DownsizeDC.org
August 12, 2010
FEDERAL RESERVE: Can you protect your endangered dollars?
By James Wilson

Quote of the Day: "I've been hearing that 40 is the new 20. I don't believe that. But I do believe that $40 is the new $20." - Jay Leno

First, the Federal Reserve created money out of thin air to buy so-called toxic assets. This action . . .

* Decreased the value of every dollar you hold by increasing the money supply
* Was taken without your consent
* Was dictatorial, in that it was subject to no outside check or balance by the electorate, or any other branch of government

Since then the Fed has been promising to withdraw the funny money it created to fund these bailouts, so as to protect you from inflation. This promise has not been kept. To be sure . . .

The Fed tells us it's still too early to re-absorb the funny money, because the economy is still weak. But the re-absorption may actually be harder once the economy recovers. To retire the funny money the Fed must be able to sell its assets back into the market, and then "destroy" the dollars it gets in return, but . . .

* People will have better things to do with their money when the economy is booming again
* The Fed may have to sell its assets at a steep discount in order to compete with these better investment alternatives
* These factors could make it very difficult to re-absorb the funny money

Sadly, the Fed has taken a step that will make things even worse. The Fed board voted on Tuesday to spend $10 billion buying government debt.

Just to be clear, it does NOT appear that the Fed is creating new funny money for this purpose. Rather, it has received some income on some of the "toxic" assets it purchased, and is using that money to buy government debt. Even so, this sends a bad message on several fronts. The Fed is . . .

* Signaling that it will not begin re-absorbing its funny money any time soon
* Trying to make it cheaper for the Federal government to borrow money, thereby encouraging more borrowing
* One small step away from doing something very bad -- creating new funny money to buy government debt

We think the Fed is moving in the wrong direction. It should be taking steps to protect the value of your dollars. Instead, it remains committed to policies that carry a high risk of future price inflation that could destroy the value of your savings. Please take action to protect yourself.

One way to do that is to break the Fed's monopoly control over what you can use for money by passing Ron Paul's "Free Competition in Currency Act." Please send a letter to Congress asking for this.

You can copy or borrow from my sample letter . . .

I strongly object to the fact that the Federal Reserve is going to spend $10 billion buying government debt. This is wrong on many levels . . .

* The Fed should be re-absorbing the new money it created during the recent crisis. It should retire this $10 billion instead of spending it.
* The Fed should NOT be doing anything to encourage more borrowing by the Federal government. You guys have spent trillions already, so if the economy is still sluggish it should be perfectly clear that government spending isn't the cure. 

But sadly, neither I nor you have an control over the Fed. You guys can't even manage to audit them, even when a majority in Congress favors legislation for that purpose. This makes two things clear to me . . .

* The Fed is a dictatorial institution, beholden to no one
* Congressional leaders control YOU, meaning that I cannot rely on you to represent me

I want you to provide me with evidence to the contrary on this last point. Instead of only doing what your party leaders want, how about doing something that I want, for a change. What do I want? I want it to be legal for me to do business with forms of money other than Federal Reserve Notes. Please break the chains that tie me to the Federal Reserve!

Please represent me. Please serve my interests. Please show a little independence by co-sponsoring the "Free Competition in Currency Act." And please know that I am paying close attention to what you do, and do not do.

END LETTER

You can send your letter to Congress using DownsizeDC.org's Educate the Powerful System: https://secure.downsizedc.org/etp/campaigns/85

And please tell your friends. Forward this message and retweet it.

Perry Willis
Vice President
DownsizeDC.org, Inc.

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