Is Ron Paul Wrong on the FED?

[Wibee]

http://www.dailyfinance.com/story/investing/seven-ways-ron-paul-wrong-about-fed/19757159/

““Low interest rates steal from savers. Paul thinks that “manipulating” interest rates is immoral and economically destructive. He’d rather that the price of money be based on how much gold can be mined and stored in big underground bunkers. I suppose that would make sense if gold was actually used in the real economy. Otherwise, due to the limited supply, setting rates based on gold would likely cause an enormous upward spike in interest rates and slam the brakes on the economic recovery. Why is using gold to manipulate interest rates any more moral than the way the Fed does it now? And if savers don’t like the low rates they’re getting, they’re free to invest elsewhere – for example, the S&P 500 has risen at a 26.9% average annual rate since January 2009.””

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[cobracarg]

peter cohan is not an economist… he is a computer engineer and art historian… AOL needs to hire qualified people to post on their website

[DD5]

[quote=“Isaac “Izzy” Marmolejo”]

peter cohan is not an economist… he is a computer engineer and art historian… AOL needs to hire qualified people to post on their website

[/quote]

Are these people qualified enough for you?

[cobracarg]

i rather have them explain why Ron Paul’s view on the economy is wrong than an art historian

[Smiling_Dave]

@Wibee

http://www.dailyfinance.com/story/investing/seven-ways-ron-paul-wrong-about-fed/19757159/

""Low interest rates steal from savers. Paul thinks that “manipulating” interest rates is immoral and economically destructive. He’d rather that the price of money be based on how much gold can be mined and stored in big underground bunkers. I suppose that would make sense if gold was actually used in the real economy.

What does this even mean?

Otherwise, due to the limited supply, setting rates based on gold would likely cause an enormous upward spike in interest rates

What does he mean by “setting rates based on gold”?

Having a gold standard means that if you have paper money, you can go to some govt office and insist on exchanging it for gold. The point of this is that the govt will not be able to print as much money as it wants, only as much as it has gold. This prevents inflation.

If the govt IS able to print money at will, it can lower interest rates by printing money and giving it to banks. Under a gold standard it won’t be able to print money and won’t be able to manipulate the interest rate.

So what will determine the interest rate? Nothing to do with how much gold is in the world. It will be determined by market forces, meaning how much businesses are willing to pay in interest in order to get a loan. This is very healthy, like everything that lets people do what they think is best without coercion.

and slam the brakes on the economic recovery.

Quite a few assumptions here. First, that we are in the midst of an economic recovery. I don’t think so. Bernanke doesn’t think so. he says we need a QE2. The 10% [really 20%] of peopel who are unemployed don’t think so. Obama doesn’t think so, because he extended unemployment benefits.

Second, it assumes that low interest rates produce economic recovery. This is a Keynesian assumption, and it’s flawed. Economic recovery comes from underconsumption, so that money is saved, the saved money put in a bank and invested, thus letting businesses buy tools and increase production. But if interest rates are low, people won’t want to put their money in the bank.

Why is using gold to manipulate interest rates any more moral than the way the Fed does it now?

Gold will not be used to manipulate interest rates. How can it be? The Fed is being immoral, because it is keeping interest rates low by inflation, which robs people of their purchasing power.

And if savers don’t like the low rates they’re getting, they’re free to invest elsewhere – for example, the S&P 500 has risen at a 26.9% average annual rate since January 2009.“”

There is a big difference between putting money in a bank and buying stocks. When you buy stocks, you can LOSE ALL YOUR MONEY. And you have to be very expert to know which stocks to buy in the first place, and who to trust. Just because we know after the fact that the S&P went up 29% doesn’t mean we know how it will do in the future. I mean, one has to be very very foolish to make such an argument.

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[billott1]

Ron Paul does not advocate an immediate return to the old Gold Standard. He advocates private currencies that compete with the dollar and one another.

Bogart says that the S&P can give up that 26.9% increase in an instant. In fact in 1929 the major market indexes lost 50% in one day. The stock market is a casino fueled by easy money and low bond yields. If the bond yields suddenly increase, and that time is becomming more and more due, then the payoff will drop a whole lot.

[CrazyCoot]

His first argument that the US economy has led the world despite having gone off the gold standard nearly 40 years ago is logically flawed. The author fails to show causation, and he ignores the possibility that the US economy has done well despite of the monetary situation.

His second argument ignores the fact that other central bankers are influenced by the Fed, but that the Fed doesn´t mandate the policies of other central banks.

His third argument fails on several counts. It conflates inflation with price inflation, does not explain over how long a period this supposed .2% loss in purchasing power has taken, and relies on faulty information. By faulting information I mean the fact that the basket of goods used for the CPI often excludes basic goods, twist ideas etc.

[CrazyCoot]

His confusion about why gold, or to be more accurate any substance chosen by the market to be used as a medium of exchange, is more moral when it comes to setting interest rates than a central bank is teling. Apparently deciding whether coercion or voluntary choice is more moral stumps some people.

The article gave me a headache.

[Kakugo]

Typical junk which, sadly, is the commonly accepted view. It’s also sad to note it perfectly reflects the present economical system, which is geared towards indebtment and coaxing people into thinking that buying stocks is an investment not because you’ll become shareholder of a firm making money by actually satisfying customers but because thanks to “quantitative easing” assets are bound to increase no matter what. Take the car industry as an example: sales are even worse than last year but shares of the various Volkswagen, FIAT etc are at an all time high. In a normal situation would you buy stocks belonging to a firm whose sales decreased 20% in 2009 and 26% in 2010? Of course not, you’d steer away from them. But we do not live in a normal situation and we also know investors are a fickle lot, easily tricked, easily fooled. Think “Enron”, “Parmalat” or “dotcom bubble”.

Also I’d like to know where this “economic recovery”. Does an assets value bubble count as recovery? Technically yes, because it inflates the GDP and, indirectly, everything else: just look at the data, we are out of it! The good times are here again, so go out and spend, spend, spend! Sorry for the sarcasm but it’s the only thing keeping me warm. ManBearPig Global Warming is here and we are freezing as we haven’t in decades. Just like last year. And 2008.

Finally one word of advice: Hitler used to say that when you repeat a lie enough times, people will eventually believe it. And the bigger the lie, the easier people will believe it. Remember this every time you read or discuss the news.

[limitgov]

its pretty simple, when the government counterfeits the money, the value of the money goes down. The government is stealing wealth from the people, and most of them (it seems including the writer of the article) are too ignorant to even know what is happening.

So even when you keep your money in savings and try to do the right thing, you are being swindled.