marxbites

Gold, Silver and Deflation

Gold is a trusted commodity least able to be manipulated by rulers and govts. Over MILLENIA free markets chose it w/o the say so of any authority.

It is the most saleable commodit. When offered gold or paper in payment for a good or service, which would YOU prefer given the choice?

There is ZERO interest expense that we currently pay to the Fed for using our own money, when the people use a money they freely chose to use instead of legal tender at gunpoint of legal govt counterfeiting.

PM monies arose to eliminate the problematic double coincidence of wants that barter generally requires. They are the most trustworthy intermediate mediums of exchange. Harder for govts to debase than printing press inflation, which BOTH reduce buying power of existing money units.

America went to a paper money system only at banker behest precisely to enrich themselves with the gains from inflation they steal by way of the reduced buying power of last users, plus a big fat interest income on every dollar created from nothing. A $0.04 dollar and 100 yrs of 6% interest compounded robbed us all being millionaires ourselves.

THAT has been the opportunity cost of allowing private bankers to print unbacked money in America the same as they'd done to England pre-1700, and why fiat was forbidden in our Constitution. The founders were fully aware of Banker treacheries, they'd lived with the King's!

Impact of Commodity ETFs on Prices: An Update

The GSE's are unconstitutional Democrat boondoggle rent seaking scams, like ALL govts interventions into what once were fairly free markets.

The threat of negative govt regulations & legislations, or the promise of special favors, are what keep corps buying reelections for the quid pro quo.

If the Fed's sole raison d'etre was to level out the boom/bust the "business" cycles that were ALWAYS caused by banks anyway, then it has failed miserably.

The FED IS the business cycle as plain as day.

PLUS it unconstitutionally charges interest on fiat it creates from nothing, plus it's printing press robs the people's buying power in a secret fashion that confuses the average gullible stupid pathetic govt indoctrinates like yourself dlaw!

Gold and the Dollar: Putting the Relative Cart Before the Relative Horse

This Thomas Edison Quote Sheds Light on the Money Scam in America. IOW's why they stole our real money.

In December 1921, the American industrialist Henry Ford and the inventor Thomas Edison visited the Muscle Shoals nitrate and water power projects near Florence, Alabama.

They used the opportunity to articulate at length upon their alternative money theories, which were published in 2 reports which appeared in The New York Times on December 4, 1921 and December 6, 1921.

Objecting to the fact that the Government planned, as usual, to raise the money by issuing bonds which would be bought by the banking and non-banking sector -- which would then have to be paid back with money raised from taxes, and with interest added -- they proposed instead that the Government simply create the currency it required and spend it into society through this public project.

This Thomas Edison quote made it plain in the following excerpt from The New York Times, December 6, 1921 issue ("Ford Sees Wealth In Muscle Shoals").

Here, the reporter reveals the Thomas Edison quote:

"That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt."

"Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 -- that is what it amounts to, with interest."

"People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work."

"That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost."

"But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good."

"The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 per cent, whereas the currency pays nobody but those who directly contribute to Muscle Shoals in some useful way."

"... if the Government issues currency, it provides itself with enough money to increase the national wealth at Muscles Shoals without disturbing the business of the rest of the country. And in doing this it increases its income without adding a penny to its debt."

"It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people."

"If the currency issued by the Government were no good, then the bonds issued would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious values of gold."

"Look at it another way. If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government?"

"The people."

"Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency on Muscle Shoals, instead of the bankers receiving the benefit of the people's credit in interest-bearing bonds?"

Rothschild Brothers of London communiqué to associates in New York June 25, 1863
"The few who understand the system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages...will bear its burden without complaint, and perhaps without suspecting that the system is inimical to their best interests."

Russell Kirk, The Conservative Mind
When democracy turns, as it often does, into a corrupt plutocracy, both national decadence and social revolution are being prepared." So wrote the Irish-born historian, W. E. H. Lecky (1838–1903) in this devastating assault on mass democracy. Lecky spoke for the landed gentry and the upper middle classes of late Victorian England when he warned his countrymen that an unfettered democracy would destroy the balance of interests in the community and thereby undermine the Constitution." A tendency to democracy," said Lecky, "does not mean a tendency to parliamentary government, or even a tendency toward greater liberty." Indeed, the type of democracy emerging in Britain seemed to be the rudiment of socialism.

Curtis Dall, son-in law of Franklin Roosevelt wrote a book called FDR: My Exploited Father-in-Law in which he stated:

"For a long time I felt that FDR had developed many thoughts and ideas that were his own to benefit this country, the U.S.A. But he didn't. Most of his thoughts, his political 'ammunition' as it were, were carefully manufactured for him in advance by the CFR [Council on Foreign Relations] - One World Money Group. Brilliantly with great gusto, like a fine piece of artillery, he exploded that prepared 'ammunition' in the middle of an unsuspecting target, the American people--and thus paid off and retained his international political support."*

H. L. Mencken
Democracy is also a form of worship. It is the worship of Jackals by Jackasses.

The Bedrock Case for the Return of the Gold Bull

Thomas Jefferson
"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered."

Alan Greenspan - “Gold and Economic Freedom” 1967
"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. . . . This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

Rothschild Brothers of London communiqué to associates in New York June 25, 1863
"The few who understand the system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages...will bear its burden without complaint, and perhaps without suspecting that the system is inimical to their best interests."


