Monetary Inflation is the Problem
Politicians often manage to fool voters and the media, but they rarely fool the financial markets over time.

By Rep. Ron Paul, MD

America's Friend: The Honorable Congressman Ron Paul


The financial press reported last week that the value of the U.S. dollar plummeted to a 14-year low against the British pound, and weakened against the Euro and Yen. Many financial analysts predict continued rough times for the dollar in 2007, given reduced expectations for economic growth at home and less enthusiasm among foreign central banks for holding U.S. debt.

This decline in the value of the dollar is simple to explain. The dollar loses value as the direct result of the Federal Reserve and U.S. Treasury increasing the money supply. Inflation, as the late Milton Friedman explained, is always a monetary phenomenon. The federal government consistently wants to spend more than it can tax and borrow, so Congress turns to the Fed for help in covering the difference. The result is more dollars, both real and electronic – which means the value of every existing dollar goes down.

Federal Reserve Chairman Ben Bernanke faces two basic ongoing choices: raise interest rates to prop up the dollar, but risk pushing the economy into a recession; or lower interest rates to stimulate the economy, but risk further declines in the dollar. This unfortunate dilemma is inherent with a fiat currency, however.

Of course Mr. Bernanke inherited this tightrope act from his predecessor Alan Greenspan. The Federal Reserve did two things to artificially expand the economy during the Greenspan era. First, it relentlessly lowered interest rates whenever growth slowed. Interest rates should be set by the free market, with the availability of savings determining the cost of borrowing money. In a healthy market economy, more savings equals lower interest rates. When savings rates are low, capital dries up and the cost of borrowing increases.

However, when the Fed sets interest rates artificially low, the cost of borrowing becomes cheap. Individuals incur greater amounts of debt, while businesses overextend themselves and grow without real gains in productivity. The bubble bursts quickly once the credit dries up and the bills cannot be paid.

Second, the Fed steadily increased the monetary supply throughout the 1990s by printing money. Recent Fed numbers show double-digit annual increases in the M2 money supply. These new dollars may make Americans feel richer, but the net result of monetary inflation has to be the devaluation of savings and purchasing power.

The precipitous drop in the dollar shows how investors around the globe are very concerned about American deficits and debt. When government policies in a fiat system are the sole measure of a currency’s worth, the currency markets act as a reliable barometer of how those policies are viewed around the world. Politicians often manage to fool voters and the media, but they rarely fool the financial markets over time. When investors lack faith in the U.S. dollar, they really lack faith in the economic policies of the U.S. government.

Sincerely,
Ron Paul


Excellence in Literature
This informative book exposes the criminal Federal Reserve System and how it all began.

ge-griffin.gif (15594 bytes) ge-griffin.gif (15594 bytes) ge-griffin.gif (15594 bytes)

THE CREATURE FROM JEKYLL ISLAND (MP3 by Prolific Author, Dr. G. Edward Griffin)

The Creature from Jekyll Island: A Lecture on the Federal Reserve (download: Real Audio | MP3)
“G. Edward Griffin exposes the most blatant scam of all history. It’s all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. It's just exactly what every American needs to know about the power of the central bank.”

Watch “The Creature From Jekyll Island” (by Dr. G. Edward Griffin)

Jekyll Clip (download MP3)

The Root of All Evil

President JFK and Executive Order 11110

ENDGAME
(2:19 hour shocking video by Alex Jones)

The ACLU — Trojan Horse Of Zionism (Communist founders)

Ephesians 6:12, “For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places.”


PAWNS IN THE GAME (by William Guy Carr)
Abolish the Federal Reserve (by Congressman Ron Paul)
China Severs it's Currencies Link to the U.S. Dollar
Is the New World Order Jewish?  |  The Federal Reserve is Evil!
Deficits Make You Poorer  |  Satan on Our Dollar  |  The Guilty Fed and Feds
Signs of Satan  |  U.S. is in Deep Doodoo!  |  America's Nightmare!
Kennedy Killed by Bankers?  |  We've Been Neo-conned! (by Rep. Ron Paul)
Quotes on the New World Order
Communism and New World Order: Wall Street's Utopian Hoax 
I stand for the silent, because I don't like bullies!

The Baptist Top 1000     The Fundamental Top 500
IFB1000.com. Top Baptist Websites