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A prudent man foresees evil and hides himself; The simple pass on and are punished.

  • Proverbs 27:12

Here we stand at the end of the Year of Our Lord 2020 and at the precipice of 2021.  My, how time flies.

When I was pondering what to write this week, it took some time, but it finally dawned on me that this would be my last Sunday post of 2020.  “Of course,” I thought to myself, “it’s time for my year-in-review post. Problem solved!”

Before launching into a review of 2020 and casting an eye toward the future in coming year, I would like to take this occasion to thank my Lord and Savior Christ Jesus for all the blessings he has brought into my life over the past year.  For the grace he has shown me in forgiving all my sins and patiently teaching me, for a job to pay my bills, for health to do that which I needed to and wanted to accomplish, for the love of family and friends.

It would be remiss of me not to mention how thankful I am for the Lord’s gracious provision in my life to write this blog.  I began blogging in March of 2009, so it won’t be long before I celebrate 12 years of posting online.  Most blogs make it only a few months.  That I have had the strength to sustain this work for so long is a testament, not to my skill or smarts or energy or anything in me, but to the calling and faithfulness of the Lord.  During my first five years of blogging, I posted occasionally.  Here a little, there a little.  It was in November 2014 that I prayed God would help me to reach the goal of posting at least once a week, and he heard me.  From that time until now, I have not gone a week without writing and posting at least one article.       

I thank God also for the opportunity to resume work on my podcast, Radio Lux Lucet.  I mentioned in last year’s end of year podcast that I wanted to start podcast again more regularly.  As it turned out, although I didn’t start out the year all that well, I have managed to string together about eight weeks in a row of podcasts, so that’s progress!

Finally, I would like to thank my readers for their support during 2020.  It is my prayer with each post that the name of God would be glorified and that my words would edify his people.  With every post, it is my goal to bring you perspective on the events of the day that you won’t be able to find just anywhere.  As John Robbins was wont to point out, the Bible has a systematic monopoly on truth.  This includes truth in the areas that I like to write about, namely, economics and politics.  The psalmist wrote, “I have more understanding than all my teachers: for thy testimonies are my meditation. I understand more than the ancients, because I keep thy precepts.”  Writing to Timothy, the Apostle Paul said, “All scripture is given by inspiration of God, and is profitable for doctrine, for reproof, for correction, for instruction in righteousness: That the man of God may be perfect, thoroughly equipped for every good work.” While I don’t claim to have greater understanding than all my teachers, I can testify to the fact that there is nothing that can prepare the Christian to take on the received “wisdom” of this world more than a solid grounding in the Scriptures.  All the truths of philosophy, politics, and economics are hidden in Christ Jesus.  And there is no other source to which Christion must repair to fight the good fight of faith against the lies of this world – and how many lies there are and how great! – than to the 66 books of the Bible.  It is from the Word of God that Christians must rebuke senators, judges, governors, presidents, prime ministers and popes for their sinful and foolish words and actions.  And this, the Apostle tells us, is a good work for which the Scriptures thoroughly equip the Christian man.  It is this good work I aim to do with each post.

Thanks is also due to those who have graciously donated to support the work of this blog.  I greatly appreciate your kindness.

Special thanks is also owed to John Bradshaw, brother in Christ, friend and keen eyed and patient editor of my posts.  This blog is much better for your work.  Thank you.     

So, with all that said, what about 2020?

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Jerome Powell, Federal Reserve Chairman.

“We print it [money] digitally.  So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government securities.  And that actually increases the money supply.”

I probably shouldn’t be, but I often am, amazed an God’s providential timing in providing illustrations of points I plan to talk about.  As I’ve been thinking about this series of posts, I planned this week to write about the Fed and the process of money, more properly currency, creation. 

In one respect, the process the Fed uses to bring currency into being is fairly easy to grasp.  On the other hand, it is so obviously fraudulent that it shocks people when they hear about it. “That simply can’t be.” is, I think, a fairly common reaction. 

