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PDF versionRon Paul's Really Great Idea
by Michael Sean Winters on Jul. 05, 2011
Ron Paul, the libertarian presidential candidate and Congressman from Texas has proposed an interesting idea for getting around the need to raise the nation’s debt ceiling. He suggests that the Federal Reserve simply destroy the Treasury notes it holds, which amount to some $1.6 trillion.
These Treasury bonds are essentially money the government owes itself, or better to say, money one part of the government, the Federal Reserve, owes another part, the Treasury Department. [Correction: The Treasury owes the Fed, not the other way round. Thanks to a reader for pointing out my mistake. As for the "private" nature of the Fed, well, I drove by their HQ here in DC the other day and it sure looked like an official government office. Yes, it is technically a private concern but it provides a function mandated by the government. This is a distinction without a difference.] The Fed, of course, is jealous of its independence from normal political influences, an independence that has served it well. Think of Paul Volcker tackling inflation despite political pressures and Ben Bernanke’s skillful responses to stop the collapse of the economy during the late 2008 meltdown when responses to that meltdown were being judged primarily in political, not economic, terms by both sides of the aisle.
I am sure that there are some economic difficulties with Congressman Paul’s solution: if it were painless, it would have been done before. But, the value of Paul’s solution is not economic, it is political. It frees the nation not only from an impending debt ceiling crisis but from the political calendar.
In the past three years, it has become obvious that the nation faces a growing economic challenge in the form of its rising national deficit and debt. Much of the fault can be laid at the feet of George W. Bush who passed tax cuts while increasing government spending at home and abroad. Much of the fault can be laid at the feet of the Democrats who never met a government program they want to kill. President Obama can be blamed for his Stimulus which was either too big or too small but spent a lot of money and did not get the economy moving again. (It can, I think be argued, that we would be in much worse off shape had there been no stimulus.)
Almost all of the blame for the country’s fiscal mess, however, can and should be laid at the feet of the American electorate. We like big government but we just don’t want to pay for it as witnessed by the Tea Party rally against the Democrats’ health care reform which carried some signs that read “No Socialized Medicine” and other signs that read “Hands Off My Medicare.” We want smaller government, but we like those programs that allowed our local school to get new computers. We detest government regulation, except the ones that keep our air and water clean, our food supply free from fatal bacteria, and that helped that nice disabled girl down the street by requiring a ramp at the school for her wheelchair. Worst of all, ill-informed Americans latch on to simplistic diagnoses or simplistic solutions to their problems, complaining about the bailout of the auto industry which was an unqualified success or promoting more federalism in Washington while failing to let the governors, already swamped with their own economic and budgetary challenges, know that they will be responsible for more government programs than before.
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The beauty of Ron Paul’s idea is that it moves the debt ceiling deadline past the next election which allows both parties to explicitly organize their campaigns around their proposals to meet this central political challenge. If the Republicans really, really want to change Medicare into a voucher program rather than raise taxes on rich folk, let them persuade the American people that is the route to go. If the Democrats want to try and present a multi-faceted approach that raises some taxes but also cuts some spending, thus denying themselves the kind of clarity the GOP stance has, let them try. What is key is that the American people will have to decide and whoever wins the next election will emerge with a mandate to achieve their program. Obama never really had a clear policy mandate because the economic crisis manifested itself so late in the campaign. America was riding a wave of hope when the economy knocked our legs out from underneath us.
It is clear that the two parties, in ways never seen before in my lifetime, are becoming as ideologically distinct as they have been since the Great Depression, in some ways more ideologically distinct. There are no more liberals in the GOP ranks, no LaFollette or Norris or Javits. There are no conservatives giants in the Democratic caucus like Richard Russell. And, the central divide between the two parties is on the nature and role and scope and size of government, and how to pay for that government. If Ron Paul’s solution buys us the time to focus on that debate, and not to muddy the waters with compromise now, it would be salutary for the political future. We have a choice to make about the direction we wish our country to go, and that choice should be made as clear as possible.
Constitutionally,
Constitutionally, legislatively, and morally, Ron Paul has no equal. His 22 year voting record speaks for itself.
Mr. Paul has not survived in politics for 22 years and maintain the ethics and morality he has by being anything other than stellar.
