Capitalism Ends, Socialsm Begins

CNSNews has a commentary up discussing how Obama’s plans are modeled after FDR’s plans and how, according to Treasury Secretary Tim Geithner, “capitalism will be different.”

Is Obama Designing the End of Capitalism?

Wednesday, March 18, 2009
By Ben Shapiro

Amid all of the mixed messages on the strength of the economy coming from the White House, one theme has emerged loudly, clearly, and unvaryingly: The American economic system is about to undergo a profound shift.

“Never allow a crisis to go to waste,” President Obama’s chief of staff Rahm Emanuel famously stated. “Never waste a good crisis,” concurred Secretary of State Hillary Clinton. Americans, said Obama, should “discover great opportunity in great crisis.” What kind of opportunity? “Capitalism,” Secretary of the Treasury Tim Geithner said last week, “will be different.”

All of Obama’s economic policies thus far are designed to drive America into full embrace of socialism. His chief means for this transformation: inflation. He is attempting to inflate the currency through two primary means: intense deficit spending, and pushing up production costs through union subsidization.

In order to make these measures politically palatable, he cites FDR as an example of good deficit spending; he cites the credit crunch as an excuse for inflationary monetary policy; and he recommends unionization in order to boost wages.

It’s a beautiful strategy for purposefully trashing capitalism, all the while blaming capitalism for its own downfall. John Maynard Keynes, the liberal economist who championed government intervention during recessions, recognized Obama’s inflationary strategy for what it is: “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency,” said Keynes. “Lenin was certainly right. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Obama pursues inflation—government devaluation of the currency—with the zeal of the newly converted. His deficit spending will be financed either through higher taxes or through inflation. Obama says he will push higher taxes—after all, he wants to appease the Chinese, who don’t want their U.S. securities paid off with inflated dollars. But covertly, Obama fully intends on inflating the currency to pay of the massive deficit he has shoved through Congress.

Meanwhile, he uses the increased prices produced by inflation to justify continuing unionization—he backs “card check” legislation—forcing up the cost of doing business and throwing people out of work. He then blames unemployment on the failure of the free market and states that the government must step in to hire more Americans.

It’s the same tried and true policy that created the Great Depression. During the inflationary period following the institution of the Federal Reserve in 1913, the purchasing power of the dollar fell rapidly — 56 percent by 1929. The easy availability of credit led to the same sort of economic bubble mirrored during the recent real estate boom.

The government’s response was the same, too. According to economist Murray Rothbard, within a week after the stock market crash of 1929, the Federal Reserve pumped cash into the system: it added $300 million to the private bank reserves; it doubled its holdings of government securities, adding $150 million to the reserves, and discounting $200 million for member banks.

Writes Rothbard, “As a result, the weekly reporting member banks expanded their deposits during the fateful last week of October by $1.8 billion (a monetary expansion of nearly 10 percent in one week).” The Federal Reserve lowered its discount rate from 6 percent to 4.5 percent.

This, of course, did not stave off the Great Depression. Similarly, Germany, Britain and many other European countries moved off the gold standard in the early 1930s; this merely heightened the sense of urgency in the United States, where the gold standard was still in place, leading to runs on gold. FDR countered by dramatically inflating the currency in 1933, when he made it unlawful for private persons to hold gold; in 1934, he reset the value of the dollar at $35 per ounce of gold rather than the previous $20.67.

Without financial stability ensured by the free market gold standard, banks became even less willing to lend. FDR attempted to push up wage rates by backing labor against business; the result was prolonged unemployment, because prices were already too high.

And all of this justified more and more governmental intrusion.

Now Obama wants to pursue the same inflationary policies. He’s pushing the deficit beyond the breaking point. He’s using “card check” to inflate wages, producing unemployment. He’s destroying savings.

And he’s loving every minute of it. When it comes to inflation, very few people can identify its pernicious effects; it’s far easier to cite the dangers of laissez-faire capitalism. Which, of course, is Obama’s plan. Capitalism will be different when Obama finishes with it—it will be another name for socialism, purposefully brought on by governmental measures.