Curtis Dall, son-in law of Franklin Roosevelt wrote a book called FDR: My Exploited Father-in-Law in which he stated:

"For a long time I felt that FDR had developed many thoughts and ideas that were his own to benefit this country, the U.S.A. But he didn't. Most of his thoughts, his political 'ammunition' as it were, were carefully manufactured for him in advance by the CFR [Council on Foreign Relations] - One World Money Group. Brilliantly with great gusto, like a fine piece of artillery, he exploded that prepared 'ammunition' in the middle of an unsuspecting target, the American people--and thus paid off and retained his international political support."*

The International Gold Rush: Bulls May Soon Be Rewarded

You can blame gold's being sold down by paper trading of the Central banks who least want us to understand just how bad a shape the worldwide fiat currencies are.

Dig: In 1932 $1 = 1/20th oz gold

Today $1 = 1/1000th oz gold

A 20:1 ratio has become a 50:1 ratio, ergo a $1 buys 1/50th of what it could in 1932.

1/50th = 0.02 = $0.02 cents/$1 of buying power today.

Do you think the FED will keep printing as do most of the saavy, or will it call in dollars from all over the world to raise the $1's purchasing power?

History proves the ratchet is always the former, IE the FED has stolen 98% of the people's wealth via inflation thus far.

Only saps can think it will change it's shylock thieving ways.

The Ben & Hank show is just in it's beginning scenes.

Per the Maestro himself:

Alan Greenspan - “Gold and Economic Freedom” 1967

"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. . . . This is the shabby secret of the welfare/(warfare) statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

The PEOPLE'S property that is.

The International Gold Rush: Bulls May Soon Be Rewarded

Just watch Edward Griffin's video on youtube;

"The Creature From Jekyll Island; Revisiting the Federal Reserve"

Then if that snks in go to mises.org for even more in depth history and economics from the Austrains that foretold the fiat enabled rise of the Euro-statists our progressive era policies & Fed were modled after!

What a country of sheeple being merrily led to their own slaughter.

Thing is I was baaaaaing not too long ago myself, before getting myself the education govt purposely denied me and all Americans.

Where Are Precious Metals Heading?

This Thomas Edison Quote Sheds Light on the Money Scam in America.

In December 1921, the American industrialist Henry Ford and the inventor Thomas Edison visited the Muscle Shoals nitrate and water power projects near Florence, Alabama.

They used the opportunity to articulate at length upon their alternative money theories, which were published in 2 reports which appeared in The New York Times on December 4, 1921 and December 6, 1921.

Objecting to the fact that the Government planned, as usual, to raise the money by issuing bonds which would be bought by the banking and non-banking sector -- which would then have to be paid back with money raised from taxes, and with interest added -- they proposed instead that the Government simply create the currency it required and spend it into society through this public project.

This Thomas Edison quote made it plain in the following excerpt from The New York Times, December 6, 1921 issue ("Ford Sees Wealth In Muscle Shoals").

Here, the reporter reveals the Thomas Edison quote:

"That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt."

"Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 -- that is what it amounts to, with interest."

"People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work."

"That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost."

"But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good."

"The difference between the bond and the bill is that the bond lets the money brokers collect twice the amount of the bond and an additional 20 per cent, whereas the currency pays nobody but those who directly contribute to Muscle Shoals in some useful way."

"... if the Government issues currency, it provides itself with enough money to increase the national wealth at Muscles Shoals without disturbing the business of the rest of the country. And in doing this it increases its income without adding a penny to its debt."

"It is absurd to say that our country can issue $30,000,000 in bonds and not $30,000,000 in currency. Both are promises to pay; but one promise fattens the usurer, and the other helps the people."

"If the currency issued by the Government were no good, then the bonds issued would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges at the hands of men who control the fictitious values of gold."

"Look at it another way. If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government?"

"The people."

"Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency on Muscle Shoals, instead of the bankers receiving the benefit of the people's credit in interest-bearing bonds?"

//////////////////////...

Rothschild Brothers of London communiqué to associates in New York June 25, 1863

"The few who understand the system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages...will bear its burden without complaint, and perhaps without suspecting that the system is inimical to their best interests."

Americans are to soon old and too late smart thanks to govt and it's cheerleader beneficiaries in big biz, media & academe.

Where Are Precious Metals Heading?

henarl

"If there is no longer a viable government, gold will be worthless. Nobody will be willing to take your gold in exchange for food, clothing, weapons, or any other necessity of survival There will be no "money", only barter"

Gold and silver have always been viable commodity money of intermediary exchange freely chosen by traders over millenia as being the easiest to spot the depredations of king's and tyrant's attempts to clip or debase it.

Not to mention gold/silver's divisibility, high worth/weight, homogeneity, relative scarcity and low annual production usually lower than economic growth, and ergo enjoys growing purchasing power instead of fiat which depreciates our buying power.

My new 1972 VW was $1,989.00. A 1960 3/2 w/pool in Miami was $19K and today would be $200K.

Is it perfect? What is? But Gold & Silver money are what works best for trade and work best at restraining evil bankers and govt always out to rob the people via interest and inflation.

For the straight skinny on money & the FED:

Second Look at the Federal Reserve by Edward Griffin 1 of 7
www.youtube.com/watch?...

Where Are Precious Metals Heading?

Alan Greenspan - “Gold and Economic Freedom” 1967
"An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. . . . This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."


Thomas Jefferson
"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered."

