Ron Paul is NOT an Austrian economist

In January I wrote a critique of HR 6550 (aka the American Monetary Act) which had expired in committee at the end of the 2010 congressional session. However, the author of that bill, Stephen Zarlenga, vowed to re-introduce it in 2011 after getting his man, Ron Paul, appointed Chair of the House Sub-Committee on Domestic Monetary Policy.

Critique of HR 2768 (formerly HR 6550) sponsored by Ron Paul, written by Stephen Zarlenga

You will notice that nothing that Zarlenga has written (and Paul has sponsored) mentions gold. It is straight-out monetary socialism.

My Critique of Austrian Economics from 1930 to 1990 makes no mention of monetary socialism because, as of 1990, no Austrian economist (including Ron Paul) believed in monetary socialism. But that was 1990 when Paul was still a young man. Now, in his old age, Paul is no longer an Austrian but a believer in the Debt-Virus Theory.

The theoretical justification for HR 2768 is the Debt-Virus Theory and NOT Austrian Economics. Read it yourself and tell me if you can find anything in there about gold. Zarlenga and his minions (Kucinich and Paul) want to give the Treasury Department the authority to print all the money that Congress asks for without holding any assets (as the Federal Reserve is required to do) that can be used to buy back currency in the event that inflation threatens to turn into hyperinflation. But, I tell you, the Debt Virus Theory is not worth a Continental!

Bottom line: Ron Paul has betrayed the Austrians.

 

I'm not sure what you're getting at. Paul is an advocate for legalizing competing currencies, a free market in money if you will...

 

If a completely destabilized economy is what you are after then a free market in money is just the thing. No Fed, privately issued currency competing with the Treasury, has anyone really considered the practical problems with that?

The US has been through this private money thing already, basically from its founding until the Civil War, a period of continuous bank failures, regular general panics, and the neverending anxiety that the money in your wallet may be worthless and your savings better off under your matress than in any bank. Our digital age will just accelerate the madness.

 

yes, many smart people have considered the implications extensively. Evidently you have not, or you would have actual specific objections instead of a knee jerk reaction.

You should do a bit more reading about the period you're talking about. You obviously know very little about it.

 

Actually, I know quite a bit about US money shenanigans in that era, more than you apparently.

Counterfeiting was so rampant that an entire publishing industry arose to print reference books and issue periodicals that illustrated good and counterfeit bank notes so people could tell the difference. They were quite popular and also rife with misinformation.

Many banks were formed with little capital and distributed their notes far from their offices to avoid redemption. One bank in Providence, Rhode Island issued $200,000 in notes in Hartford Connecticut. An audit found only $40 in gold in its vaults.

Bank notes were routinely discounted depending on their distance from the issuing bank and its reputation. Many bank notes became worthless at the county line, others at the state line. No one would take them in trade because their bank would refuse them, as was their right. There was a huge exchange in NYC dedicated entirely to the trade of bank notes with the streets around it often littered with notes that no one would trade for.

A quite often occurrence was when a bank would refuse to redeem one of its own notes. Word would quickly spread and people would literally run to the bank to get their savings out in specie before the bank closed its doors, which became inevitable once it started. This was how the term "run on a bank" was coined.

The charter of The Second Bank of the United States was not renewed because western bankers objected to its practice of sending couriers with their notes who would demand redemption in specie or Second Bank notes. This was merely the bank's attempt to keep the bankers honest by actually backing their money with something instead of nothing. Since the Second Bank was the repository of Federal Revenues it had a requirement to issue only notes backed by real deposits and so sought to redeem notes from other banks deposited in its accounts to square its books.

There was a consortium of private banks in Boston that did much the same for northern New England and also hunted down counterfeiters. That area manged to avoid many of the problems that plagued the rest of the nations banking.

I don't know how smart those private money people are but they have certainly not considered all the implications, especially the ones that past history points out.

 

Evidence please.

