Presented with little comment since whatever we say would likely be superfluous to this all-encompassing speech. The full Ron Paul 'Farewell to Congress' speech and transcript.
...To achieve liberty and peace, two powerful human emotions have to be overcome. Number one is 'envy' which leads to hate and class warfare. Number two is 'intolerance' which leads to bigoted and judgmental policies. These emotions must be replaced with a much better understanding of love, compassion, tolerance and free market economics. Freedom, when understood, brings people together. When tried, freedom is popular.
The best chance for achieving peace and prosperity, for the maximum number of people world-wide, is to pursue the cause of LIBERTY...
If nothing else, read the five greatest dangers that the American people face today that impede the goal of a free society.
Representative Ron Paul gets his opportunity to say farewell - providing a compendium of reality and liberty for all that choose to listen.. He begins: "My goals in 1976 were the same as they are today: to promote peace and prosperity by a strict adherence to the principles of individual liberty" and goes on..."economic ignorance is common place, as the failed policies of Keynesianism are continually promoted"... "psychopathic totalitarians endorse government initiatives to change our world" - live webcast (and full speech)...
"We have just spent 15 years learning that a policy of creating asset bubbles is a bad idea, so it is hard to imagine why the Fed wants to create another one. But perhaps the more basic question is: How fruitful is the wealth effect? Is the additional spending that these volatile paper profits are intended to induce overwhelmed by the lost consumption of the many savers who are deprived of steady, recurring interest income? We have asked several well-known economists who publicly support the Fed’s policy and found that they don’t have good answers. If Chairman Bernanke is setting distant and hard-to-achieve benchmarks for when he would reverse course, it is possibly because he understands that it may never come to that. Sooner or later, we will enter another recession. It could come from normal cyclicality, or it could come from an exogenous shock. Either way, when it comes, it is very likely we will enter it prior to the Fed having ‘normalized’ monetary policy, and we’ll have a large fiscal deficit to boot. What tools will the Fed and the Congress have at that point? If the Fed is willing to deploy this new set of desperate measures in these frustrating, but non-desperate times, what will it do then? We don’t know, but a large allocation to gold still seems like a very good idea."
The truth of the matter is that there is no such thing as a free lunch. The phony prosperity of monetary inflation is entirely illusory. You cannot get something for nothing. "So, whenever you see a criticism of austerity as fostering recession, you are reading a Keynesian. He may not call himself a Keynesian, but in this case, he is delusional. Only Keynesianism teaches that reduced national government spending (“austerity”) in a nation whose national government spends 40% of its GDP (Greece) will produce a recession." Keynesian economic pundits advance many fallacious arguments about government spending. Chief among them is the egregious notion that mortgaging your posterity with debt and deficits is somehow “virtuous.”
There should be three objectives for a well-functioning monetary system: i) internal balance, ii) allocative efficiency and iii) financial stability. The international financial and monetary system (IFMS) has functioned under a number of different regimes over the past 150 years and each has placed different weights on these three objectives. Overall, this recent Bank of England paper finds that today’s 'fiat' system has performed poorly against each of its three objectives, at least compared with the Bretton Woods System, with the key failure being the system’s inability to maintain financial stability and minimize the incidence of disruptive sudden changes in global capital flows. There is little consensus in the academic literature, or among policymakers, on what are the underlying problems in the global economy which allow excessive imbalances to build in today’s IMFS and/or which impede the IMFS from adjusting smoothly to counteract these imbalances. Critically though, while the fiat money system we are currently does indeed exhibit lower GDP growth volatility (by design), it has dramatically more incidents of banking and currency crises than under a Gold Standard.
The other day the Huffington Post ran an article by a Bonnie Kavoussi called “11 Lies About the Federal Reserve.” And you’ll never guess: these aren’t lies or myths spread in the financial press by Fed apologists. These are “lies” being told by you and me, opponents of the Fed. Bonnie Kavoussi calls us “Fed-haters.” So she, a Fed-lover, is at pains to correct these alleged misconceptions. She must stop us stupid ingrates from poisoning our countrymen’s minds against this benevolent array of experts innocently pursuing economic stability. Here are the 11 so-called lies (she calls them “myths” in the actual rendering), and Tom Woods and Bob Murphy's responses.