Read Full Post »

California Democrat Funneled TARP Funds To Husband’s Bank

Americans for Prosperity is reporting on a New York Times article stating that California Democratic Representative Maxine Waters helped to funnel funds from TARP to OneUnited, a California bank where her husband served on the board and owns $250k in bank stock.

Americans for Prosperity Outraged by Rep. Waters’ Misuse of Taxpayer Dollars to Further Personal Agenda

Friday, March 13th 2009

For Immediate Release: Thursday, March 12, 2009

Contact: Mary Ellen Burke, (202) 349-5880

Americans for Prosperity Outraged by Rep. Waters’ Misuse of Taxpayer Dollars to Further Personal Agenda

WASHINGTON- Today, NYTimes.com reported that Representative Maxine Waters, a California Democrat, used her political influence to pressure U. S. Treasury officials to grant $50 million in bank bailout funds to OneUnited—a bank for which her husband served on the Board of Directors and owned at least $250,000 worth of stock in the institution.

As a result, OneUnited received a cash infusion of $12 million last December through the Treasury’s bank bailout effort, the Troubled Asset Relief Program.

In regards to Rep. Waters’ personal connection to the funding, Tim Phillips, president of Americans for Prosperity released the following statement:

“Rep. Maxine Waters allegedly steering funds to her husband’s bank is an example of the kind of abuse you get with massive government bailouts of industries. When trillions of dollars are being spent with little accountability, it’s far too easy for millions to be abused for political purposes. We need a return to real fiscal discipline and an end to the wasteful and abusive spending of our children’s future.”

Americans for Prosperity (AFP) is a nationwide organization of citizen leaders committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and scope of government is the best safeguard to ensuring individual productivity and prosperity for all Americans. AFP educates and engages citizens in support of restraining state and federal government growth, and returning government to its constitutional limits. For more information, visit www.americansforprosperity.org

Read Full Post »

Obama And The Stock Market

John Wohlstetter from Letter from the Capitiol has a post up detailing how the stock market is reacting to Obama’s policies and actions.

March 04, 2009

Obama’s Stock Market: Investors Vote With Their (Financial) Feet…Exit!

A WSJ editorial sums up the detritus of 44′s first days by looking at the collapse of the Dow Jones Industrials this year.  As of January 2 the Dow closed at 9o34, its highest level since the autumn panic plunge.  It closed at 6763.29 Monday, March 2, a 25 percent plunge (from January 19′s 8279.63 close the DJIA has fallen more than 18 percent).  Economist Robert Barro sees a 20 percent chance of a crashing market bringing about a depression (technical economist definition: a drop of 10 percent in GDP or consumption).  Since 1870 America has seen two depressions: 1917 – 1921, with a 16 percent macro-economic plunge, and the 1929 – 1933 Great Depression, with a 25 percent plunge.  (Barro doesn’t count the 1937 – 1938 “Depression within the Depression” period, when indicators fell back to near-1933 levels.)

Here are key DJIA metrics from Nov. 3 through March 2 (four months) that collectively flesh out the picture (I made two minor corrections–the date Obama was elected & one spelling miss):

November 4, 2008: Obama is Elected
November 4, 2008: 9326.04 Open
November 4, 2008: 9139.28 Close

January 20, 2009: Obama is Inaugurated
January 20, 2009: 8,279.63 Open
January 20, 2009: 7,920.66 Close

February 17, 2009: Obama signs stimulus package into law.
February 17, 2009: 7,845.63 Open
February 17, 2009: 7,502.59 Close

February 27, 2009: Obama announces budget
February 27, 2009: 7,180.97 Open
March 2, 2009: 6763.29 Close

Let us then trace the (rounded) numbers from 9326 to 6763. On Election Day the market fell nearly 200 points, a 2 percent drop.  From there to January 2–the first trading day of 2009, after a smooth transition, when Obama as President-Elect had appointed moderate economic advisers–and with Bush 43′s Detroit rescue depriving his remaining days of any market credibility, thus permitting investors the “audacity of (financial) hope”–the market fell another 100 points, but remained well above the nadir of autumn, and above (see WSJ chart) the 7500 low in that period.  On January 19 the market closed at 8279, about 9 percent lower than January 2.  Since January 19, to March 2, the market has fallen another 18 percent.   (March 3′s 10-point move was statistically irrelevant, so I did not adjust the numbers this AM.)