In the Lord’s providence, and quite apart from any planning by me, it so happened that Jerome Powell, the Chairman of the Federal Reserve, was interviewed on 60 Minutes last Sunday by correspondent Scott Pelley of CBS News.  You can watch the full interview and ready the transcript here.  In my opinion, Pelley did a good job asking important questions of Powell, especially concerning the process by which the Fed prints money.  At one point, Pelley asked Powell about the Fed’s response to the coronavirus (CV) crisis, and Powell ticked off a list of the Fed’s market interventions.  Here’s what was said next,

PELLEY: Fair to say you simply flooded the system with money?

POWELL: Yes. We did. That’s another way to think about it. We did.

PELLEY: Where does it come from? Do you just print it?

POWELL: We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.

There you have it.  The Fed chairman admitting on national television that the Fed creates money and uses it to buy, “Treasury Bills or bonds or other government guaranteed securities.”  He also noted that this activity, “actually increases the money supply.” 

What I would like to do in today’s post is to examine these statements – Powell’s saying that the Fed “creates money” and that this act “actually increases the money supply” – in greater detail.  Just how does the Fed create money and what are the effects of “increasing the money supply” on our daily lives? 

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The_Phillip_Medhurst_Picture_Torah_122._Abraham_purchasing_Ephron._Genesis_cap_22_v_16._Hoet (2)
Abraham purchasing the cave of Machpelah from Ephron by Phillip Medhurst. Courtesy of Wikimedia Commons.

Abraham weighed out the silver for Ephron which he had named in the hearing of the sons of Heth, four hundred shekels of silver, currency of the merchants.

  • Genesis 23:16

In his lecture “Money, Freedom and the Bible,” John Robbins argued that the manufacturing of money was not a proper function of government, because there is no warrant for this in Scripture.  The Bible charges the civil magistrate with the duty to punish evildoers and reward the good.  There is no mention of anywhere in Scripture of God granting civil governments the right to manufacture money.

The first time I heard this many years ago, I was shocked by this idea.  “But all governments manufacture money,” I thought to myself.  “If the government didn’t supply money, who would?” I continued.

Of course, my initial objection can be answered by pointing out that simply because a thing is done does not logically imply that it ought to be done.  In the 18th century, David Hume famously made this point.

Secondly, concerning who would supply money in the absence of governments, the answer to this is the market would take care of this.  As Robbins noted in his lecture, there is such an example of this in Genesis 23, where Abraham pays for the field to bury Sarah by weighing 400 shekels of silver, “currency of the merchant.”  Note that it was not the currency of Pharaoh, nor the currency of the King of the Hittites that Abraham weighed out.  It was the currency of the merchants.  That is to say, it was a unit of money that arose from the common practice of the free market.  Importantly, it was not a government issued currency, neither was it the product of a government licensed central bank.

For that reason, that it arose in the marketplace and was privately managed by the merchants who used it, the shekel weighed out by Abraham was an honest unit of money.  The same cannot be said for sovereign currencies of our day.  Not only do they fail to maintain purchasing power, but they are deliberately designed to lose value over time.  To this author’s knowledge, there is not one honest currency in use today, including, and perhaps especially, the U.S. Dollar.

Last week’s post titled “This is Going to Hurt, Part 1: Honestly Facing our National Bankruptcy,” discussed the disastrous economic numbers coming out as a result of the government’s response to the coronavirus pandemic.  Please note, I did not write, “the disastrous economic numbers coming out as a result of the coronavirus pandemic,” but, “the disastrous economic numbers coming out as a result of the government’s response to the coronavirus pandemic.” It is not the Chinese coronavirus that caused over 30 million Americans to lose their jobs in the past six weeks, it is decision, more accurately decisions, of various government officials that have led to this disaster.

But oddly, as I also noted, the stock market has rebounded even as economic activity has made record declines.  How can this be?  The short answer to this question is money printing on a mind-blowing scale by the U.S. Federal Reserve, the central bank of the United States.