If You refute the above comment, then I please invite You to listen to him speak about key issues. It is amazing how well he comes across because he doesn’t have to remember lies like other politicians. He understands what is happening in the world and knows how to apply the basic principles of liberty to achieve the real change that America so desperately deserves.
American to American we are all on the same team. So I present Mr. Ron Paul as my Candidate for 2011 and invite anybody to meaningfully and respectfully debate why he is not the best for American and its people in 2012.
Ron Paul = A real change, not for special interest, but for America’s Interests!
Thank You for Your time
Ron Paul 2012
"There are no more liberals
"There are no more liberals in the GOP ranks,..."
Puhleeze - there are plenty of RINOs in the GOP ranks.
Two of the biggest are Senators from Georgia, Isakson and Chambliss - supporters of TARP, bailouts, farm subsidies, homebuyer tax credits, etc. They're just as big fans of spreading the wealth around as Obama.
It's way past time to throw them out and replace them with more principled men like Ron Paul.
Ron Paul 2012
"These Treasury bonds are ...
"These Treasury bonds are ... money one part of the government, the Federal Reserve, owes another part, the Treasury Department."
**Treasury bonds are money that the treasury owes to whoever holds those treasury bonds.
Great article except one
Great article except one thing: the Federal Reserve is NOT part of the U.S. government. The Fed is a group of private, central banks separate from government to which the U.S. government owes interest on debt every time a Federal Reserve Note is printed. Check here:
http://www.rcreader.com/commentary/neither-federal-nor-reserve/
The Federal Reserve would
The Federal Reserve would have to take some asset in trade, since the currency must be based on something. There is not nearly enough gold in the system but there are scads and scads of housing notes in the Freddie and Fannie portfolios - although basing our currency on those assets would be disasterous. I had thought that the Fed owned more than $1.6 trillion.
Ron Paul has my vote!!!!
Ron Paul has my vote!!!! Former Obama supporter; no more.
On topic, very interesting idea. Of course there would be some issues with actually doing it, but it is probably the best solution that I have heard so far.
Ron Paul actually has many
Ron Paul actually has many great ideas, this just being one of them. The author is correct in stating that the ultimate blame is with the American electorate. Folks, do some research into Ron Paul (Google him, check out some videos on Youtube). While you many not agree 100% with everything he says, I bet that you would eventually realize that he is the only honest, consistent politician running for President that would truly help get us out of the mess we are in. A vote for Obama or whichever Republican the mainstream media tells you is the "frontrunner" will only lead to more of the same endless wars, wasteful spending, and increased debt.
I will avoid a discussion of
I will avoid a discussion of ownership of the Federal Reserve System (the Federal Reserve banks are owned by the member banks, all privately owned). However, I will comment on "These Treasury bonds are essentially money the government owes itself, or better to say, money one part of the government, the Federal Reserve, owes another part, the Treasury Department." these notes and/or bonds are issued by the Treasury. The FRS purchased these promises by the Treasury to pay in the future: the Treasury owes the Fed.
Though you might be correct
Though you might be correct that the two parties have grown a bit more distinct lately... Paul points out how 'meeting in the middle' is bad for our nation. Instead of sticking to their principles and 'fighting' what they see as a bad idea, the two parties work together and we get a hybrid of both party's ideas. (i.e. 'you want more money for schools, and we want more money for these missiles... let's work together.')
Those that might be intrigued by Paul... I recommend you read some of his writings, or watch some videos on youtube... his ideas don't always sound great in 30 second debate responses.
The Fed, as a private bank,
The Fed, as a private bank, collects 4% interest on money it lends to Treasury via distribution through other private banks like Goldman Sacks.
Check wikipedia.org for more info. The Fed does not want to loose its annual 4% interest on 1.6T since it is forced to devalue its own holding money by printing paper money to accommodate big government spending.
Please send this article
Please send this article National....a balanced, considered discussion, that would help the average person to more readily understand the issues and the total folly of the members of the members of the Congress. This would allow the people of the USA decide the best route for their future at the next election.
Ron Paul sounds great to me.
Ron Paul sounds great to me. I am supporting him all the way
ron paul always votes for the
ron paul always votes for the individual not big government
Sorry, The Federal Reserve is
Sorry,
The Federal Reserve is a privately held entity with enormous regulatory power from Congress to manage/manipulate the economy however they see fit. They have NEVER been audited by anyone so Congress has no idea what they are up to. They are also authorized by Congress to regulate the financial system that is largely owned by the people who own the FED. Can you believe it...a corporation (non-elected) with more power from Congress than any part of the elected government!! With the passage of the 1913 Federal Reserve Act, the government handed it's sovereign right/power to produce currency to a private bank so that now it can only BORROW money.