Divide these metrics into two periods, for simplicity: Nov. 3 close – Jan 19 close, from 9326 to 8279, down 5.6 percent; 8279 Jan. 19 close to 6763 Mar. 3 close, down another 18.3 percent–to a full 10 percent below the 7500 transition period bottom.  Thus, the DJIA has fallen more than three times as much (18.3 percent is 3.26 times 5.6 percent) since 44 was inaugurated than during his transition.  This second fall took 6 weeks, versus 11 weeks for the first fall during the transition; this equate to a 6 times faster fall in value since Obama took office, adjusted for the different duration of the two periods.  This makes sense, because a moderate transition has been followed by a left-wing blowout in President Obama’s first 6 weeks.

The WSJ editors point to “sources of recovery” already at work, but that have failed to lift the DJIA:

The price of oil and other commodities have fallen by two-thirds since their 2008 summer peak, which has the effect of a major tax cut. The world is awash in liquidity, thanks to monetary ease by the Federal Reserve and other central banks. Monetary policy operates with a lag, but last year’s easing will eventually stir economic activity.

Housing prices have fallen 27% from their Case-Shiller peak, or some two-thirds of the way back to their historical trend. While still high, credit spreads are far from their peaks during the panic, and corporate borrowers are again able to tap the credit markets. As equities were signaling with their late 2008 rally and January top, growth should under normal circumstances begin to appear in the second half of this year.

Yet the beginnings of recovery elude us.  The WSJ details the policies of Team 44 & a liberal Congress that punish producers & investors & lenders, while rewarding non-producers, non-investors & borrowers.  Investors are on a capital strike, voting “no confidence” in Team 44′s nostrums.  AIG’s fourth taxpayer capital infusion does not do wonders for investor confidence either.  Nor does the confidence offensive launched by Team 44 help; verbal reassurance brings to mind the chaotic “Animal House” final scene, when as the Delta tank rolls downtown and marbles spill all over the pace, one ROTC guy screams: “Everyone remain calm.  Everything will be alright….”  Presidents are rarely good sources of market advice.

WSJ pundit Holman Jenkins fingers government intervention as a major cause of investors going on strike:

Investors don’t have to put their money in any particular company’s stock, or in stocks at all — and the wholesale flight of investors from bank stocks has put almost the entire weight of recapitalizing the financial sector on the taxpayer.

Shafting Citi’s preferred stockholders by forcing them to convert at a loss to common stock sends a signal to investors to stay away from equity ownership where government invests and can (inevitably, will) run the enterprise with political considerations put before economic value creation.  And now FDIC Chairman Sheila Bair wants to draw $27B capital FROM banks to shore up FDIC, whose “funds” are (like the Social Security & Medicare “trust funds”) an accounting fiction!!  She would dun banks by increasing the premium they pay for FDIC insurance.  True, as the WSJ editors note the sum is a fraction of the $4.76TR in total deposits covered by FDIC, but why draw ANY capital away from banks and thus reduce their lending base, when we want banks to lend more?

As for 44, yesterday, as noted by Bill Kristol, he said not to worry.  (I would say that 44 gave us an Alfred E Neuman “What me worry” moment):

“What I’m looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the United States and the entire world economy to regain its footing. And, you know, the stock market is sort of like a tracking poll in politics. You know, it bobs up and down day to day. And if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong.”

44 continued:

“Now, having said that, the banking system has been dealt a heavy blow. It has to do with many of the things that Prime Minister Brown alluded to: lax regulation, massive over-leverage, huge systemic risks taken by unregulated institutions as well as regulated institutions. And so there are a lot of losses that are working their way through the system. And it’s not surprising that the market is hurting as a consequence. In fact, you know, I think what we’re seeing is — is that as people absorb the depths of the problem that existed in the banking system, as well as the international ramifications of it, that, you know, there’s going to be a natural reaction.”

