Ron Paul was right. It’s the ultimate moral hazard and it’s the inflationary engine that allows for spending on war, entitlements, welfare, and corporatism. It must be obliterated. It is unconstitutional and acts as nothing more than a transfer of wealth via the creation of more money and benefiting those who get it first. We need banks to compete with each other on the basis of safety and reputation while they issue their own notes like how it was before central banking entered this country. Ending the Fed means:
No more empire building since we aren’t using military force to back currency.
Our spending would slash itself and almost all federal agencies would cease to exist. No more CIA, FBI, DHS, FDA, CDC, etc. that end up serving as corporate sock puppets and no more lifetime politicians.
Our purchasing power is retained. We wouldn’t need social security, medicare, or welfare.
We produce our own goods and export more. We wouldn’t be exporting inflation and propping up phony GDP numbers.
Asset prices and home prices would collapse. Interest rates would be allowed to rise and price in money where it needs to be.
The FDIC wouldn’t serve a purpose without a Federal Reserve. Actually, it shouldn’t exist to begin with because it creates yet another moral hazard where banks lend out money they don’t have via rehypothecation and fractional reserve lending. This results in reckless lending that banks wouldn’t do if deposits weren’t guaranteed by the government.
All of our debt would be unpayable, meaning we default and experience a debt jubilee.
But specifically on #7:
My landlord’s mortgage is default (so, the money he owed are forgotten and forgiven, the mortgage note is null and void) - he owns the property (and 7 others that he owns to rent out) clean out.
So, what is my choice of actions now?
Should I stop paying to him and enjoy “free rent” till… ?
Should I keep paying him money he didn’t earn (it was a profit on the borrowed money that he will not be returning now, remember?)
Should I just tell him to back off and consider the property I occupy mine (all debt records are forgiven, right?)
Same with the cars and all other property obtained on credit…
we MIGHT be OK to produce for our own consumption - it is really great to not rely on imports, especially in critical area. But to “export more”…
Did you see in which conditions/at what pace and all those creating our import do that?
Have you been to a DMV (or any other of our workplaces) - did you notice anyone being even on-pace, let alone rushing-up?
Now, imaging the price tag on any of our exports, which are NOT of the same superior quality of the times “made in the U.S.A.” meant just that - who in their right mind would pay that?
Ron Paul is correct in many-many aspects — but “let’s just cut all debt, spread the wealth evenly and - miraculously, AFTER we give everyone the wealth, actually - put everyone to making great domestic product — that is more like a marxist’s communism than anything else
does #7’s “all debt will be void” i.e. you got all the goods, property, etc. on credit, which you will not be repaying - does that not qualify for “spreading wealth”?
@snbrd3 Hey, it doesn’t mean wealth distribution per say, but hey @treilly6 clause 7 of your proposal would piss off most nations. The US needs to pay into it’s debts to other nations, even if we find a way through tax payments to eliminate internal/personal debt.
I don’t see how we’ll pay off all of our debts to other nations, but the USD won’t be the reserve currency at that point anyway. A lot of central banks around the world are ditching the USD for gold and silver. But when it comes to paying off all the debt the US has to the world, it’s quite literally impossible because it’s all from rehypothecation that creates the multiple sources of debt. Most of the debt is relying on the future cash flows exchanging hands from one borrower back to a lender and to a different borrower. At that point, we have no way to pay off existing debt without creating more money and repeating the process.
The M2 money supply isn’t big enough to pay all of the outstanding debt because the debt itself comes from recirculating currency and the promise to pay it back with future cash flows. If all debt was forgiven, most of the people who lose out are the lenders. If we were to print the difference, we’d simply end up with the same amount of nominal debt but with more inflation.
Sorry, I’ve been afk for a while. I forgot I posted here. I’ll address all your posts in this one reply.
1.I don’t think the change from fiat currency to sound money is going to be easy. It’s going to be extremely painful especially for the financial sector seeing as we’ve made debt and IOUs our form of lending. It’s all debt that comes from rehypothecation and fractional reserve lending and the amount of debt in the economy somehow needs to be paid off with a very small M2 supply in comparison. $20 trillion in the M2 supply somehow needs to recirculate across millions of ledgers to pay off 100s of trillions of dollars in debt which is impossible. Creating more money into existence just creates more debt somewhere and it results in more inflation. Banks are going to crash, Wall Street implodes, no more lending, and the United States will take the medicine we should’ve taken in 2008. We can’t bail out corporations or the government anymore because now the Federal Reserve has left us with two choices: save the dollar or save the markets and the government.
Price discovery and the substantial fall in prices of goods, services, assets would be an eventual manifestation of less currency in circulation. The dollar has lost 99% of its purchasing power since the Fed came into existence in 1913. Had it never been created, everything would cost pennies on the dollar compared to today. Though a crude example, a $400,000 median-priced home in the US would cost $4,000. Same thing with cars. We can get back to that point especially given that technology has made labor more efficient and cheaper in terms of real value. The problem is that fiat currency creates such a huge delta between real vs. nominal value. Again, this is going to be extremely painful but it takes away the phony wealth effect that prices people out of buying certain homes and cars in the beginning. The real issue is that there has simply been way too much money created over the last 111 years since the Federal Reserve’s creation and most of it ends up in the financial sector propping up bonds, stocks, and real estate. Then over time this new money transitions from financials to the real economy. However, this doesn’t apply the same to someone who already bought a house or car at 2024 price levels and sees them fall. I’ll explain.