According to the Paul Krugman, the “confidence fairy” is the erroneous belief that ambiguity over future government regulation and taxation plays a significant role in how investors choose to put capital to work. To the Nobel laureate, the anemic economic recovery in the United States shouldn’t be blamed on this “uncertainty” but rather a “lack of demand for the things workers produce.” The theory which puts a lack of aggregate demand as being the cause of economic recessions has the issue backwards. Demand by itself doesn’t add to the stock of goods in society; only production does. Because economic theory deals with the interactions of mankind it needs to be applicable to all times and places. On a desert island, only a true charlatan would insist that a “lack of demand” is holding the primitive economy back from its full potential. Desert islands are no different from today’s economy; both are still dominated by scarcity. If the world economy is ever going to recover, the obstacles put in business’s place have to be lifted to make way for investment in real, tangible goods and services. Consumption will come after.
The problem we are going to face at some point as a nation and in fact as a civilization is this: there is no well-developed economic theory inside the corridors of power that will explain to the administrators of a failed system what they should do after the system collapses. This was true in the Eastern bloc in 1991. There was no plan of action, no program of institutional reform. This is true in banking. This is true in politics. This is true in every aspect of the welfare-warfare state. The people at the top are going to be presiding over a complete disaster, and they will not be able to admit to themselves or anybody else that their system is what produced the disaster. So, they will not make fundamental changes. They will not restructure the system, by decentralizing power, and by drastically reducing government spending. They will be forced to decentralize by the collapsed capital markets. The welfare-warfare state, Keynesian economics, and the Council on Foreign Relations are going to suffer major defeats when the economic system finally goes down. The system will go down. It is not clear what will pull the trigger, but it is obvious that the banking system is fragile, and the only thing capable of bailing it out is fiat money. The system is sapping the productivity of the nation, because the Federal Reserve's purchases of debt are siphoning productivity and capital out of the private sector and into those sectors subsidized by the federal government.
Curious why distinguished, Nobel-prize winning economics professors (most of whom have their own Op-Ed columns and blogs to fill all that free time they have when they are not actually filling impressionable minds with "this time the model will work" ideas, keeping Solitaireoffice hours or coming up with arcane, meaningless equations to explain human behavior) have gone "all in" to defend a system which promotes the ubiquity of cheap credit, and the creation of a generation of nondischargeable debt slaves? Because if it wasn't for said cheap, ubiquitous debt, their salaries would be utterly unsustainable (and for once austerity would hit the academic ivory tower headquarters of Keynesianism located in Cambridge, New Haven and West Philadelphia). And for this they have to thank an economic system they created which is now disintegrating before their eyes, and in which every incremental dollar of systemic debt raises total disposable income per capita by less and less and less.
The great day has come and gone when the Fed would once again ride to the action, not daring to be left behind by the ECB’s perverse vaunting of its new ‘unlimited’ programme of bond purchases. But the few, brief sentences from Bernanke contain such a miasma of error that it is hard to know where to begin if we are to restore a fresh breeze of economic rationale to this swamp of non sequiturs and wilful misunderstandings. It is not enough that crude, Krugmanite Keynesianism clings to the cheap parlour trick of using money illusion to fool unemployed wage-earners into lowering the reservation price of their labour, but now we must battle against banal, Bernankite Bubble-blowing – the hope that money illusion will fool cash-constrained asset owners instead. It is not only that Bernanke’s policies will inevitably assist the zombie companies and the obsolescent industries to absorb scarce resources (not least on bank balance sheets) to a much greater degree than is justified, there is also the danger that lax money misleads even today’s supramarginal businesses into over-estimating the depth and duration of demand for their products, ultimately undermining many otherwise sound undertakings and reducing these, too, when the cycle next turns, to the ranks of the Living Dead.