"The condition upon which God hath given liberty to man is eternal vigilance; which condition if he breaks, servitude is at once the consequence of his crime, and the punishment of his guilt."

Commodity Forecasters See Prices Declining

The WW central banking system of fiat money IS selling to manipulate the price and heavies like Greenspam have admitted so.

Goto gata.org for the whole story of paper funny money makers trying extremely hard to make the world still believe the phony stuff has any value whatsoever left in any of them.

The scrip nobility's robbery of the taxpayer vias interest and inflation of worthless unredeemable paper may meltdown around their very feet.

The problem is that the vast amount of wealth they have embezzled from generations of Americans can never be recovered - but I say we still should by dividing up every single Foundation and Trust among the people as a good starting point.

Now Banking Reparations is a reparations I can get behind!!

Anyone else feel they deserve a chunk of a Rothschild, Rockefeller or Morgan's fortunes amassed since 1913 when their cartelization via the Fed ended any real competition between them?

Get Out of Commodities - Barron's

The only REALLY scary thing is how indoctrinated ignorance has fooled Americans into accepting fiat currencies that throughout ALL history eventually met demise in hyperinflated worthlessness.

And yet the lowly oz of gold still buys today what it did 100 or 2000 years ago - a damn fine suit & shoes, or the finest toga and sandals to be found on the streets of the Roman Empire.

The PURE definition of inflation is: more "currency" units each with less purchasing power, period.

Prices do not rise vis gold. More dollars, worth ever less, requires more of them to purchase the same amounts of goods or sevices.

According to Marx, Lenin, and ideological pal Keynes; inflation, along with graduated taxes, are the millstones with which to grind away the wealth of the people - and which not one man in a million could detect because of it's invisibility.

It's the EXACT reason the Constitution calls for ONLY gold or silver money, and NO fiat toilet paper a la the 2nd Reich or Imperial Rome, because elites can diddle with it for their own benefit to the people's impoverishment, as stated by too many founders to EVER be quibbled over.

Does ANYONE know that Hamilton was married to a Rothschild? Or that Rothschilds were behind Rockefeller & Morgan who conspired to create the FED, the author of the FED being Paul Warburg, Hitler's banker Max's brother?

Read Murray N Rothbard's "Wall Street, Banks and American Foreign Policy" for the eyeopener of your lives:

mises.org/resources/12...

an excerpt from the intro:

The New Deal economic policy was, as Rothbard demonstrated, prefigured by Herbert Hoover, champion of big business, and foreshadowed in the reforms of the Progressive era. As the
revisionist economic historians, such as Gabriel Kolko, have shown, those who regulated the great industries in the name of progressive "reform" were recruited from the very cartels and
trusts they were created to tame.

And of course the monopolists didn't mind being tamed, so long as their competitors were tamed (if not eliminated). Every giant leap forward of economic planning and centralization—central banking, the welfare state, "civil rights," and affirmative action—was supported if not initiated by the biggest and most politically powerful business interests in the country. The House of Morgan, the Rockefellers, and the Kuhn-Loebs must take their place alongside the First, Second, and Third Internationals as the historic enemies of liberty.

Giant multinational corporations, and their economic satellites, in alliance with governments and the big banks, are in the process of extending their influence on a global scale: they dream of a world central bank, global planning, and an international welfare state, with American troops policing the world to guarantee their profit margins.

After the long battle to create a central bank in the U.S., the high priests of high finance finally seized and consolidated control of domestic economic policy. It only remained for them to extend their dominance internationally, and for this purpose they created the Council on Foreign Relations, and, later, the Trilateral Commission.

These two groups have been seized upon by the new populist Right as the virtual embodiments of the Power Elite, and rightly so. It is only by reading Rothbard, however, that this insight is placed in its proper historical perspective. For the fact of the matter is that, as Rothbard shows, the CFR/Trilateralist network is merely the latest incarnation of a trend deeply rooted in modern American history.

Long before the founding of the CFR or the Trilateral Commission, there was a power elite in this country; that elite will likely endure long after those organizations are gone or transmuted into something else. Rothbard's unmasking of the historical and economic roots of this trend is vital in understanding that this is not a "conspiracy" centered in the CFR and the Trilateralist groups, as such, but an ideological trend traditionally centered in the Northeast, among the upper classes, and deeply rooted in American history.

I put the word "conspiracy" in quotes because it has become the favorite swearword of the Respectable Right and the "extremist"-baiting Left.

If it is conspiracy-mongering to believe that human beings engage in purposeful activity to achieve their economic, political, and personal goals, then rational men and women must necessarily plead guilty. The alternative is to assert that human action is purposeless, random, and inexplicable. History, in this view, is a series of discontinuous accidents.

Yet it would be inaccurate to call the Rothbardian world view a "conspiracy theory." To say that the House of Morgan was engaged in a "conspiracy" to drag the U.S. into World War I, when
indeed it openly used every stratagem, every lever both economic and political, to push us into "the war to end all wars," seems woefully inadequate. This was not some secret cabal meeting in
a soundproof corporate boardroom, but a "conspiracy" of ideas openly and vociferously expressed. (On this point, please note and underscore Rothbard's analysis of the founding of The New Republic as the literary flagship of "the growing alliance for war and statism" between the Morgan interests and liberal intellectuals—and isn't it funny how some things never change?)

A conspiracy theory attributes virtually all social problems to a single monolithic agency. Radical feminism, which attributes all the evil in the world to the existence of men, is a classic conspiracy theory; the paranoid views of the ex-Communists in the conservative movement, who were obsessed with destroying their ex-comrades, was another.

