Eminent Domain...again

[Jimmy C.]

Picture this... The Dallas Cowboy game lets out...
The new stadium will hold 75,000 people
There are ALWAYS drunken fans leaving the stadium.
What is less than a mile away from the stadium?
Six Flags over Texas Theme Park!
Let[ch8217]s be conservative. 50.000 fans and only .01% are under the influence and driving home.
That is 5 intoxicated drivers within 1 mile of a family amusement park.
I know The Texas Ranger Ballpark is right next to the Six Flags Parking lot. But that is a totally
different crowd. And there are always problems when the Ranger games let out.
I am not an activist,
Just sad that safety of my childhood playground has been compromised by greed.

[glenn kangiser]

Government is a big pusher of sports in schools and other ways - Dubya was even set up with a team if I recall correctly.  It is a massive distraction from what they are up to and encourages people to unwittingly pledge their support to a team or cause without questioning the values of the team or leadership they are following--not just speaking of sports.  Pick one, no special reason --maybe the home team --cheer for it --fight for it--drink for it --fill the sports bars for it-- support commerce for it---spend your money for it --get drunk for it --- run off the road for it-- ruin your car for it- get thrown into jail for it --bet on it--- lose on it.  Unquestioning support- no matter what the cause or why.  Yea, team!!!!  It makes it easy to get an unknowing public to support a broken system.

I suppose there will be others who don't agree with me. :-/

[Billy Bob]

That's one of the things I meant about parallels with Ancient Rome, Glenn.  The Roman senate instituted a program of free bread and circuses, (NOT the kind with cute animal acts and clowns... gladiators!), to distract the populus from noticing what the government was up to. Georgious Caesar?  Naw, couldn't happen! [smiley=undecided.gif] [smiley=undecided.gif]

[bartholomew]

Maybe the best route to the Founder's ideal of limited government is through limiting gov't. revenue!

Didn't work with the Bush administration. Tax cuts went hand in hand with a ballooning budget.

Pick one, no special reason --maybe the home team --cheer for it --fight for it

As The Onion put it, "you will suffer humiliation when the sports team from my area defeats the sports team from your area." I've never understood why fans are so loyal to a sports corporationteam just because it happens to be based in their town.

http://www.theonion.com/content/node/33426

[Sassy]

Quote from harry51 on Mar 12th, 2006, 2:23pm:
Maybe the best route to the Founder's ideal of limited government is through limiting gov't. revenue!

Here's a link to a short & sweet   synopsis of the Federal Reserve Cartel...  read it at your own risk  :'(

Federal Reserve

I'm currently reading the long version - Creature From Jekyll Island - I thought the book I just read about Enron was bad, but this will knock your socks off!  

Another good resource on the central banks & international banking (Bank of International Settlements, International Monetary Fund)  August Review

No wonder the economy is in the mess it is.  Guess I've been a bit naive & uninformed... :-/

[harry51]

Quote from harry51 on Mar 12th, 2006, 2:23pm:
Maybe the best route to the Founder's ideal of limited government is through limiting gov't. revenue!


Kathy, I read that book years ago after meeting Ed Griffin at a meeting where he was the speaker, and haven't found my socks yet!  With reference to controlling gov't through reduced revenue, I was thinking at the local level. It's true, it won't work at the federal level because they don't and can't depend on revenue to fund their current agenda. Taxes are just a way for politicians to direct our spending/investments in the direction that will do them the most good (read: toward their political allies). The truth is, they just can't take enough away from us by force to make ends meet, and still keep most people docile. (Glenn, note I stipulated "most people"!)

Instead, they use the fiat currency system, personified by the federal reserve system, which, btw, is totally private and for profit, not federal or public, to create all the currency and credit they want when they want it. The most obvious effects are the dilution of the savings we have all worked so hard to put away (diminished buying power over time), and constantly rising prices in general.

An unconfirmed rumor posits that JFK had refused to sign the bill renewing the federal reserve franchise on the currency, instead kicking control back to the Treasury, and that the first official act of LBJ, performed on the airplane immediately after being sworn in as President, was to sign that bill. Is there any truth to it? Who knows? We do know the "money power" tried to assassinate Andrew Jackson for similar reasons.........

