End the Fed is Stupid

Retarded Ron Paul wants to End the Fed – Why?

If you’ve followed Ron Paul and his supporters, you know that they want to abolish the Federal Reserve. This is a very important topic that I think too many people easily fall into without understanding how it all works and the moving parts that must be maintained. Often you get a very specific narrative that supports the view of abolishing it, but often left with a false impression.

Another item of interest regarding the Federal Reserve is the conspiracies associated with it. Often arguments will fall into the category of economics, but that often can be a more mainstream talking point. Conspiracies such as cartels, international bankers, the New World Order and the hatched plan at Jekyll Island.

The Federal Reserve certainly isn’t perfect, but it’s better than the alternatives out there. I think that this is the point I want to get across on this page. It’s not without its flaws, but it’s the best we have right now. Despite hearing all the great things about the Gold Standard, negatives exist and often the same negatives that are used to criticize the Federal Reserve.

The Fed Conspiracies

I need more time to prepare a proper response to this. The reason is that there is so much on the subject, but it’s all pretty much half truths or outright lies.

The Gold Standard Solution

The gold standard is something that is the alternative solution that Ron Paul and his supporters offer as the better solution to the Federal Reserve. As above you have the explanation based on economics and the other based on Armageddon.

The gold standard is really simple to understand. You either have literal gold coins or you have paper money backed by gold. This means that you could take a dollar bill and exchange it for a sum of gold from the Treasury.

The Economics

Economically, applying this isn’t so simple. Inflation and deflation is a concept of economic growth/decline where the money supply doesn’t follow. For example, if the money supply grows faster than the economy you get inflation. If the supply of money shrinks faster than the economy, we get deflation.

Gold provides an interesting problem as there just isn’t much of it. In the history of man we’ve only extracted 20 cubed meters of it. Think of that for it. All the invested time, money and all the mines around the world have come up with a mere 20 cubed meters. This means that the money supply will not keep up with the economy by a lot. This creates deflation and economics teaches deflation is the most destructive.

If you’re having a hard time wrapping your mind around deflation, here is a better way of thinking it: your money grows in value for holding it. This is often marketed as a positive by Ron Paul. Try to put some critical thought into that. This actually encourages hoarding. Why invest? Why lend? Why do anything other than hoarding? It’s a pipe dream to think that doing absolutely nothing, but hoarding would make you richer. The economy would truly collapse.

Armageddon

These type of people suffer from what I feel is a delusion. There’s one thing about liking your politics and there’s another where you believe if your politics aren’t implemented completely everything is going down the tubes. This is what you run in with Ron Paul and his supporters. They’re literally waiting for the economy to collapse and they’re prepping with gold bars. The only thing that matters in this case is weaponry and gold.

I find this sort of ironic. In an economic collapse gold won’t matter really, unless everyone else has it. Either people will just brutally kill each other or they’ll find something else. For example, after the collapse of Germany post WW1, they had a non-government “free market” currency. Was it gold? No. It was cigarettes.

The Counter Argument

Why gold? Gold can’t grow with the economy. Its value comes from what people will value it as (exactly the same as paper money). It’s just a shiny rock. Why not a bottle of beer? Or housing? Or televisions?

All these items will work. Why use gold when it will create nothing, but inflation? Supporters of this standard know this fact and ignore it. The question becomes why gold? The only thing I can think of is that they’re all heavily invested in such things, but really I couldn’t tell you why.

The Inflation Argument

A big argument for Ending the Federal Reserve is that it creates inflation.  The only time the statement is true is when you have the concept of quantitative easing. The problem with a lot of Ron Paul supporters is that they don’t even understand the positions they support when it comes to the Federal Reserve. They will often rattle on about how the government deficit is just printing money causing inflation and so on/so forth.

Fact: Government debt is funded through bond sales purchased by the private sector.

