He wants to return to the gold standard and clash government spending – in effect, to create an economy without government. So what he actually advocates is not only the end of the Fed, but the end of a functioning credit and tax system. The idea is otherworldly and has no possible chance of being enacted, because it would cause a vast debt default as a result of plunging prices, incomes and employment.
I don't think Prof. Hudson is fully right on this. I don't think Ron Paul actually wants the entire system to be abolished overnight. Of course that would cause a massive depression on a world scale and Ron Paul is fully aware of that. What I see him propose recently (even during the most recent banking committee meeting) is the idea of competing currencies. I think that's a brilliant idea.
Let gold and silver freely float against all fiat currencies and remove all capital controls (such as punitive taxes) on the sale of physical gold/silver. In fact, if we do that -- people will start saving in these entities, which can serve better as a long-term store of value (no deterioration in purchasing power). Debt is not a long-term store of value
Of course, Dan will argue that there has been tremendous increase in purchasing power in gold due to huge run-up in prices. But this huge run-up is mostly related to the QE and liquidity injection programs which gold anticipates. So much liquidity sloshing around and it's bound to cause price volatility in these metals.
It means that instead of serving the public interest, it serves the interests of the banking class.
While this may be seen as a disadvantage (and I agree partly to this), it is also an advantage because the political class is crazy than the banking class. If you give monetary authority of paper currency to political class, you get Zimbabwe.
Mr. Greenspan made it clear that he believes that this is incompatible with the ideal of price stability
Completely true. The Fed should not have dual mandates. The Fed should be more like the ECB, with a single mandate of price stability. Employment really should be in the hands of the private sector, where labor is efficiently utilized.
I don't see any bigger issues such as Triffin's Dilemma addressed here in this essay, because the Fed is at the heart of this Triffin Dilemma issue.
The Fed is a reason for serious problems, but not the only reason.
FOFOA's dilemma : When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers . FOFOA's dilemma holds true for both gold and fiat, the solution being Freegold, which incidentally also resolves Triffin's dilemma.
The blogger FOFOA ripped apart MMT in his Moneyness post.
Here's the thing, the act of government deficit spending without either counterbalancing taxes or Treasury sales to the private/foreign sector, and the act of Fed quantitative easing, both change the nature of the money supply in a way that all other "normal" activities do not. They debase "our money" by expanding "their money" in volume to ease their discomfort. And this kinda gets us to the driving thrust of MMT; that MMT sees little to no danger of this monetary plane debasement spilling out into the physical plane with deadly consequences for the dollar.
Patrick, don't you think its ironic that the Fed calls its committee the FOMC- the Federal Open Market Committee?
Its not Federal, and has nothing to do with the "open market". The phrase open market would indicate market forces being allowed to exert themselves without any outside pressure.
The Fed does NOT allow the open market to determine interest rates...they do. In other words, they IGNORE the open market and operate by artifically price fixing interest rates.
Of course, if you or I did that we'd be jailed. We can't price fix - its illegal - but they can. We can't counterfeit - its illegal - but they can. We can't debase our currency - its illegal - but they can. We can't artifically manipulate interest rates - its illegal - but they can.
The guiding philosophy of the Fed is to inflate prices of assets in order to expand the market for real estate loans (which account for some 80 percent of bank loans in the United States), corporate takeover loans and speculative “casino capitalist” loans for foreign-currency and interest-rate arbitrage.
This can be simply shortened to "The fed policy is to inflate prices." Inflating prices gives the illusion of perpetual growth and a delusion of increasing value of assets.
In the end, it comes down to what will be useful between people and in the future. Money is a tool which accelerates the use of resources, but it doesn't create any more than there actually are. Money "policy" is a false policy, based on something that isn't a sensible commodity of value. The value lies in what backs the money. Inflating prices and monetary policies encourage people to leave their real living skills behind them and join in the fray of monetary civilization, rather than human society and circumstances. Most of what we now do as humans is unnecessary and useless, and the inflated money supply is a reflection of unnecessary and useless activities that simply consume resources in order to increase the flow of money (or even create the illusion of increasing flow via inflation).
Growth-based economics is a detachment from real economic activities, which follow resource-based needs and supplies. Any group of people working together needs to have some idea what the end product is, yet as a society, we only have "Growth" as our end product. This is no better than "love" as a goal. The sales pitch is the product.
As Sherm said (psychopathiceconomics.com), "One day people are going to wake up and realize what the fuck rope was made for—while it will put and end to this happy horeseshit it won’t be a pretty time."
lol. One of us is stupid. The article doesn't detail any capital controls or obscuring discovery tactics. I completely disagree with the claim that gold derivatives drive down the price of gold. That is just plain wrong.
So, you don't like that gold returns are taxed at 28%. What else is stopping you from buying gold?