By Paul-Martin Foss
The US Treasury Department has warned the Chinese government that it will be paying attention to China’s new currency regime. Any further devaluations of the yuan will likely result in a strong denunciation from Washington. Meanwhile, the Federal Reserve continues to devalue the US dollar, but you won’t hear a peep from the Treasury about that. After all, do as we say, not as we do, right?
Every time an American official opens his mouth, one cannot help but be astounded at the outright hypocrisy that emanates. It is as though American officials believe that the world financial system is designed to benefit the United States to the exclusion of other nations, funneling wealth to the US and sticking other countries with the bill. This isn’t a new viewpoint, of course, and you can understand why these people think what and how they do. American policymakers by and large are members of the same socioeconomic class, products of the same schools, being taught the same propaganda by the same professors, regurgitating the same pap on their exams to get good grades, and never questioning what they are being taught. They are ignorant of other points of view, intellectually incurious, and completely lacking in empathy or understanding. They adhere to a perverse type of American exceptionalism, that America is a special nation with a mission to rule the world, and that America doesn’t have to play by the rules she imposes on other nations.
We have seen the results of this mindset in foreign policy, where the very simple concept of blowback is completely unknown to policymakers. The US expects to be able to attack any country in the world without anyone else objecting, and if anyone should dare to retaliate against US government actions, the US government acts as though it is a horribly aggrieved party. Iran is a perfect example of this, where the CIA overthrew the Iranian government, propped up an autocratic Shah and supported his terroristic secret police. Yet when the American embassy in Tehran was overrun, the US government expressed complete shock that something like that happened. How dare those Iranians violate our embassy? After a quarter century of violating the sovereignty of a 600,000+ square mile country, the US government went apoplectic when the sovereignty of its little postage stamp of an embassy was violated. That hypocritical attitude continues to this day in foreign policy as it does in economic policy.
Financial blowback will come in the form of the dollar eventually being pushed aside as the world’s reserve currency. Ever since the Bretton Woods system was created in the aftermath of World War II, the United States has used its privileged position to benefit at the expense of others. Under Bretton Woods’ gold-exchange standard, under which the dollar was supposed to be as good as gold, the US created far more dollars than it had gold to back those dollars. As gold redemption threatened to exhaust US government gold stockpiles, the gold window was closed. Closing the gold window in 1971 removed the last major restraint on dollar creation, and the Federal Reserve has taken full advantage, driving up the money supply and prices along with it. The US continues to export its debt and inflation abroad, importing goods in return. When the bill finally comes due, expect the US to default. As Treasury Secretary John Connolly said in 1971, “The dollar is our currency, but your problem.”
To American policymakers, it’s perfectly okay for the United States to devalue its currency, offload its debt, and export its inflation abroad. But if other countries, such as China, dare to do the same thing, the gloves come off. Of course, Treasury Secretary Lew’s comments were made last week, before this week’s market declines. For all we know, the Treasury may fear that a collapsing Chinese stock exchange will destabilize American markets, and may very well push China this week to intervene in the stock markets and make further moves to devalue its currency. American policymakers, remember, have no underlying principle save to support what they claim to be in “America’s best interest,” something which can easily change from week to week.
This article was originally published at The Carl Menger Center.
By Ron Paul
We are facing economic consequences that are going to involve not only the American people and stock markets, but are going to be a worldwide problem. There will be more conditions like we’ve recently seen in Greece, and we ought to prepare ourselves for that.
But for me, the only way that we can prepare for this is to do our best to stop it, and to accept the fact that the politicians aren’t going to change. The statements made by the GOP presidential candidates blaming China for the stock market crash indicate that they don’t have the vaguest idea as to what is going on. They are not willing to bite the bullet.
You may think: “But Trump is the guy. He’s going to do it.”
But he’s a protectionist!
Trump’s going to make it worse if he puts on tariffs and takes charge of the economy. We want the people to take charge of the economy, which means that we have to get rid of the Federal Reserve, get rid of the income tax, let the people go to work, let the people keep what they earn, don’t violate their civil liberties, don’t violate their privacy, and don’t get involved in the affairs of other nations.