If I buy a bond for $1, this means I have one less dollar and the government has one more dollar. Net: zero change. There is no inflation caused by running a deficit. It’s when quantitative easing (QE) is put into place that causes this problem. QE is when the Federal Reserve (because lack of market interest) has to buy these bonds in order to fund the deficit. These are extreme circumstances and QE isn’t something that happens that often. I will agree that it is inflationary in a sense and it’s the big reasons why deficit spending can’t be out of control.

I’m trying to point out the misinformation that happens to fly around when you get in a discussion about this.

Fact: A Gold Standard will not create balance of inflation or deflation

The fact of the matter is that inflation and deflation are caused by market discrepancies with the supply and demand of the market place. It is true that our current system of paper money is more inflationary because that is really the goal it has for itself. The target is about 2-3% a year. If you’re wondering why this is the number aimed for it is just due to history. Our economies have been the most stable with a slight inflationary monetary policy. In the past we’ve had very bad economic times before the Federal Reserve and with gold backed currencies that couldn’t do it right.

The gold standard isn’t going to stop the boom and bust because these things do happen. Ron Paul and his crew have this notion that the economy is driven by sound money. Sound money is something that allows the economy to flow properly, but it isn’t a driver. The driver is making money. Booms and busts tend to be the results of speculative ventures. People throwing money into things because the money is so easy, but the fundamentals don’t justify it. This is why there has been plenty of booms and busts with gold backed money. Remember, it wasn’t until the 1971 that the US currency become fiat. Just think of all the booms and busts before that point. Just look at the booms and busts before the Federal Reserve was even created. End the Fed’ers will try to tell you that booms are caused by the expansion of the money supply and busts are caused by the reduction of the money supply. Not true. The money supply adapts to the market. Booms require more money and busts require less. Not following the economic movements creates much more extreme inflation/deflation.

The reality is that the gold standard would create a deflationary trend. Like I mentioned before, there isn’t a lot of gold. In the entire history of man we’ve only been able to get our hands on about 20 cubed meters. If the economy grows by 3% a year, then the money supply needs to grow 3% a year to balance it out. That’s how the market will try to work, but there simply isn’t enough. At a 3% yearly growth, after 15 years we’d need over 10 cubed meters more just to balance it out. It’s not going to happen.

This means that the demand for gold will increase while the supply can’t keep pace. If you can earn 5-10% a year by simply holding onto your gold, then why would you invest it? Why would you spend it? The economy would turn into nothing more than hoarding because that’s where you can make the best return. The economy would collapse on a hoarding orgy and eventually turn into anarchy as jobs would be far and few in between. This is the economy that Ron Paul is talking about. One where people hoard because the system is built so poorly.

Fact: We have fiat currency because it’s the best we’ve come up with so far

The fact is that this is the best we’ve come up with so far. It presents the best incentives to prosperity and economic growth. It’s not perfect, but neither is the alternative to gold back currency. The reason we ended up with fiat is that we’ve had issues in the past with gold and it didn’t work for us. It created economic disasters and we didn’t want to repeat them. End the Fed’ers will talk of conspiracies of rich bankers looking to make money by getting rid of gold and so forth. They’re conspiracies. They’re not important. They have no evidence or facts. They require revisionist history books to get their facts.

Fiat is definitely not perfect, but it is better than the gold standard.

Fact: Fiat Currency Has Value

One of the most common things you’ll hear from gold standard supporters is that paper money is worth the value of paper.  That isn’t true. The paper is worth pennies and I can buy things more than pennies. Their idea of value only comes from the physical characteristics of it. I guess this is probably the big reason why they don’t believe in intellectual property rights. The value of paper money comes from the same place the value of gold comes from. Whether you’re trading pieces of paper (dollar bills) or shinny rocks (gold) the value comes from the same place.

