Heartland Institute's Peter Ferrara: Restore Gold Standard Before China or Russia Does

Friday, 01 Aug 2014 12:32 PM

By John Morgan

FROM Moneynews.com

The gold standard is the foundation for restoring booming growth and prosperity in the United States because it would keep the dollar stable and head off inflation, according to Peter Ferrara, a policy director at the Heartland Institute and White House veteran.

Ferrara, who worked in policy and legal positions under Presidents Ronald Reagan and George H.W. Bush, wrote in a column for Forbes that few Americans today even know what the gold standard is.

He noted the U.S. Constitution provides that Congress should define the dollar as a specific weight of gold.

“But since America abandoned the gold standard in 1971, the purchasing power of the dollar has declined by 85 percent. A dollar saved in 1971 was worth only 15 cents by 2012,” he wrote. “When America was on the gold standard, the real rate of economic growth averaged nearly 4 percent a year. Since then real annual growth has stagnated at about 25 percent less. Under Obama the Magnificent, real growth has been barely half what it was under the original American gold standard.”

According to Ferrara, the gold standard strongly encourages capital investment, and means wages are unlikely to become depreciated by inflation.

“Under the gold standard, working people would control the money supply, not elitist bureaucrats. If the Fed increased the supply of dollars beyond the people’s demand for dollars, people would exchange dollars for gold. The people would consequently stop the Fed before it could create inflation.”

Reinstating the gold standard would be easy, Ferrara believes.

“The gold standard could be restored first by legislation simply instructing the Fed to follow a price rule in conducting its monetary policy that would maintain a stable dollar price for gold,” he wrote. Before the gold standard was abandoned in 1971, gold prices were pegged by the government at $35 per ounce.

“If America restored its gold standard, other countries would quickly follow. Otherwise, their economies would fall behind. The Chinese and the Russians could be expected to do the same immediately. Indeed, if America does not act, nothing would stop the Chinese from adopting their own gold standard for their currency, with Russia to quickly follow.”

Wikipedia notes that under a gold standard monetary system, “gold coins do not circulate, but the authorities agree to sell gold bullion on demand at a fixed price in exchange for currency.”

In an appearance on Newsmax TV, Steve Forbes, chairman and editor-in-chief of Forbes Media, also asserted that a return to the gold standard would stabilize and strengthen the U.S. economy.

"All it would mean is that the dollar would have a stable value, which it had for 180 years from the time of George Washington through the early 1970s,'' Forbes said.

Advantages of Gold Standard From Wikipedia. Click Wikipedia link for links to footnoted references:

• Long-term price stability has been described as the great virtue of the gold standard.[52]The gold standard makes it difficult for governments to inflate prices through expanding the money supply. Under the gold standard, significant inflation is rare, and hyperinflation is essentially impossible because the money supply can only grow at the rate that the gold supply increases. High inflation under a gold standard is seen only when warfare destroys a large part of an economy, reducing the production of goods, or when a major new gold source becomes available.[53] In the U.S., inflation occurred during the Civil War, which destroyed the economy of the South.[54] Inflation also followed the California Gold Rush that made large amounts of gold available for minting.[55] Historical data shows that the magnitude of swings in prices were far higher under the gold standard.[56][52]
• The gold standard provides fixed international exchange rates between participating countries and thus reduces uncertainty in international trade. Historically, imbalances between price levels were offset by a balance-of-payment adjustment mechanism called the "price specie flow mechanism."[53] Gold used to pay for imports reduces the money supply of importing nations, causing deflation, which makes them more competitive, while the importation of gold by net exporters serves to increase their money supply, causing inflation, making them less competitive.[57]
• A gold standard does not allow some types of financial repression.[58] Financial repression acts as a mechanism to transfer wealth from creditors to debtors, particularly the governments that practice it. Financial repression is most successful in reducing debt when accompanied by inflation and can be considered a form of taxation.[59][60] In 1966 Alan Greenspan wrote "Deficit spending is simply a scheme for the confiscation of wealth. [Editor's Note: Before his descent to chairman of the Federal Reserve Thiefdom.] Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."[61]

FROM It's the Spending, Stupid

By Ed Moy — Friday, 31 Oct 2014 08:38 AM

U.S. Treasury Secretary Jack Lew proudly announced that for the fiscal year ended Sept. 30, 2014, the federal government collected the most tax revenue ever: $3.013 trillion. But despite record taxes, the federal government spent $483 billion more than it took in.