Kristol observes that the “natural reaction” began last fall, and thus the steeper drop since January 20 is a (natural) reaction to Team 44′s policy moves & statements.  And yes, markets do fluctuate.  That is all one can say for certain about the future–markets fluctuate.  But when people see their 401k become a 201f, with the plausible prospect that soon it will become a 104c, they get worried.  Thus Kristol writes: “No, the stock market isn’t like a tracking poll. Tracking polls were just about the electoral prospects of Barack Obama. The stock market is about real money, about the real livelihoods of real Americans.”  President 44 needs to worry more about it.

At bottom is a nugget from the 2008 Democratic Presidential debate in which ABC’s Charles Gibson pointed out that recent capital gains tax cuts had generated more revenue for the Treasury, while capital gains tax hikes had produced less, and thus did candidate Obama really wish to raise them, when deficit reduction was a major goal of his?  To which, astonishingly, Obama answered that he would raise capital gains taxes even if the result produced less federal tax revenue, in pursuit of redistributive fairness.

There you have it.  After making moderate noises throughout the transition and appointing relatively centrist economic advisers, Obama turned to the ultra-left Democratic leadership in Congress to write his proposals.  And he embraced the result as his own.  Now the stock market has voted on the result: Investors have voted with their financial feet, running for the exits.

Steve Forbes sees Washington v. Wall Street coming to a head soon, with one view (growth first) or the other (redistributive “fairness” first) prevailing.

Read Full Post »

Clarity On Obama’s Deficit Claim

CNSNews has a good article spelling out the misinformation Obama is feeding America over this $1.3 trillion deficit he “inherited” and how he plans to reduce it by half by 2013.

Obama’s Deficit Charade

Wednesday, February 25, 2009
By Terence P. Jeffrey

President Obama posed as a fiscal conservative Monday when he hosted a “fiscal responsibility summit.”

Close inspection reveals that what he is actually proposing, however, is a massive increase in government debt—thus raising the already unsustainable burden of government that is certain to fall on our children unless the welfare state is somehow curtailed.

In the first seven fiscal years overseen by the high-spending President Bush, the annual federal budget deficits were truly obscene. Yet, they never exceeded $500 billion.

In fiscal 2002 through 2008, according to the historical tables published by the Office of Management and Budget last fall, the annual deficits were $157.7 billion, $377.5 billion, $412.7 billion, $318.3 billion, $248.1 billion, $162 billion and $410 billion. (The Congressional Budget Office has since calculated that the fiscal 2008 deficit actually ended up being $454.8 billion.)

President Obama said Monday that his “administration has inherited a $1.3 trillion deficit” for fiscal 2009.

The extraordinary size of that deficit is due, of course, to what one would have hoped were passing circumstances and one-time policies: a recession, a $700 billion bailout of the banking industry and that part of the $787 billion “stimulus” President Obama signed last week that will actually be spent in this fiscal year.

“And that’s why today I’m pledging to cut the deficit we inherited in half by the end of my first term in office,” President Obama said at his summit.

But what does that mean? The administration says President Obama’s promise to “cut the deficit we inherited in half” means he will reduce it from $1.3 trillion in fiscal 2009 to $533 billion in fiscal 2013.

This $533 billion deficit—that President Obama vows will be the lowest annual deficit he runs in any of the next four years—is larger than any deficit the profligate President Bush ran before this recessionary year.

In fact, President Obama’s planned $533 billion deficit for fiscal 2013 is more than twice as large as the $248.1 billion deficit Bush ran in 2006 and more than three times as large as the $162 billion deficit Bush ran in 2007.

In other words, President Obama is planning to permanently increase the scale of government borrowing—even before we are hit by the fiscal tidal wave that will come when the bulk of the baby boom generation retires and begins collecting Social Security and Medicare benefits.

The truth is this: Our federal government has been wading ever deeper into red ink for a full half-century, and President Obama is now planning to wade deeper and faster than any president who has gone before him.

According to the Bureau of the Public Debt, the overall federal debt has increased every single year for the past 50 years. The last time it declined from one year to the next was from 1956 to 1957.