We will explore how QE and the new Fed plan might work- might work...So far what the Fed is putting in front of us and what Paul Krugman has written about are two wholly differnt things. It makes me wonder if there is any stucture behind QE besdies prayer...
While Koo-nesianism is only one ideological branch removed from Keynesianism, Nomura's Richard Koo's diagnosis of the crisis the advanced economies of the world faces has been spot on. We have discussed the concept of the balance sheet recession many times and this three-and-a-half minute clip from Bloomberg TV provides the most succinct explanation of not just how we got here but why the Fed is now impotent (which may come as a surprise to those buying stocks) and why it is the fiscal cliff that everyone should be worried about. As Koo notes, the US "is beginning to look more like Japan... going through the same process that Japan went through 15 years earlier." The Japanese experience made it clear that when the private sector is minimizing debt (or deleveraging) with very low interest rates, there is little that monetary policy can do. The government cannot tell the private sector don't repay your balance sheets because private sector must repair its balance sheets. In Koo's words: "the only thing the government can do is to spend the money that the private sector has saved and put that back into the income stream" - which (rightly or wrongly) places the US economy in the hands of the US Congress (and makes the Fed irrelevant).
It’s easy to be pessimistic over the future prospects of liberty when major industrialized nations around the world are becoming increasingly rife with market intervention, police aggression, and fallacious economic reasoning. The laissez faire ideal of a society where people should be allowed to flourish without the coercive impositions of the state is all but missing from mainstream debate. In editorial pages and televised roundtable discussions, a government policy of “hands off” is now an unspeakable option. It is presumed that lawmakers must step up to “do something” for the good of the people. Thankfully, this deliberate false choice will slowly but surely bring the death of itself. Illogical theories can only go on for so long before the push-back becomes too much to handle. For those who desire liberty, it’s a joy that the statist economic policies of the Keynesians become even more irrational as the Great Recession drags on. The two following examples will illustrate this point.
With a price hovering around $1,600 an ounce and the prospect of "additional monetary accommodation" hinted to in the latest meeting of the FOMC, gold is once again becoming a hot topic of discussion. Krugman, praising 'The Atlantic's recent blustering anti-Gold-standard riff, points to gold's volatility, its relationship with interest rates (and general levels of asset prices - which we discussed here), and the number of 'financial panics' that occurred during gold-standards. These criticisms, while containing empirical data, are grossly deceptive. The information provided doesn’t support Krugman’s assertions whatsoever. Instead of utilizing sound economic theory as an interpreter of the data, Krugman and his Keynesian colleagues use it to prove their claims. Their methodological positivism has lead them to fallacious conclusions which just so happen to support their favored policies of state domination over money. The reality is that not only has gold held its value over time, those panics which Krugman refers to occurred because of government intervention; not the gold standard. Keynes himself was contemptuous of the middle class throughout his professional career. This is perhaps why he held such disdain for gold.
Following David Einhorn's take-down of the great and glorious Oz Larry Meyer eighteen months ago, the latter has been in training - readying his counterfactual counter-punches and controlling his ire. The king of Keynesianism just had his bell rung once again by a market realist and pragmatist as Stephen Roach destroyed the "if-we-don't-have-models-we-are-making-it-all-up" maestro and his constant diatribe of counterfactual crap. "Where's the beef, Larry?" Roach asked on CNBC this morning, which was followed up with a rabbit punch from Kiernan, "and what about Christina Romer's stimulus-employment model?" The visibly shaken (seriously watch the clip) Meyer falls back once again to a defensive pose - and while practically admitting that the Fed is impotent - as he pulls out the ultimate "but without our models we would not be able to tell you how much worse it would be without the Fed interventions". Roach takes this weak cross to the chin and comes over the top with a devastating "mark your models to market in light of what the economy has done over the four and a half years, the traction from monetary policy has been the major disappointment of this so-called post-crisis recovery." TKO.