Endless Wars, Welfare & "Stimmies" Aren't "FREE" -- Inflation Is The Tax
When a government spends money it doesn't have (which is how the U.S. federal government routinely operates) that money must come from somewhere. The unconstitutional Federal Reserve often ends up printing (i.e., counterfeiting) it into existence for the government to spend. The counterfeiting of new money destroys the value of the money already in existence. Inflation is the tax. There is no free lunch; especially from government.
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Hello, everybody, and thank you for tuning in to the Liberty Report.
With us today is Chris Rossini, our co-host.
Chris, welcome to the program.
Great to be with you, Dr. Paul.
Very good.
You know, we're going to talk about a subject, I have to admit, we've talked about it a whole lot.
And one reason why is I think it's so important.
And also, the reason we're doing our program today is we believe, I believe, and many who believe in the true free market and sound money, realize there's some misconceptions about the subject of inflation.
We're going to talk about inflation because the precise definition is crucial because we see inflation as being a real threat to the economy and to liberties, and it's done so much harm over the many, many centuries, and it has to do with sound money and paper money and all these things that people talk about, but they don't always come down with the same definition that we have.
And we're going to want to define it, define what non-inflation is and what sound money is, and what we have to do to stop the problems of the inflation.
And I think most people listening to this program are very much aware of this, but I keep looking for information, talking about it, and reading about it because I think it's so important and there's so much misinformation on the television.
But one thing that's happening now in the public arena on this subject is that more and more people are starting to realize, you know, what inflation is all about.
They're getting worried about it, how you protect against inflation and who caused the inflation.
What are we going to do about it?
And that's the reason everybody talks about it, but they don't always come up with the same answer.
Now, the one thing, though, that is popping up on the televisions is the many ads right now advertising and talking about what are you going to do about it?
How can you protect against it?
And they're bringing up the subject of gold.
And it is true on a gold standard, you don't have the type of inflation that we have today.
It's honesty and money that makes the difference.
But we have talked about it, and our partners at gold company Birch Gold Group has worked with us in trying to get people interested enough and protecting against the inflation that is not only with us now, but is going to get much worse, in my opinion.
And that is there's different ways that you can buy gold.
When I first got interested in this before 1971, Americans weren't even allowed to own gold.
At least we have the right to own gold, and I think that's good, and we should take advantage of it.
But what Birch Gold Group suggests is there's ways that you can put gold into your IRA or 401k and preserve real assets of gold.
Now, what they offer is some more information on it because it has to be done in a proper way to satisfy the tax peoples and others.
But they will give you information if you just request it.
And all you have to do is text Ron at 989898.
Ron at 989898.
And they will facilitate you in getting you information on how to set up, you know, 501k and also the also the your retirement account, the IRA account.
This is important and they'll be available there.
Once again, if you want more information on this, text Ron 989898.
And now, Chris and I will talk a little bit more about gold.
And we've come to the conclusion, as many others have, there's a lot of fallacies out there on belief in gold and what causes it.
And that is all so important because if you do the wrong thing or you assume something, if you assume that the Fed is going to, well, we'll alter the interest rates, and all of a sudden we'll get rid of the problem of inflation.
It's not quite so simple.
So, Chris, what I want to do is try to get the definition out on the table because a lot of people think, well, well, tomorrow, you know, Friday of this week, we're going to hear from the authorities on what the gold, what the CPI is.
And that'll tell us what prices of gold should be.
Well, it isn't that simple.
Increasing Supply of Money00:12:23
Prices increasing are nothing more than a reflection of inflation.
Inflation is increasing the supply of money and credit and pushing prices up.
So when everybody talks about, and so many do, and they assume everybody, you know, cost of living is going up, prices are going up.
That is inflation.
And it isn't.
It's a consequence of inflation.
The inflation comes by increasing the supply of money and credit.
So we want to make that point, but what do we do about it?
There are other fallacies about what's going on in inflation.
And Chris has been doing a little bit of investigation on this.
And Chris, what do you have to say about real inflation?
What should we do about it?
Yeah, it is the counterfeiting of money by the banking system, not just the Fed.
The commercial banks also create money out of thin air.
Yeah, and they do it, as you mentioned, through the loan market.
And it's price controls.
And I like to give the following example because it's easy to understand how this works.
Imagine your local supermarket.
You have a bag of chips there.
The market price is $5.
Every day you go in and out.