The FED holds over $10 Trillion (70%) of the nations debt. $1.2 Trillion is about to come due and will need to be refinanced by taking on more debt. Thus the issue with the debt ceiling.
Ron Paul wants to end the fed and his recommendation of tearing up the debt that is about to come due is a first step. Of course, the people who own the fed have a lot of power by holding so much government debt. They aren't going to tear up anything anytime soon.
Does this mean that the
Does this mean that the Federal debt to the social security trust fund would be wiped out?
If so, no way!
Anything the Paul says needs to be taken with a large number of grains of salt. The good of the commonweal is not high on his list of priorities.
I wonder if anyone really
I wonder if anyone really understands the finance system in our government? One part of the government owing another part of the government money? What's with that? I mean why don't we just bring in Glinda, good witch of the north in Oz to wave her magic wand at the national debt to make it go away? That makes about as much sense as Ron Paul's theory to me. Anyway, I thought China was holding all those T-Bills. If they get destroyed I'm sure they won't be happy campers!
I agree with Paul and Mr.
I agree with Paul and Mr. Winters. Its madness we supposedly owe these thieves money. I say we send them a sorry note and a pink slip. Bernenke's little helecopter strategy mentioned in his thesis has proven to be a collossal failure of economic theory and management. To bad they can't refund Doctoral degrees at MIT.
It is a great idea but won't
It is a great idea but won't happen for many reasons, namely because the wealthy bankers that comprise the Fed won't let go of the IOUs that the American Citizens owe them. One must understand that the Fed is an altruistic government agency, but rather a fractional banking cartel that exists for profit, power and influenc. Benjamin Franklin and President Jackson were right. The country prospered in free market capitalism prior to our politicians getting their way with being able to borrow from the Citizens by way of a central bank.
Let's put this simply... an
Let's put this simply... an American citizen who wishes to live a good life knows that he/she needs to work hard, save money, creat and provide for a family, be responsible with their money, and MOST people know that the accountability for their money management failures falls directly on their lap. Money problems cause drug and alcohol addictions, divorce and one-parent kids, suicide, banishment from associations, unbelieveble stress, death DUE to stress, and sometimes hell on Earth. In other words, money and its perceived value is taken as seriously as life and death by the average person.
GOVERNMENT and the FED... print, establish the value of, and manipulate the supply of, the same dollar which we are dying over. These are two different games we play. In Milton Bradley terms, the population is coerced and influenced to play the game of LIFE, while the manipulators of our financial lifeblood get the privilege of playing MONOPOLY.
Ron Paul IS the most important and most intelligent man in politics today because he has the BACKBONE to tell the truth to anyone who has the backbone to hear it, at a time when we HAVE no more time for lies, manipulation and the standard venomous "divide and conquer" rhetoric which allows our global MONOPOLY bankers to carry their financial scams through so many decades.
Since our fiat monetary system is based on faith and confidence in this worthless paper we value, we need to vote NO CONFIDENCE... we need to disallow Fed debts immmediately.
Great Idea. The Fed lost 5.3
Great Idea. The Fed lost 5.3 billon on AIG & BearSterns alone because of over leveraged mortgage securities. Why should taxpayers pay for this for generations. If your broker made your pension a huge Negative value trading derivitives on margin, you wouldn't say, ok, bill me for life until you guys aren't under water. Why waste good money on something with negative worth? Politicians wanted bank lobby money, with no concern for taxpayer. Ron Paul 2012! Our only hope. Spread the word. Some people still don't know who he is.
Regarding: "He suggests that
Regarding: "He suggests that the Federal Reserve simply destroy the Treasury notes it holds, which amount to some $1.6 trillion."
- The idea is so simple that it is elegant.
LOVE IT!!! Ron Paul is the
LOVE IT!!! Ron Paul is the smartest one of the group!!! He's not paid off by big business like the others! He's the people's politician! And don't let the false media scare you away from him. He's not for marijuana like they say, he thinks the government should leave these decisions at the state levels and should be taking care of the country instead. He is a Christian man too.
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