Overall federal debt increased even in each year from 1998 to 2001, when the OMB was calculating annual federal surpluses. This seeming contradiction, budget experts tell me, results from the fact that when they calculate the annual surplus or deficit they do not account for the interest the government pays itself on paper for the money it has borrowed out of the Social Security, Medicare and other entitlement trust funds to pay for current expenditures in other government programs.

The interest paid on the money the government has borrowed from Social Security and Medicare taxes to fund other things does not require the government to dole out real cash today. It will require the government to dole out real cash tomorrow, however, when the number of retired people receiving Social Security and Medicare benefits balloons compared to the number of younger working people paying taxes to support those programs.

Every dollar President Obama borrows and spends, like every dollar President Bush borrowed and spent, adds to the permanent burden of government laid on the backs of our children.

Last year, then-Comptroller General David Walker reported that every American household would have to put up $455,000 to cover the $53 trillion gap that already exits between the entitlement benefits promised to living Americans and the tax revenue currently expected to pay for those entitlements.

On top of this, President Obama has just promised to add more than $2 trillion to the national debt over the next four years.

To expand on a metaphor I used in a previous column, America is heading down the blind alley of big government toward the brick wall of national bankruptcy—and President Obama is now putting his foot on the accelerator. What’s next: Liberals will use the coming crash as an argument for even more big government, quite possibly in the form of socialized medicine that seeks to control government spending by rationing the health care of all Americans.

Read Full Post »

Fact Checking Obama’s Speech

CNSNews has an article with a few fact checks on Obama’s Tuesday night speech.

AP Fact Check: Obama’s Words on Home Aid Ring Hollow

Wednesday, February 25, 2009
By Calvin Woodward and Jim Kuhnhenn, Associated Press

Washington (AP) – President Barack Obama knows Americans are unhappy that their taxes will be used to rescue people who bought mansions beyond their means.

But his assurance Tuesday night that only the deserving will get help rang hollow.

Even officials in his administration, many supporters of the plan in Congress and the Federal Reserve chairman expect some of that money will go to people who used lousy judgment.

The president skipped over several complex economic circumstances in his speech to Congress — and may have started an international debate among trivia lovers and auto buffs over what country invented the car.

A look at some of his assertions:

OBAMA: “We have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and refinance their mortgages. It’s a plan that won’t help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values.”

THE FACTS: If the administration has come up with a way to ensure money only goes to those who got in honest trouble, it hasn’t said so.

Defending the program Tuesday at a Senate hearing, Federal Reserve Chairman Ben Bernanke said it’s important to save those who made bad calls, for the greater good. He likened it to calling the fire department to put out a blaze caused by someone smoking in bed.

“I think the smart way to deal with a situation like that is to put out the fire, save him from his own consequences of his own action but then, going forward, enact penalties and set tougher rules about smoking in bed.”

Similarly, the head of the Federal Deposit Insurance Corp. suggested this month it’s not likely aid will be denied to all homeowners who overstated their income or assets to get a mortgage they couldn’t afford.

“I think it’s just simply impractical to try to do a forensic analysis of each and every one of these delinquent loans,” Sheila Bair told National Public Radio.

——

OBAMA: “And I believe the nation that invented the automobile cannot walk away from it.”

THE FACTS: Depends what your definition of automobiles, is. According to the Library of Congress, the inventor of the first true automobile was probably Germany’s Karl Benz, who created the first auto powered by an internal combustion gasoline engine, in 1885 or 1886. In the U.S., Charles Duryea tested what library researchers called the first successful gas-powered car in 1893. Nobody disputes that Henry Ford created the first assembly line that made cars affordable.

——

OBAMA: “We have known for decades that our survival depends on finding new sources of energy. Yet we import more oil today than ever before.”

THE FACTS: Oil imports peaked in 2005 at just over 5 billion barrels, and have been declining slightly since. The figure in 2007 was 4.9 billion barrels, or about 58 percent of total consumption. The nation is on pace this year to import 4.7 billion barrels, and government projections are for imports to hold steady or decrease a bit over the next two decades.