Fact: Gold isn’t an indicator of inflation

I don’t know if you’ve ever argued about the economy with a Ron Paul supporters or gold standard supporters, but you’ll probably learn quickly that they have warped views of inflation. They’ll often say that Gold is a hedge against inflation.  That gold is REAL money and its value stays the same no matter what and it’s really the dollar that is getting weaker. I had one blatantly tell me that in today’s economy where we have very low inflation and a little deflationary trend that gold was going up, so there is inflation. 10 years ago an ounce of gold was worth around $300 and today it is roughly $1700. Anyone thinks that $300 10 years ago will buy the same amount of stuff at $1700 obviously has a warped view of reality.

Gold has nothing to do with inflation. It’s just a convenient talking point because of the economy. They often quote long hundred year graphs to show their point. In the year 1800, if you bought $1 worth of gold you’d have $80 today. If you put $1 into the stock market, you’d have well over a million today. It simply isn’t an inflation hedge. If you look at 1975 we had inflation of 10%, so we would expect a 10% jump in Gold. Nah, it lost 22%. Through 1980-82 there was 10% annual inflation, and gold lost 33%.

The fact of the matter is that gold is in such a speculative bubble right now, and really doesn’t have an easy to determine value. Gold certainly doesn’t follow inflation (hedge).

UPDATE March 15 2014

Well, I thought I should update this a little bit based on some of the comments I’ve been getting from Ron Paul people. I’m sure it won’t matter though because it’s not like they read the actual article. The same consistent points keep being brought up that have been fully addressed in the article. But there is one point I want to make that seems to be a repeated talking point without any real substance.

The Federal Reserve Creates Money out of Thin Air

This is a nice sounding snippet, but it simply isn’t true. The only aspect of it that is real is that paper currency is printed. Doesn’t matter if the paper currency is backed by gold or the good graces of the government. That’s about as real as that statement can get.

The problem with the statement is that it implies that the money is injected. The act of printing money really doesn’t mean anything. It’s how the money is pushed into the economy. The “thin air” comment makes it sound like the “federal reserve” drops money from the sky. That’s truly where the thin air would make sense.

The entire money system that most countries in the world have is a credit based influx of money. There are two specific things that come with this, there is an economic demand for this credit and that consenting players must accept the debt. In the purest sense, the Federal Reserve doesn’t have the power to inflate the money supply. A transaction must take place first. I think this is a point that many people miss out on.

If you’re a person that thinks this is a problem, that’s fine. This is an actual item to discuss. Sound bites like money is created out of thin air is just flat out lies.

A Gold/Silver Standard Would Force the Government to Balance the Books & Not Go To War

I find this one comical because it’s simply isn’t true. I feel like people who have made this statement know very little of how the government works, but also haven’t matured to the point of simply saving for retirement. Assumption is that people who make this statement still live with their parents. Let’s focus on each of the points separately.

The Gold/Silver Standard would lead to Balanced Budgets

This one I can’t exactly figure out the reasoning too. I’ve honestly never have seen the premises that lead to this type of conclusion. If you have some of them, please leave a comment and let me know. I’d love to hear them. This type of statement is accepted as an axiom, rather than a position to be argued and reasoned. There seems to be this huge misconception by the Paul ideologues that debt is somehow impossible with a gold or silver standard. Where this thought comes from is beyond me.

How does the government get into debt? They sell bonds on the open market. I own bonds. Guess what, that’s government debt. I lent the money to the government and they have to pay it back. This is all that needs to be said to show the first point is absolutely false. There’s nothing forcing the government to balance the budget. There’s nothing more than the same forces that exist today to prevent the government from going into debt or not.

**Aside: Quantitative easing is a means to violate this. With the credit crunch that occurred in 2009 the Federal Reserve has purchased government bonds because the private sector wouldn’t buy all that were being sold. It’s fair to point this out as an argument against government intervention in the economy. Some, like myself, would say this is the market place voting against the amount of government debt. But my argument is against the statements above. For most of history, and most debt serviced by government in this country and many countries around the world, it is done completely by the market place and that’s only evidence required to debunk the first statement.

The Gold/Silver Standard Stops Government Wars

Well, plenty of countries have been going to war (including the United States) during times of the gold standard. Again, that’s really all that has to be said. Maybe if isolationist libertarians were in control of the government war would stop, but this is a basis of political ideology – not how the currency of a nation is backed. As long as bonds are being purchased, deficits will exist.