But the complexity and subtlety of the Rothbardian analysis, backed up by the sheer mass of rich historical detail, sets Rothbard on an altogether different and higher plane. Here there is no single
agency, no omnipotent central committee that issues directives, but a multiplicity of interest groups and factions whose goals are generally congruent.

In this milieu, there are familial, social, and economic connections, as well as ideological complicity, and none is better than Rothbard at ferreting out and unraveling these biographical details. Taken together, the author's small and studied brushstrokes paint a portrait of a ruling class whose ruthlessness is surpassed only by its brazen disloyalty to the nation. It is a portrait that remains unchanged, in its essentials, to this day. Wall Street, Banks, and
American Foreign Policy was written and published in 1984, during the Reagan years.

Reagan started out by denouncing the power elite and specifically the CFR and the Trilateralists, but wound up with that epitome of the Establishment, Skull-&-Bonesman George Bush as his vice president and successor. Bush is a longtime CFR director, and Trilateralist; most of his major cabinet officers, including his chairman of the joint chiefs, Colin Powell, were CFR members.

The Clinton administration is similarly afflicted, from the President (CFR/Trilateral) on down through Donna Shalala (CFR/Trilateral) and George Stephanopoulos (CFR), with the CFR honeycombed (as usual) throughout the State Department. In addition to Secretary of State Warren Christopher, other CFR members in the Clinton cabinet include Laura Tyson, chairman of the Council of Economic advisors, Treasury Secretary Robert Rubin; Interior Secretary Bruce Babbitt, HUD honcho Henry Cisneros; and Alice Rivlin, OMB director.

The other side of the aisle is equally co-opted at the leadership level, as vividly dramatized by Gingrich's retreat before the power and majesty of Henry Kissinger. One naturally expects cowardice from politicians, but the indictment also includes what passes for the intellectual leaders of the Republican free-market "revolution."

mises.org/resources/12...

----Both parties are rotten to the core and serve the very same masters who tap, groom & place their puppets in govt, media and academe's top slots, and is why Rothbard's 40 pg essay is a MUST read for ALL Americans in understanding what this corrupt establishment LEAST wants Americans to know, having wasted billions of our tax dollars to make sure we don't via the state's compulsory educrats.----

Almost ALL media is controlled w/few exceptions - thank goodness for the WWW while we still have it!

Did Barron's Really Pan All Commodity Investing?

The only REALLY scary thing is how indoctrinated ignorance has fooled Americans into accepting fiat currencies that throughout ALL history eventually met the demise of hyperinflated worthlessness.

And yet the lowly oz of gold still buys today what it did 100 or 2000 years ago - a damn fine suit & shoes, or the finest toga and sandals to be found on the streets of the Roman Empire.

The PURE definition of inflation is: more "currency" units each with less purchasing power, period.

Prices do not rise vis gold. More dollars, worth ever less, requires more of them to purchase the same amounts of goods or sevices.

According to Marx, Lenin, and ideological pal Keynes; inflation, along with graduated taxes, are the millstones with which to grind away the wealth of the people - and which not one man in a million could detect because of it's invisibility.

It's the EXACT reason the Constitution calls for ONLY gold or silver money, and NO fiat toilet paper a la the 2nd Reich or Imperial Rome, because elites can diddle with it for their own benefit to the people's impoverishment, as stated by too many founders to be quibbled over.

Does ANYONE know that Hamilton was married to a Rothschild? Or that Rothschilds were behind Rockefeller & Morgan who conspired to create the FED, the author of the FED being Paul Warburg, Hitler's banker Max's brother?

Read Murray N Rothbard's "Wall Street, Banks and American Foreign Policy" for the eyeopener of your lives:

www.mises.org/resource...

an excerpt from the intro:

The New Deal economic policy was, as Rothbard demonstrated, prefigured by Herbert Hoover, champion of big business, and foreshadowed in the reforms of the Progressive era. As the
revisionist economic historians, such as Gabriel Kolko, have shown, those who regulated the great industries in the name of progressive "reform" were recruited from the very cartels and
trusts they were created to tame.

And of course the monopolists didn't mind being tamed, so long as their competitors were tamed (if not eliminated). Every giant leap forward of economic planning and centralization—central banking, the welfare state, "civil rights," and affirmative action—was supported if not initiated by the biggest and most politically powerful business interests in the country. The House of
Morgan, the Rockefellers, and the Kuhn-Loebs must take their place alongside the First, Second, and Third Internationals as the historic enemies of liberty.

Giant multinational corporations, and their economic satellites, in alliance with governments and the big banks, are in the process of extending their influence on a global scale: they dream of a
world central bank, global planning, and an international welfare state, with American troops policing the world to guarantee their profit margins.

After the long battle to create a central bank in the U.S., the high priests of high finance finally seized and consolidated control of domestic economic policy. It only remained for them to extend their dominance internationally, and for this purpose they created the Council on Foreign Relations, and, later, the Trilateral Commission.

These two groups have been seized upon by the new populist Right as the virtual embodiments of the Power Elite, and rightly so. It is only by reading Rothbard, however, that this insight is placed in its proper historical perspective. For the fact of the matter is that, as Rothbard shows, the CFR/Trilateralist network is merely the latest incarnation of a trend deeply rooted in modern American history.

