Tuesday, June 28, 2011

Ron Paul: Stiff the Federal Reserve

During an interview with Iowa radio host Jan Mickelson, Ron Paul called for the Treasury to stop making payments on Treasury securities held by the Federal Reserve. Congressman Paul pointed out that the Fed simply prints up new money when they buy Treasury securities, so there is no obligation to payback the Fed. He pointed out that through taxes, Americans are paying the interest on the Treasury securities owned by the Fed and this should also stop. As part of its $2.8 trillion balance sheet, the Federal Reserves holds $1.6 trillion in Treasury securities.

Dr. Paul also explained why the default of the debt is going on right now by the Fed decreasing the value of the dollar, and that things will only get worse from here.

10 comments:

  1. So the trillion+ put in the economy in the last 2 years, by the fed should, NEVER be taken out? Hello (hyper)inflation. Come on Ron, this is not smart.

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  2. @anon 4:11 ... I think you're conflating 2 or possibly more things ... Not to be a dick, but what you're saying doesn't mean anything.

    He's saying the Fed shouldn't be paid interest on its Treasury security holdings. This has nothing to do with the ~$1.6 trillion sitting in excess reserves or any cash that already made its way into the system. Further, this has nothing to do with whether the Fed could sell its Treasury holdings (or any of its other holdings, e.g. MBS, ABS), which would start to drain money out of the system.

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  3. Dean Henderson says: 'Nationalize the Federal Reserve. According to a London barrister I have been in contact with, under the Federal Reserve Act there is a provision that allows for the US government to buy back the Fed’s charter for $4 billion. We should pay this fee, revoke the Fed charter and launch a new US dollar issued by the Treasury Department. With the dollar fixed, the vampires cannot crash it.'

    This makes sense to me also.

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  4. He said to get rid of the 1.6 trillion held by the fed and reduce the debt by that amount. The fed printed that money to buy those bonds. The money came from no where. If that money is not sucked back in and taken out of circulation, that money will be added to the monetary base permanently. The monetary base was 800 billion before the crisis, and within 3 years it is over 2.5 trillion. The money is just sitting in reserves, for various reasons, which is why inflation hasn't truly kicked in.

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  5. @anon 4:53 ... I thought you were referring to what Mr. Wenzel stated that RP said. I didn't actually listen to the interview (no sound on work comp). If RP said to use the 1.6 trillion to pay down the debt, then what I said is unrelated.

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  6. That is what I got from it, though he wasn't clear.

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  7. This would just be an accounting sleight-of-hand trick that has nothing to do with the real problem (i.e., too much state spending). It might make it harder for the state to get money, but it means nothing until the fetishes on both sides are addressed (welfare and imperialism).

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  8. What I want to know is why the bond-rating agencies are given so much importance anyway..what were they doing the last decade?

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  9. @Lila

    Part of the significance of bond-rating agencies is not because of any forecasting ability they have , or don't have, but that certain downgrades eliminate some funds and pension managers as buyers of bonds that are downgraded because their terms of management prevent them from doing so.

    Thus interest rates tend to go up on a downgrade becasue there is automatic lower demand.

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  10. @Bob

    You're misunderstanding me. I said nothing about predicting.

    I'm talking credibility.

    How do they have any credibility after rating subprime debt triple A for years?

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