That is a solution, but that's exactly why we need a FED instead of the Congress being in charge of the monetary system. If they do that, we can
expect an increase in food, oil, and commodity prices to increase by about 50% since it would be a permanent increase to the money supply of about 50%
which will of course spur very fast inflation. That's essentially the same as creating money from nothing and is exactly what Ron Paul and others
have against the FED. Here is a link
relating to money supply with current levels.
It is true, however, that Timothy Geithner has the power to choose who gets paid with the money that is coming into the treasury. Since the FED will
of course be the last paid, without a debt increase(which I also believe raising the ceiling is a BAD idea), we can probably expect inflation anyway
since this policy is already on the table. That is unless Obama follows through on his threat to not pay SSI benefits on August 3rd. If that happens
then we can expect there to be no inflation since the FED will be paid just like every other creditor. This is not a Ron Paul idea, its simply
another tool the Treasury has and knows about.
It is interesting to note that if he does not pay SSI then demand will drop in our economy and we will plummit back into recession(as if we ever truly
left). Its also interesting to see that one of the first tests of Keynesian theory, SSI, is proving to be the unwinding of our economy rather than
the stimulus that it was created for.
Another example of why we DO NEED a FED and why our government CANNOT stimulate the economy, it simply does not work!
Side Note: For all of you Ron Paul fans out there, please pick a side. He is totally against the FED as I assume you are too. However, here he is
stating that we should ignore the debt to the FED, essentially creating money from nothing without any attention to the wrecklessness of such a
policy, in direct opposition to his stated position on the FED and its monetary policy, and the precise reason he wishes to eliminate the FED; yet, he
is advocating for exactly the same policy?
This type of politics is exactly why the FED was created in the first place. Here is a brief history lesson for you, all of the three following are
links to governments that had runaway inflation after such policies were enacted. These governments are only the tip of a very large iceberg. When I
say runaway inflation, I mean such high prices it might have taken a suitcase of money to buy a loaf of bread:
Forgive me for stealing a table from the Zimbabwe one, but here are the highest rates of inflation in history:
What all these countries have in common is the lack of a central bank, or a heavily attached monetary agency to their central government. With the
exception of the USSR which began by retiring debt as Ron Paul suggests, before they began printing money to pay off foreign creditors.
It is entertaining to hear Ron Paul talk, he is persuasive, and his points are excellent and make sense to the lay person. Unfortunately, he simply
does not understand basic economics and so his seemingly good points are troublingly destructive!
he is stating that he is against runaway inflation, of
course because we all are, but wishes to undertake inflationary policies.
Additionally, he stated in the recent debate that he wishes to strengthen the US Dollar in order to create domestic jobs. The economy does not work
that way. If you want to create jobs you need to weaken the dollar. Watch the question and answer at 1minute 50seconds on this video:
Ron Paul New Hampshire Debate Link
A strong dollar makes foreign imports cheaper, of course discouraging domestic production. A weak dollar encourages investment from abroad, just like
we invest in China and India to save money and make prices cheaper.
The absolute last thing we need to do is to forget about paying ourselves. Its a good temporary measure, but it will certainly destroy the dollar if
such a policy is undertaken. There is a bright side, however, with a worthless dollar there will be a huge influx of foreign capital, manufacturing
within the U.S. borders will definitely increase, and we will create a massive number of jobs.
Further Note: I like Ron Paul, he provides sound leadership, and should be admired for his constitutional principles. He should not, however, be
elected president if for no other reason than the fact that he doesn't understand economics. Let him champion the constitution, let him advocate for
change and real leadership, but please don't let him direct the economy!
edit on 12-7-2011 by memarf1 because: Clarifying a point on Mr.