Long before the founding of the CFR or the Trilateral Commission, there was a power elite in this country; that elite will likely endure long after those organizations are gone or transmuted into something else. Rothbard's unmasking of the historical and economic roots of this trend is vital in understanding that this is not a "conspiracy" centered in the CFR and the Trilateralist groups, as such, but an ideological trend traditionally centered in the Northeast,
among the upper classes, and deeply rooted in American history.

I put the word "conspiracy" in quotes because it has become the favorite swearword of the Respectable Right and the "extremist"-baiting Left.

If it is conspiracy-mongering to believe that human beings engage in purposeful activity to achieve their economic, political, and personal goals, then rational men and women must necessarily plead guilty. The alternative is to assert that human action is purposeless, random, and inexplicable. History, in this view, is a series of discontinuous accidents.

Yet it would be inaccurate to call the Rothbardian world view a "conspiracy theory." To say that the House of Morgan was engaged in a "conspiracy" to drag the U.S. into World War I, when
indeed it openly used every stratagem, every lever both economic and political, to push us into "the war to end all wars," seems woefully inadequate. This was not some secret cabal meeting in
a soundproof corporate boardroom, but a "conspiracy" of ideas openly and vociferously expressed. (On this point, please note and underscore Rothbard's analysis of the founding of The New Republic as the literary flagship of "the growing alliance for war and statism" between the Morgan interests and liberal intellectuals—and isn't it funny how some things never change?)

A conspiracy theory attributes virtually all social problems to a single monolithic agency. Radical feminism, which attributes all the evil in the world to the existence of men, is a classic conspiracy theory; the paranoid views of the ex-Communists in the conservative movement, who were obsessed with destroying their ex-comrades, was another.

But the complexity and subtlety of the Rothbardian analysis, backed up by the sheer mass of rich historical detail, sets Rothbard on an altogether different and higher plane. Here there is no single
agency, no omnipotent central committee that issues directives, but a multiplicity of interest groups and factions whose goals are generally congruent.

In this milieu, there are familial, social, and economic connections, as well as ideological complicity, and none is better than Rothbard at ferreting out and unraveling these biographical details. Taken together, the author's small and studied brushstrokes paint a portrait of a ruling class whose ruthlessness is surpassed only by its brazen disloyalty to the nation. It is a portrait that remains unchanged, in its essentials, to this day. Wall Street, Banks, and
American Foreign Policy was written and published in 1984, during the Reagan years.

Reagan started out by denouncing the power elite and specifically the CFR and the Trilateralists, but wound up with that epitome of the Establishment, Skull-&-Bonesman George Bush as his vice president and successor. Bush is a longtime CFR director, and Trilateralist; most of his major cabinet officers, including his chairman of the joint chiefs, Colin Powell, were CFR members.

The Clinton administration is similarly afflicted, from the President (CFR/Trilateral) on down through Donna Shalala (CFR/Trilateral) and George Stephanopoulos (CFR), with the CFR honeycombed (as usual) throughout the State Department. In addition to Secretary of State Warren Christopher, other CFR members in the Clinton cabinet include Laura Tyson, chairman of the Council of Economic advisors, Treasury Secretary Robert Rubin; Interior Secretary Bruce Babbitt, HUD honcho Henry Cisneros; and Alice Rivlin, OMB director.

The other side of the aisle is equally co-opted at the leadership level, as vividly dramatized by Gingrich's retreat before the power and majesty of Henry Kissinger. One naturally expects cowardice from politicians, but the indictment also includes what passes for the intellectual leaders of the Republican free-market "revolution."

www.mises.org/resource...

----Both parties are rotten to the core and serve the very same masters who tap, back & place their puppets, and is why Rothbard's 40 pg essay is a MUST read for ALL Americans in understanding what this corrupt establishment LEAST wants Americans to know, having wasted billions of our tax dollars to make sure we don't via the state's compulsion.----

10 Reasons Why Gold Has Further to Run

Gold or Government Paper

Throughout history, two commodities have been able to outcompete all other goods and be chosen on the market as money; two precious metals, gold and silver (with copper coming in when one of the other precious metals was not available). Gold and silver abounded in what we can call "moneyable" qualities, qualities that rendered them superior to all other commodities. They are in rare enough supply that their value will be stable, and of high value per unit weight; hence pieces of gold or silver will be easily portable, and usable in day-to-day transactions; they are rare enough too, so that there is little likelihood of sudden discoveries or increases in supply. They are durable so that they can last virtually forever, and so they provide a sage "store of value" for the future. And gold and silver are divisible, so that they can be divided into small pieces without losing their value; unlike diamonds, for example, they are homogeneous, so that one ounce of gold will be of equal value to any other.

The universal and ancient use of gold and silver as moneys was pointed out by the first great monetary theorist, the eminent fourteenth-century French scholastic Jean Buridan, and then in all discussions of money down to money and banking textbooks until the Western governments abolished the gold standard in the early 1930s. Franklin D. Roosevelt joined in this deed by taking the United States off gold in 1933.

There is no aspect of the free-market economy that has suffered more scorn and contempt from "modern" economists, whether frankly statist Keynesians or allegedly "free market" Chicagoites, than has gold. Gold, not long ago hailed as the basic staple and groundwork of any sound monetary system, is now regularly denounced as a "fetish" or, as in the case of Keynes, as a "barbarous relic." Well, gold is indeed a "relic" of barbarism in one sense; no "barbarian" worth his salt would ever have accepted the phony paper and bank credit that we modern sophisticates have been bamboozled into using as money.