——

OBAMA: “We have already identified $2 trillion in savings over the next decade.”

THE FACTS: Although 10-year projections are common in government, they don’t mean much. And at times, they are a way for a president to pass on the most painful steps to his successor, by putting off big tax increases or spending cuts until someone else is in the White House.

Obama only has a real say on spending during the four years of his term. He may not be president after that and he certainly won’t be 10 years from now.

——

OBAMA: “Regulations were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn’t afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day.”

THE FACTS: This may be so, but it isn’t only Republicans who pushed for deregulation of the financial industries. The Clinton administration championed an easing of banking regulations, including legislation that ended the barrier between regular banks and Wall Street banks. That led to a deregulation that kept regular banks under tight federal regulation but extended lax regulation of Wall Street banks. Clinton Treasury Secretary Robert Rubin, later an economic adviser to candidate Obama, was in the forefront in pushing for this deregulation.

——

OBAMA: “In this budget, we will end education programs that don’t work and end direct payments to large agribusinesses that don’t need them. We’ll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use. We will root out the waste, fraud and abuse in our Medicare program that doesn’t make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.”

THE FACTS: First, his budget does not accomplish any of that. It only proposes those steps. That’s all a president can do, because control over spending rests with Congress. Obama’s proposals here are a wish list and some items, including corporate tax increases and cuts in agricultural aid, will be a tough sale in Congress.

Second, waste, fraud and abuse are routinely targeted by presidents who later find that the savings realized seldom amount to significant sums. Programs that a president might consider wasteful have staunch defenders in Congress who have fought off similar efforts in the past.

——

OBAMA: “Thanks to our recovery plan, we will double this nation’s supply of renewable energy in the next three years.”

THE FACTS: While the president’s stimulus package includes billions in aid for renewable energy and conservation, his goal is unlikely to be achieved through the recovery plan alone.

In 2007, the U.S. produced 8.4 percent of its electricity from renewable sources, including hydroelectric dams, solar panels and windmills. Under the status quo, the Energy Department says, it will take more than two decades to boost that figure to 12.5 percent.

If Obama is to achieve his much more ambitious goal, Congress would need to mandate it. That is the thrust of an energy bill that is expected to be introduced in coming weeks.

—–

OBAMA: “Over the next two years, this plan will save or create 3.5 million jobs.”

THE FACTS: This is a recurrent Obama formulation. But job creation projections are uncertain even in stable times, and some of the economists relied on by Obama in making his forecast acknowledge a great deal of uncertainty in their numbers.

The president’s own economists, in a report prepared last month, stated, “It should be understood that all of the estimates presented in this memo are subject to significant margins of error.”

Beyond that, it’s unlikely the nation will ever know how many jobs are saved as a result of the stimulus. While it’s clear when jobs are abolished, there’s no economic gauge that tracks job preservation. The estimates are based on economic assumptions of how many jobs would be lost without the stimulus.

—–

Associated Press writers Tom Raum, Ricardo Alonso-Zaldivar and Dina Cappiello contributed to this story.

(Copyright 2008 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

Read Full Post »

Rep Ron Paul: Abolish The Federal Reserve

WorldNetDaily has an article where Ron Paul (R-TX) is calling for the abolishment of the Federal Reserve.  In face, he has introduced a bill that would essentially get rid of the Fed.  He says the Constitution does not give Congress the power to delegate monetary policy to a central bank.  The Constitution only provides that a monetary system be backed by a commodity like silver and gold.

Financial fix? Abolish the Fed, says congressman

Paul: Constitution requires coin based on gold, silver

---

Posted: February 21, 2009
8:35 pm Eastern

By Bob Unruh
© 2009 WorldNetDaily

U.S. Rep. Ron Paul

In just recent weeks, the federal government has designated billions of tax dollars for bank bailouts, including vast quantities to quasi-government agencies that helped create the economic crisis; billions more for automakers, and billions more for homeowners who default on their loans, so where will it end? Republican Rep. Ron Paul of Texas says he has at least part of the answer: abolish the Federal Reserve.

