's a huge disencentive to investment."

      Experience has shown that the market can adapt to a steady, predictable and fairly low rate of inflation through changes in interest rates. I think the same would be true of deflation, if it were due to primarily to economic growth and not deleveraging. The only difference is, the actual interest rate would be

      (real interest rate) - (deflation rate)

      instead of

      (real interest rate) + (inflation rate)

      Thus, as long as the deflation rate remains signficantly smaller than the real interest rate, the market should stay healthy in this respect. If it gets to close to the real interest rate, then it becomes a disincentive for making loans or investing, since one could get almost as much return simply by holding currency. But, if such a thing happens, it would probably become self-correcting at some point: if enough people simply hold currency, then the laws of supply and demand would require real interest rates to rise, since there is less money available for lending.

    • Gold standard == eventual deflation.

      The only solution to that problem was to bring in silver, and then to get off metals entirely.

      Either we manage the money supply, or it manages us.

      Ron Paul's trip to the nostalgia of metals-based commodity money is not what the world needs.

      The world needs managers to be held accountable. It always has needed accountability, even under a gold standard. Why did Archimedes have a flash of insight in a bathtub? Because the king wanted to make sure his crown was real gold. The gold standard doesn't eliminate the need for accountability. It's not a magic elixer of truth. Gold isn't truth. Truth is truth.

    • I heard Obama on the radio yesterday say that he wasn't worried about the budget because of the "risk of recession."

      What these idiots don't realize is that recession isn't the worst thing that could happen. They could completely destroy the economy with debt.

    • The US will not face inflation at all. The dollar will go up forever. Obama will create jobs, build and buy "green" cars, open CDs in every single bank in America, change Afghanistan, build another Jerusalem (one for Israel, one for the Palestinians) .. you guys don't get it at all.

      Obama will create wealth by decree, just like Al Gore created the internet.

    • God bless Dr. Paul.

    • The Mafia's Counterfeit Printing Machine vs. Big Ben's Printing Machine: Who will win the contest of 'Destroying the US Wealth'?

      The movie will be out in late 2011. Tickets anyone..?

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