My purpose in this post is to lay out in non-technical language what a central bank is and what it does.  In subsequent posts, I shall illustrate the unbiblical, immoral nature of central banking by looking in detail at the origin, the workings and the disastrous effects Federal Reserve (the Fed) policy has had on our nation.

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Yahoo_Limit Down_2020_03_22_802pm

Yahoo finance reports US stock futures in ‘limit down’ status on Sunday, 3/22/2020.  Worth noting is Yahoo’s attribution of the crisis to the “coronavirus crisis.”  This is incorrect.  Our financial crisis is the responsibility of the Fed and those who justify and encourage its ungodly practices of debt creation, monetary debasement and bailouts.

“And we know that all things work together for good to those who love God, to those who are called according to his purpose.”

Romans 8:28

That was an interesting week.  Last week, I’m talking about.  The one where, if we are still working, we’re doing so from makeshift home offices, the one where governors are locking down the citizenry of entire states and shutting down their economies, the one where the financial markets continue of crash at a rate comparable to, or even exceeding, that of 1929, and this at a time when the Fed is printing more funny money faster than it ever has.

It would seem that Humpty Dumpty indeed has fallen, and all the king’s horses and men are working feverishly to put him back together.  Will they succeed?  That depends on your definition of success.  It may well be that by printing enough money and bailing out not just individual companies, but entire industries, the powers that be may succeed in extending the current politico-financial system a bit longer.  Maybe another year of so.  Who knows?  Longer term, it is doubtful that the current governmental and financial structures currently in place will be able to survive in their current form.  Change is going to happen.

Just to give you a idea about how desperate some in the political establishment haver become, last week a member of Congress suggested  that the federal government provide every person in America – she did not say citizens, but every person in America, which includes, among others, illegal aliens – with a pre-loaded debit card in the amount of $2,000, which would be renewed with $1,000 per month for a year.  That works out to $660 billion for the first month, then $330 Billion for the next eleven months.  If I’ve done my math correctly, this works out to almost $4.2 trillion.

How does she plan to pay for it?  This Congresswoman, Rashida Tlaib (D-Mich.), wants the Treasury to issue two $1 trillion platinum coins, have the Fed purchase the coins, then have the Treasury sweep the funds into the Treasury General account, from which the money would be disbursed to “every person in America.”

This is nothing but a massive dollar devaluation scheme, not unlike what FDR did in 1933-34 when he forced everyone to turn in his physical gold, then devalued the dollar about 70% against gold.  The biggest difference is that Tlaib’s scheme would be far more aggressive in devaluing the dollar, meaning it would be massively inflationary.  This can easily be seen if we consider the current price os platinum and the amount of investment grade platinum that is currently available.  The current price of platinum in US dollars is $618.61.  According to this article, there are about 8 million total ounces of investment grade platinum bullion available in the world.  At current prices, this means the total value of all investible platinum is about $5 billion.  If the US federal government used this entire 8 million ounces to mint two huge coins weighing 4 million ounces each, this implies that the dollar would be devalued against platinum to approx. 1/400 of its current value.  Put another way, platinum would go from $618.62 per ounce to around $247,444 per ounce.  Other prices would rise accordingly.  Put another way, the dollar would lose 99.75% of its value against platinum.  This is even enough to make an inflationist such as FDR blush.

Of course, it’s highly doubtful that, even if Tlaib’s scheme were put into practice, the coins – if you can call a 4 million troy ounce object a coin at all – would almost certainly be far smaller than in my example above.  This means that the devaluation of the dollar would be far greater than 99.75%

Further, Tlaib claims that her scheme is deficit-neutral, not requiring any new debt to be issued.  Perhaps I’m missing something here or have done my math wrong, but the cost of her program for one year is more than double the $2 Trillion value of her two proposed coins, so where does the other $2 trillion plus come from?

I went through the above exercise in some detail just to give you an example of the sort of absurd nonsense that passes for thinking among our leaders in Washington.  And while Tlaib’s scheme is ridiculous, it’s really not all that much more absurd than proposals being floated by the Trump administration.  Trump is talking about bailing out whole industries, having the federal government own stock of bailed out companies and sending checks to everyone as well.  President Trump himself has gone on record arguing for negative interest rates and quantitative easing.