 

And were any of those banknotes considered legal tender and were contracts required to be fulfilled in any of them?

 

This is pretty common knowledge for anyone who studied US history.

http://www.ronscurrency.com/rhist.htm

See 1836

 

On the other hand all you have is free market theory, armchair philosophizing. You know the old warning "it looked good on paper"?

 

There is nothing there that suggests that the confusion and counterfeiting were significant problems not dealt with by the market, which is what I was asking for. You are creating a bogeyman where there was none.

 

You could just read the book

"A Nation of Counterfeiters"

It is a well written and very well referenced short history of US money from the founding to after the Civil War. You could explore all the references in the book if you want to get into the nitty gritty.

 

It's rather fun to read the summary. There was the possibility, in those times, claims the author that "significant inflation might be sparked." Of course, the Federal government sparked significant inflation twice - once with Continentals and again with Greenbacks. It's doing so again with the Federal Reserve Note. Apparently the danger of banks releasing bank notes pales in comparison to the very real damage done by the government which seeks to monopolize the money supply. But no, freedom is much too dangerous and government counterfeiting is "safe."

I'm sure it's a good read. Maybe I'll read it. Meanwhile, here's a copy, freely available, of Murray Rothbard's "History of Money and Banking in the United States.". He actually goes into some detail the charges you make, but his conclusions may differ from yours.

 

It is a good read, interesting and fun.

The Continentals were before that time and the greenbacks at the end. In between the growth in the money supply in in the US was almost entirely from private bank issues. The Federal government would occassionally flood the market with new money as new gold was found, like the California gold strikes, which would cause a huge inflationary spike and massive private bank note issues which would eventually collapse.

Private money was always a big damper on the economy because no one was sure of the value of the money they held. One thing a national currency did was alleviate the interminably tedious negotiation of numerous different private bank notes at variable rates of exchange in almost every economic transaction.

Significant inflation was sparked, but it also sparked massive economic growth in a nation with very little real money. This was a good thing that came from uncontrolled private money expansion but was always followed by panic and deflation. Nevertheless, the railroads and steamships and factories were already built by the time the economy collapsed and got bought up at huge discounts as the original owners and financers went belly up. With low acquisition costs and wage declines they became immediately profitable.

There is always the danger that a currency will be overissued and cause inflation. It really does not matter who is doing it if there is no one to keep them honest, like a large bank or exchange that can demand redemption of currency. This would require banks to keep adequate reserves at all times, something many bankers objected to then and still do today.

There is no expectation of US monetary inflation today by investors, if there was they would be demanding high interest rates on $US denominated debt but benchmark rates for medium term debt issues have been declining steadily for a few years now and show no sign of increasing. Three and ten year Treasury notes are a good indicator of inflation expectations, they are currently priced at around a 2-3% a year inflation expectation.

 

None of these comments have anything to do with the OP.

Does it concern anybody else that there is legislation in Congress (HR 2768, sponsored by Ron Paul) that would introduce monetary socialism to America?

 

do you have a source?

 

http://www.govtrack.us/congress/bill.xpd?bill=h112-2768

Read it yourself and tell me that is not monetary socialism.

If you don't know what monetary socialism is, ask Stephen Zarlenga to define the term for you.

 

I think it is monetary socialism, however canceling the us debt held by the fed is in almost no way different from inflating the us debt out of existence (continuing to pay off the debt with new debt). Its just more honest about whats really happening. Is that it? The bill says nothing about making the fed part of te treasury and all that other nonsense.

 

Which would be basic ignorance of political economy in order to peddle an irrelevant ideology.

 

Can you be more specific? What are you referring to?

 

It was in my quote: Monetary socialism. Complete drivel

 

When I asked I you could be more specific my hopes were not high. And I was not disappointed. You can try again if you want.

 

A poor reply. I've been very specific: your reference to monetary socialism is cretinous

 

How would you define monetary socialism?

 

I wouldn't. Its bobbins

 

A poor reply.