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Is the American dollar no longer a good investment? Consider, first we had a stock market crash between 2000 and 2002. The American stock market lost nearly 38% of its value. Then there was the housing bubble, followed by the housing bust.
The housing bubble began in about 1996, but the balloon really started to inflate at about the same time the stock market was deflating. It certainly looks like money sloshed out of the stock market and into the housing market. It looks like people have been trying to find a safe place to invest their dollars.
But if the stock market and real estate turn out to be unreliable then it stands to reason that some money would then go to things like gold or to other currencies. This would explain the retreat from the dollar, but it doesn't necessarily account for rising prices for food and other goods.
There is actually one thing that explains all of these phenomena: the size of the money supply.
When the Federal Reserve expands the number of dollars certain sectors get the new Fed money first. Those sectors are . . .
* The government, and those who do the most business with the the government
* The banking system, and those who do the most business with banks
This means that you would expect to first see the impact of an expanded money supply in the Big Business and Big Banking sectors. And what did we in fact see? We saw a stock market bubble (Big Business) followed by a housing bubble (Big Banking).Eventually the new Fed money has to work its way through the entire economy, raising prices for everything you buy. We might call this the Consumer Bubble. And what are we in fact seeing? We are seeing rising prices for consumer goods like food.
The Cox News service reports that food prices are up 37% from a year ago. This isn't a minor hiccup, this is massive inflation, which is just another word for the government stealing from you by creating a surplus of dollars in the market.
The raid on the Liberty Dollar conducted at the end of last month (and the raids on e-Gold earlier this year) begins to take on new meaning in this light. Can't have any alternative currencies out there for people to easily exchange their dollars for.
Which brings us to the latest tidbit from Ron Paul.
Ron Paul's Honest Money Act
Congressman Paul has hit upon the easiest way to end inflation, and the booms and busts that follow in its wake. Simply repeal the legal tender monopoly enjoyed by FRNs, and allow monetary competition. Not only would this help to end inflation and recessions, it would also limit the ability of politicians to hide the true cost of government through the inflation tax. But that's not all . . .
Forcing FRNs to compete with gold would also confer one other benefit. Over time the prices you pay would tend to fall as increases in economic efficiency (for example, technological improvements) lower the cost of production and increase the supply of goods and services. A stable money supply tends to become more valuable over time, unlike an inflationary currency that constantly loses value.
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Which would clear the way for currencies like the Liberty Dollar or eGold to compete in the money marketplace, holding the government's feet to the fire when it comes to the real costs of government.
It's time to end the fed's monopoly. It's time for real money to re-emerge and take it's rightful place. Go here and agitate for Honest Money.