Continue this excellent article by America's greatest if unsung hero of historical truth and liberty, Murray N Rothbard, at the Ludwing von Mises Institute, at mises.org, my heros all of them!

www.mises.org/rothbard...

And then see what Greenspam himself has said about real money as statism & tyranny's primary impediment, before the last defense of arms, I'd suppose - and please share these around - BTW I'll be writing in Ron Paul, the ONLY honest politician in my 55yr lifetime, no matter what:

GOLD AND ECONOMIC FREEDOM

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense-perhaps more clearly and subtly than many consistent defenders of laissez-faire -- that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth.

When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one -- so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists -- why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely -- it was claimed -- there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates.

The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market -- triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.

With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form -- from a growing number of welfare-state advocates -- was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which -- through a complex series of steps -- the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

Four-Digit Gold Sets a New World Order

I believe you are correct. But do you not see that The Fed, and fiat money created from nothing, are the true culprit of the unjustly called "Business cycle" when it's, the happenstance of, or the political expansions and contractions of the Fed that are wholey outside, and in spite of, market leveling forces that exist in all other spheres of commerce?

EG - capitalism and metals based money units NEVER failed, it was Big Banking and Business who sought not their own competitive economic means to wealth, but instead by the political means that privileges the few via cartelization and regulation, and the very essence of the progressive era that expanded our govt beyong all conceptions of it by the founders except that bastard banker's boy Hamilton and the Rothschilds behing them!

Fiat currency if fixed in quantity forever, which no king or govt has ever been able to do, would work fine. Real gold and silver was never instituted by govts or kings, indeed it was an impediment to theft of the people.

Why do you think it's ok we pay interest for using our own money to shylocks who game the system at all other's expense? A private corp with monopoly cartel privilege & barrier to entry?

When you warehouse your furniture and get a receipt for it, do U expect the warehouseman to rent your furniture out, such that it may NOT BE THERE when you come to claim it? Such is the same case with fiat unredeemable money. It's immoral and always has been for millenia.

100 years of compulsory Govt indoctrination of ignorance in the people is no excuse.

Ladies and Gentlemen, Here's Gold at $1000

Is the Fed an Inflation Fighter or Creator?
By Frank Shostak
Posted on 10/25/2005

Every few days, a senior Fed official expresses concern regarding the effect of high gasoline prices on inflation. These comments are always phrased in the way a meteorologist would report on the weather, as if the phenomenon in question is an act of nature. Even stranger, these statements imply that only the Fed can hope to save us from this natural disaster.

To invoke another metaphor, this is like the cook who bakes a poison pie and then arrives on the scene of grave sickness, claiming to be the medic with the antidote.

It is the Fed that creates, not cures, inflation. The surest way to stop it is to stop the printing presses—something that a government with massive debt and the desire to sustain a boom is not likely to do.

The Fed’s latest warnings began on September 5, 2005, when the retail price of gasoline climbed to $3.069 per gallon—an increase of 72.6% from early January of this year.

They believe that the decisive factor in the setting of an inflationary spiral is people’s inflationary expectations. This causes workers to press for higher wages. Businesses try to recoup these wage increases by pushing the prices of goods and services higher. This ignites inflation, or so it is believed.

On October 19, 2005, the President of the Dallas Federal Reserve, Richard Fischer, said at a luncheon in Houston, "I will not waver from advocating policy that discourages expectations of higher core inflation. The object will always be to keep inflation at bay, so that the American business machine can keep on humming."

It is inflationary expectations, so they believe, that keep inflation going once inflation is triggered. Also, once expectations are set in motion it is not easy to get rid of them.

On October 20, 2005, the President of the St. Louis Federal Reserve, William Pool, told reporters, "If confidence in price stability starts to erode and inflation expectations begin to develop, it can be painful and long to reverse those expectations. Undoing inflationary expectations can be a matter of a couple of years."

Consequently, he believes that the Fed must raise interest rates enough to keep inflationary expectations well contained. He also added that, "if we were to end up overshooting on the federal funds rate target on the high side and we found that the economy slowed more quickly than anticipated then cutting rates could restore growth relatively quickly."

On October 21, 2005, the President of the Federal Reserve Bank of Richmond, Jeffrey Lacker, told reporters that he is increasingly worried about inflation and the prospect that higher energy prices will filter through into other goods. "My concern about inflation is distinctly higher now. We are facing the prospect now of the possibility of the energy price surge passing into core prices."

The latest data gives credence to the Fed officials’ concerns. The rate of growth of the producer price index which excludes energy prices jumped to 0.6% in September after falling 0.1% in August. Year-on-year the rate of growth climbed to 2.4% in September from 2.2% in the previous month and 1.7% in June.

Furthermore, year-on-year the consumer price index rose by a massive 4.7% in September. Additionally, according to a closely watched survey by the University of Michigan, consumers' expectation of inflation 12 months ahead jumped to 4.6% in early October from 3.1% in August.

On account of these developments, it is believed, the Fed must show leadership and act as soon as possible against emerging inflation. Once people see that the Fed is a serious inflation fighter this will calm down inflationary expectations and will keep inflation at bay, or so it is held.

What is inflation all about?

