Federal Reserve Chairman Ben Bernanke testified this week that our nation’s long term economic outlook has improved and that consumer inflation is a modest one percent. Chairman Bernanke is grossly misleading the American people when he calls inflation ‘subdued.’
Just yesterday, it was reported that the median home price in Houston is at an all-time high, having risen 14.5 percent in the last year alone. Americans are struggling with soaring food and energy prices that the federal government conveniently chooses to ignore in its measure of inflation in order to hide the true effects of its policies from the American people.
The real measure of inflation is the increase in the monetary supply, and the Federal Reserve has increased the Federal Reserve credit by 17.4 percent in the last year alone. The reality is, the Federal Reserve’s policy of monetary expansion through the buying of up to $100 billion of securities each month may help the big-spenders in Congress and their cronies in the banking sector, but it is harming the rest of America.
Make no mistake, despite Chairman Bernanke’s claims; the Federal Reserve’s unprecedented monetary expansion has created a significant amount of pent-up inflation that, when released, will cause prices to rise even higher and the average American’s standard of living to decline.
Until our leaders understand that we cannot print our way to prosperity, the American people will continue to suffer the disastrous effects of higher prices, higher unemployment, and lower standards of living and qualities of life for years to come.
Ron Paul is a former U.S. Congressman from Texas and leader of the pro-free market movement in the United States.
59 comments
So is deflation then a tax cut? Japan would like to know.
“So is deflation is a tax cut?”
Do you mean price decreases?
It’s kind of a mess terminology wise…but Paul refers to inflation as an increase in the money supply, deflation would be a contraction.
Most in the mainstream refer to inflation as price increases…hence the confusion.
Paul and the Austrian economists separate the two because they feel that the money supply creates bubbles and artificially gooses or hinders the economy(based on its movement up or down), and the price fluctuations are lagging indicators.
In the current case, the $85 billion a month is obviously inflationary from that definition, but a lot is going into MBS’s(hence temporary uptick in housing), and much more into “reserves”…which the banks are keeping there because they get paid 25 basis points to do it. It’s free profit for them with no risk, courtesy of the taxpayer and the Fed.
Once the reserves come out, whether to cover bad loans/losses or because banks decide the environment is better than their 25 basis points…that when you are going to see more substantial price increases beyond what we have today.
The whole enchilada as far as the Austrian Business Cycle theory goes is tied directly to circulating money supply(which the reserves are not).
That’s a very good, informative post from someone with whom I don’t normally agree in terms of politics.
ty
Even if we disagree, it’s important to try to understand why without vilifying each other when possible.
Btw, I just realized I didn’t answer your question:
The act of not printing money, from the viewpoint that gov’t printing money expands the monetary base and dilutes the money already in circulation and is referred to a “hidden tax”, would indeed be a “tax cut”…or in using that similar terminology a “hidden tax cut”…lol
Really, Paul says this because he’s trying to point out that pols don’t need to “raise taxes” or even be on record to vote for such at the Federal level because they just print up what they don’t collect.(for 42 years now)
The reality is that the US gov’t is purposely stealing from everyone via this dilution more so than “taxing” everyone….but Paul is trying to highlight it by playing with words.
So is deflation then a tax cut? Japan would like to know.
“So is deflation is a tax cut?”
Do you mean price decreases?
It’s kind of a mess terminology wise…but Paul refers to inflation as an increase in the money supply, deflation would be a contraction.
Most in the mainstream refer to inflation as price increases…hence the confusion.
Paul and the Austrian economists separate the two because they feel that the money supply creates bubbles and artificially gooses or hinders the economy(based on its movement up or down), and the price fluctuations are lagging indicators.
In the current case, the $85 billion a month is obviously inflationary from that definition, but a lot is going into MBS’s(hence temporary uptick in housing), and much more into “reserves”…which the banks are keeping there because they get paid 25 basis points to do it. It’s free profit for them with no risk, courtesy of the taxpayer and the Fed.
Once the reserves come out, whether to cover bad loans/losses or because banks decide the environment is better than their 25 basis points…that when you are going to see more substantial price increases beyond what we have today.
The whole enchilada as far as the Austrian Business Cycle theory goes is tied directly to circulating money supply(which the reserves are not).
That’s a very good, informative post from someone with whom I don’t normally agree in terms of politics.
ty
Even if we disagree, it’s important to try to understand why without vilifying each other when possible.
Btw, I just realized I didn’t answer your question:
The act of not printing money, from the viewpoint that gov’t printing money expands the monetary base and dilutes the money already in circulation and is referred to a “hidden tax”, would indeed be a “tax cut”…or in using that similar terminology a “hidden tax cut”…lol
Really, Paul says this because he’s trying to point out that pols don’t need to “raise taxes” or even be on record to vote for such at the Federal level because they just print up what they don’t collect.(for 42 years now)
The reality is that the US gov’t is purposely stealing from everyone via this dilution more so than “taxing” everyone….but Paul is trying to highlight it by playing with words.
