Liberty Maven

Since 1990, the Real Interest Rate has been negative and continues to plummet. This negative rate of interest is causing the capital destruction we see in America today. The stock market and real estate booms and collapses are merely symptoms of this root cause.

by Jake Towne, the Champion of the Constitution

Originally published Wednesday, June 17, 2009 at http://www.nolanchart.com/article6542.html

“Interest is the difference in the valuation of present goods and future goods; it is the discount in the valuation of future goods as against that of present goods.”

– Ludwig von Mises, Human Action, 1949.   (photo license)

Consumers in our modern market economy primarily use government fiat debt-based currency. Historically and currently, these currencies are inflated and debased by central bankers. Quite possibly THE key factor to understand is the concept of interest rates, and the “real” interest rate I will introduce in this article. (see note 1)

As related earlier in the series, when dealing with fiat currencies like the dollar, it does not matter how many dollars you have, but how much purchasing power you can command. Each consumer makes a conscious action to either spend the currency have or save it, usually in a bank. When saving, the consumer usually does this because they believe the purchasing power they are saving up will be of more utility – to “remove them from uneasiness” as Mises puts it – in the future.

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Obama is set to announce some truly sinister regulatory changes today. Changes that will make Ron Paul and other anti-Federal Reserve crusaders ill. How convenient for this news to arrive right after Ron Paul’s HR1207 surpassed a House majority.

To get that sick feeling one need not read beyond the first part of this USA Today story:

President Obama on Wednesday plans to unveil the most sweeping overhaul of financial market regulation since the 1930s in response to a Wall Street crisis that sent the economy into an epic tailspin.

His plan would give broad new powers to the Federal Reserve, abolish the Office of Thrift Supervision, establish a new watchdog agency to protect consumers, and more tightly regulate hedge funds and derivatives, according to a senior Treasury Department official.

Yeah, that’s what the Fed needs: Broad new powers! Hopefully Obama is truthful when he speaks about his new plan. he should begin with, “Hello America, let me introduce you to your next iteration of Progressivism or Socialism or Fascism. In fact I’m going to “ism” you to death.”

My Fed-ache just reached migraine status again. When will our long national Obamagasm be over?