Chips are five bucks.
But one day the supermarket suppresses the price down to 25 cents from $5.
By the time you find out about that and you get there, the shelf will be empty.
People will scoop them up at 25 cents on a bag and the shelf is empty because the supermarket can't create chips out of thin air.
So once the shelf is empty, that's it.
They're gone.
Well, the same principles apply to interest rates.
Let's say the market rate is 7%.
That's what the market can bear at the moment.
But the Fed says, no, we're going to fix it at 1%.
So again, just as people rush to go get those cheap chips, people rush into the banks to get cheap loans, 1%.
But unlike the chips, the banks don't run out of dollar digits.
They can create as many digits as they want.
So more and more borrowers go and they're taking all this money and all this money is being counterfeited into the economy.
And people, they spend them on crazy things.
Every stupid idea that's uneconomic gets funding at 1% because everything looks good at 1%.
So it distorts the economy.
It drives up prices because now you have all this new money and not new goods have been created.
And that's how it messes up the entire economy.
And this is all from the simple idea that it's legal and okay for the banking system, the Fed and the commercial banks, to counterfeit money.
Chris, I think you make a very important point in calling attention to how the banks do this.
And it's the manipulation of a system with fractional reserve banking.
True banking is that, and there's a little bit of that goes on.
You put your money in a CD and say to the bank, you can hold this for one year and you pay us a certain amount of interest.
But nobody can touch it otherwise.
After a year, they give you your money back plus the interest.
And this doesn't, they don't follow this all the time.
If you put money in the bank, if you put $100 in the bank one day in your checking account and you're not earning anything, the Fed is allowed to, you have access to that $100.
But they can loan it out to somebody else.
So there may be two people that are using the same $100.
It is amazing they can get away with this because that person can put it in a bank and it expands.
And there's an estimate that a lot of people follow that when you put $100 in the bank after a period of time, it will increase by sevenfold.
And that is the increase of the credit system mainly because it allowed people to buy treasury bills and you raise the monetary base and that will allow people to have some money.
You put it in and you expand it.
So the banks do make a good deal on this.
Matter of fact, the Federal Reserve was created by the banks for the benefit of the banks, always argued it is to protect the consumer.
And they do a bit of an attempt from that.
But we still have the problem of bankruptcies.
But I think less so than ever.
I think in recent years, there's not many banks that just are totally closed down.
In the Depression, thousands of them, which was a bad thing because everybody was overly leveraged.
But the banks will continue to do this if they're allowed to do it.
And that's why reserves should not be manipulated.
If you put $100 in the bank, unless you have a discipline agreement, it's your money and you should get it back and it should be 100%.
But that would be too slow.
We need to stimulate things.
The stimulation does stimulate the economy and it looks good.
But what happens if it has to go in the reverse?
If that seven-fold increase starts where people are getting bankrupt and they want their money out, then you have the recession.
The fallacy here is that when the monetary authorities look at this, they say, well, you know, it looks like we're having a recession going on and it looks like the economy is booming too much, and that's the reason you have the inflation.
So they say the solution to that, if it's going up, is to have a slump, and they will purposely raise interest rates.
That's what we're in the process of doing right now.
How much the market will help in that sense?
They will raise interest rates, but the monetary authorities increase it because they think because prices are rising, it's an overheated economy.
In a free market, if prices were going up and there was, you know, one thing, and if there's more prosperity, if the size of the economy was healthy, that would be good.
But under these circumstances, they come in and the Fed decides you have to slow up the economy.
In a healthy economy, just because it's booming and the economic growth is fantastic, instead of minus something or 2%, it could be 8%.
It could be normal and natural and good, but they oh, no, 8% is too high, so we have to have it growth at a certain level.
So they purposely bring it on.
So that's a fallacy they have in the misunderstanding of the value of honest money, the honest and the correct definition of inflation.
If you're worried about prices, you have to deal with a monetary unit, and you have to worry about the balance sheet of the Federal Reserve.
And the balance sheet is skyrocketing and will continue to because the government, you know, under circumstances of war, the war is going on in Ukraine, or the leftover funding that was increased to fight the war against the COVID virus.
I mean, it was analyst spending, but they didn't have the money.
They didn't tax people.
That would have even been worse.
But it is a tax, though.
When you inflate, it's an invisible tax.
So, this idea that there's not a whole lot of damage done by just increasing the money and helping people pay their bills is a real fallacy.