Until Liberal-Tarians SPEND EVERY WAKING moment, working to get rid of democrats, they are a waste…
Liberal-Tarians (see FITS) exist to try to cut Republicans off at the knees, when ANYTHING even remotely appealing about Liberal-Tarians is Republican-based…
Quit being so SELFISH. Accept the fact your ideas are losers, Ron-Paul, FITS, Mace, Davis and Sanford…and then help US stop the destruction of our country by liberals..Otherwise you ARE the problem…
BBRRAAAAKKKKK! Liberals! SQQUUAAAAAWWWKK! Liberal-Tarians!
Looks like you ran out of Metamucil last night, T. Should I stop by the Bi-los and pick you up a bottle?
You are a Brain-Dead idiot..w/ no real ideas, other than How-to-be-a-stupid-Lemming…
Name-calling was elementary school. Read and think about ideas, rather than the next name you call someone who disagrees.
STFU…you ignorant, Stupid, excuse-making, @$$-Kissing, redneck, countrified, rube, cretin, pervert, dolt, imbecile…
No name-calling to it, idiot, all of that’s a description….
You’re parrot replies really do crack me up.
I enjoy when you, Jan and the like hand T his ass when he posts a particularly uninformed comment.
And what’s the deal with him not wanting to curse on this board? Is he that religious? Because his racist, hate-filled bloviations are anything but Christian. But most importantly, how does he manage to sext with his wife/girlfriend/neighbor without saying dirty words? “I wanna put my wee-wee in your hoo-hah.”
And I just get all squishy inside my little sissy feminine-self when you girls talk so sweet about how aroused you get by comparing your experiences, kneeling in front of your god, Obama….
Your worship of your idol shows how you are the Best and Brightest…You are so smart, creative and think so good…
Chee-Willicers girls…I just get so verklempt…OMG I think I got the vapors….
You really should stop posting on things you know nothing about… You’re making a spectacle of yourself…
You obviously are fairly new to the site….
Well, not new. infrequent visitor would be a better description…
I think everyone in America realizes what you fail to see-
Republicans as we know it will never attain power again.
Hmmm????The GOP owns Congress. and they’re kickin’ Obama’s @$$ with it…Dumb@$$….
If by owns you mean is able to stop it from doing anything- then yes it owns congress.
Try to pass a law- even a Republican backed one. Game over.
Whats silly is the entire party believes being an obstructionist is better then just fixing things. The party doesn’t even follow its own guiding principles when it comes to things the majority of American’s support- like pot legalization. It is a majority opinion, and between the two parties the Republican party should support it based on civil liberties and/or states’ rights.
Your only hope is Rand in ’16- and I wouldn’t be surprised if the establishment forces out the younger Paul similarly to his father.
All of this- and I am a republican! lol
There is a big difference between you and me- I live in the real world. I discuss this constantly with my grandmother. She is a wonderful, kind, old lady, but she is very misinformed by the conservative echo chamber. How can someone so die hard republican like her and yourself not be anything but upset with your own party?
Seriously- wake up man they aren’t working for you anymore- they work for the bigs! Big Oil, Tobacco, Pharma, Defense, and Alcohol. Me and the rest of the world will take you seriously if you can admit that.
This guy ought to run for President! Oh wait.. he did. How did that work out?
People overlooked what they could not open their minds to.
The corrupt media lied about his views enough to try and discredit him for the ones that were unable to think for themselves – oh, wait, that’s the very vast majority of walking brain stems in this country …
This guy ought to run for President! Oh wait.. he did. How did that work out?
People overlooked what they could not open their minds to.
The corrupt media lied about his views enough to try and discredit him for the ones that were unable to think for themselves – oh, wait, that’s the very vast majority of walking brain stems in this country …
Inflation really sucks…for those sitting on cash and debt instruments. Not so much for those basically living hand to mouth (most folks). Those with hard assets and commodoties can ride the wave too, though they get hit on the tax when cashing out.
“Not so much for those basically living hand to mouth (most folks).”
I disagree. IMHO they are the ones hit the hardest by inflation, when the eventual price increases follow.
I agree it hurts savers and fixed income people too, but the poor people get hammered eventually.
At least in the great depression we had falling prices with a bad economy….with the current amount of reserves built up and the other money that still made it into the system there’s a good possibility for the mother of all stagflation environments. We are really in uncharted territories. Bernanke claims he can unwind it…but hasn’t told anyone how….
Stagnant(or even falling) wages, but increased cost of living! Double whammy for those living hand to mouth.
I think you are comingling the separate issues of falling real wages and rising nominal prices. If the money supply increases 10%, all things being equal my wages and the cost of goods should both increase 10%, so nothing really has changed if you are spending 100% of what you get. Yes, we in the US have been seeing the real value of our labor diminish due to globalization, but I don’t think that has much to do with the money supply.
“I think you are comingling the separate issues of falling real wages and rising nominal prices. If the money supply increases 10%, all things being equal my wages and the cost of goods should both increase 10%”
Well that’s the disagreement, I don’t think they are separate issues .
Keynesian/MS economists treat the money supply effects on prices & costs as homogeneous when it’s clearly not.
In fact, our proof for it is the existence of bubbles(like housing, internet, etc)…which Keynesians have a hard time explaining.