In a market economy, money enables the goods of one specialist to be exchanged for the goods of another specialist. For instance John the baker has produced ten loaves of bread, which he has exchanged for ten dollars. He then uses the ten dollars to buy twenty tomatoes from a farmer Bob. Note that in order to acquire twenty tomatoes John had to produce ten loaves of bread first. In short, his consumption of tomatoes is fully backed up by the production of bread. Also, note that the money here is honestly earned and hence fully backed up by John’s production of bread. Or we may also say that here we have a case where something useful is exchanged for money and money in turn is exchanged for some other useful thing—something is exchanged for something else by means of money.

Let us now consider a case of a counterfeiter—call him Charlie—who instead of producing something useful has created ten dollars by means of printing these ten dollars. He then uses these dollars to buy twenty tomatoes from Bob the farmer. His counterfeiting amounts to an "exchange" of nothing (since Charlie hasn’t produced anything economically useful) for ten dollars, which is in turn exchanged for twenty tomatoes.

Consequently, by means of money, which was created out of "thin air," Charlie the counterfeiter can consume without any production. Note that the money here, which was created out of "thin air," is not supported by any production of useful goods or services. Or we can also say that here we have a case where nothing useful is exchanged for money and money is exchanged for useful things—nothing is exchanged for something useful by means of money out of "thin air."

By creating money out of "thin air," Charlie the counterfeiter has in fact boosted or inflated the stock of money. This inflation of money in turn has enabled Charlie to secure tomatoes at the expense of a genuine wealth producer John the baker. In other words, while John the baker has contributed to the pool of funding, i.e., the pool of final goods this is not the case as far as Charlie the counterfeiter is concerned—he is consuming final goods without putting anything useful to the pool of these goods.

It follows then that the diversion of real wealth from wealth generators to non-wealth generators by means of increases in the money supply is what inflation is all about. Or we can say that inflation is about the economic impoverishment of wealth producers, which is set in motion by means of inflating the stock of money.

Through the increase in money supply, Charlie the counterfeiter adds an extra demand for goods and services without making any contribution to the production of goods and services. In short, the new money that Charlie created together with the previous money is now chasing an unchanged stock of goods.

Now, a price is the amount of dollars paid per unit of a good. Hence with more money now chasing a given amount of goods it implies that the price, i.e., the amount of dollars now paid for a unit of a good, has risen. Note that a general increase in prices here took place as a result of the inflation of the money stock.

Observe that the fall in the purchasing power of money, i.e., general increase in prices, is not what triggers the economic impoverishment of wealth generators. The trigger is the creation of money out of "thin air," or the inflation of the money stock. A general increase in the prices of goods and services is merely the symptom of the inflation of money, i.e., the manifestation of inflation. In short, a general increase in prices reflects the fact that increases in the money supply, i.e., money out of "thin air," have given rise to nonproductive consumption.

Note what we are not saying. We don’t say that inflation is the increase in prices caused by increases in money supply. What we are saying is that increases in money supply is what constitutes inflation.

What is wrong with the popular definition of inflation?

According to Mises,

Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation.

In short, what today is called inflation is the general rise in prices, which is in fact only the outcome of inflation. Consequently, anything that contributes to price increase is called inflationary and therefore must be guarded against.

Thus a fall in unemployment or a rise in economic activity are all seen as potential inflationary triggers and therefore must be restrained by central bank policies. Some other triggers such as rises in commodity prices or workers wages are also regarded as potential threats and therefore must be always under the watchful eye of the central bank policy makers.

If inflation is indeed just a general rise in prices, why is it regarded as bad news? What kind of damage does it do? Mainstream economists maintain that general price increases cause speculative buying, which generates waste. Inflation, it is maintained, also erodes the real incomes of pensioners and low-income earners and causes a misallocation of resources.

Despite all these assertions regarding the side effects of what they define as inflation, mainstream economics doesn’t tell us how all these bad side effects are caused.

Why should a general rise in prices hurt some groups of people and not others? Why should a general rise in prices weaken real economic growth? Or how does inflation lead to the misallocation of resources? Furthermore, if inflation is just a rise in prices, surely it is possible to offset its bad side effects by adjusting everybody’s incomes in the economy in accordance with this general price increase. However, once it is established that inflation is about the destruction of the process of wealth generation then all the above questions are easily answered.

We have seen that increases in the money supply set in motion an exchange of nothing for something. They divert real funding away from wealth generators toward the holders of the newly created money. This is what sets in motion the misallocation of resources, not price increases as such, which is only the manifestation of this misallocation.

Moreover, the beneficiaries of the newly created money, i.e., money out of "thin air"—are always the first recipients of money, and so they can divert a greater portion of wealth to themselves. Obviously, those who either don’t receive any of the newly created money or get it last will find that what is left for them is a diminished portion of the pool of real funding.

Additionally, real incomes fall not because of general rises in prices, but because of increases in the money supply, which gives rise to nonproductive consumption. In other words, inflation depletes the real pool of funding, which undermines the production of real wealth—i.e., a lowering of real incomes.

General increases in prices, which follow increases in money supply, are an indication that the erosion of peoples’ purchasing power has taken place. It is not the symptoms of a disease but rather the disease itself that causes the physical damage. Likewise, it is not a general rise in prices but increases in the money supply that inflict the physical damage on wealth generators.

Can inflationary expectations trigger a general price rise?

Recall that according to popular thinking, workers' expectations for higher inflation make them demand higher wages. Increases in wages in turn lift the cost of producing goods and services and force businesses to pass these increases on to consumers by raising prices. It is true that businesses set prices and it is also true that businessmen while setting prices take into account various costs of production. However, businesses are ultimately at the mercy of the consumer who is the final arbiter.