And the one reason why I think they do that, they look at prices and the different reasons prices are going up, is that prices we can regulate them, or they want to regulate them.
They'll have price controls, wage controls.
They'll do these things to try to control and slow down the economy.
But that is not necessary.
It's wrong to have to do that.
The economy might be increasing or decreasing, but the market has to adjust it by the people buying and selling and setting interest rates.
But the setting of interest rates artificially by the government has done a great deal of harm.
It has created as an incentive and it has pushed the Federal Reserve to do certain things.
It's like federal debt.
Oh, the federal debt, Democrats spent too much money, Republicans spent too much on war.
They cause the inflation because they spend money.
The war.
Well, psychologically, it contributes.
But the big thing is where the real inflation comes from is they can't tax the people for all this expenses.
So they have to print the money.
They have to increase the balance sheet.
And just looking at the balance sheet during the COVID lockdown is huge.
And the balance sheet is continuing to expand because of the recession that's going on and the different problems we have.
So that is not an answer to the problem of just continue to spend money.
It's because the spending of the money, the debt, will incentivize the Federal Reserve to do the real evil, and that is promote the system of fractional reserve banking as well as increasing the balance sheet by taking credit out of thin air because they have the authority to do it and buy government debt to keep the government alive.
It's amazing they get away with it for so long, but they're not getting away with it quite as easily.
And it looks like there are signs on the horizons that bad times will come of it.
Chris?
Yes, absolutely.
Yeah, the next fallacy I wanted to bring up, Dr. Paul, is that inflation creates wealth.
That when they create money, they're actually creating new wealth.
It's the exact opposite.
They are destroying wealth because what happens is you have a situation of something for nothing.
They create digits by typing on a keyboard in two seconds, you know, just to add another zero.
And you now have this money that you did nothing for.
You didn't work for it.
You didn't labor.
And then you take this newly created money and then you could go out into the economy and then purchase real goods and services that people are laboring for.
So a person could be a farmer and he's tilling the soil.
He's doing the whole thing to finally get vegetables to the market.
And here comes this counterfeit money that he's going to be paid in.
And there was no work behind it.
There's no trade here.
What has happened is his money, the farmer's money, has been diluted.
So he's been robbed.
He did all this work.
The person with the counterfeit money did zero.
And that's why it's a destroyer of wealth.
It destroys the value of the money.
And the people that do this, the authoritarians, the government, they use this to their advantage.
They create dollars to propagandize us.
They create dollars to send to Ukraine.
And we have no say whatsoever.
We just read the headlines.
Oh, another $10 billion to Ukraine.
Okay.
We have no say in the matter.
But this is all funny money that they create.
They don't ask us.
They don't care what we think.
And they do whatever they want.
And this creates, like Dr. Paul said, a very, very big mess because they mess everything up.
The economy is not meant to work this way.
And eventually, you know, it buckles and the reality hits.
And the reality is very hard to take at that point.
Recession, depression, but it's all created by this system of creating money for nothing, out of nothing.
Oh, very good.
You know, the biggest fallacy that I see that allows this to happen is the failure and the deliberate ignoring a definition for the unit of account.
What is a dollar?
Unit of Account Matters00:03:45
And one time I held a Federal Reserve note of $1, and the Secretary of the Treasury was there.
I said, this is supposed to be redeemable.
It's a note.
It's not money, right?
And I said, what will you give me if I take this in?
He says, I would just give you another Federal Reserve note.
So they defined this instrument by another instrument.
So it makes no sense at all.
So you have to have a definition.
The founders knew about this because during the revolutionary period, you know, the continental dollar was defined, but they ignored it during the revolutionary period, and they created too many of them, and they lost value.
It went to zero.
So it was wiped out.
But that's why they went to the Constitution.
They had a definition that you could only use gold and silver.
In 1792, they had definitions.
They started with a precise weight of silver as a unit of account.
Basically, it worked pretty well.
There were ups and downs.
The Civil War, there were problems.
But when the Fed was created in 1913, they accepted the dollar at $20 gold as $20 an ounce.
And it was never perfect, but it was understood that it can't get out of whack or the international markets would penalize the dollar.
So that happened.
But the definition was definitely changed and rejection because they abused that during the period of time from the World War II up until 1971 because they printed like crazy because we were king of the world and we were building our empire and we had the wealth.
So we were getting away with the inflation.