I haven't done the math, but it would be interesting to compare the total taxes collected last year with the dollar cost of prosecuting the Iraq war in 2005. Chances are the bills will be coming in, figuratively speaking, for a long, long, time, regardless of the actual need for the war.

Unfortunately, wars are not the only excuse for inflating the currency supply beyond what would truly represent the increase (if any) in the goods and services available in the economy across a given period of time; social programs work the same way. It's smoke and mirrors, it's a huge source of the power available to politicians, and it's one of the biggest hammers they hold over our heads to make us keep working for them whether we like it or not.

[bartholomew]

Instead, [politicians] use the fiat currency system, personified by the federal reserve system, which, btw, is totally private and for profit, not federal or public, to create all the currency and credit they want when they want it.

One the one hand you criticize the Fed for being private, on the other hand you criticize it for being completely subject to government control (in the same sentence no less). The Fed was structured the way it is in order to prevent politicians from meddling with the economy. Yes, the Reserve Banks are "private" in some senses. Commercial banks are required by law to purchase "shares" in the Reserve Banks, but that doesn't give them control. The Fed is governed by a board of governors who are appointed by the President. Once appointed, it is difficult for the government to remove them, which keeps the Fed independent from government manipulation. That doesn't mean the Fed can do whatever it wants. Its actions are governed by statute, it has to report to government twice a year, and if the government really didn't like the job the Fed was doing, it could rewrite the statute. The Fed's main mandate is to keep the economy running smoothly, which means keeping enough cash in circulation to facilitate economic transactions while avoiding excessive inflation.

Yes, the Fed does make a profit. By generating a profit it can be self-funding. That means it does not depend on government for funding, which again keeps it safe from government coersion. Any surplus does not go to the private member banks, it goes back to the government.

And no, the government cannot generate unlimited amounts of money for itself just by printing more. The money supply is controlled by the Fed, whose operations are purposely protected from government interference. Even if the government could, it doesn't. Over the past 5 years the money supply (M1, i.e. cash) has increased by $300 billion, or about $60 billion per year. That does go to government but it's a drop in the bucket compared to the $2000 billion it collects in taxes, the $500 billion it borrows and the $2500 billion it spends.

But lets pretend the government can print as much new money as it wants. If the government did get greedy and started printing trillions of new dollar bills, the effects would be... 1. massive inflation (which the Fed is mandated by law to suppress)... 2. As a result the dollar loses all its value... 3. Economy grinds to halt, major recession if not depression begins... 4. Tax revenues dry up as a result... 5. Government treasuries and bonds become worthless, royally p**sing off everyone who has lent the government its $8000 billion debt... 6. Because of that, no one will be willing to lend the government any more money (current deficit about $500 billion).

So, by turning on the printing presses the government would risk $2000 billion in tax revenue and $500 billion in borrowing. What would they gain? There is $1400 billion cash in circulation. That is the most government could gain, and it barely covers half a year's worth of spending.

The most obvious effects are the dilution of the savings we have all worked so hard to put away (diminished buying power over time), and constantly rising prices in general.

It's true that inflation erodes the value of cash and can be viewed as a tax on cash. But it's easy to avoid just by not holding cash. Cash is intended to facilitate transactions, not to be a store of wealth. Keep your savings in cash in your mattress or in a bank account and your wealth will decrease over time. But put your savings into real assets and it will be protected from inflation. You can keep your wealth in real estate, stocks, bonds, precious metals, collectibles, etc. Those assets do not lose value due to inflation.

[Sassy]

I guess since I started the discussion on the Federal Reserve - I should comment - I am still studying the issues.  Harry, were you on the debate team in school?  I'll have to look at the yearbooks...  Bart, you must have been on the debate team, also!  You both have me convinced.  :-/   I have always been for private enterprise & the free market, but I think, from what I see going on in the world & from what I have read so far, the international banking  interests, which are made up of the nations' central banks of which the Federal Reserve is a member, are basically controlling the economies.  If I understand things right, this would make the politicians "beholden" to private banking interests whose bottom line is profit.  If there are no national interests, only profit interests, where is their allegience?  (looks like foreign interests own more of our country than its citizens due to the deficit.)

