Both Fiscal and Monetary Policy

In Washington, D.C., the saga of the Federal debt ceiling, resulting from ever growing budget deficits, continues. Unfortunately, the story that fiscal policy alone is not enough to solve this problem remains largely untold.

On March 16, 2006, freshman Senator Obama pointed out, “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.” And, as Democratic Senate leader Reid said just a short while before Obama spoke that same day, “President Thomas Jefferson said: I place economy among the first and most important government virtues, and public debt as the greatest of the dangers to be feared.”

As we near yet another vote on increasing the debt ceiling, we should keep in mind 2 facts: (1) not increasing the ceiling does not equate to a default, and (2) it is a myth that the Federal government has never defaulted in the past.

On the fiscal policy front, a number of serious proposals have been made to address the budget and debt problems, such as Dr. Ron Paul’s Plan to Restore America and Dr. Rand Paul’s bill S.162 introduced in 2011. (There are a number of other proposals, e.g., the Paul/DeMint/Lee budget, the Tea Party Debt Commission budget, the Cato Institute budget, and the proposals published by the Heritage Foundation mentioned in my earlier article.) Also see Congressman Broun’s bill H.R. 2409 from 2011 to lower the debt ceiling.

But that of course leaves out the monetary policy. Previously, I have pointed out that we cannot honestly address the debt problem unless we follow the 3 part solution offered by Warren T. Brookes in the 1986 Heritage Foundation symposium on cutting the budget:

  • returning to the gold standard (as Bill Clinton has pointed out, going off the gold standard has had a number of deleterious effects),
  • allowing for competing currencies, and
  • abolishing the Federal Reserve.

Congressman Paul Broun has introduced legislative proposals in the House that would address these issues by following most of the solutions proposed by Brookes.

An additional measure would be the passage of a modified version of Dr. Paul’s bill from 2011, H.R. 2768 -- the Debt Crisis Resolution Act, which would “cancel public debt held by the Federal Reserve System and ... lower the public debt limit by an equal amount.” I would modify the original bill to make sure that the second part of its stated purpose is carried out. My addition to the original bill would be a new section:

SEC. 3. LOWERING OF THE PUBLIC DEBT LIMIT

(a) Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection; and inserting in lieu thereof an amount equal to the difference between the stricken out dollar limitation, and the amount equal to the amount of obligations described in Section 2(a) of this Act.

(b) The amendment made by Section 3(a) of this Act shall take effect immediately upon the execution of Section 2 of this Act.

While many “deficit hawks” focus on “entitlements,” the untold story continues to be monetary policy, including the potential $1 trillion per year interest payment debt bomb.

We will soon see who the true “deficit hawks” are.

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The Most Important Thing Holding Up the US Dollar

by Ron Paul

Today’s economic conditions reflect a fiat monetary system held together by many tricks and luck over the past 40 years. The world has been awash in paper money since removal of the last vestige of the gold standard by Richard Nixon when he buried the Bretton Woods agreement — the gold exchange standard — on August 15, 1971.

Since then we’ve been on a worldwide paper dollar standard. Quite possibly we are seeing the beginning of the end of that system. If so, tough times are ahead for the United States and the world economy.

Yellen’s Missing Jobs

March 31, 2014

The new Federal Reserve chairman, Janet Yellen, gave a policy speech today at Chicago, where, in a startling gesture, she mentioned three working individuals by name — Jermaine Brownlee, Vicki Lira, and Doreen Poole. They lost their jobs the Great Recession and have been struggling ever since. It was a refreshing, even affecting demarche by Mrs. Yellen, who has made a return to full employment a public priority. She underscored her sincerity by telephoning Mr. Brownlee and Ms. Lira and Ms. Poole before delivering her speech.

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The Rueffian SynthesisJohn D. Mueller

Publisher's Note: Originally released in June/July of 1991, this detailed report discusses Jacques Rueff's economic theories and applies them to modern economic events.

By John D. Mueller

Who Was Jacques Rueff?

... Trained in science and mathematics at the Ecole Polytechnique, Rueff devoted his first theoretical work to showing that the same scientific method applies to “moral” or “social” sciences like economics as to the physical sciences (Des Sciences Physiques aux Sciences Morales, 1922). In both cases, he pointed out, individual acts can be “indeterminate,” but the pattern of large numbers of individual acts can be predicted as a matter of probability. And so in economics no less than physics, as he later wrote, “A scientific theory is considered correct only if it makes forecasting possible.”

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Excerpts From:


by Lewis E. Lehrman

"Forerunners of man lived upon the planet several million years ago. But the unique, modern, social order of man – civilization – emerged only four to five thousand years ago. Historical and archaeological evidence suggests that the institution of money evolved coterminously with civilization. From the standpoint of the 100,000-year history of Homo sapiens, civilization and money are but young and fragile reeds. Today their very existence is threatened by financial disorder."

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Captain America, Report for Duty!

Kathleen Packard  |  Apr 14, 2014
“Captain America: The Winter Soldier” is now out – just when it finally turning to spring. The movie set a record for an April release at $96 million on its opening weekend – showing that Captain America is still good box-office, at least when fighting a Soviet agent. Chris Evans faces...

Losing La Dolce Vita

Kathleen Packard  |  Apr 11, 2014
France and Italy are Swimming against the tide of European austerity – while the tide of unemployment continues to swamp their efforts to shake off their economic recessions. The Wall Street Journal reported that French President Francois “Hollande’s renewed bid to steer the European crisis response away from austerity could reopen...
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Jacques Rueff, a key figure in European economic circles from the 1930s until the 1970s, was, first and foremost, an...
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Nov 01, 1985
Key Monetary Writings
Lewis E. Lehrman

Protectionism, Inflation, or Monetary Reform

This is the seventh in a series of strategic-issue essays by "good thinkers" that have been published on subjects...
VIEW KEY MONETARY WRITINGS
 
Prosperity Through Gold
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