 

22 Responsesso far.

  1. Good Lord says:

    Feeling sorry for you.

    Not necessary. The New World Order pays me well. – Site Owner

  2. Joey Stewart says:

    It’s BECAUSE Gold is scarce that it would make a good backing commodity for our money. That way, we couldn’t just print more money out of thin air and back it by the silver/trust system we have today. In post WW1 Germany they were using their money as wallpaper because their money was absolutely worthless due to it 1. not being backed by a valuable commodity and 2. Having more money printed to stave off the horribly rising cost of goods due to inflation caused by issue number 1. We shouldn’t just print money that doesn’t have something LIKE Gold backing it, it would be like paying in cigarette paper with no tobacco in it, it has nothing really making it of value to anyone.

    • Anonymous Admin says:

      Why is scarce good though? I guess that would be my first question. Being able to print money out of thin air is wrong, but it isn’t quite that simple. The expansion of the money supply comes from credit with a fractional reserve. Whether the reserve has gold or paper money in it, it can be expanded. Without a person to accept the loan, the money supply can’t be expanded. Unless they’re dropping it from planes, but as I know the Federal Reserve isn’t doing that.

      You say it doesn’t have any value. I can purchase my internet, the rights to this domain and the hosting to keep it online with this worthless money. The better question is what makes a shiny rock like gold any more valuable? Scarcity isn’t an answer. I think you’ll find the value of that shiny rock comes from the same part of the brain that provides value to a piece of paper.

      I also made the argument in that post about Gold being a STUPID idea for the backing of a currency. What makes gold better than say a bottle of beer, pack of cigarettes or an iPhone. At least those things are of use to people, other than being shiny.

      • Christopher Bucklew says:

        Gold makes the best standard because it is durable and its supply is relatively fixed. Nobody (that I know of) is suggesting that we trade gold bullion. Some believe that a currency should be backed by a set amount of gold. We would still trade in dollars, but those dollars would be worth a fixed amount of gold. This would limit the Federal Reserve’s control over the money supply which some believe is a good thing since they are the biggest cause of inflation and government debt.

        • Anonymous Admin says:

          The problem with first sentence is that it is an axiom that you hold. Why is the “best standard” defined as being durable and with a fixed supply? I think we can all agree durable money is important, but fixed supply? That encourages hoarding as the value of money increases over time (increased demand, stagnant supply – deflationary). It is an accepted economic fact that deflation is more destructive than inflation. Since we have yet to come up with a way to eliminate these distortions in the value of money, the central banking system has worked under the idea of slight inflationary increases.

          It’s all well and great to pick out all the errors in today’s economy. Maybe take a little time, away from conspiracy sites of course, to look at the reasons why the gold standard was abandoned. Has their not been depressions under gold based money systems in history?

          Also government debt is mainly funded by the private sector buying government bonds. There is very few times in history where the Federal Reserve has bought some of the bonds. The government representatives create debt, not a central bank. The government issues bonds to fund the debt and the private sector buys them.

  3. I like you says:

    The thing that makes it better then those that you listed are, it doesn’t degrade, destroy, or stop working.

    We could use pebbles if we wanted, but it seems you are missing the greater point. Growing the money supply, devaules all the money in the system. You keep stating that ‘the value of paper money and a shiny rock come from the same part of the brain’, but you don’t seem to be actually engaging that part of your brain. It’s because there is a finite supply of both. If suddenly, tomorrow, the treasuray printed 3 trillion dollars and put it in circulation, you can sure bet prices would rise and the ‘value’ of the dollar would fall. Same as if someone discovered 30 cubed meters of gold, the value of gold would fall.