Thomas Jefferson said:  "If we run into such [government] debts, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in twenty-four, give the earnings of fifteen of these to the government for their debts and daily expenses, and the sixteenth being insufficient to afford us bread, we must live, as they now do, on oatmeal and potatoes, have no time to think, no means of calling the mismanagers to account; but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-suffers."

I have also read about Andrew Jackson's fight to get rid of the central bank in the United States.  Originally, the US Constitution called for only Congress to print money & that had to be backed by gold & silver, so you couldn't print more paper money than what you had in precious metals to back it up.  That money could then be loaned out at interest, therefore earning a profit to pay for running the gov't instead of levying heavy taxes on its citizens.  

The Federal Reserve uses fractional banking, which means that they loan out most of what has been put in reserve, so the name "Federal Reserve" is a misnomer.  At this stage in the game, it is questionable as to whether there is any reserve at all, since, in some of my reading, it is speculated that they loan out 97% of what they take in (probably more) - but the real   is the Federal Reserve Bank has never been audited (they also don't pay taxes on their profits!)  Supposedly the United States has 800+ million ounces of gold in Fort Knox?  But that hasn't been audited either.  

This all may be elementary to you... I took an economics class in college but dropped it as I had to study too hard   ---girls just want to have fun   ---- anyway, I'm now trying to understand the way things work.  I know this started out on eminent domain - economics are a big part of the equation, so that's why the interest in it.

Which, brings me to another controversial subject      National Heritage Areas & Corridors.  Are we selling our communities out?  At the same time, losing our property rights?  I realize this isn't a political forum but if we don't have any property rights, all the discussion about building is moot...   Any info or thoughts on that?

[John Raabe]

Interesting discussion. Bart does a good job of explaining the Federal Reserve system.

One point I'd make - profit is not a four letter word. Profit is a by-product of smart economic action. There has long been a thread of thinking (strongest in the Muslim world but also at the foundation of Marxism) that profit is somehow "bad"  - IE: a product of greed and selfishness - and most importantly is something taken at someone else's expense.

Nonsense - this is zero sum thinking and is not aligned with the economic environment (which is just as natural as the physical environment and has its own "rules of nature"). Most all natural systems evolve by non-zero sum interactions - sometimes called co-evolution or altruistic self-interest. There are lots of examples in nature and society and the economic system, where everyone is essentially doing each others laundry is a prime example of this higher function. For more information see NonZero, by Robert Wright.

Profit is not a taking but a necessary "expense" of the system. In open economic systems this expense is quickly minimized by competition and innovation.

Profit is the automatic feedback of an open economic system telling the pilot or operator (business person) that they are doing the right thing and flying into an uplifting current. When the opposite (losses) are encountered the pilot must quickly readjust to maintain lift and keep the business airborne.

When an economic system is working properly there are many planes in the air at once going many different directions. All are automatically adjusting to the currents and to each other. The role of government is not to tell the pilots when to go up or down or even when to take off or land, but to insure that as many planes as safely possible can be in the air at the same time.

The Soviets tried to run everything from the control tower with pilots being only bored robots. We know how well that worked - very few planes were in the air and they tended to fly poorly and burn a lot of fuel.

Problems happen (to all natural systems) when too much control is vested in one entity in what would otherwise be a self-balancing interplay of smaller competing organisms or forces. At this point the overly powerful entity can change the rules in their favor and start to control the natural system. In business this shows up as cartels and monopolies. Windfall profits themselves are not the issue since they could just be a strong uplift feedback. But excessive profits over extended periods of time are often an indicator of monopolistic practices and "unnatural" control over markets.

Then government should play its oversight role and step in to re-level the playing field.

There are some things government has to try to monopolize because it can't be done by a free and natural economic system:

• Violence is the big one. Government has to have a police force that will monopolize and stamp out unauthorized violence. This force must earn the faith of the people that they can be expected to have their rights protected. If this faith breaks down you have warlords and anarchy. This is tied into Justice below.
• Outside encroachment - this is what armies are there to stop. Some would argue (and I would agree) that the military in the U.S. is not so much interested in the defense of the nation - that is only the poster boy rhetoric - but is now used as the hammer of foreign policy and to protect markets. This is not its proper purpose.
• Justice - the governed must have faith in a system of impartial justice that all - citizens, businesses and government - must abide by. Americans have more faith in their justice system than most counties. Just look at the largely voluntary and honest system where people decide how much money to pay the government for taxes. In countries such as Iraq we can see difficult it is to build faith in such a system where none existed before.
• Roads, communications, power grids, and other large infrastructure projects. Most of this people are willing to pay taxes for or want it privatized. (Which can work if oversight is free from interference.)