The congressman, a candidate for the 2008 Republican presidential nomination, once again has introduced a bill that would get rid of the private organization that sets interest rates and establishes monetary priorities.

“Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy,” Paul said in a statement at the time the proposal was introduced.

“The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency,” Paul said. “The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.”

You’ve never needed to understand money like you need to understand it now! “Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free” unravels the deception of the Federal Reserve and presents a crystal clear picture of the financial abyss towards which we are heading.

The Texas lawmaker said the constitutional mandate to Congress actually provides only for currency “backed by stable commodities such as silver and gold.”

“Abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation’s founders: one where the value of money is consistent because it is tied to a Paul said every problem in the economy, “from the Great Depression, to the stagflation of the ’70s, to the current economic crisis caused by the housing bubble,” can be traced to Federal Reserve policy.

Paul’s opinions on the Fed are available in a video linked here and embedded here:

Paul’s plan calls for the director of the Office of Management and Budget to “liquidate” Fed assets “in an orderly manner so as to achieve as expeditious a liquidation as may be practical while maximizing the return to the Treasury.”

Columnist and commentator Chuck Baldwin believes it’s about time.

“‘We’ve seen money go out the back door of this government unlike any time in the history of our country,’ Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor. ‘Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?’” he wrote.

“Senator Dorgan is exactly right. No one oversees the Fed. The Fed is held accountable to absolutely nobody. But Senator Dorgan (as with everyone else in Congress) has no one to blame but himself. Ever since the Marxist, E. Mandell House, convinced President Woodrow Wilson to create the Federal Reserve in 1913, the Congress of the United States has had virtually nothing to do with the way our fiscal policies are managed. The Fed (which is not even a government agency, but rather a private corporation consisting of mostly foreign bankers) dictates America’s financial policies,” Baldwin said.

Baldwin cites the U.S. Constitution itself. In Article I, Section 8, Paragraph 5, it states Congress has the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.”

“Only the elected Congress, not some private foreign (or even domestic) banking interest, has the power to make monetary policy,” he said, and “paper money – known as the Federal Reserve Notes – is not even legal tender.”

The problem Paul’s plan confronts is simple, he wrote.

“No cosponsors. That’s right. No cosponsors,” he said.

“Until the American people demand that their elected members of Congress live up to their duties and responsibilities under the Constitution, they will continue to have their pockets picked clean by these corrupt banksters in New York City (and London) and their contemptible facilitators in Washington, D.C.,” Baldwin wrote.

Paul’s spokeswoman, Rachel Mills, told WND the congressman has strong feelings about the issue.

“The inflationary policies of the Fed are insidious,” she told WND. “It’s a hidden tax on the poor.”

She confirmed the idea has been getting more attention recently, because “people are becoming really curious about the roots of our problems.”

Federal Reserve Chairman Ben Bernanke this week said “policymakers” have “pulled out all the stops – cutting the federal funds rate … and establishing a series of lending programs designed to add liquidity into credit constrained markets.”

He also committed to more “transparency,” by introducing a new website for Fed information and new communications efforts.

Paul was unimpressed.

“While I applaud any effort towards greater Federal Reserve transparency, Chairman Bernanke’s latest effort contains more window dressing than substance,” he said.

Getting information from the Fed won’t help, he said, “as this data is often inaccurate.

“If the Fed could not be trusted to foresee the present economic downturn, despite the myriad of market commentators predicting this, why should the current Fed data and predictions be any more trusted?” Paul asked. “Furthermore, these new initiatives only divert focus from the real areas where transparency is needed. The Fed’s agreements with foreign central banks and international finance institutions need to be audited, as do the source and destination of funds provided through the Fed’s emergency funding facilities.”

At the CitizenEconomists.com site, J.D. Seagraves noted his organization’s poll showed a “sarcastic and/or deranged 5 percent of respondents” believe the Fed’s performance in the current economy is excellent.

One in four in that poll believe, “We should get rid of them.”

“Support for abolishing the Federal Reserve System is mounting every day,” the report said. “The fact that people are beginning to wake up to the problems caused by the Federal Reserve System is a hopeful sign. The only question is: is it too late? Can the dollar be saved by the political action of the president and the Congress, or must we wait for the entire global financial system to completely melt down so we can start over?”

