Abolish the Federal Reserve

by Perry Willis, DownsizeDC.org

The stock market rises and then crashes. Housing prices soar and then plummet. The Federal Reserve causes these booms and busts by constantly expanding and contracting the supply of money and credit.

Credit expansion by the Federal Reserve increases the demand for producer assets and investment instruments. This causes bubbles in things like stocks and housing. When the Fed then contracts credit to avoid systemic price inflation the asset bubbles burst.

This is the history of the Federal Reserve — booms and busts, mixed with episodes of economic stagnation and high inflation like the 1970s.

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The Constitution And Paper Money

by Dr. Clarence Carson, FEE.org

The United States Constitution does not mention paper money by that name. Nor does it refer to paper currency or fiat money in those words. There is only one direct reference to the origins of what we, and they, usually call paper money. It is in the limitations on the power of the states in Article I, Section 10. It reads, “No State shall . . . emit Bills of Credit . . . .” Paper that was intended to circulate as money but was not redeemable in gold and silver was technically described as bills of credit at that time. The description was (and is) apt. Such paper is a device for expanding the credit of the issuer. There is also an indirect reference to the practice in the same section of the Constitution. It reads, “No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of Debts . . . .” Legal tender laws, in practice, are an essential expedient for making unredeemable paper circulate as money. Except for the one direct and one indirect reference to the origin and means for circulating paper money, the Constitution is silent on the question.

With such scant references, then, it might be supposed that the makers of the Constitution were only incidentally concerned with the dangers of paper money. That was hardly the case. It loomed large in the thinking of at least some of the men who were gathered at Philadelphia in 1787 at the Constitutional Convention. There were two great objects in the making of a new constitution: one was to provide for a more energetic general government; the other was to restrain the state governments. Moreover, the two objects had a common motive at many points, i.e., to provide a stronger general government which could restrain the states.

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Why the Founders Rejected a Central Bank

by Rep. Ron Paul

The Latin term “fiat” roughly translates to “there shall be”. When we refer to fiat money, we are referring to money that exists because the government declares it into existence. It is not based on production or earnings, and not backed by any commodity. It is solely based on trusting the government.

Fiat money is exchanged in the economy as long as there is faith in the government that issues it.

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The Falling Dollar and Rising Energy Prices

by Rep Ron Paul

Oil prices are on the minds of many Americans as gas hits $4 a gallon, and continues to surge.  How high can prices go?  How can we solve these problems?  What, or who, is to blame?

Part of the answer lies in understanding bubbles and monetary inflation, but especially the Federal Reserve System.  The Federal Reserve is charged with controlling inflation through interest rate manipulation, however, many fail to realize that creating money, and therefore inflation, is really its only tool.  When the Federal Reserve inflates the dollar as drastically as it has in the past few decades, the first users of the newly created money go in search of investments for their dollars.  They must invest this money quickly and aggressively before it loses value. 

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