[harry51]

One the one hand you criticize the Fed for being private, on the other hand you criticize it for being completely subject to government control (in the same sentence no less).

The point of my comment was simple, the federal reserve is not federal in the sense that it is a department of the federal gov't. My experience is that this is a commonly held misconception. No criticism for being private was intended, only for using a name that seems to me misleading. As far as the reference to "for profit" goes, it was included as another distinction between a private business and a public not-for-profit institution. Profit is largely responsible for the abundance we all enjoy, most of which probably would not exist without that motivation. It's a win/win situation when the profit is earned through a transparent, honest, voluntary transaction between a willing seller and a willing buyer. Unfortunately, the transactions between the people of this country and their gov't, and between the people of this country and the Fed, often don't qualify as win/win, and it's not the man on the street with the smoke and mirrors.  The ability to create currency and credit out of thin air confers incredible power. Power corrupts. Corruption has eventually destroyed every fiat currency system in history. Maybe the Fed will be the first to rise above human frailty. Maybe.

[PEG688]

 I hate politics as much as I distrust politicians  

A necessary evil I guess

This long  C&P might interest some of you and does touch on parts of all that has been bantered about .

 http://www.afr.org/mission.cfm%20

  God I got to go build something , I feel dirty

PEG

[glenn kangiser]

Good article PEG.  See --I'm a true friend -- I'll still talk to you in your soiled condition.

The only problem I see with any of this is that too many people are still trying to fix the system with bandaids.  Too many people still believe the system is fixable.  There will never be enough support for a party capable of fixing the system because team spirit will not allow them to support a non-corrupt party.  Any serious contenders, with the possibility of doing good will be destroyed by one of the two current corrupt parties ie: John John Kennedy.  The system must fail just like ancient Rome -- everyone must end up in the gutter and only the strongest will be able to crawl out.  Survival of the fittest.  The ones who have spent their lives being supported by the system, welfare dependents, government employees, politicians will be left floundering, victims of the excesses they have supported.  When their support system has failed they will be lost.  Benevolent working class members will be so busy caring for their own, they will be unable to take care of the leeches, picking them off like the parasites they are and throwing them off onto the ground to wither and die or be consumed by the roving masses of carrion eaters.

I call it the Glenn driving a junk truck theory.  Doors banged in --it still moves --
tail light's broken --enough red showing -not a problem.  Leaks oil out the bottom--pour more in the top.  I will keep it going until a catastrophic failure because in that way I can still get more other toys.  Pure greed and lust for other material things causes me to continue to patch the old thing up.  When it drops me on the street and is a broke down worthless shell, I will consider replacing it.  Until that day, I will continue to add the patches in the hope that it will last forever.  Only when the harsh reality strikes---when I finally realize that it is a broken down, beat up piece of crap and it is not going to take me any farther, when all my worldly friends abandon me because they don't want to associate with a guy who will even ride in a piece of junk like that, -------then I will replace it.


Cool, eh?  I just felt like pursuing an abstract idea for your enjoyment.

Lets go build something, PEG.

[Sassy]

John, [size=16]I LIKE PROFITS!!![/size] I also like living in a country with a good infrastructure (roads, services ie my job as a nurse in a Veterans Adm Hosp.) I like living in a safe environment but not in a [size=16]police state[/size] so feel I can be a good citizen by keeping informed on current events, knowing what my constitutional rights are, protecting them & also being a good neighbor.  

Good article PEG.  See --I'm a true friend -- I'll still talk to you in your soiled condition.

The ones who have spent their lives being supported by the system, welfare dependents, government employees, politicians will be left floundering, victims of the excesses they have supported.  When their support system has failed they will be lost.  Benevolent working class members will be so busy caring for their own, they will be unable to take care of the leeches, picking them off like the parasites they are and throwing them off onto the ground to wither and die or be consumed by the roving masses of carrion eaters.