Then we can be free and prosperous. Such is a system that the rest of the world would want to emulate. That would make the difference.
Unfortunately, right now, it’s not on the horizon. But it still can come if we have enough people who understand the difference between what we have, and where we should go. There has to be a replacement. We can’t linger like this.
We have to have the type of reforms where we talk about free markets, property rights, and sound money. That would be the solution, instead of blaming China.
By Ron Paul
Nothing is going to be solved until we get a handle on the monetary system. The dollar will finally collapse. There will be monetary reform. We have to have enough people to realize that the Fed is a useless organization. It causes much more harm than good. It subsidizes the growth of government. It subsidizes wars. It is a perpetual threat to our liberties.
Not only must we get rid of the Federal Reserve, we have to get rid of government management of the economy. We must have more trust in liberty and property rights. That will solve these problems. In the meantime, in spite of the fact that the politicians could allow the corrections necessary and allow the deflation and liquidations occur, it’s not going to happen. They’re going to prop up, prop up, until the dollar is destroyed.
Time will tell, but my prediction is that things will not be a lot better in three months, or six months, because they will not have offered the real solution. Conditions could very well deteriorate over this period of time.
It’ll be interesting to see what happens in the presidential election because everybody wants to help the middle class (including myself). The big job is to explain why the middle class is getting wiped out, and if you really want to know, go study the Federal Reserve. They are the culprits who cause the most damage to the middle class.
By Chris Rossini
This is pretty bad:
Where on Earth does Sanders see "unfettered free trade"?
He surely can't see it here in the U.S. The federal government is the largest government in mankind's history! Just take a look at the number of pages in the federal register:
And that's just the federal government. Add in the state and local governments, and we Americans are drowning in red tape and regulations. You can barely make a move without having to get some kind of bureaucratic approval to trade.
What about international trade? Is it "unfettered"?
NAFTA, CAFTA, TPP....and the rest of the acronym soup are all government-regulated trade. These are all government-to-government agreements that run into the thousands of pages. They are littered with red tape, restrictions, and cronyism.
Just because these monstrosities have the words "free trade" in the titles doesn't actually make it so. The signatory governments are merely playing to public naiveté. Real, and "unfettered" free trade would mean governments would get out of the way.
Is Bernie Sanders trying to pull the wool over his followers' eyes?
We'd be lucky to have "unfettered free trade".
Sadly, it's nowhere to be seen.
By Joseph T. Salerno
In April it was announced that Greece was imposing a surcharge for all cash withdrawals from bank accounts to deter citizens from clearing out their accounts. So now the Greeks will have to pay one euro per 1,000 euros that they withdraw, which is one-tenth of a percent. It doesn’t seem very big, but the principle at work is extremely big because what they’re in effect doing is breaking the exchange rate between a unit of bank deposits and a unit of currency.
Why would they do this? Why would they want to do this? Well, it’s one of the anti-cash policies that mainstream economists have vigorously been promoting.
PAVING THE WAY FOR NEGATIVE INTEREST
To make the calculations easier, and to illustrate the effect, let’s say that the Greek “surcharge” is ten dollars for every 100 dollars withdrawn. Now, instead of being able to convert one euro in your checking account into one euro in cash, on demand, you will only be able to buy one euro in cash by spending 1.10 euros in your bank accounts. That’s a negative 10-percent rate in some sense. That is to say that you can only take out one euro from the bank if you’re willing to pay 1.10 euros. So, you would only really get ninety cents for every dollar that you wanted to withdraw and that’s very significant because this means it will be more expensive to buy an item with cash than with bank deposits.
At the same time, the Greek government made it very clear that if you deposit the cash in the banks, you don’t get 1.10 euros of bank money for every euro you deposit.