To address the hypothetical with property obtained on credit, this would simply require time to allow nominal asset prices to deflate to what their real cost should be which is the cost of the raw materials and labor required to build them. For the people who haven’t missed payments and all of a sudden we end the Fed, the money supply is still circulating and changing hands and people will still be able to make payments. It’s not as if all that money just disappears and suddenly every stops receiving the currency needed. We simply stop the expansion of the fiat currency supply which is continually bidding up prices and it gives us time to shrink the M2 supply circulating the economy. It also slows down lending and creation of more debt sources. The people who have physical possessions and are still paying their debts back to lenders are going to win vs. those who rely on the nominal asset values of stocks, bonds, and real estate are going to lose. You and your landlord would be able to change hands with the future cash flows you need to bring down the balance on the ledger.
If your landlord is using a mortgage as a form of leverage to own another property without having to expend all of his capital to purchase it and then a wave of defaults hit, it really depends. If the bank that he borrowed the mortgage from collapses, he’ll get to keep the property more than likely. All situations are different, but because most banks are so over-leveraged and their ledgers are propped up on nominal asset values and prices, the tight monetary policy crashing them means the borrowers win. But let’s say that doesn’t quite happen and instead the property he owes the mortgage for is underwater but the bank isn’t. He’ll take a loss paying back for an asset at a premium since its market price has gone down vs. what he bought it for. Or if he doesn’t mind a hit to his credit, a Chapter 11 or 13(?) bankruptcy can reduce the amount he’ll want to pay back. He’ll lose the house, but it sounds like he’s doing quite well financially seeing as he owns 7 other properties outright. Now I’ll assume he’s an average Joe homeowner. Again, it depends on the financial well-being of the lender. If they’re over-leveraged and they go broke without a bailout, he still wins. But if the bank isn’t quite finished off and he’s left with a collapsed home price, it’s more than likely a Chapter 11 or 13 bankruptcy will happen anyway. This is also part of the reason why I think a debt jubilee will occur as people don’t want to pay back a mortgage that would leave them underwater. Should the Federal Reserve be ended, this is something the country needs to be made aware of either by the likes of Donald Trump, Jerome Powell, or someone else that can communicate what happens when such a change takes place.
I don’t want to just abolish the USD and the Fed immediately, but rather enforce a transition to phase central banking out such as legalizing competition of the dollar with physical currency like silver and gold. There needs to be a way to shrink the supply of money and precious metals can do just that. Silver is still relatively cheap and it can be recognized anyone. Before we do that, the Federal Reserve needs to do the right thing and allow interest rates to rise, shrink its balance sheet of debts, and do more quantitative tightening. We’re talking some Paul Volcker style rate hikes. It would absolutely crush the US government and force it to default, but it needs to be done. I’d argue the government getting as big as it has is because of the Federal Reserve and stripping away all forms of a gold standard up until 1971 (FDR taking our gold, then Bretton Woods, and finally Nixon when we would’ve defaulted to the French). It’s been able to spend with impunity at the expense of future generations footing the bill.
Over the last century, our economy has been systematically dismantled from free markets and sound money to a system of debt, IOUs, imports, empire building, and corporate-kleptocracy interests. We definitely have the resources to make our own goods and services but we ship everything out because big-business and big-government have made competition in this country impossible primarily through policies and legislation that sound nice on paper but fail in practice. For example, minimum wage is loved by big-business because it makes doing business harder for smaller competitors. It also opens the door to things like illegal immigration and hiring undocumented laborers for way less than minimum wage. Same with occupational licensing, income taxation, etc. We’d need to take a chainsaw to about 99.99% of regulations because they’re not really meant to be regulations at all. They’re meant to be barriers to entry.
*Sorry for the super long post, but I’m glad you asked the questions you did. It makes me think about endgame scenarios.
WOW! Your post was an impressive barrage of economic truths and observations. I am very impressed and would certainly consider you more than simply someone with a finger on the pulse of the American economy – you presented your information clearly, demonstrating an in-depth understanding of finance- and macro-economics, monetary history and policy, market behavior, and more in your post. Thanks for taking the time to share your ideas – I really enjoyed it. You offer strong promise and hope in our seemed economically terminal condition. Quite impressed! BRAVO! (And I agree with your assessments and points, for what its worth.) Your policy proposal is a true winner for America, I think. Thanks.
Love your points. You’re right, it’s gonna be a sh*tshow. I’ve been promoting a switch from a consumer society back to a production-based-agarian society.
You made a big point: there isn’t enough money supply to pay off our debt, and by that point it won’t be a reserve currency. So we need to default, or pay it through production in order to limit our money supply, so that it can be backed by commodity metals.
Instead every time, during the 1800s, that silver would leave US circulation Congress would debase our currency instead of expanding it’s backing (Coinage Acts of 1853&'73). This should be done with a commonly agreed upon, valuable resource that’s in high demand. Allowing for the expansion of the money supply, and therefore the economy (which is what was originally intended) but preventing the current fiat global expansion of our money supply.
First step is money out of the creation of legislation. Secondly, a tariff based taxation system, and the end of direct taxes needs done. I’d value limitations being established on how much of a deficit the gov’t can run before having to encourage a surplus. The Great Tariff Debate of 1888 is a great example.
