Great read by Ron Paul. Could have been more succinct, but ultimately eye-opening and compelling so that I finally get the heart & soul of what the Occupy Wall Street movement is all about.
The authors of the Constitution debated and defeated the idea of paper money, having just experienced the runaway inflation of the Continental dollar in the 1780s. "Paper currency...is multiplied beyond the rules of good policy. No truth being more evident, than that where the quantity of money...exceeds what is useful as a medium of commerce, its comparative value must be proportionately reduced." Further, inflations "tend to the depravity of morals, and decay of public virtue, a precarious supply for the war, debasement of the public faith, injustice to individuals, and the destruction of the honor, safety, and independence of the United States."
So the Constitution's Article I, Section 10 states: "No state shall...make anything but gold and silver a coin tender in a payment of debts" since states had caused themselves harm issuing their own paper money. In the 1819 Supreme Court case McCulloch v. Maryland, Thomas Jefferson and others argued that the Constitution gave no specific authority to Congress to establish a central bank, and according to the Tenth Amendment, if a power is not "delegated to the United States by the Constitution," it doesn't exist. Amazingly, the other side, championed by Alexander Hamilton, then-President James Madison and Chief Justice John Marshall, purported that Article I, Section 8, permitted Congress to enact any law deemed "necessary and proper" (ignoring the fact that clause was for exercising enumerated powers only). This singular decision establishing the principle of "necessary and proper implied powers" had a domino effect giving Congress much more authority than originally intended, gradually leading us to the massive, overreaching government we have today. We should not forget Jefferson's admonition: "Let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution."
The Supreme Court later defended making greenbacks legal tender during the Civil War period. In 1869's Hepburn v. Griswold, the Supreme Court wisely found legal tender laws unconstitutional. "It has not been maintained in argument, nor indeed would anyone, however slightly conversant with constitutional law, think of maintaining that there is in the Constitution any express grant of legislative power to make any description of credit currency a legal tender in payment of debts...An act making mere promises to pay dollars a legal tender in payment of debts previously contracted, is not a means appropriate, plainly adapted, really calculated to carry into effect any express power vested in Congress, that such an act is inconsistent with the spirit of the Constitution, and that it is prohibited by the Constitution." But one year later this ruling was reversed by the Supreme Court in 1870's Knox v. Lee, with the majority offering no regard for the unconstitutionality of paper money: "It would be sad, indeed, if this great nation were now to be deprived of a power so necessary to enable it to protect its own existence." William Graham Sumner summed up this decision well: "The legal-tender decision did as great a wrong as the Dred Scott decision, and the latter instance shows us that it is not useless to discuss a constitutional question, even after the court decided it. It will not probably take a war to overthrow the principle of the legal-tender act, but it may take a national bankruptcy."
A gold standard doesn't need a central bank to manage it (only oversight needed is to enforce antifraud laws and contracts), so its sole purpose could only be to circumvent or eliminate the restrictions the gold standard places on those who want to enlarge the government over the opposition of the people. The Fed was established by the Federal Reserve Act of 1913 to "furnish an elastic currency to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States and for other purposes." An elastic currency is nothing more than arbitrarily increasing volume at the discretion of the monetary managers for the benefit of whatever special interests they are concerned with for the moment.
In 1920, economist John Maynard Keynes wrote the following (before he became a champion of inflation) in his book The Economic Consequences of the Peace: "Lenin is said to have declared the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." He also wrote in his 1923 Tract on Monetary Reform: "A government can live for a long time...by print[ing] paper money. That is to say, it can by this means secure the command over real resources--resources just as real as those obtained by taxation...A government can live by this means when it can live by no other. It is the form of taxation which the public finds hardest to evade and even the weakest governments can enforce, when it can enforce nothing else."
Here are some of the most compelling statements Ron Paul makes in this book that were really eye-opening for me:
- When you think about it, debasing a currency is counterfeiting. It steals value from every dollar earned or saved. It robs the people and makes them poorer...Inflation is the most vicious and regressive of all forms of taxation.
- Inflating...destroys prosperity, feeds the fires of war, is responsible for recessions and depressions, is deceptive and addictive, causes delusions of grandeur with regards to wealth and knowledge. Wealth cannot be achieved by creating money by fiat, which instead destroys wealth and rewards special interests, but more importantly, simply is not real.
- In a structured social welfare / interventionist state, no one becomes solely responsible for his or her own actions. The penalty is diluted and hidden from the victims. Benefits are seen, costs are delayed and difficult to identify.
- If individuals aren't responsible for their actions as the bubble forms, the responsibility falls on others and to a future generation. Taxpayers, eventually, must foot the bill. High prices, a consequence of inflationary policies, act as a tax on everyone, but hurt the poor and the middle class the most. All bailouts are dependent on the Fed to create new credit out of nothing, the very policy that caused the mess in the first place.
- When government grows, liberty suffers...no matter what the justification is given for the government programs being financed. Operating on deficits politicians thrive on and artificial increases of value of property and stocks is based on fiction, a bubble that must burst. When the bill comes due, it's hard to identify the victims. Those who do suffer from the inflation and lost jobs rarely see the connection between Federal Reserve monetary policy and the suffering that comes as a consequence of financing big government in this evil manner.
- We can no longer pay the bills for social welfare or maintain the empire overseas...Liberty is compromised every time a new welfare program is established or a new war is entered into. With each new crisis, the cry once again is for government, the perpetrators of the crisis, to come to the rescue with even more government, which requires more sacrifice of liberty. President Bush summed up where we've arrived on CNN on 12/16/08 when he proudly announced, "I have abandoned free-market principles to save the free-market system."
Unfortunately, even though the Government Accounting Office is responsible to audit the Fed under Title 31, Chapter 7 of the code, they are very restricted in what they can ask for: "Audits of the Federal Reserve Board and Federal Reserve Banks may not include: Transactions for or with a foreign Central Bank, government of a foreign country, or non-private international financing organization; deliberations, decisions, or actions on monetary matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations; transactions made under the direction of the Federal Open Market Committee; or a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection." So much for government accountability or transparency. The Fed chairman can (and frequently does) decline to respond to inquiries by saying it would be "counterproductive" to answer.