So the system is now structured to lock the money in the banks. Now, what does that allow them to do? If you lose 10 percent every time you withdraw one euro in cash, they can lower the interest rate that you get on bank deposits to negative 5 percent, or negative 6 percent. You still wouldn’t withdraw your cash from the banks even if the interest rate went negative.
What we are witnessing is a war on cash in which governments make it either illegal or inconvenient to use cash. This, in turn, allows governments the ability to spy on and regulate financial transactions more completely, while also allowing governments more leeway in manipulating the money supply.
THE ORIGINS OF THE WAR ON CASH
It all started really with the Bank Secrecy Act of 1970, passed in the US, which requires financial institutions in the United States to assist US government agencies in detecting and preventing money laundering. That was the rationale. Specifically, the act requires financial institutions to keep records of cash payments and file reports of cash purchases or negotiable instruments of more than $10,000 as a daily aggregate amount. Of course, this is all sold as a way of tracking criminals.
The US government employs other means of making war on cash also. Up until 1945, there were 500 dollar bills, 1,000 dollar bills, and 10,000 dollar bills in circulation. There was even a 100,000 dollar bill in the 1930s with which banks made clearings between one another. The US government stopped issuing these bills in 1945 and by 1969 had withdrawn all from circulation. So, in the guise of fighting organized crime and money laundering, what’s actually occurred is that they made it very inconvenient to use cash. A one hundred dollar bill today has $15.50 worth of purchasing power in 1969 dollars, when they removed the last big bills.
THE PROBLEM IS INTERNATIONAL
The war on cash in Sweden has gone probably the furthest and Scandinavian governments in general are notable for their opposition to cash. In Swedish cities, tickets for public buses no longer can be purchased for cash; they must be purchased in advance by a cell phone or text message — in other words, via bank accounts.
The deputy governor of the Swedish Central Bank gloated, before his retirement a few years back, that cash will survive “like the crocodile,” even though it may be forced to see its habitat gradually cut back.
The analogy is apt since three of the four major Swedish banks combined have more than two-thirds of their offices no longer accepting or paying out cash. These three banks want to phase out the manual handling of cash at their offices at a very rapid pace and have been doing that since 2012.
In France, opponents of cash tried to pass a law in 2012 which would restrict the use of cash from a maximum of 3,000 euros per exchange to 1,000. The law failed, but then there was the attack on Charlie Hebdo and on a Jewish supermarket, so immediately the state used this as a reason for getting the 1,000 maximum limit. They got their maximum limit. Why? Well, proponents claim that these attacks were partially financed by cash.
The terrorists used cash to purchase some of the stuff they needed. No doubt, these murderers also wore shoes and clothing and used cell phones and cars during the planning and execution of their mayhem. Why not ban these things? A naked barefoot terrorist without communications is surely less effective than the fully clothed and equipped one.
Finally, Switzerland, formerly a great bastion of economic liberty and financial privacy, has succumbed under the bare-knuckle tactics of the US government. The Swiss government has banned all cash payments of more than 100,000 francs (about $106,000), including transactions involving watches, real estate, precious metals, and cars. This was done under the threat of blacklisting by the Organization of Economic Development, with the US no doubt pushing behind the scenes. Transactions above 100,000 francs will now have to be processed through the banking system. The reason is to prevent the catch-all crime, of course, of money laundering.
Chase Bank has also recently joined the war on cash. It’s the largest bank in the US, a subsidiary of JP Morgan Chase and Co., and according to Forbes, the world’s third largest public company. It also received $25 billion in bailout loans from the US Treasury. As of March, Chase began restricting the use of cash in selected markets. The new policy restricts borrowers from using cash to make payments on credit cards, mortgages, equity lines, and auto loans.
Chase even goes as far as to prohibit the storage of cash in its safe deposit boxes. In a letter to its customers, dated April 1, 2015, pertaining to its “updated safe deposit box lease agreement,” one of the high-lighted items reads, “You agree not to store any cash or coins other than those found to have a collectible value.” Whether or not this pertains to gold and silver coins with no collectible value is not explained, but of course it does. As one observer warned, “This policy is unusual, but since Chase is the nation’s largest bank, I wouldn’t be surprised if we start seeing more of this in this era of sensitivity about funding terrorists and other illegal causes.” So, get your money out of those safe deposit boxes, your currency and probably your gold and silver.