(by the way, Peg, I joined the AFR organization...  great article)

Gee Glenn, I hope you are part of the benevolent working class since my "federal gov't" job will have disappeared....   will you take care of me?  

[glenn kangiser]

As my good friend, PEG always says,

[glenn kangiser]

I should probably clarify my above statements -- referring to leeches was from an article by Murray N. Rothbard stating that there are two ways of making income.  Producing goods -having a tangible product. The other way is political leeching off of the producers.

From Rothbard's The Anatomy of The State

The great German sociologist Franz Oppenheimer pointed out that there are two mutually exclusive ways of acquiring wealth; one, the above way of production and exchange, he called the "economic means." The other way is simpler in that it does not require productivity; it is the way of seizure of another's goods or services by the use of force and violence. This is the method of one-sided confiscation, of theft of the property of others. This is the method which Oppenheimer termed "the political means" to wealth. It should be clear that the peaceful use of reason and energy in production is the "natural" path for man: the means for his survival and prosperity on this earth. It should be equally clear that the coercive, exploitative means is contrary to natural law; it is parasitic, for instead of adding to production, it subtracts from it. The "political means" siphons production off to a parasitic and destructive individual or group; and this siphoning not only subtracts from the number producing, but also lowers the producer's incentive to produce beyond his own subsistence. In the long run, the robber destroys his own subsistence by dwindling or eliminating the source of his own supply. But not only that; even in the short-run, the predator is acting contrary to his own true nature as a man.

I am not against working for the government as long as the system is working.  You pay for it-- do your best to get your little piece of it back.  I always encourage friends and family to get a gravy train job if it is to their advantage.  There -- I put my foot in it again --

[Sassy]

Here are a few more interesting quotes:

1862: By April $449,338,902 worth of Lincoln's debt free money had been printed and distributed. He went on to state, "We gave the people of this republic the greatest blessing they ever had, their own paper money to pay their own debts."

That same year The Times of London publishes a story containing the following statement, "If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce.
It will become prosperous beyond precedent in the history of civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe."

1881: President James A. Garfield (The 20th President of the United States who lasted only 100 Days) states two weeks before he was assassinated,

"Whoever controls the volume of money in our country is absolute master of all industry and commerce...and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."

1913: Congressman Charles Lindbergh stated following the passing of the Federal Reserve Act on December 23, "The Act establishes the most gigantic trust on earth. When the President signs this Bill, the invisible government of the monetary power will be legalized.......The greatest crime of the ages is perpetrated by this banking and currency bill."

Again, the privately owned Federal Reserve does NOT pay any taxes on their profits!  Is that what is called "Corporate Welfare"?

So what does it all mean?   :-/

[Billy Bob]

There was an interesting article in today's local paper about the whole "Eminent Domain" issue.  There are a couple of legislative attempts being made here in Connecticut to limit or wholly abolish the usage of "Eminent Domain" protocols to seize property when the sole purpose is "economic developement".  One bill would require stringent proofs that the real purpose is to benefit the community, and not feather somebody's nest.  Along with that, it would require payment of 150% of the fair market value of the property.  
The other bill would prevent the seizure of property under the "economic developement" theory all together.
Will (some) sanity prevail in the Nutmeg State?
[smiley=shocked.gif] [smiley=shocked.gif]

[glenn kangiser]

Nice to see some trying to come to their senses -thanks for the good news, Billy Bob.  I hope they follow through with it.

[Sassy]

Just read that March 20, 1968 was the date that the United States went off the Gold Standard...

[bartholomew]

Harry, my apologies for misinterpreting your comments. I read too much into that Griffin reference.

By April $449,338,902 worth of Lincoln's debt free money had been printed and distributed.

Sassy, I truly hope you don't share the views of whoever wrote that "article". Anyways, it suggests that Lincoln struck a blow against the big banks by printing his own money when he was not able to borrow more to finance the Civil War. The "debt-free" claim is wrong. Lincoln's greenback was backed by debt just as it is now...

http://www.mises.org/fullstory.aspx?control=1428&id=71

The Legal Tender Act authorized the issue of $150 million in government currency and a bond issue of $500 million. The notes, soon known as "Greenbacks," were made legal tender for all private debts, receivable by the government for taxes and land sales (but not import duties), and were fundable into the bonds.

