Tuesday, July 11, 2006

Ron Paul on the Fed

From Congressman Ron Paul's Website:

Federal Reserve Policy Destroys the Value of Your Savings

For years officials at the Federal Reserve Bank, including Chairman Bernanke himself, have assured us that inflation is under control and not a problem-- even as the price of housing, energy, medical care, school tuition, gold, and other commodities skyrockets.

The Treasury department parrots the Fed line that consumer prices, as measured by the consumer price index (CPI), are under control. But even many mainstream economists now admit that CPI grossly understates true inflation. The most glaring problem is that CPI excludes housing prices, instead tracking rents. Everyone knows the cost of purchasing a home has increased dramatically in the last ten years; in many regions housing prices have more than doubled in just five years. So price inflation certainly is alive and well when to comes to the largest purchase most Americans make.

When the Federal Reserve increases the supply of dollars in circulation, both paper and electronic, prices must rise eventually. What other result it possible? The supply of dollars has risen much faster than the supply of goods and services being chased by those dollars. Fed policy makers have more than doubled the money supply in less than ten years. While Treasury printing presses can print unlimited dollars, there are natural limits to economic growth. This flood of newly minted US currency can only increase consumer prices in the long term.

Mr. Bernanke has stated quite candidly that he will use government printing presses to stimulate the economy as necessary. He is famous for joking that he would endorse dropping money from helicopters if needed to prevent an economic slowdown. This is nothing short of an express policy to destroy our money by inflation. Every new dollar erodes the value of existing dollars based on simple supply and demand. Does anyone really believe the Treasury can make us rich simply by printing more money?
...
Faced with uncomfortable financial realities, Congress will seek to avoid the day of reckoning by the most expedient means available-- and the Federal Reserve undoubtedly will accommodate Washington by printing more dollars to pay the bills. The Fed is the enabler for the spending addicts in Congress, who would rather spend new fiat money than face the political consequences of raising taxes or borrowing more abroad.

4 Comments:

Anonymous Anonymous said...

I think every index is flawed. Basically, everybody has a personal inflation rate based on his or her personal situation (e.g. if you are a homeowner it is irrelevant if house prices double - and then crash few years later). In the long run home prices have not risen very much.

Re printing dollars: Interesting side note is that North Korea has been printing $100 bills for years. Dollar is their main export. Recently we shut down a bank in Macau for its link to this (and Kim went ballistic..literally).

7/11/2006 09:19:00 PM  
Blogger RentinginNJ said...

OT

The inversion in the yield curve appears to be worsening. The 2 yr and 10 yr are inverted by 6 bps and the yield on the 30 yr has also dropped below the 2 yr.

In December this seemed to attract a lot of press. This time around it doesn’t seem to be getting nearly the same attention.

7/11/2006 09:40:00 PM  
Anonymous Anonymous said...

rentinginnj..

It is being evaluated.

Watch the money flow to the old standby shops..

Check out UHC.

Pat

7/11/2006 09:42:00 PM  
Anonymous Anonymous said...

Bob translation:

UHC = UNH .... health care and other standby stocks

7/11/2006 09:50:00 PM  

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