The Kuyperian Commentary

Politics, Economics, Culture, and Theology with a Biblical Viewpoint

Archive for the category “Federal Reserve”

Money Comes From Society; The State Steals Credit

printing-moneyby Mark Horne

It is pretty common to hear conservatives or libertarians deride “fiat currency” as if it is worthless trash. They are absolutely right to insist that it is flawed. And those flaws will certainly lead to a bad end some day. But that is not the same as claiming it is “worthless.” If it were worthless, no one would give you anything in exchange for it. But they do.

The common claim is to say that money is “government created.” Supposedly, this leads to the conclusion that the money must not be really worth anything. But that is not the only way the argument could work. Many people hear that money is created by the state and then see how well it works for buying things and conclude that the state must be pretty competent in creating currency (I’d say, “making money,” but that would be confusing). Read more…

There is low price inflation because we are still in a deflationary credit contraction

printing-moneyAndrew Isker asks,

Why Has There Been So Little Price Inflation?

He poses the scenario:

A question I have heard a lot from those with a Kuyperian bent is “since the Federal Reserve has so greatly increased the money supply, why hasn’t there been corresponding inflation because of it?”

I appreciate Andrew blogging about Austrian economics, a subject I care much about and love to discuss. But I would like to offer some slight differences on how to look at our present situation. Read more…

Why Has There Been So Little Price Inflation?

Inflation

A question I have heard a lot from those with a Kuyperian bent is “since the Federal Reserve has so greatly increased the money supply, why hasn’t there been corresponding inflation because of it?” Here is one attempt to answer this question, and my hope is, begin a discussion on this topic. Read more…

What is Sequestration?

A mirage, wrapped in propaganda, surrounded by demagogues. It is Chicken Little running around crying out that the end is near because she stubbed her toe, while the sky was actually falling. It is sound and fury, signifying nothing, while MacBeth hawks the crown jewels to buy more knives to kill more enemies.

Not long ago the Republicans and Democrats could not agree on how quickly to file for bankruptcy. Unable to agree, but needing to move on, they agreed that if they couldn’t agree on when to file for bankruptcy, they would spend a week buying Grande’s instead of Venti’s (that’s mediums, instead of larges for those who don’t speak Starbucks). Their reasoning was two-fold. On the one hand, the horror of going down a size on our coffee was thought to be a great motivator to settle the issue. Second, if the issue wasn’t settled, when we should file for bankruptcy, prudence would mean getting the smaller cup of coffee. (Or in this case, to cut $85 billion from an unpassed budget that was more than $85 billion dollars bigger than  the last unpassed budget.)

The agreement wasn’t reached, Read more…

What’s the most important economic lesson Americans need to learn?

By Kuyperian Commentary Special Contributing Scholar, Dr. R.C. Sproul Jr.

There are any number of appropriate ways to answer this question. I have for years now affirmed that the most foundational economic truth is that God owns everything. We need to learn that, down to our toes. I have also affirmed that the first law of economics is that consuming more than we produce leads to poverty, consuming less than we produce leads to prosperity. Grasping these truths would go rather a long way in fixing what ails us, economically speaking.

Having barely survived another election season, however, and mourning the end of Twinkies, I’m tempted instead to start with this lesson- governments cannot create any wealth, though they can and usually do destroy wealth. On both sides of the aisle we had voters demanding and candidates promising more jobs, better health care, rising home values. Government, however, is a parasitic institution rather than a productive one. That is, the government doesn’t actually produce anything. Everything that it has it first must take from someone else. If it “invests” in infrastructure, it does so with money taken from others who would invest where there was market demand. Federal loans (or guarantees which amount to the same thing) to green companies happen because people investing their own money don’t think it a wise investment. Turns out people were right, the government wrong, again. The key point, however, is that they had to take money from you and me first.

Please remember this when the left complains of corporate greed supplanting human need. What these folks mean is, “I know better what to do with the wealth of stockholders than they know. I should have control over the wealth of others.”  Every dollar directed by the state is a dollar that once belonged to someone else, who would make market decisions, rather than political ones.

Which brings us to the other side of the coin. The state cannot create wealth, but they certainly can destroy it. The notion that businesses can just pass tax burdens on to consumers is patently false. Suppose for a moment that Michelle Obama successfully lobbies for a Twinkie Tax of $10 a Twinkie. How many Twinkies will Hostess be able to sell? Demand for a given product or service goes down when prices go up, even if prices go up because of an increased tax burden. Lowering demand is generally bad for business.