To paraphrase Ronald Reagan, we don't have a $17.8 trillion debt because we have not taxed enough. We have a $17.8 trillion debt because we spend too much.

Obviously, the federal government's strategy of taxing our way to a balanced budget is not working. The more money that is collected, even more money is spent. Taxes aside, the budget has little chance of ever being balanced (or producing surpluses) unless the government stops spending as much.

There have been recent efforts at spending cuts. There were across the board cuts in discretionary government programs (sequestration) and capping future discretionary spending. Both helped. But they were more than offset by mandatory increases in entitlement programs, expanding populations in the entitlement programs and new programs like Obamacare.

That is because entitlements are the main driver of increased spending. Medicare, Medicaid, Social Security and other entitlements currently account for 55 percent of the federal budget. Without entitlement reform, their mandatory rate of growth will overwhelm the rest of the budget. That means crowding out the defense budget (20 percent) and all other government spending (17 percent).

And when the federal government does not have all the money to pay its bills, it borrows. Interest payments on the federal debt represent 7 percent of the federal budget. By the way, the average interest rate paid on the $17.8 trillion of debt is 2.3 percent. Imagine how much interest would be paid when interest rates normalize, say at 5 percent.

The problem is that cutting spending is hard work and requires unpleasant choices. So instead of tackling them now, the president and Congress are content to kick the can down the road. But soon that road will run out and there will be fewer choices and less time for a solution.

Big spending requires big revenues to pay for that spending. All those tax revenues take hard-earned money away from Americans, who would use their money on what they think is important. And whether they spend it, save it or invest it, the end result is a big boost to the economy.

But when the federal government gets that money, it spends it on what it thinks is important. Because of the political process and bureaucracy, it is inherently an awful and inefficient allocator of resources. Think of it this way: Are Americans better off if a family cannot buy a refrigerator so that mountain lions can be trained to walk on treadmills?

I would rather rely on the people making choices. Cut spending and taxes, and have the people decide on how best to use their money. They and our country will be better off.

Why Do We Need Term Limits?

John Adams said, “Without [term limits] every man in power becomes a ravenous beast of prey”. That being said, here are some of the reasons we believe our country needs Term Limits.

1. Term Limits can help break the cycle of corruption in Congress. Case studies show that the longer an individual stays in office, the more likely they are to stop serving the public and begin serving their own interests.
2. Term Limits will encourage regular citizens to run for office. Presently, there is a 94% re-election rate in the House and 83% in the Senate. Because of name recognition, and usually the advantage of money, it can be easy to stay in office. Without legitimate competition, what is the incentive for a member of Congress to serve the public? Furthermore, it is almost a lost cause for the average citizen to try to campaign against current members of Congress.
3. Term Limits will break the power special interest groups have in Congress.
4. Term Limits will force politicians to think about the impact of their legislation because they will be returning to their communities shortly to live under the laws they enacted.
5. Term Limits will bring diversity of people and fresh ideas to Congress.

Term limits for lawmakers: when is enough, enough?

[Editor's Note: If you want to get rich, i.e. advance from a low paying government bureaucrat job on the local or state level, THEN GET ELECTED TO THE US CONGRESS (House or Senate). Once you're elected, it's easy to steal from your campaign contributions or the Congressional budget allocated to your seat and staff. You can go on a government-funded junket with 'lavishly' paid expenses. The list of ways to steal from the government while in office is inexhaustible. There are only a few Congressmen who left Congress just wealthy instead of a multi-millionaire. Of course, there are several who arrived in Congress as multi-millionaires and don't need to steal from the government.]

[Editor's Note: what I have dubbed the "Legislative-Executive-Judicial Cabal" which the American People have caused by ignoring the generational transition from our Constitutional Republic to what now is, in effect, an "elected" dictatorship. Never mind who is elected. Never mind which bogus party is in power. We the People still lose more freedom.

FROM Project to RESTORE AMERICA

The FairTax is a consumption tax unilaterally applied to all Americans at the same rate. For businesses, payroll taxes would no longer exist. Our exports would include a heavy tax for overseas buyers purchasing our products, while our imports would be cheaper for us to purchase. I'm not sure how this would affect GDP, as more information is necessary.

According to the FairTax website, "Under the FairTax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate." The prebate gives every legal resident household an "advance refund" at the beginning of each month so that purchases made up to the poverty level are tax-free.

So a family of four making something like $50,000/year should not have to pay taxes, thus preventing an unfair burden on low-income families. Since the FairTax eliminates both federal and payroll taxes, you get to keep your gross pay amount of each paycheck earned.