January 06, 2012

What causes paper money to fail? USA free enterprise foundation has a flaw

  The question that first needs to be answered is:
“What is current as the Money of Account of the United States and how much of it is a DOLLAR quantity?”

Article I, Section 8, Clause 5, says in part, “Congress shall have Power To . . . fix [FIX] the Standard of Weights and Measures.” To construe these words to mean let “Dollar” float, is absurd and a False Belief.

That is the premise of my opinion. I think that education regarding an understanding of the mechanical process of money creation and its nature is prerequisite to meaningful discussion of tax policy. I recommend referring to the source, the Federal Reserve, for their explanation. See “Modern Money Mechanics” and “Two Faces of Debt,” both booklets published by the Federal Reserve Bank of Chicago for their explanation.

If we continue to engage in the distraction of political arguments rather than focus on fundamental principle, we may soon all be using the old phrase, “Not worth a Continental.” The electorate will lose any possibility of influencing an orderly return to Constitutional limits if a collapse occurs. Education is extremely important yet taking a back seat to politics in too many groups.

“. . . A number of characters of the greatest eminence in this country, object to this Government, for its consolidating tendency. This is not imaginary. It is a formidable reality. If consolidation proves to be as mischievous to this country, as it has been to other countries, what will the poor inhabitants of this country do? This government will operate like an ambuscade. It will destroy State governments, and swallow the liberties of the people, without giving them previous notice. If Gentlemen are willing to run the hazard, let them run it; but I shall exculpate myself by my opposition, and monitory warnings within these walls. But, then comes paper money. We are at peace on this subject. Though this is a thing which that mighty Federal Convention had no business with, yet I acknowledge that paper money would be the bane of this country. I detest it. Nothing can justify a people in resorting to it, but extreme necessity.”
- Patrick Henry, 9 June 1788

Modern Money Mechanics http://www.facebook.com/album.php?aid=10104&id=100000009836203

R. George Dunn~ The value of the dollar. Being we are a papercurrency, does not the vlue of the dollar then become the extension of the GDP? If we fail to produce, we fail to consume. If we fail to consume, we fail to produce. Which came first, the chicken or the egg?

The greatest power of our economy is the enorimity of it. It takes a lot to bring it to zero consumption, thus zero production. But, as pointed out, there comes a moment when a sudden lock up of the economy is entirely possible. That would come when you expand the paper money, lowerring it's value in relation to the GDP at a time of the GDP falling or stagnate. If this fact of huge expansion of the paper is covered up and no steps are taken to end the foundational reason for the GDP failing to grow, a day arrives when it becomes self evident. Eventually, the true value of the dollar paper reaches it's true deflation of fiscal stability by hyper-inflating a false GDP growth. No one can afford their cashflow anywhere, bringing the system to a halt.
The failure of paper money is the symptom, be it from neglect of the foundation of the economy or be it from tyranny from within. The value is the same. To repair the economy from a dollar faultering, the foundation of the economy needs to be adjusted to eleviate the clog to growth. The natural cycle of a free enterprise will always have an up and down. It is when government puts into the equation a burden that cannot be overcome by the economy. This is what has happenned to America.
We have placed excise tax on domestic production by movng from a closed border trading community to an open border while keeping a closed border tax structure. This action has produced a downward slide of the economy of the US Dollar, weakening it until it reached a point of threatening to hyper-inflate the currency. Without exposing the hyper-inflation, it is possible t recover from the near sudden esposure of failing, by simply changing the Tax structure to an open border consumption tax.

It would also be very important to find a path to bring back the money standard to finite terms(precious mineral), to avoid such exposure to a fiscal apocalyse in the future.
Here is my blogg on where our nation's economy has gone wrong and how to fix it: