Marshmellows and the Fed

Check out my latest at The Downsize DC Foundation.

Ron Paul Discusses Gold and the Fed on the Kudlow Report

This is my latest Dispatch for DownsizeDC.org. Excerpt:

The reason people buy gold is because it is a hedge against MONETARY INFLATION. Which means . . .

Gold is the money that doesn't inflate.

Which means . . .

Gold is the REAL money.

When people see that their dollars aren't buying as much as they used to, and their incomes and savings aren't keeping up with inflation, they buy gold. That's because, over time, a unit of gold INCREASES in purchasing power, while the dollar buys less and less.

The System Makes No Sense

Check out my latest at The Partial Observer. Excerpt:

But the economic disaster of the past three years has caused many others to question The System.

They are learning about how the banking system really works, and how the Federal Reserve Board operates in secret. They are questioning bailouts of the fat cats and "stimulus" programs that were nothing but a series of pork-barrel projects.

When they learn that The System relies on money being printed out of thin air, they realize that the System itself "makes no sense."

The Mint vs. The Fed

Quote of the Day: The government called three accountants to testify. The defense asked each one, "What is the proper way to calculate income for purposes of the Internal Revenue Code if you are paid in a gold coin that has a $50 face value on it?" All three of them responded, "I do not know; I'll have to research that." -- Mike Zigler, reporting on the 2007 case against Robert Kahre that ended in a hung jury.

Subject: How can legal tender be illegal?

Robert Kahre is facing up to 296 years in prison. His crime? He hired workers on mutually-agreed terms, and paid them in gold and silver dollars rather than in Federal Reserve dollars.

First, some background . . .

* The face value of the U.S. Mint's gold and silver coins are legal tender, meaning they must be accepted in payment of debt

* But a Gold Eagle coin that has "$50" printed on it is legal tender only up to $50, while its gold content is worth about $1,000 in Federal Reserve notes

* No law or IRS regulation requires that receivers of Gold Eagles and other U.S. Mint coins must report the market value of the coins instead of the legal tender value

After extensively researching the issue, Kahre . . .

* hired workers as independent contractors, so he would not pay the payroll tax for their labor

* paid them in gold and silver coins, whose face value - that is, legal tender value - was so low that the workers legally didn't have to report it as income to the IRS

For instance, if a worker was annually paid in gold coins with a legal tender face value of $2,000, the market value of the gold content in those coins could be $40,000, but only the legal tender face value of $2,000 would theoretically count as taxable income. That face value of $2,000 is low enough to be non-reportable to the IRS. But . . .

Even though the coins Kahre used were legal tender, the Justice Department alleged that Kahre's system was a fraudulent, tax-evading scam.

We agree with Jacob Hornberger who asserts that the federal government's prosecution of Kahre is self-contradictory . . .

* if you owe $100 in taxes and pay with gold coins with face values totalling $100, the IRS will accept the payment as $100; it could then sell the coins on the market for twenty times that amount and keep the difference. The government will accept your payment as "legal tender."

* but if YOU receive gold coins from someone else in a private transaction, the IRS says you must report the market value of the coins, not the face value. That is, YOU CANNOT TREAT THE COINS AS LEGAL TENDER.

The government fears that if more people took the law at its word and behaved like Kahre . . .

* people would demand payment in the Mint's gold and silver coins and have far fewer reportable "dollars" in income, meaning fewer people would pay income taxes

* the market would soon prefer the coins produced by the Treasury Department's Mint that are regulated by law - not the inflated dollars created by order of the independent Federal Reserve Board

* good money (gold and silver) would drive out the bad (paper Federal Reserve Notes and electronic keyboard strokes), whereas the federal government needs inflated, deficit-driven money to pay for its endless wars, failed welfare schemes, and expanding police state

No wonder the government views Kahre as a threat, and is willing to made a mockery of its own legal tender laws to destroy him!

DownsizeDC.org, however, believes Kahre was on to something. That's why we endorse the "Honest Money Act," which would repeal the legal tender law that gives the Federal Reserve a monopoly over the money supply. This bill, along with the "Tax-Free Gold Act" and the "Free Competition in Currency Act," is a plank in our End the Inflation Tax Campaign.

Repealing the legal tender law would foster the creation of HONEST free market money, and protect people from the Federal Reserve's endless onslaught of legalized counterfeiting, which constantly reduces the value of your money.

Tell Congress to pass the bills in our End the Inflation Tax Campaign.

Use your personal comments to mention the hypocrisy involved in the Kahre case. If the feds are going to make it a crime to FOLLOW the legal tender law, then that's just one more argument for repealing it. You can send your message here.

Thank you for being a DC Downsizer.

James Wilson
Assistant to the President
DownsizeDC.org

Monopoly Money

Check out my latest at the Partial Observer. Excerpt:

"[T]he distortions and evils caused by government control and creation of money cannot be attributed to the free market. In a real free market, the government would prosecute murder, not protect and encourage murderers. And in a real free market, money would be defined by the market and valued by the market, not monopolized and depreciated by the government."

Decline and Fall Update

Two years ago I published The Decline and Fall of the United States of America, which marks March 23, 2006, the day the Fed stopped reporting the total amount of dollars in the world, as the beginning of the end. Since then,

• The housing bubble burst within the year, leading to the subprime mortgage crisis. In other words, this real estate speculation that had propped up somewhat rosy economic figures during much of the Bush Administration, became unsustainable when the Fed panicked over M3.
  
• Oil went from $64 a barrel, to $110.
• Gold went from $513/oz on Dec 31, 2005 to $1000 today (not adjusted for inflation, because inflation is the point!)
  
• The dollar lost 25% of its value relative to the Euro
• and 17% against the Canadian dollar
  

Some of this was inevitable, because of the long-term looming crisis of Social Security and Medicare financing. If the U.S. government took no action to reform these entitlement programs, foreign investors would, sooner or later, question the sustainability of the American Dream.

And the U.S. government took no action. Bush's only action was a Social Security "privatization" scheme that didn't address the core financing problem, and in any case was more than offset by his insistence on expanding Medicare entitlements. Congress was worse than useless.

To be fair, I doubt that other industrialized countries, which provide most of our foreign investment, are any more responsible regarding their own entitlement programs. Then again, they're also not wasting hundreds of billions of dollars on "Defense," most of which goes to bases in other countries, domestic pork-barrel projects, and costly wars that do nothing to protect the United States and American citizens.

Had Bush and Congress merely held discretionary spending to late-1990's levels and avoided a bellicose foreign policy - in short, had they done nothing, our situation wouldn't be nearly so dire as it is today.

Whatever one may think about the gold standard, if people would rather invest in an inanimate object such as a metal, rather than in a business enterprise that has people dividing labor, trying new ideas, and creating wealth, we know that the country is generally inhospitable to business enterprise. And that means the standard of living will not increase and will probably decrease substantially over time. And this has to change.