As in 2008, so it is in 2020.  Government officials are running around with their hair on fire desperately trying to fix a debt crisis by, wait for it…taking on more debt!

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NYSE

The New York Stock Exchange. Jeenah Moon for The New York Times

But when he had spent all, there arose a severe famine in that land, and he began to be in want.

Luke 15:14

Coronavirus live updates:  Washington state weighs mandatory measures to contain outbreak” is the most recent headline on CNBC. As has been the case with countless other headlines over the past few weeks, it announces another possible government action, this time by the State of Washington, to combat the spread of coronavirus in the U.S.  My point in citing this headline is not to commend or to criticize Washington for its program, but merely to illustrate that coronavirus continues to be the lead story in the American press, a position that for the most part it’s held for at least a month.

Admittedly, the coronavirus story has proven difficult for this author to assess.  A big part of the problem is the lack of credible sources.  The Communist Chinese government is not necessarily the most reliable source of information concerning the state of affairs in the country.  Then again, the Western press, specifically the American mainstream media, is no better, at least in the opinion of this author. For example, two weeks ago the New York Times ran a “helpful” opinion piece titled “Let’s Call It Trumpvirus” which attempted to lay the blame for the current coronavirus crisis on the president.

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Coronavirus

CNBC headline on 2/21/20.  They want you to think it’s the Coronavirus that’s behind the stock market selloff, but the truth lies elsewhere.

“But we will certainly do whatever has gone out of our own mouth, to burn incense to the queen of heaven and pour out drink offerings to her, as we have done, we and our fathers, our kings and our princes, in the cities of Judah and in the streets of Jerusalem.  For then we had plenty of food, were well-off, and saw no trouble.”

  • Jeremiah 44:17

In his book Logic, Gordon Clark noted a number of informal logical fallacies.  On page 17, he mentioned, among others, a fallacy called in Latin post hoc ergo propter hoc, or as we would say it in English, “after this, therefore because of this.” This logical error, hereafter the post hoc fallacy, involves asserting that, because event B took place after event A, that A is what caused B.

Now it’s true that there can be a cause and effect relationship between an earlier event and a late event.  In Jeremiah 44, the prophet, speaking for God, states, “You have seen all the calamity that I have brought on Jerusalem…because of their wickedness which they have committed to provoke Me to anger.”  God makes it entirely clear in this passage that the prior disobedience of the people of Judah was the cause of his bringing judgment on Jerusalem.  We don’t have to guess at why the Babylonians leveled Jerusalem and burned the temple in 586 BC, God tells us explicitly both the cause and the effect.

Later in chapter 44, we get the reaction from the people to whom Jeremiah was prophesying.  As it turned out, they didn’t much care for his sermon. Part of their response to Jeremiah was a classic case of post hoc fallacy.  See if you can spot it.

But we will certainly do whatever has gone out of our own mouth, to burn incense to the queen of heaven and pour out drink offerings to her, as we have done, we and our fathers, our kings and our princes, in the cities of Judah and in the streets of Jerusalem.  For then we had plenty of food, were well-off, and saw no trouble. But since we stopped burning incense to the queen of heaven and pouring out drink offering to her, we have lacked everything and have been consumed by the sword and by famine (Jeremiah 44:17-18).

Did I say, see if you can spot it?  Reading this passage further, it seems to me that there are two post hoc fallacies to be found.  In the first place, the people argue that their burning incense and pouring out drink offerings were the cause of their prosperity when they were in the land, when, in fact, it was God’s grace that provided for them.  Second, they attributed their current state of exile to their worshipping the queen of heaven, when, in fact, the cause of their exile was God’s punishing them for their disobedience.

I bring up the preceding Biblical example of post hoc fallacy to introduce the main point of this post, which is to refute the linkage, put forward by mainstream financial reporters, the outbreak of the Corona virus in China is reason for the recent stock market sell off and spike in the price of gold.