And as for striking a blow against bankers...

http://www.libertyhaven.com/theoreticalorphilosophicalissues/economichistory/presimoney.html

Another important consequence of Lincoln's term was the creation of a new, quasi-centralized, fractional reserve banking system. This laid the groundwork for the Federal Reserve System, which was eventually established in 1913. The National Banking Act of 1863 forever ended the federal government's separation from banking. Lincoln built upon the Federalist/Whig policy of central banking, implanting the soft-money tradition permanently in the United States.

John's economy to airplanes analogy can be extended to the design of the planes. Once in a while, someone will design a plane that flies very well, outperforming all existing planes. Competitors copy the new design, maybe tweaking it a bit for even better performance. Occasionally a plane will crash. Someone may investigate the crash and discover that it was caused by a defect that can corrected, resulting in a better design. Over time, the economy "learns" how to design better performing and safer airplanes.

If that Times article quote is true, people of 1860 believed that real wealth could be created just by printing money. I doubt they were that naive (and so I doubt the quote is real), but it is still clear that the country's leaders had a lot to learn about the money supply and running an economy...

http://www.mises.org/fullstory.aspx?control=1428&id=71

The consequences of the legal tender law and emission of irredeemable notes were such as any economist would have expected. First, it destroyed American credit abroad. Foreigners dumped their holdings of American bonds and would not buy the war bonds. Second, it drove specie out of the country, much of it going to pay for the augmented imports incident to an inflated currency. Third, they depreciated. Fourth, the Treasury printed more.

Now we know that printing excess money is inflationary and that it ruins a country's credit rating. When the Fed was created, it was set up at arm's length from government to prevent abuse from politicians who forget those lessons from history. That is not to say that all the lessons have been learned. There will be times when the Fed doesn't react quickly enough to an economic crisis, and there will be other times when it over-reacts. Hopefully those lessons don't cause too much pain.

Again, the privately owned Federal Reserve does NOT pay any taxes on their profits!

That is because, first, it isn't really private, it is an independent agency of government much like the Supreme Court is; and second, any surplus it generates goes back to the government treasury!

[Sassy]

Thanks, Bart, for all your scholarly research.  I'll have to look at the sites you've posted.  I have a question, if all the profits go back into the treasury, how does the Fed make money?  Have you read any articles on banking from the August Review site?
http://www.augustreview.com/index.php  Just wondering what you think of them, you seem to be pretty well read on all of this.  I worked in a bank for 10 years & although I took some classes on banking, etc, never really used the info for more than helping me with my job.  I like to read all sides of the argument, then, hopefully, I get to the truth?   :-/  I especially like links to info backing up the claims.  Glenn keeps telling me, "where's the proof, where's the citation? - Bart's gonna call you on it... "

[bartholomew]

Hi Sassy, I'll have a look at the August Review site, I don't know anything about it. Mises is a very libertarian organization. I used that as a source because I know Glenn has quoted from them in the past, and the fellow he quotes above, Murray Rothbard, has written for the site as well, arguing for a gold-backed currency and abolition of the central bank... http://www.mises.org/story/1503

The other quote actually references a publication of the Cato Institute... //www.cato.org (I couldn't find the source document on the Cato site though, hence the link to the other site). I'm not as familiar with Cato, but they claim that "the Institute is named for Cato's Letters, a series of libertarian pamphlets that helped lay the philosophical foundation for the American Revolution."

Since both you and Glenn seem quite libertarian, I thought it would be best to refer to libertarian sources. I consider myself libertarian as well, but definitely not to the extent that Mises (or at least some of their writers) advocates (multiple and competing private police departments, a privatized army, multiple governments, etc). But even though I don't agree with everything they suggest, at least I know that they have a very good understanding of history, government, and economics. By comparison, Griffin just comes across as a quack. I don't know if he believes it himself or if he's just trying to sell his book, but he doesn't seem to have a very good grasp of either economic theory or fact.