ONLY (SUPERVISED) SPENDING IS ALLOWED
Gregory Mankiw, a prominent macroeconomist, came up with a scheme in 2009: the Fed would announce that a year from the date of the announcement, it intended to pick a numeral from 0 to 9 out of a hat. All currency with a serial number ending in that numeral, would instantly lose status as legal tender, causing the expected return on holding currency to plummet to -10 percent. This would allow the Fed to reduce interest rates below zero for a year or even more because people would happily loan money for say, -2 percent or -4 percent because that would stop them from losing 10 percent.
Now the reason given by our rulers for suppressing cash is to keep society safe from terrorists, tax evaders, money launderers, drug cartels, and other villains real or imagined. The actual aim of the ﬂood of laws restricting or even prohibiting the use of cash is to force the public to make payments through the financial system. This enables governments to expand their ability to spy on and keep track of their citizens’ most private financial dealings, in order to milk their citizens of every last dollar of tax payments that they claim are due.
Other reasons for suppressing cash are (1) to prop up the unstable fractional reserve banking system, which is in a state of collapse all over the world, and (2) to give central banks the power to impose negative nominal interest rates. That is, to make you spend money by subtracting money from your bank account for every day you leave it in the bank account and don’t spend it.
This article was adapted from a talk delivered at the New York Area Mises Circle in Stamford, Connecticut. It was originally published at The Mises Institute.
By Ron Paul
What should be done with the estimated 15 million people living in the United States without the legal right to be here? It seems most politicians and many Americans come down on one or the other extreme. Many Republicans, including Republican presidential candidate Donald Trump, have the idea that they can round up 15 million people and ship them back to wherever they came from. Many Democrats, on the other hand, would grant them blanket amnesty, give them citizenship, and make sure as many as possible are fully signed up to the welfare ranks.
Has anyone thought for a moment about how difficult, expensive, disruptive, and dangerous to our civil liberties it would be to turn over every stone in this country to search for someone who might not be here legally? How many billions of dollars would it cost? The government would likely introduce a national identification card in effort to determine who should be here and who should not. The cards would no doubt be equipped with biometric data to transmit to the government information about law-abiding American citizens that they have no right knowing.
But on the other hand, how many billions of dollars per year does it cost to provide federal, state, and local welfare and other benefits to individuals who are not legally in the United States?
The situation seems impossible and it is true there are no easy answers. I have suggested in my book Liberty Defined that some status short of citizenship might be conferred on a case-by-case basis. Perhaps a “green card” with a notation indicating that the person is not eligible for welfare and not permitted to vote in the United States. I don’t think there is any doubt that many who come to this country illegally simply want to work and will take jobs that Americans refuse to take.
The fact is, in a more libertarian society citizenship itself would not be all that highly prized. Immigration could be controlled to a degree using property rights instead of building walls and issuing a national ID card. One very important “right” currently granted by US citizenship is the “right” to all the free stuff from the government. A more libertarian society would likely have a more restrictive immigration policy because entry into the US would not be accompanied by guarantees of free things and most property would be owned privately.
Similarly, the issue of birthright citizenship would be much less difficult if acquiring American citizenship by the fact of being born on US soil did not grant the child the ability to take advantage of the welfare state. Remove the welfare magnet and you will greatly reduce the incentive to give birth here in order to gain citizenship for the baby.
Congress has within its power the authority to clarify the 14th Amendment’s definition of citizenship by making it clear that it does not grant citizenship by birthright. Article I, Section 8 of the Constitution is very clear: Congress has the power, “To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States.” This power has been used in the past to clarify birthright citizenship, including for the children of diplomats born on US soil and foreign prisoners who may give birth while in jail. There is no reason Congress cannot provide further clarification of what the 14 Amendment means when it refers to “subject to the jurisdiction” of the United States.