    The reason ‘paultards’ want a gold backed currency (in reality they just want competition to the dollar) is because the likelihood of someone discovering 30 cubed meters of gold is quite a bit less then the government printing 3 trillion dollars. It removes the power of manipulation away from the government. This is the same reason the government collects a ton of cash and shreds it every year, they are trying to artificially create the same scarcity of something like gold. They don’t have to print money to devalue the dollar, they just have to destroy less of them.

    • Anonymous Admin says:

      It’s true that gold doesn’t degrade, destroy or stop working, but that doesn’t mean anything about whether it is good for money. For me, it’s simple supply and demand. The supply of money needs to grow with the growth of the economy. This is how an ideal market based currency would work. The problem is that gold is just a rock. The value of gold comes from the same place the value of fiat currency comes from, which is this pretend value. For example, silver is a better form of currency because it actually has a MARKET based demand for its use. It can be used for medical purposes and water purification if my memory serves me right. Wouldn’t you think that a real product would be better way of meeting supply and demand of the market, rather than a rock that is for the most part completely hoarded?

      You make the statement that growing the money supply devalues all the money in the system and that is simply not true. The devaluation happens when the money supply grows faster than the demand for it. For example, each day there are many people that enter the work force and others that are born. There will be more demand for it. The math explanation would be if you had a country of 10 people and the total money supply is $10. You have $1/person. If the country grows to 20, but there is only $10. You have $0.50/person. There is an increased demand. If the money supply had doubled, the value of the dollar would have remained constant.

      Lastly, you mention the discovery of gold. Sure there could be vast discoveries. Or there could be perfectly good things that aren’t rocks that could be it. Why gold? I’ve yet to get an explanation on why gold is better than anything else produced by the market.

      You keep speaking of the printing of money and I know that is a very cliche thing to throw around, but unless the Fed is flying planes over cities and dropping these bills everywhere, it means nothing. A market transaction has to take place to get this money into the market. Someone has to lend the money and someone has to accept it. That injection of money, based on a market transaction, has a stimulating result in the economy. Whether that stimulating is worth more or less than the money injected is another debate.

      The real issue that you don’t seem to pick up on is that the money supply can be grown with gold backed currency. It’s called fractional reserve banking. The elimination of that, whether with fiat or gold would result in a massive decline in monetary creation through credit. What’s your position on that?

      • Christopher Bucklew says:

        gold is the best conductor, it has its functional uses

        • Anonymous Admin says:

          The use of being the best conductor is based on price too. Aluminum and copper are fine for that. Unless you want to have a $20,000 trailer outfitted with a million dollars worth of electrical conductors?

          • Aidan says:

            yeah seriously copper and aluminum are better standard ideas than gold…. but the real solution is for families to have a set food and water source from within, one family member having a food grow and water extraction method, etc-these goods can feed our country, then export begins, then the federal reserve falls apart naturally because we realize they only started because we stopped producing on a family level. Just a thought. Food and water production is a good base to expand into other projects too sooooo…..yeah, the federal reserve is more or less a gang that lasted unfortunately long.

  4. Some Basic Math says:

    If we rely on gold, and the population and economy grows, we do not “need more gold” and run out. The existing gold increases in value. People would use smaller amounts of gold to buy what they bought last year. If you’re worried it’ll get down to carrying gold flakes to pay for burgers, 1. other metal and exchangeable items exist, and it’s value can be deemed relative to gold’s; 2. we can still use paper money, or gold receipts/bonds to represent our gold flakes. I wouldn’t mind paying for a burger with a paper printed “1/1,000th Gold Ounce;” 3. our market already uses a digital currency that handles big fluctuations without the need for printing/shredding/mining anything – it works well, just as long as it’s ‘backed by something.’

    The fractional reserve process is much worse than selling bonds dollar for dollar. I give you an imaginary IOU for $100, you give me $110 with inflation, and I only actually had $10 to begin with. Value out of nowhere. It’d be an arrestable scam if anyone other than banks did it.

