A Spooked Economy in October

http://paul.house.gov/index.php?option=com_content&view=article&id=1783:a-
spooked-economy-in-october&catid=31:texas-straight-talk

A Spooked Economy in October        

Last week we received worse than expected unemployment numbers, challenging 
recent claims that the recession has come and gone.  Also, as the economy 
continues to suffer the after effects of the Federal Reserve-created bubbles 
of the last decade, there is renewed interest in gold.  Fears that the 
Federal Reserve will pump even more money into the system had caused the 
price of gold to reach new highs. Also contributing to enthusiasm for gold is 
continued instability in the banking industry, symbolized this week by fraud 
allegations that have caused many banks to halt foreclosure proceedings, thus 
further destabilizing the housing market. Yes, October has a reputation for 
being a scary month economically and this month is shaping up to be 
frightening, as well.

The Fed has been wreaking havoc and devaluing our monetary unit steadily 
since 1913, and greatly accelerating it since the collapse of the Bretton 
Woods agreement in the 1970s.  This severing of the dollar’s last tenuous 
link with gold allowed the Fed to create as much new money as it pleased, and 
it has taken full advantage of this opportunity.

In 1971, Gross Domestic Product (GDP) was $1.29 trillion.  Today it is $14.6 
trillion, nominally.  But adjusted for all the inflating the Fed has been 
doing, it is only $2.73 trillion, which constitutes only a 1% real increase 
per year!  So with all this extra money going around, we may appear nominally 
wealthier, but the reality is, we have barely moved at all.  This is 
unfortunate especially for the prudent, conscientious savers, whose nest eggs 
are constantly being devalued.  Unless of course, they have saved in 
something out of the Fed’s reach, like gold.  While the economy has basically 
been in a holding pattern against the leeching of wealth by the Fed for 39 
years, gold has seen an inflation adjusted increase in value of over 5% per 
year, if measured in 1971 dollars.  This is due to the Fed’s ability to make 
dollars plentiful.  And yet, this is the only tactic the Fed can come up with 
to rescue an economy already devastated by “quantitative easing”, as they 
call it.

The turmoil in the housing market demonstrates how disastrous it is to flood 
the economy with fiat money.  Latest events with foreclosures are good 
examples of mistakes made in the market, in this case, by the banks, in the 
rush to soak up manipulated currency.  This is why the truly free market 
depends on sound, honest money, free from false signals of artificially low 
interest rates.

The government finds ways to spend money even faster than the Fed can create 
it, bringing our national debt well past the point of the taxpayers ever 
being able to pay it off.  Other nations who, in the past, have eagerly 
bought up any amount of debt we produced are now starting to resist.  We are 
reaching a crucial point at which the dollar will no longer function, and in 
the absence of a functioning dollar, restoring sound money will be the only 
alternative.
 
The truly scary notion is that those in power might allow our system to 
collapse so chaotically to the detriment of so many people rather than simply 
obey the Constitution.

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