It is our weak economy, caused to a great degree by the Federal Reserve system and the business cycles it constantly creates, that makes the immigration situation worse for us. Neither extreme position is correct because neither takes this into consideration. A move toward more liberty would be the first step toward a normal immigration policy.
By Chris Rossini
One of the biggest problems that Americans face today is understanding what the role of government should be in a society. A century of compulsory government schooling has twisted the role into the exact opposite of what it should be.
Republican Presidential contender, John Kasich, provides the following awful analogy as to what his role as President would be:
“You need to recognize people’s frustrations. It’s easy for me. I grew up in a town where all we had was frustration. At the end of the day they want you to land the plane. They don’t want you to crash. . . . It’s like a doctor. A doctor diagnoses you and tells you you’re sick. What if the doctor then turned and left the room?”
The belief that Kasich is reinforcing here is that if you have a problem, you go to the government to get it fixed. Government then (as your "doctor") diagnoses the problem, and is expected to heal you.
However, there are grotesque details that "Doctor" Kasich is leaving out. You see, in order for government to help you, it must first harm someone else. Government must go and beat up your neighbor first, and then it can offer you some temporary relief.
This is a very twisted way for society to function. Once such a poisonous idea is accepted, it's only a matter of time before there are no healthy people left for government to beat up on, in order to "help" its "patients".
On the other hand, a real Doctor, named Ron Paul, has lived by a very different philosophy: "First, do no harm".
Government, by its very nature, cannot "first, do no harm". Instead, it must first "do harm." This is why it's so important for American individuals to change their government indoctrinated belief on what government's role should be.
If you have a problem, don't go to government. Don't even consider it an option. Instead, seek a voluntary, private, or market-oriented solution. Go to a real doctor, or charitable institution (that's not taxpayer-funded of course). Seek out those who will help you without beating up on anyone else.
There is no shame in accepting voluntary charity.
But there should be shame in accepting government help.
Someone else has to suffer a black eye in order for you to get it.
Is Samantha Power an excellent US ambassador to the United Nations? Is she putting America's best foot forward?
RPI Executive Director Daniel McAdams joins veteran journalist Patrick Smith and former US intelligence community linguist Scott Rickard to discuss how "human rights" has been weaponized to push regime change overseas:
By Chris Rossini
Over at MotherJones, Kevin Drum worries about the mad scientists at The Fed:
...the Fed should stay cautious about raising interest rates. It's not just that the recovery remains fragile; the entire global economy remains fragile. This is not a good time for experiments just to appease inflation hawks.
Were "the global economy" a collection of free market economies that used sound money, there would be no such thing as "fragile recoveries".
There would be no general booms and busts to be concerned about at all. Sure localized investment errors would still occur, but they would be localized, and could not cause the "systemic" crisis that all believers in the current system seem to fear like the plague.
There would be no price-fixing of interest rates, or arbitrary creations of currency. There would be no mass illusions of prosperity, followed by very real mass economic pain. That is what 100+ years of central banking has given us - a sickening roller-coaster ride that never seems to end.
While Kevin Drum worries about The Fed "experimenting" with higher interest rates, one must wonder if knows that the entire monetary system is a grand experiment itself. This experiment has been imposed on an unsuspecting public by the mad scientist elites, and it treats the rest of us as if we were lab rats. Sadly, this experiment is conducted on a worldwide scale. Politicians and bankers around the globe have legislated away sound money.
They may have succeeded in pushing sound money away from public consciousness, but they have totally failed in delivering on their promises. Economic law, and economic reality cannot be legislated away.
Unlike Kevin Drum, we shouldn't be worrying about central bankers raising or lowering interest rates. Central planning can't work. The Soviets proved that. We should be worried that an institution has such a power to begin with. Not only should we be worried, we should be vehemently calling for an end to this failed experiment.
We are not lab rats.
Enough is enough!