    Why “end” the Fed? They have no oversight and are free to literally steal, not just scam, and nothing is done about it even when they’re caught. See http://lybio.net/elizabeth-a-coleman-shocking-federal-reserve-bank-admits-they-lost-9-trillion-dollars/news-politics/

    • kenji says:

      The sentiment against the federeal reserve is ridiculous, those central bankers have like 50 years of experience in finance and a guy like Ron Paul came along thinking he knows better? That guy is a total joke.
      Keep up the good work man, i’m cheering for you.

  5. Steve says:

    I’m not a Paultard or anything, but I’m trying to learn a little bit about economics. You stated that increasing the money supply at the same rate that the economy grows isn’t inflationary. However, there has no doubt been inflation. To my knowledge, a dollar today isn’t worth nearly as much as a dollar was worth fifty years ago. Why is that? Is inflation necessary?

    • Anonymous Admin says:

      The concept of inflation is simple supply and demand. But demand is the one item that never really gets discussed. If the supply of money increases, yet demand remains the same, you’ll experience a depreciation of the dollar. Obviously it is easier to quantify the money supply, but it is more difficult to quantify the demand.

      The demand for money isn’t a stagnant concept. There is an increased demand for supply of money as the economy grows and as more people enter the economy. If you have an economy of 10 people and $100 for the economy. That’s $10/person. If the population grows to 20, that’s $5/person. If the supply of money remains the same you’ll have strong deflation. If the money supply grows along with the population, you’ll have 20 people and $200, which is $10/person. Prices stay the same. Obviously a simple example and looking at population alone isn’t really a full way of quantifying demand.

      The point about increasing the money supply at the same rate of the economy grows isn’t inflationary holds. But that’s a theoretical view. The government over the last 100 years hasn’t been following that plan. Nor is it really the plan that was sought out. A big reason for that is it is really hard to quantify demand, therefore really hard to find that sweet spot.

      Everyone seems to focus on the inflation mainly because it’s what we experience today. The concept of a gold standard has been used before. Depressions have existed before. The reason we live in a world where most central banks aim for 2-3% inflation rate is that it has been really the only way we can stabilize strong economic growth and reasonable stability. It’s not to say that doing it this way is perfect, but it’s a means of avoiding deflation. Deflation is the real killer and what is really being avoided. The sad thing about the “Gold Standard” is that the supply side of money would severely lag the demand. This would cause your possessions to go down in value, and your money to go up in value. I know that sounds nice, money becoming worth more. But think about how that works with a society. It encourages hoarding. Why would you spend or invest your money today, when it’ll be worth a lot more next year without doing anything.

      To sum it up, this is all about supply and demand. Since it’s hard to figure out demand, we aim for an inflationary policy (a little extra supply of money) in order to avoid the paralyzing affect of deflation.

  6. Oneness says:

    I feel deeply sorry for your ignorance. I get it if you don’t agree with his ideals but you choose to make a website attempting to humiliate one of the few guys in politics who actually stand for the people and the constitution. Its really sad.

    • Anonymous Admin says:

      So what am I so ignorant about? Your rebuttal and statement has no substance. You get that I have a different opinion (gasp* how could anyone not be libertarian?), but it’s bad of me to make a website. Ironic coming from a Paultard that certainly doesn’t respect the ideals of Obama or Bush and will endlessly circle jerk about this online.

      Nice. Come back when you have a substantial rebuttal.

  7. Timothy OBrien says:

    I had trouble reading this because every statement was so off base. Everything the Fed was designed to avoid and control, it’s actually made worse.

    Gold MUST come back. Silver would probably be better. I’d vote for a single commodity money standard, rather than gold and silver.

    • Anonymous Admin says:

      Nothing is off base, only your comment. The Fed has controlled it quite well. Gold on the other hand has brought economies to their knees… how do I know this? The gold standard existed for a long time and we’ve evolved to something better.

  8. JE says:

    Some of your facts are false:

    Fiat Currency Has Value… no it doesn’t, it literally is worthless… 10% of loans can be used for more loans. That means money is printed from thin air.

    Deposits are multiplied by four, and split 3 additional ways.