Governments also destroy wealth by inflating the money supply. This is a tax on savings. My $1 can buy a loaf of bread in an economy with x paper dollars. Double the number of paper dollars to 2x and dollars to donuts my dollar will now buy only half a loaf. The government, without taxing me, without breaking into the bank, has stolen half a loaf of bread from me. Inflation isn’t businesses being greedy, but governments being devious and destructive.

Finally governments can destroy wealth by regulating businesses. Requiring companies to provide health insurance to its employees, or pay them a wage above some arbitrary standard may seem like a good idea. Until we realize that wages are actually determined by supply and demand. If it costs me $10 an hour, because of government mandates, to hire someone for a job that I value at $9 an hour simply means no one gets hired to do the job. Multiply that principle across the board at a given business and it will go out of business.

God gave the state the power of the sword, to punish evildoers. That’s what they are to do. When they step outside their calling hardship comes, every time. Economies create wealth. Governments punish evildoers.

(Original piece can be found here. Also visit R.C. Sproul Jr. at his new website)

Paul Ryan and the Federal Reserve

Salon reports,

The Congressman from Wisconsin, who is most known for his laissez-faire budget proposals, is also celebrated or reviled in more nerdish circles for his supposedly unwavering support of a laissez-faire approach to monetary policy – “my first love,” as he once described it.

In 2008, he sponsored legislation designed to strip the Federal Reserve of its full employment mandate. He has also characterized expansionary monetary policy as “insidious” and favored by those with “a narrow view of interest.”And in response to quantitative easing in November 2010, Ryan blasted the Federal Reserve, saying“[it’s] going to give us a big inflation problem down the road.”

But WikiLeaks Cablegate disclosures indicate that what Ryan says about monetary policy behind closed doors doesn’t always comport with what he says in public. His supposedly rigid ideology might be more malleable than popular lore indicates.

For example, Ryan, in a meeting with Argentine legislators in earlyJanuary 2009, “cited monetary policy and protecting jobs as critical issues that consume the attention of the U.S. Congress.” It doesn’t exactly sound like the sort of thing a true believer in austerity might say.

And in another meeting with then Argentine Cabinet Chief Minister Sergio Massa in late December 2008, Ryan’s criticism of contractionary monetary policy and a hands-off approach was even more penetrating (emphasis mine):

Rep. Ryan noted that among the many tools being deployed to address the crisis, careful attention was being paid to monetary policy, which previously had sought to contain inflation but now needed to target potential deflation. He called “historic” the Federal Reserve’s decision the previous day to lower interest rates to near zero. Ultimately, the important thing was to fix the financial system by requiring greater transparency and to keep speculation from spinning out of control … Rep. Ryan recalled that Federal Reserve Chairman Bernanke was one of the most prominent scholars of the Great Depression in the 1930s, and that two lessons he had drawn from Bernanke’s academic work were the negative consequences in this type of crisis of taking liquidity out of the system and of enacting protectionist measures.

{Thanks to American Vision News}

Celebrating Ron Paul’s Legacy

WASHINGTON — Hundreds of young libertarians gathered Wednesday night to celebrate the legacy of retiring Rep. Ron Paul hours after the House passed legislation to audit the Federal Reserve that the Texas congressman has been pushing for years.

Read more: http://dailycaller.com/2012/07/25/ron-pauls-legacy-celebrated-after-house-votes-to-audit-federal-reserve/#ixzz21jeZSWJy

A Small, but a Gigantic Victory for Ron Paul

In a move that serves as a capstone to Rep. Ron Paul’s colorful career, the House on Wednesday approved a bill that would let Congress’s chief investigators conduct a full audit of the Federal Reserve’s shrouded decision-making process.

The overwhelming 327-98 vote sends the bill to the Senate where Majority Leader Harry Reid, Nevada Democrat, has previously expressed support for an audit — though it’s unclear he’ll carve out time for the legislation this year.

Read the rest

Audit the Fed Bill Advances

Bernanke’s nightmare is becoming increasingly a reality:

The House oversight committee voted Wednesday to demand a broad audit of the Federal Reserve System by congressional investigators — a major move that lawmakers said is designed to bring accountability to the murky workings of the independent central bank.

The bill was sponsored by Rep. Ron Paul, the Texas Republican who turned the push for an audit into a powerful presidential campaign slogan and whose criticism of the Fed’s monetary policy drew hundreds of thousands of voters into the political process.

It passed by voice vote, signaling the growing sense among lawmakers that the time has come for a full review.

Would Milton Friedman have endorsed Bernanke?

Has Bernanke abused his reliance on Friedman? It appears he has.

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