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Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

Proverbs 22:3

The hits – negative economic news, that is – just keep coming.  To underscore what I mean by bad economic news, consider the following headlines from just last week:

Yet for all that, stocks hit a record high on Friday with the Dow closing above 28,000 for the first time.  CNBC’s headline on Thursday summed up the mainstream financial press’ exuberance quite well, “This is now the best bull market ever.”

How is it possible, on one hand, for there to be so much bad economic news and, on the other hand, for stocks to be hitting record highs?  We dealt with this topic last week, but this topic is of such importance that it bears additional commentary.  The answer to this question, to borrow a turn of phrase from one commentator I follow regularly, is that nothing’s real.  We have fake financial markets designed to manipulate your perception of reality.

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Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

Dow hits record as stock market rally extends into 5th week” ran Monday’s AP headline. The same day, CNBC was even more ebullient, proclaiming “After Dow hits a record, analysts believe these stocks will lead the measure to its next milestone.” So what shall I say? The past three months I’ve been writing series talking about the ongoing financial crisis of 2008 and not only are the stock markets refusing to crash, they’re hitting records highs! To make matters worse, Yahoo reports that “Gold Suffers Worst Week in Three Years as Bulls Run for Cover.”

I guess I should just give up writing about financial matters, right?

Or maybe not.

You see, my thesis that the American economy has never recovered from the 2008 financial crisis is not based upon where the Dow or S&P averages close or the price action of gold and silver in a particular week.

As a Scripturalist, that is, as someone who believes that the Bible has a systematic monopoly on truth, I seek to analyze the markets and the overall economy, not by what the day’s headlines report, but by the propositions found in the Word of God.

When looked at in light of the Scriptures, we can see that what is hyped as the greatest economy ever is, in reality, a house built upon sand, which, in the opinion of this author, the coming economic storms will sweep away.

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Financial Crisis
A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

It’s been a couple weeks since my last posting in this series, but there certainly has been no break in the flow of events. In the intervening time since my last entry on 10/20/19, there have been several noteworthy bits of financial news. Of those, the most important was the announcement from the Fed this past Wednesday that they had decided to lower the Fed Funds rate another quarter point. This was the third time the Fed has lowered interest rates in the past three months.

Now any such decision by the Fed is important given the tremendous power of the Fed to push financial markets one way or the other. The big takeaway, however, is what this decision says about the Fed’s assessment of the economy. Despite all the propaganda from the administration saying the economy is doing great, the decision by a the Fed, or any other central bank, to lower interest rates is a tacit admission that the economy is not doing well. If the economy were doing well, the Fed would be raising rates, not reducing them.

When you add to the Fed’s lowering of interest rates the ongoing (permanent?) bailout of the overnight repo market and the restart of quantitative easing (i.e. money printing), it is obvious that the those closest to the situation think that the economy is seriously struggling.

One of the justifications put forward for lowering interest rates and money printing is that there is no price inflation. But even according the Consumer Price Index (CPI), the official measure of price inflation put out by the Bureau of Labor Statistics, the CPI-U (the broadest measure of inflation) rose 1.7% for the period September 2018 to September 2019. But beware of official government statistics! Over the years, the federal government has changed the way it measures inflation. And it should come as no surprise that the change has been in the direction lowering reported inflation.

Economist John Williams runs a website called Shadow Stats where he purports to calculate inflation the old fashioned way. His most recent calculations of the CPI-U tell a very different story from the figures put out by the Bureau of Labor Statistics (BLS). As you can see Williams most recent numbers come in a little higher than those of the BLS. According to Williams, the official method of calculating inflation used prior to 1990 shows inflation running at a more than 5% annual rate. If you look at this calculations with the pre-1980 method, the difference from the current official number is even more striking. The pre-1980 method of calculating inflation indicates that the current inflation rate is almost 10% annually!

If Williams is even close to being right, all this latest round of money printing by the Fed is like dumping gasoline on a raging fire, meaning we can expect to see much higher inflation numbers going forward.

