Ron Paul talks about the Fed, monetary policy and fractional reserve banking.
Below is an interview of Ron Paul on CNBC. Steve Leisman is his usual obnoxious and pretentious self, but that is only because he has no idea what the hell Paul is talking about. This is probably the best I have seen Paul as he sticks to the talking points and covers a wide range of important issues. He does however make the usual Paul-like commentary that I have written about before whereby he makes allegations that he KNOWS are controversial.
In this case the subject matter is too defense for most people and most certainly for the CNBC staff so they let him slide, but when Paul asserts that reserve banking is fraudulent he is walking a fine a line. Before the Great Depression, it would have been considered fraudulent only because the dollar was backed by gold. People deposited the gold into banks and banks issued certificates granting the ability to withdraw the gold. As the gold sat there, banks figured they could make loans assuming that not everyone would come in at the same time and grab their gold. These loans were also papers and banks issued more guarantees than the gold they had. This was fraud, because if everyone came and collected at the same - the bank would go bust and some people would be without their gold, aka theft aka fraud.
We are no longer on a gold standard and therefore this fraud makes no sense. You could argue that fractional reserve banking is inflationary though and that is true. Similarly you could argue that fractional reserve banking guarantees cycles via booms and busts.
Still very much worth watching as he alludes to Austrian theory and the insanity of the fiat money. Much more importantly, beyond all the politics a weak monetary policy is the most important problem for us to solve. Nothing else really matters and this is why much of the content on this blog is economically driven.
In this case the subject matter is too defense for most people and most certainly for the CNBC staff so they let him slide, but when Paul asserts that reserve banking is fraudulent he is walking a fine a line. Before the Great Depression, it would have been considered fraudulent only because the dollar was backed by gold. People deposited the gold into banks and banks issued certificates granting the ability to withdraw the gold. As the gold sat there, banks figured they could make loans assuming that not everyone would come in at the same time and grab their gold. These loans were also papers and banks issued more guarantees than the gold they had. This was fraud, because if everyone came and collected at the same - the bank would go bust and some people would be without their gold, aka theft aka fraud.
We are no longer on a gold standard and therefore this fraud makes no sense. You could argue that fractional reserve banking is inflationary though and that is true. Similarly you could argue that fractional reserve banking guarantees cycles via booms and busts.
Still very much worth watching as he alludes to Austrian theory and the insanity of the fiat money. Much more importantly, beyond all the politics a weak monetary policy is the most important problem for us to solve. Nothing else really matters and this is why much of the content on this blog is economically driven.
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