    READ MODERN MONEY MECHANICS (The Book the Fed Uses to create Money)!!!

    Therefore, the value is whatever the Federal Reserve (the Fed) says the value is. Not to mention, it’s not a public bank, it’s a private bank, which is why it can buy Bonds.

    Another comment: Gold Backed, if you look everywhere about how much the value of gold is, no matter which country you go to, the gold value is still the same. It’s the only item that has the same value regardless of where you go. Yes, it’s ridiculously expensive, and a dollar wouldn’t get you a thing. However, if you make the dollar backed by gold, it would be far easier to use our dollar world wide.

    You’re right on a couple of occasions:
    Gold wouldn’t impact inflation/deflation
    This is because regardless of what the monetary system is, everything in our country has a value based on the current dollar (including gold) so the same value will still be in debt.

    However, you’re wrong about the Fed on account of the Fed disappearing, there is no longer a debt owed, because the central bank would be gone(due to the government removing it entirely from the calculation).

    • Anonymous Admin says:

      Fiat Currency Has Value… no it doesn’t, it literally is worthless… 10% of loans can be used for more loans. That means money is printed from thin air.

      You’re confusing “fiat currency” with fractional reserve banking. The fact that this little item has slipped through the cracks of your argument makes me loose all hope for an actual coherent argument. Fractional reserve banking with literal gold bricks would work the same way. Keep 10% of gold reserves in the bank and loan out the rest.

      Therefore, the value is whatever the Federal Reserve (the Fed) says the value is. Not to mention, it’s not a public bank, it’s a private bank, which is why it can buy Bonds.

      So the President of the United States appoints the head of the board of private companies eh? And that profit goes into the US Treasury.

      Another comment: Gold Backed, if you look everywhere about how much the value of gold is, no matter which country you go to, the gold value is still the same. It’s the only item that has the same value regardless of where you go. Yes, it’s ridiculously expensive, and a dollar wouldn’t get you a thing. However, if you make the dollar backed by gold, it would be far easier to use our dollar world wide.

      Gold has value because in each country it is still the same product. The Euro, the US dollar and the Canadian dollar are different products. You’ll find that most “products” that are the same are the same value in each country (obviously not accounting for regulations, taxes, tariffs, etc).

      However, you’re wrong about the Fed on account of the Fed disappearing, there is no longer a debt owed, because the central bank would be gone(due to the government removing it entirely from the calculation).

      I’m not really sure what you’re referring with this comment, but I don’t think I would have made the case. Of course if the government decides to eliminate an entity or just flat out refuse to pay debt, that you wouldn’t have to count it. Maybe you’re referring to debt of government? Like I said, the government can deficit spend all it wants. For most of history it does it by selling bonds. That’s what debt is.

  9. Bill says:

    You are pretty much spot on with all of your points, only one thing that isn’t quite accurate.
    “With the credit crunch that occurred in 2009 the Federal Reserve has purchased government bonds because the private sector wouldn’t buy all that were being sold.”
    The Federal Reserve does not and cannot by law purchase Federal government bonds directly from the the federal government at treasury bond auction, the FED may only purchase bonds on the secondary bond market ( buy bonds that have previously been purchased by the private sector at treasury auction.)
    Bond prices and bond interest rates always move in the opposite direction, the FED buys bonds to remove them from the market, fewer bonds remaining in the market causes the bond prices to raise thus causing interest rates to fall.
    The Feds motive in these bond purchases is to drive down interest rates and inject liquidity into the private sector in an attempt to spur more risk taking style investments that are more likely to expand economic activity.
    In 2008 investors fled from risky investments such as stocks and private sector securities and flocked into safe US. government bonds, so no, the treasury never had a failed bond auction, quite the contrary.

    • Anonymous Admin says:

      Thanks for the response. What you say is true. I guess I misinterpreted what was happening. I could of swore I heard something about bond sales failing, but that could have been the cries of the “end of fed”ers because it does make sense that investors pushed into the bond markets – so that means they shouldn’t have failed.