Here’s a critical idea to keep in mind when talking about price inflation: Inflation is always and everywhere a monetary event. By this I mean that inflation is always the fault of money printing by central bankers. You can watch the evening news faithfully for decades on end and you will not hear this. Ditto with the financial channels such as CNBC and Fox Business. They will never tell you the simple reason for price inflation: Central bank money printing.

Why is this? It’s not an accidental oversight. The mainstream press is essentially the propaganda organ of the establishment, and central bank money printing is the financial black magic the establishment uses to increase its wealth and power at the expense of ordinary Americans. The powers that shouldn’t be – Washington politicians of both parties, Wall Street bankers and big shot investors together with a gaggle of academic theorists and news media talking heads – have a great scam going and do not want to let ordinary Americans know how badly their being ripped off and by whom.

To borrow a turn of phrase from Warren Buffett, “If you’ve been playing poker for half an hour at the table and you still don’t know who the patsy is, you’re the patsy.”

Ordinary Americans have been the patsies of the financial elite, of whom Warren Buffett is one, since the founding of the Fed over 100 years ago. The Fed’s inflation games are not only bad policy, they are also sinful in the eyes of God. The Bible unequivocally condemns “divers weights and measures” which God calls an “abomination” (see Proverbs 20:10 and 20:20 for example), which merchants of the day used to rip people off in much the same way central bankers, politicians and their super wealthy clients do today. It’s high time people woke of to this fact. End the Fed!

There’s much more that could be said about inflation and, Lord willing, I shall discuss this topic in greater depth in the future. For now, though, it is enough to know that 1) the cause of price inflation in money printing by the Fed, 2) the current method of measuring price inflation deliberately and significantly understates its true rate and 3) these facts are not reported in mainstream news outlets in order to keep the public in the dark about what is going on.

“So what,” you may ask, “does any of this inflation talk have to do with financial prepping?” Quite a lot, actually. If we understand that a falling dollar is the product of the Fed’s intentionally increasing the money supply too fast, we are positioned to understand ways of protecting ourselves against the ravages of price inflation.

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“The greatest threat facing middle and working class Americans is our depreciating paper currency.”

    – Ron Paul

Gold, Peace, And Prosperity, The Birth Of A New Currency
by Congressman Ron Paul (Auburn, Alabama: Ludwig Von Mises Institute, 2011, 91 pages with index).

There is, perhaps, no more critical subject facing our nation at the moment than the activities of the Federal Reserve, the central bank of the United States of America. But while the Fed’s actions over the past 100 years have had a profoundly negative effect on the lives of nearly all Americans, very few people are aware of the ways in which they are robbed by Fed policy. Even more frustrating from the standpoint of those who believe in sound money is that that there appears to be little desire on the part of Americans to cure their ignorance by studying the machinations of these masters of the universe who run the Fed.

Gold_Peace_Prosperity

One of the principle reasons people remain in the chains of ignorance concerning the Fed is the reporting of mainstream financial journalists. The stories one sees in the mainstream press about financial matters – whether in print or on television, it matters not – seem designed more to steer people away from the truth about the workings of the Fed rather than lead them to understanding.

In stark contrast to the long-winded flim-flam one hears on most news outlets about the Fed, Ron Paul’s Gold, Peace, An Prosperity, The Birth Of A New Currency (hereafter Gold, Peace And Prosperity) is a breath of fresh air. In his typical fashion, Paul manages to be both profound and concise in his comments. This book, a short 91 pages including introductions by Henry Hazlitt and Murray Rothbard plus an index, equips the reader with more sound teaching about the problems with our current Federal Reserve system as well as how to fix it than entire shelves full of books by most authors.

Did I mention that this is a short book? Just to give you a sense of what I mean, it can be read in one sitting. When I re-read it for this review, it took me a little over two hours reading at a leisurely pace and taking notes. As John Robbins noted in his exposition of Philemon, many scholars make the assumption that nothing short can be profound. But this is a mistake. Gold, Peace, An Prosperity stands as proof of this.

