Tuesday, October 30, 2007

$3.00 Gas??

Q. What does the difference between this

and this

to do with this ?

A: A lot. Back in the good old days our money was backed by gold or silver. The first picture is a Peace Dollar coin made of 90% silver. In fact, if you had paper money you could redeem it for silver. Now of days our money is backed by faith in the Federal Reserve, which sadly is bad thing to have faith in. See the Federal Reserve can create more money whenever it wants. This is both a good and a bad thing. Good if you are the one getting the new money first. These people are typically banks, Wall Street and the military. It's bad if you're the one to get the new money later, that is most of us. See, to make things simple, prices are basically the ratio of dollars to the number of goods or services available. So when the Federal Reserve prints more money out of thin air that forces prices up. This is inflation. It gets worse. When banks run out of money (typically to bad loans) they can ask the Fed to create more money just for them. Wouldn't it be nice if they did that for you when you ran out of money to pay your bills? Also since banks can typically loan out 10 dollars for every dollar you deposit, this creates even more money backed by thin air. So tomorrow when the Fed lowers interests rates again, this will cause more people to borrow money because it makes loans more attractive. The more people borrow, the more money banks create, the more money banks create, the higher prices go. This also causes our US dollar to be worth less compared to other currencies. For example the Canadian dollar now buys $1.05. Since oil is traded internationally with US dollars and the dollar is worth less, it takes more dollars to buy the same amount of oil. While the rate cut may be good for people getting mortgages, along with the banks, and wall street, it is bad for people who have to buy food and pay for gas. The Fed has way to much power. Why should some people benefit from their action and the middle or lower class suffer? This is one of many reasons I'm supporting Ron Paul for president. He would not abolish the Federal Reserve, but allow gold and silver coins and certificates to fairly compete with paper federal reserve notes as legal currency. Competition is an excellent way to prove which method is better.

1 comment:

DrBacchus said...

I've been getting a huge amount of spam supporting Ron Paul, and it makes utterly absurd claims (eg, if I don't vote for him, my kids will assuredly be implanted with RFID chips, and other similar claims) that make it very hard to take anything else in it seriously. While I realize it's silly to make a presidential choice based solely on his misinformed marketing strategies, it does make me think that he's probably not going to be particularly good for folks in my chosen profession.