But even this wealthy country of ours when producing and had the military power and the financial power, there was a limit.
And finally, the market says, you know, the French led the way.
I know I remember the people being so angry at De Gaulle because he says, no, you're printing too much money.
We have these dollars here, and you're telling us they're worth $35.
You know, an ounce of gold is worth $35.
I want to send you my $35.
I want my ounce of gold.
And they did it, and a lot of gold left the country because we were pretending we were still on a definition.
But finally, in 1971, they had to reject the whole notion that we have a currency that we can define precisely.
And, of course, that lasted up until they did that during the Depression.
Roosevelt took it up from 20 to 35.
In 1971, they had to reject the Bretton Woods Agreement, the fake agreement of pretending it was $35 an ounce, and they had to dismiss it.
And that allowed us to enter this age of runaway inflation of what we have now.
And we have this mess.
And I put the date of August 15th, 1971, as a big day in monetary history.
And it will finally either destroy the currency or will change it.
The likelihood of us changing our tune is very, very, very poor because there's so much pain and suffering when you start saying, We're going to quit giving you your drug, your drug, your monetary drug of having endless money because all it does is devalue the currency.
Like Chris says, it doesn't create wealth.
So the people know, housewives know more about that than the Federal Reserve would admit.
So this too is coming to an end, the system that we have today.
Sound Money Conference00:03:19
And the biggest fallacy right now has to be corrected is the absence of a definition of the unit of account.
And right now, it's just anything and everything.
And there's a lot of attempts now to compensate with this by trying to devise another unit of account outside of the dollar arena.
And it remains to be seen when that comes.
I think it will come, but eventually it will have to deal with the subject of what is the unit of account that we're dealing with.
Chris?
Fantastic, Dr. Paul.
I will finish up a little differently today.
I'd like to, you know, every day Daniel urges our viewers to come see us at the conference.
I'd like to throw my two cents into the ring too because I attend this conference in Virginia.
And for the many people that watch us, you get to see us regularly, but we don't get to see you unless you come to our conferences.
And it's so great for us to see the people that tune in every day, whether you're listening as a podcast or a video, and to meet like-minded people.
We're not the majority, and that's not a bad thing because the people that do all the damage in the world, they're a tiny minority themselves.
They just have levers of power at their disposal.
So it's always a minority that is in control, the ideas.
So the size of libertarians and people that believe in the Constitution may be small at the moment, but it is the small groups that move the world.
The vast majority of people are, this is human nature, our followers.
They follow whatever ideas dominate, whether they're good or whether they're bad.
And they've been bad for quite a long time now.
So please consider coming and seeing us.
I love meeting the people that watch our show.
We have such bright individuals that tune in, and it gives us a charge to come to see you in person.
So I'm going to put a link in the description of this show where you can check out purchasing tickets in the hotels.
We do our best to make it worthwhile.
We've been doing it for many years now, so we must be doing something right.
And we just love seeing everybody in person.
Thank you.
Chris, excellent job.
That's wonderful.
And we are all looking forward to meeting so many people that have been to our conferences before, and I'm sure we'll see some new ones.
We get messages all the time.
A lot of people drive long distances and come from faraway places to come to our conference.
So I think that is important.
And one thing that I've learned a long time ago is that numbers are important to a degree.
We'd like to have a full house, of course.
But the most important thing is quality.
So we emphasize quality in the people we get to our conferences, high quality because it's ideas that we deal with.
The ideas have to be changed.
You can get large crowds out to go along with the average understanding of how am I going to promote what I need?
How am I going to get a good lobbyist to get me more money out of the treasury?
This sort of thing.
People Want Changes00:01:02
And that has nothing to do with what we're talking about.
We're talking about sound economic policy, sound money, and trying to get people to get involved and change ideas.
And then you don't have to wait.
Then that will help create the majority and a prevailing attitude of the people to want changes.
And some of that is coming alive now because people have gotten disgusted, you know, with the COVID lockdown.
And people are getting disgusted with the inflation.
But that's why I think it's so important they understand where the inflation comes and don't say, well, it's rising prices.
So if the government just said increases my benefits, it'll all be okay.
No, that's putting gasoline on the fire.
You want more of what caused the inflation.
And I think that is so important that it happens that people understand if you do get the politicians in there that want to do the right thing, you have to understand why they're doing it.
I want to thank everybody today for tuning into the Liberty Report.