Worth noting is that this book was first published in 1981. That is significant for the reason that Ron Paul was part of the Gold Commission convened by President Reagan at the time to study the possibility of returning the United States to the gold standard, an option that ultimately was voted down by the Commission. The next year, the Minority Report of the Gold Commission was published under the title The Case for Gold (see here for free pdf and epub downloads), which is considered something of a modern day classic by advocates of sound money. I would by all means recommend reading The Case for Gold, but I think Gold, Peace, An Prosperity is an even better place to start. While The Case for Gold provides more detail than Gold, Peace, And Prosperity, the latter is less technical in its language and much shorter, making it an ideal read for those just starting to learn about sound money, or, for that matter, those who would like a refresher course from one of the few statesmen of recent times who actually understands the monetary problems we face as a nation as well as what is needed to fix them.

In the first chapter of the book titled “Impending Social Strife?,” Paul writes, “We probably will see widespread civil disorder in the 1980s.” Looking back 38 years, some may be tempted to discount Paul’s argument for sound money by accusing him of being an alarmist. “You see,” they will say, “we didn’t have widespread civil unrest in the 1980s, so all this talk about economic collapse in 2019 is just so much conspiracy theory nonsense.”

What shall we say to this? Does the fact that widespread civil unrest did not occur in America in the 1980s refute Paul’s argument against the Fed and for sound money? No, it does not. While it may seem odd to many today that there was serious consideration of a return to the gold standard in the early 1980s, one has to remember the context. America had just gone through the terrible stagflation – stagflation was a term coined in the 1970s to describe a situation where there was simultaneous inflation and little or no economic growth, a state of affairs that the standard Keynesian economics of that time could not account for – of the 1970s that followed hard on the heels of President Nixon’s decision to take America off the Bretton Woods gold exchange standard in 1971. Just to give you a sense of the inflation of the 1970s, gold went from $35 dollars and ounce in 1971 to around $800 an ounce at its peak in 1980, a surge of roughly 2000%.

Second, all the problems that Paul identified in 1981 with the Fed are still with us today and are far larger than what they were when he first wrote. On October 22, 1981, 38 years ago almost to the day, the federal debt first topped $1 trillion. Today in 2019, it stands at over $22 trillion. According to this CCN article, the 2019 federal deficit – the deficit is the yearly amount by which federal spending outstrips tax revenue; the debt the total of all previous budgetary shortfalls – was $984 billion. Stop and think about that for a moment. It took the federal government over 200 years to accumulate $1 trillion debt, an amount it’s now adding on a yearly basis.

What Ron Paul did not foresee in 1981 was the cunning ruthlessness of the central bankers and the politicians to not only maintain the corrupt system, but also to expand it. In 1981, there was no Plunge Protection Team. No one had ever heard of Quantitative Easing and if anyone had spoken of negative interest rates, he would have been laughed to scorn. Yet the bankers, politicians and news media have managed not only to sell the public on all this financial flim-flam, but they make it seem downright normal. This was possible largely because the American people did not take to heart Paul’s warnings from 1981.

Ron Paul was right on target when he wrote, “The greatest threat facing middle and working class Americans is our depreciating paper currency.” This was true in 1981, and it’s true today in 2019.

I highly recommend Gold, Peace, An Prosperity. Not only is it a great primer on the dangers of the central banking, paper money and the importance of sound money, reading it makes me want to shout the title of a more recent book by Paul, End the Fed!

Chapters include: Foreword by Henry Hazlitt; Preface by Murray Rothbard; Impending Social Strife?; The People are Demanding an End to Inflation; Depreciation is Nothing New; “Not Worth a Continental”; The Best Medium of Exchange; Cross of Paper; How Our Money was Ruined; The Stage is Set; Is Business to Blame?; Are Banks to Blame?; Are Unions to Blame?; Inflation and the Business Cycle; The Guilt of the Economists; The Alternative to Inflation; Money and the Constitution; Morality and Transfer Payments; Citizen Control of Money; Day of Reckoning; Free Market Money?; Legal Tender Laws; An Historical Precedent; The End – or the Beginning; Index.

 

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