I don’t know much about Keynes except that he reached his long run (i.e. he’s dead), and perhaps so has the singularly great economic expansion in human history (i.e., gonna be hard to stimulate much more growth from here). Anyway, bubbles as I understand them are just assets that have been bid over their intrensic value; to me a function of bad information and human psychology, though I imagine a monetary expansion could help fuel those factors as the money needs somewhere to go.
“to me a function of bad information and human psychology, though I imagine a monetary expansion could help fuel those factors as the money needs somewhere to go.”
Bingo!
Inflation really sucks…for those sitting on cash and debt instruments. Not so much for those basically living hand to mouth (most folks). Those with hard assets and commodoties can ride the wave too, though they get hit on the tax when cashing out.
“Not so much for those basically living hand to mouth (most folks).”
I disagree. IMHO they are the ones hit the hardest by inflation, when the eventual price increases follow.
I agree it hurts savers and fixed income people too, but the poor people get hammered eventually.
At least in the great depression we had falling prices with a bad economy….with the current amount of reserves built up and the other money that still made it into the system there’s a good possibility for the mother of all stagflation environments. We are really in uncharted territories. Bernanke claims he can unwind it…but hasn’t told anyone how….
Stagnant(or even falling) wages, but increased cost of living! Double whammy for those living hand to mouth.
I think you are comingling the separate issues of falling real wages and rising nominal prices. If the money supply increases 10%, all things being equal my wages and the cost of goods should both increase 10%, so nothing really has changed if you are spending 100% of what you get. Yes, we in the US have been seeing the real value of our labor diminish due to globalization, but I don’t think that has much to do with the money supply.
“I think you are comingling the separate issues of falling real wages and rising nominal prices. If the money supply increases 10%, all things being equal my wages and the cost of goods should both increase 10%”
Well that’s the disagreement, I don’t think they are separate issues .
Keynesian/MS economists treat the money supply effects on prices & costs as homogeneous when it’s clearly not.
In fact, our proof for it is the existence of bubbles(like housing, internet, etc)…which Keynesians have a hard time explaining.
I don’t know much about Keynes except that he reached his long run (i.e. he’s dead), and perhaps so has the singularly great economic expansion in human history (i.e., gonna be hard to stimulate much more growth from here). Anyway, bubbles as I understand them are just assets that have been bid over their intrensic value; to me a function of bad information and human psychology, though I imagine a monetary expansion could help fuel those factors as the money needs somewhere to go.
“to me a function of bad information and human psychology, though I imagine a monetary expansion could help fuel those factors as the money needs somewhere to go.”
Bingo!
Ron should have been our President.
Ron should have been our President.
Ron Paul is embarrassing stupid. is “pent-up inflation” the same as imaginary inflation? this idiot points to a house in houston that lost half its value 7 years ago and says it has risen by 14% and that’s inflation? he is speaking to the dumbest half of the GOP coalition and it’s working! these morons really believe they are republicans.
You’re right. He’s stuck in a 19th-century commodity-money mindset, and refuses to even try to understand modern monetary theory (MMT), because if he understood it, he would no longer be able to whip up his minions into a revolutionary frenzy by flogging “fiat” money as a demon to be exorcised. For example, fiat money can be “unprinted”; by contrast, nobody is going to put gold back in the ground when inflation threatens. But the gold standard is his religion, and it has attracted a sizable congregation of adherents; never mind modern realities. (Imagine what a surprise that religion’s followers are in for, as soon as new technology enables the extraction of gold from seawater at a cost of a nickel an ounce.)
Ron Paul is embarrassing stupid. is “pent-up inflation” the same as imaginary inflation? this idiot points to a house in houston that lost half its value 7 years ago and says it has risen by 14% and that’s inflation? he is speaking to the dumbest half of the GOP coalition and it’s working! these morons really believe they are republicans.
You’re right. He’s stuck in a 19th-century commodity-money mindset, and refuses to even try to understand modern monetary theory (MMT), because if he understood it, he would no longer be able to whip up his minions into a revolutionary frenzy by flogging “fiat” money as a demon to be exorcised. For example, fiat money can be “unprinted”; by contrast, nobody is going to put gold back in the ground when inflation threatens. But the gold standard is his religion, and it has attracted a sizable congregation of adherents; never mind modern realities. (Imagine what a surprise that religion’s followers are in for, as soon as new technology enables the extraction of gold from seawater at a cost of a nickel an ounce.)
Clever. When price inflation is low and falling, but one still wants to cry wolf (“inflation!”), simply shift to a different definition–inflation=growth of money supply–and ignore the offsetting drop in money velocity. Presto! Minions’ batteries are recharged; “inflation” is still the looming grim reaper, and “hyperinflation” is still just around the corner. Same corner it’s been “just around” for many, many decades.
Clever. When price inflation is low and falling, but one still wants to cry wolf (“inflation!”), simply shift to a different definition–inflation=growth of money supply–and ignore the offsetting drop in money velocity. Presto! Minions’ batteries are recharged; “inflation” is still the looming grim reaper, and “hyperinflation” is still just around the corner. Same corner it’s been “just around” for many, many decades.