For example, he spends a lot of time dwelling on the "Mandrake Mechanism", which economists call the money multiplier. According to Griffin, the money multiplier is the result of having a central bank and "fiat" money. It's not. The multiplier exists even if there is no central bank and the only cuurency consists of minted gold ducats. Someone has 100 gold ducats and deposits them in a bank. The bank promises to pay interest. To generate the interest, pay for the bank's own overhead, and generate a profit for itself, the bank has to loan part of the gold out again. They might keep 10% of deposits in reserve to handle withdrawals by other customers, so they loan out only 90 ducats. The borrower spends the 90 ducats on a horse, and the horse trader deposits the 90 ducats in his account. Keeping 9 in reserve, the bank has 81 ducats to lend out again, which will generate the interest to pay the horse trader plus some profit for the bank. So the result is that having 100 ducats in circulation actually results in 100+90+81+72+... ducats extra in the money supply. They is really nothing magical about that, but Griffin would have us believe that the devious banks are making a profit "on nothing". (Interestingly, he never seems to mention the interest paid "on nothing" to depositors.)

On facts, Griffin claims that due to inflation, families now require two wage earners in order to match the standard of living of a one-income family of the seventies. He claims that real wages (i.e. inflation adjusted) have fallen when in fact they've been mostly flat. The reasons that two-income families may not feel much better off is that they have to pay for a second car and child care. They also pay more in taxes than a family of the seventies did. Lastly, the typical family of today chooses to live in a much larger house than the family of the seventies did (I've read somewhere that there are now 2.2 rooms per person versus 1.6 30 years ago). If you account for those factors, then inflation has not been an issue at all.

Conspiracy theories can be entertaining, but unfortunately they also cause people to focus on non-issues (inflation) while ignoring the real issues (high taxation, gross over-consumption). (Could it be that that is the real purpose of conspiracy theories?  nahhhhhhhh)

As to how the Fed makes money... This is my understanding of where most of the money comes from but it may not be fully correct...
The Fed sets the reserve ratio. That is the 10% I used in the example above. The banks deposit that reserve, usually in the form of interest-earning bonds, into the Fed Reserve banks. So the Fed has the bonds and collects the interest, but it doesn't give the interest directly back to the banks who own the bonds. It first uses the interest to pay for its own salaries and expenses. With the leftover, it pays a dividend to the member banks (i.e. the bond owners). There is a limit on what it can pay out (set by the Act that governs it), so there may be a surplus. If there is, it can hold onto that surplus in order to pay its expenses and the dividend in following years. However, if the accumulated surplus grows large enough, a chunk of it will be transfered to the government. I don't know how often those transfers occur or how much it amounts to, but $3.75 billion was transferred in 2000.

[Sassy]

Thanks Bart.  You could say we are a combination constitutionalist/libertarian - I really like  what the site Peg posted had to say.  They made the most sense of all & seemed to espouse some workable solutions rather than extreme ideologies --  Recommending educating & bringing about a gradual change - like John has mentioned.

http://www.afr.org/mission.cfm

[harry51]

Quote from Bartholomew:

(Interestingly, he never seems to mention the interest paid "on nothing" to depositors.)

Griffin would likely argue that the depositors are paid interest on deposits that they have earned by the sweat of their brow, and properly so, as opposed to the central bank collecting interest on currency they have created out of nothing.  

Call it a conspiracy theory if you will, but it's indisputable that 1913 marked a sea change in the U.S. In that year, between the establishment of the central bank, the imposition of the graduated income tax, and the direct election of U.S. Senators,  the balance of power shifted massively toward the Federal government. Convincing arguments have been made by Griffin and many others that this was, and continues to be, a major blow to liberty as envisioned by the founders.  

I have to disagree that inflation is a non-issue. It must be factored into every investment decision we make, and the fact that it exists complicates everyone's life to some degree or another. What's the answer? I certainly don't claim to have a sure-fire solution to all the world's economic ills, but money that really is a store of value, that would relieve us of having to put our saved earnings at risk in the markets as we try to maintain their purchasing power, doesn't seem like asking for too much.  

[bartholomew]

The AFR manifesto was a mixed bag for me, some interesting ideas and some goofy ones. I'll post more tomorrow if I get the chance.