DownsizeDC.org
February 18, 2008
New Ron Paul bill
By Perry Willis
Today's Downsizer Dispatch . . . Change the political environment. Recruit more Downsizers. Share this message with others. Quote of the Day: "Inflation has now been institutionalized at a fairly constant 5% per year. This has been determined to be the optimum level for generating the most revenue without causing public alarm. A 5% devaluation applies, not only to the money earned this year, but to all that is left over from previous years. At the end of the first year, a dollar is worth 95 cents. At the end of the second year, the 95 cents is reduced again by 5%, leaving its worth at 90 cents, and so on. By the time a person has worked 20 years, the government will have confiscated 64% of every dollar he saved over those years. By the time he has worked 45 years, the hidden tax will be 90%. The government will take virtually everything a person saves over a lifetime." -- G. Edward Griffin Subject: New Ron Paul money bill The above quote may need some explanation. Most people don't know that the Federal Reserve has the power to create new dollars out of thin air. It does. Most people also don't know that this is one of the ways the government pays its bills. The process is simple . . .
  • The Federal Reserve creates new dollars
  • It transfer these dollars to the federal government in return for Treasury bonds
  • The U.S. Treasury uses this money to cover some of its expenses
It's a neat trick. The politicians don't have to raise your taxes, but they have more money to spend. What happens when this new money hits the economy? Apologists for the Fed use a clever supply-and-demand argument to claim that nothing at all happens. Here's how the argument works . . .
  • Economic growth equals increased productivity equals an expanded supply of goods and services
  • An expanded money supply equals an increased demand for goods and services
  • If the expanded demand equals the expanded supply prices will remain stable
  • Insto, presto, no price inflation will result
But there are two big problems with this argument. First, it assumes that the Fed will be able to determine the total supply of goods and services in the economy, and keep the money supply in balance with it. This assumption causes the argument to fail, instantly. Total U.S. economic activity amounts to many trillions of productive events. No amount of reporting to the government could possibly measure this with any degree of precision. It's inevitable that the Fed will misjudge how big the economy is, and thereby misjudge how much money creation is consistent with avoiding price inflation. When the Fed causes the money supply to grow faster than productivity grows, supply and demand will be out of balance. There will be more money chasing relatively fewer goods. The result will be higher prices on the things you buy. Each of the dollars in your pocket will buy less than they did before. Your savings will lose value. This is one way you pay the government's inflation tax. Here's another way . . . Your wages will rise slower than prices will. It's much easier for a super-market to change a price tag on a carton of milk than it is for your employer to adjust your compensation. Your standard of living will decline as your paycheck buys less. This is another way you pay the inflation tax. How do we eliminate the hidden inflation tax? Congressman Ron Paul has developed a simple approach to this. He wants to end the Fed's monopoly over the money supply. He wants to make the Fed compete with other forms of money, such as gold. This competition would reduce the Fed's ability to inflate the dollar supply. Toward this end . . . He first proposed the "Honest Money Act," which would repeal the legal tender law and provide people with increased legal security to make transactions in other forms of money, such as gold. Now he has a new bill, designed to remove the federal government's monopoly control over the creation of coins. This new bill is called the "Free Competition in Currency Act." We have joined these two bills into one campaign! If you want to stop paying the inflation tax please send Congress a message asking them to co-sponsor these two bills. You can do so here. Thank you for being a part of the growing DownsizeDC Army. Jim Babka President DownsizeDC.org, Inc.
Filed under Wealth & Poverty
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