Friday, October 19, 2007

Ron Paul and money

Whenever you become indebted, you loose some fundamental freedom. You tie yourself to that person or institution that you become indebted to in somewhat of a master-servant relationship. Whether that is fundamentally right or wrong depends upon individual opinion. It really depends who you become indebted to, and whether you like being in debt to them or not. Our financial system is based on debt. The fundamental unit of the dollar is debt, or the use of credit. Credit is merely trust. Our dollar is based on the trust that the Government can pay back it’s debt to the Federal Reserve. The dollar is based upon the IOU treasury notes issued by the United States treasury. The fundamentals of this system are severely flawed, and practically unfixable. Right now there are $22 in debt for every $1 in circulaion! Although it is fixable, it would take a massive education effort first; for if the majority of people do not know what the problem is, they cannot fix it. Here is the problem: Fractional reserve banking, and private central banking. Our government issues debt "bonds", "bills", and "notes" to fund their over budget spending, and the Federal Reserve issues paper money into the banking system by loaning it at interest to the Government and other banks. Then the other banks loan out many times that amount. For every $1000 the Fed issues (by loaning it to the government), the banks can loan out $100,000 Realizing this is true you can see that it is impossible to get out of the debt and have any money left. There is no money created to cover the interest, and that has been the case since before the Federal Reserve. In fact the Federal Reserve bank was created to fix the problem!
There is a solution, and it is not impossible to do without severely rocking our economy. The first thing that must be done is end fractional reserve banking, money creation should be done by government if it is not gold, or silver. We must completely eliminate the fraudulent fractional reserve policy. Of course the gold standard is the absolute best money system in history, and it is the only money that is legal tender in the Constitution, but it is limiting for a people and a government. You cannot spend gold that you do not have, even if you need something and the one who has that thing wants something from you. If you do not have gold as money to complete the exchange, you are severely hampered.
One solution is the “Greenbacks” the way Abraham Lincoln did it. Congress, by the authority of the Constitution has the right and the power to coin money, and regulate the value thereof. The problem is the trust people have in a completely fiat currency is very weak. Congress can have absolute power over inflation by regulating the value of the dollar directly, but they would not have something to exchange for it, (which is the case now). But it would take debt out of equation. This way congress is responsible for inflation, completely, rather than just being blamed for it.
Another solution is to print dollars from the value of not exclusively gold, but to silver, land, and a host of other real tangible things; even commodities, and energy. Congress can authorize the printing of money based on the value of these things.
Another possibility is to charter a second Central Bank, called the Social Security Bank, and allow only citizens to deposit money there and then loan that to banks and the government as the Federal Reserve does; at interest, and make fractional reserve banking illegal. The Treasury would deposit all of its money here in the only checking account of the Federal Government. Interest would all be in paid only on retirement, but accumulate throughout the time the money stays there. They would issue “Social Security Notes” that are adjusted against Federal Reserve Notes every day at the Federal Reserve bank, thus removing devaluing inflation. If money gets scarce than this bank can issue loans to other banks that is based on credit too, but that should be only very short term. The interest would become property of the Treasury, completely, and a source of income for the government.

Here is what I propose:
FIRST pass a law increasing the commercial bank’s required reserves at the Central Bank and in their vaults at a steady rate per year, say 5-10%.
SECOND, create a second silver value currency that the government issues to pay it’s debts and have that backed by gold and silver, the value of government property, say, National Park dollars, Highway dollars, and Capital building dollars etc. with that money completely debt free.
THIRD, as interest at banks rise because of the rise in reserve requirements, the Social Security bank can lend money it borrows from the new hard asset currency that the Treasury creates.

A Central Bank that was truly owned by the Government, with branches in each state and territory, each raising their own money and lending it at interest to other banks would be great, it would be interest income for the government and would pay for things with much less taxation.

We all can dream can't we?

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