The consumer determines whether the price set is "right," so to speak. Now, if the money stock hasn’t risen, consumers won’t have more money to support the general increase in prices of goods and services. (Remember, that a price is the amount of money per unit of a good).

Consequently, a strengthening in inflationary expectations cannot by itself set in motion a general increase in prices. After all the realization of expectations has to go through the monetary channel. So irrespective what people’s expectations are, if the money supply hasn’t increased then peoples monetary expenditure on goods cannot increase either. This means then that no general strengthening in price increases can take place without an increase in the pace of monetary pumping.

By the same token, a strengthening in gasoline price rises cannot by itself set in motion a stronger rate of increase in general prices. Without the strengthening in the rate of growth of money supply relative to the rate of growth of goods there can’t be a general strengthening in price rises.

However, one could argue that a rise in inflationary expectations will cause the lowering of the demand for money, which with all other things being equal, will result in the decline in money’s purchasing power, i.e., a general rise in prices. However, what does a change in the demand for money have to do with inflation?

Inflation as we have seen is an increase in the money supply that leads to economic impoverishment through the increase in nonproductive consumption. There is however, nothing wrong with changes in the demand for money. This is no different from changes in the demand for any good. The fact that people want to hold less money doesn’t give rise to nonproductive consumption that sets in motion a process of economic impoverishment.

Likewise inflation is not about increases in money supply in excess of the demand for money. According to this way of thinking, as long as the increase in money supply is fully backed up by the demand for money there is no inflation. Note also, that in this way of thinking inflation is regarded as a general rise in prices. However, irrespective of the demand for money, once the money supply increases it sets in motion a process of impoverishment, which also sets in motion the dreadful boom-bust cycle.

It follows that the popular view, which asserts that by means of transparency the Fed can prevent rises in inflation, doesn’t hold water. Irrespective of how transparent the Fed is, what matters here is the rate of increase in the money supply. It is rises in the money supply that cause the physical damage to the process of real wealth formation irrespective of the Fed’s transparency.

Imagine that somehow the Fed did manage to convince people that central bank policies are aimed at stopping inflation and maintaining price stability, yet at the same time the central bank also raises the rate of growth of money supply. So even if inflationary expectations were stable the destructive process will be set regardless of these expectations on account of the increase in the rate of growth of money.

Note that people’s expectations and perceptions cannot offset this destructive process. It is not possible to alter the facts of reality by means of expectations. The damage that was done cannot be undone by means of expectations and perceptions.

Is the Fed an inflation fighter?

Between January 2001 and June 2004, the Fed had pursued an aggressive lowering of the federal funds rate target. The target was lowered from 6.5% to 1% by June 2003. To attain a given federal funds rate target, the Fed must constantly manage the flow of money to financial markets. Changes in the Federal Reserve’s balance sheet, also known as Federal Credit, depict the variability in the monetary pumping to sustain a given federal funds rate target.

Thus, to support a lower fed-funds rate target the yearly rate of growth of Fed Credit jumped from 0.7% in January 2001 to 12% by September 2001. Furthermore, during most of the 2003 period the rate of pumping by the Fed stood in excess of 9%.

The effect of Fed’s pumping is manifested by the up-trend in the growth momentum of the CPI since June 2002 (see chart). Note that the general rise in prices as depicted by the rate of growth in the CPI is driven by the past actions of the Fed.


By responding to the symptoms of inflation that the Fed has itself created the US central bank gives the impression that it fights inflation. Once it is realized that inflation is increases in the money supply, it becomes obvious that the source of inflation is the Fed and fractional reserve banking. It also becomes obvious that rather than fighting inflation, it is the Fed itself that generates the inflationary process. On this Mises wrote,

To avoid being blamed for the nefarious consequences of inflation, the government and its henchmen resort to a semantic trick. They try to change the meaning of the terms. They call "inflation" the inevitable consequence of inflation, namely, the rise in prices. They are anxious to relegate into oblivion the fact that this rise is produced by an increase in the amount of money and money substitutes. They never mention this increase. They put the responsibility for the rising cost of living on business. This is a classical case of the thief crying "catch the thief." The government, which produced the inflation by multiplying the supply of money, incriminates the manufacturers and merchants and glories in the role of being a champion of low prices.

It is amazing that almost forty years ago the champion of present inflationary policies, Fed Chairman Alan Greenspan wrote the following,

The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

Conclusions


Devastating: $5
For the past several weeks, Fed officials have warned the public about the growing inflation threat. Officials blame the growing risk of inflation on the rising price of gasoline as a result of the rise in crude oil prices and hurricane Katrina. Despite all this Fed officials are resolute that it is their duty to protect the US economy from the inflation menace.
According to officials, what is needed to counter the looming inflation threat is to prevent an acceleration in inflationary expectations. This, it is held, can be achieved by pursuing a transparent and credible policy to counter inflation. It is overlooked by most experts that the source of inflation has nothing to do with the high price of oil and high gasoline prices.

The main source of inflation is the Fed itself. Various measures that Fed officials are promising to employ in the fight against inflation rather than fixing the problem will make things much worse. These policies only generate a further misallocation of resources, which in turn undermines the process of wealth generation.



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Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. Send him MAIL and see his outstanding Mises.org Daily Articles Archive. Comment on this article on the Mises Economics Blog.