Ron Paul

Tennesseahawk · May 7, 2011

Ya know, people are going to complain no matter what you do. If it weren't for the Fed thing, people would probably say they can't stand Godfathers Pizza.

Honestly, I don't know what to think about the Fed thing. I don't particularly like the Fed, and think it should revert back to the government. However, having a chance at a financial genius being in the Waffle House is nothing to sneeze at; and part of the reason he was on the Fed board in the first place. He's GOOD, y'all!

blackpup · May 7, 2011

I am not against Herman Cain by any means. Would like to know more about him. I also wonder about the federal reserve's policies, and what they mean to the average person.

jimmy

greg334 · May 7, 2011

Maybe returning the fed back to the per-1940 structure would help us a lot - where congress actually had a word or two about their operation.

EASYTRADER · May 8, 2011

The FED was set up to put an additional layer between congress and the money supply. Giving Congress MORE power over a fiat money supply would be a bigger disaster than we have now.

Perhaps if Congress had more disapline in managing the nations fiscal policy we could have more faith in their managing monetary policy. The inflation is NOT being caused by the FEDs low interest rates. It is being caused by the Congresses rampant deficit spending. Until Congressional spending is brought under control all ending the FED will do is give absolute power to the congress to steal us blind.

The FED is used as a bogey man by Congress because no one at the FED is subject to public recall. So congress runs up debt and then blames the fed publically for inflation. This way congress can spend recklessly to buy votes and get none of the blame for the disaster that insues.

If Congress gets the budget under control the value of the dollar will climb. If they don't the value will continue to fall as US debt places more fiat currency in circulation.

More supply than demand lowers value. The dollar is dropping because every time the US Gov issues more debt that debt ends up as collateral at banks. The banks then borrow against that collateral to make loans. Meanwhile the US Gov immediately spends the dollars it borrows. Whether the FED buys the US debt or the Chinese buy it the result is the same. The bank holding the collateral uses it for reserves and the US Gov takes the cash from the debt sale and spnds it immediatly.

Lower interest rates DON'T create money supply. Low interest rates create monetary velocity - the speed at which money changes hands. The current low interest rates are serving a dual purpose 1. Driving money into circulation, 2. Re-capitolising the banks so another BAILOUT is not neccesry.

Neither of those two things neccesarily Creates Money. Howevr, the issuance of GOV Debt always creates money. Because they debt is used as bank collateral. The FED can in fact CREATE money but they have not in this instance and haven't done so since the Clinton boom when the economy was exanding and US GOV had surplusses.

The PRIMARY duty of the FED bank under US law is NOT price stability, but is to try and create FULL Employment through monetary activity. The FED by statute is on our side. The only tool the FED has to create monetary activity is LOW interest rates.

The reason interest rates have been kept so low for so long is as governments on all levels medle in the economy it is harder for business to grow and only economic growth creates jobs. GOV jobs are not economic growth because the goverment does not add new VA"UE to the system. It takes vaue out of the system. As GOV grows at all levels more and more value is removed from th system. Right now 45% of all economic activity in the country is consumed by GOV at all levels. That is why the economy has experienced no REAL growth since the internet boom.

Right now the only way to GROW the economy for real is to cut back on the amount of VALUE that GOV consumes.

This is not likely to happen as 50% of the population is dependant on some Government subsidies for their living. These people are allowed to vote.

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blackpup · May 8, 2011

Ron Paul seems to be blaming Ben Bernanke .

Ron Paul says Bernanke ducks the issue Outside the Box - MarketWatch

jimmy

EASYTRADER · May 8, 2011

Ron Paul wants to return to the gold standard. Which if the country did do in a honest way there would be no need for a fed. The challenge we have with what Ron Paul wants is that there is not enough gold on the planet to service the US money supply. If Ron Paul would focus his efforts on a balanced budget ammendment instead of federal reserve scape goating he would be doing our country a big favor.

Politicians blamed the German Central Bank for the weimar inflation during the 20's too but the reality was it was the german war debt and social spending that ultimatly destroyed the weimar mark. We are in the early stages and it is not to late. If we get a balanced federal budget followed by balanced state budget there will be NO monetary colapse. If not the colapse is ineveitable FED or no FED.

Government debtor spending IS the problem. Ron Paul is also for a balanced budget but he only gets press for his "end the FED" rants.

I like Ron Paul I believe in liberty too and would like to see it restored. However in the grand scheme of things there are 100 other more important things to do before crushing the FED. Balancing the Federal and State budgets is #1 and 2

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greg334 · May 8, 2011

We can not return to the gold standard.

Tennesseahawk · May 8, 2011

Thanx Easytrader. You've helped me understand Cain's stance a lot better. But can you explain why he was for the TARP? He talked about the citizens being paid big dividends by the government partially and temporarily buying into the banks when they were in trouble.

EASYTRADER · May 8, 2011

TARP stands for Troubled Asset Relief Program it was a narrow US Treasury ran program to purchase mortgage related securities at a substantial discount to their "Nominal Value" but at a realistic premium to there "Market" value. It allowed systemically significant institutions access to capital when no other capitol was available because of unfounded fears.

"Market" value "Nominal" value and "Actual" value are different things. Think of my Truck as an example.
I have a Hino which cost me 106k that is its "Nominal" value. I could sell it quickly today for 20K which is its "Market" value.
It is worth to me 2000k per month for its remaing useful life which I estimate at another 36 mos. So 2000k * 36 = 72k.

Financial instruments are priced in a similiar way. A mortgae bond with a nominal value of 100mil. May have 10% bad loans in it. Making its nominal value 90mil. However because of panic and uncertainty the "Market" value on many of these assets was 15 or 20 mil. It would be stupid to sell 90mil for 15 mil.

What TARP did was buy those assets between "Market" value and "Nominal" value. As of today All Tarp investments were profitable. The GM bailout was NOT part of TARP Treasury at Obamas and Congresses request moved money from TARP to the Auto Bailout.

During the Bush administration standard accounting rules were changed by the Gov to require all assets used for banking reserves to be assigned "Market" value instead of "Nominal" or "Performing" value. His created a crisis when certain assets went "NO BID". When the market crashed these assets still had "Value" but because of Governemt impossed accounting standards those values could not be used to determine a banks capitol. Banks would then have to "Call" in short term loans. Which means you and me would have to come up with payoff cash or be forclosed. Rather than see that nightmare take place Treasury Offered to create a market for tose assets allowing "Price Discovry" once treasury made a few purchases banks could then set a value on thoe securities lessening the need for calling in loans.

If you remeber your credit card lines of credit were slashed or just closed during the crisis. That was done in order to shore up capital ratios. The mortgage crisis was completely caused by government manipulation of the mortgage industry. The need for TARP was created by the "Mark to Market" account rule put in place by the Bush administration. Without "Mark to Market" TARP would not have been neccesary. My understanding is that "Mark to Market" has been eliminated as a rule and a case by case system is now back in place.

I was for TARP and called my congressman and told him to vote for it. I think I even posted here urging others to do the same. I was not for the GM bailout as GMs problems were not a result of anything the government had done to them but a result of years of mismanagement.

I don't know where Herman Cain stands on GM I suspect he would have let them go down.

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EASYTRADER · May 8, 2011

Lol i made a mistake on my truck value it's worth 2k per month not 2000k. Were ur eyes sharp enough to percieve my gufaw?

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