Columnist Jacob Hornberger last year noted that while Paul’s abolition plan is considered “wacky” by some, at least two Nobel Prize-winning economists have agreed.

Economists Milton Friedman and Friedrich Hayek called for the abolition of the Fed during their careers, Hornberger notes.

“While Friedman spent much of his life advocating externally imposed constraints on the Fed’s power to expand the money supply, his first wish was to have the Fed abolished, as he pointed out in a 1995 Reason magazine interview. In his book, ‘Denationalization of Money: An Analysis of the Theory and Practice of Concurrent Currencies,’ Hayek advocated a free-market monetary system of competing currencies,” said Hornberger.

“Most Americans probably still believe that the Great Depression was caused by ‘the failure of the free-enterprise system.’ It is a false belief. The truth is that the worst economic disaster in American history was caused by the Federal Reserve. Give current Fed Chairman Ben Bernanke credit for publicly acknowledging that fact in a speech delivered in 2002 commemorating Friedman’s 90th birthday,” Hornberger said.

WND recently reported that under the fiscal policies of the Fed, the total obligations of the United States have reached $65.5 trillion – exceeding the gross domestic product of the world.

Read Full Post »

Reforming Freddie, Fannie Tried 5 Years Ago By Bush Administration, Blocked By Democrats

CNSNews has an article about how the Bush Administration tried to reform Freddie Mac and Fannie Mae years ago, but Democrats blocked every effort.

Bush Administration Tried to Reform Freddie and Fannie Five Years Ago

Thursday, February 19, 2009

(CNSNews.com) – Why didn’t the Bush administration sound the alarm on the unstable housing market that began to unravel on his watch?

Fox News’s Bill O’Reilly asked former White House adviser Karl Rove that question on Wednesday’s “O’Reilly Factor.”

“You left the Bush administration 15 months before the president did,” O’Reilly said to Rove. “While you were there at the end, was there any inkling, did you have any idea that the underpinnings of the economy were eroding so seriously?”

Rove responded, “Well, there was concern about it, particularly in the housing area, we were briefed as far back as 2001 about the problems with Fannie and Freddie; in fact, we moved aggressively in 2004 to regulate Fannie and Freddie, actually got a bill through the Senate Banking and Finance Committee only to have it filibustered by [Sen.] Chris Dodd.”

Rove said Fannie Mae and Freddie Mac “accelerated their imprudent behavior after we attempted to regulate them. They bought almost as much mortgage debt from 2005 through 2008” as they bought in their first 30 years of their existence.

A Google search brings up the following Sept. 11, 2003 New York Times article, which shows the Bush administration was aware of potential lending problems and did try to do something about it:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

Rove told O’Reilly on Thursday that Rep. Barney Frank (D-Mass.) was among those in Congress who attacked the proposed reform of Fannie Mae and Freddie Mac.

“In fact, in 2003, when we sent our first members of the Cabinet up to talk about this on Capitol Hill, Barney Frank had a hearing in which they basically beat up everybody we sent up there in pretty vociferous language. This is the famous hearing where one of the Democratic members literally says that he is ‘pissed off’ that the administration is even raising this issue,” Rove said.

Rep. Gregory Meeks, a New York Democrat, said at that Sept. 25, 2003 House Financial Services Committee hearing that he was “pissed off at OFHEO (Office of Federal Housing Enterprise Oversight),” because of the agency’s suggestion that Fannie Mae and Freddie Mac should be regulated more closely. A number of other Democrats agreed there was no need for reform.

Nevertheless, O’Reilly on Thursday said that President Bush could have done a better job of getting the word out to the public: “I think that if the president had made it a central issue, had sounded the alarm, called some of us, gone on the “Factor” on radio and television – it might have been better than working as they did, not behind the scenes, but under the radar.”

The Bush administration was above the radar, Rove replied. “But at a time when housing prices were going up and when we have two of the biggest, most positively treated companies in America, particularly Fannie Mae…it was hard to get people to focus on the underlying problem,” Rove replied.

Read Full Post »